Marketing Mix Decisions

We have seen that being able to satisfy customers’ needs profitably depends on making right decisions in the four main areas of product price, place, and promotion. In practice, this will mean answering a whole series of key questions. Again, we have to bear in mind that the questions cannot be answered in isolation, but that each may have an impact on the others. The questions to be answered will vary from situation to situation but will commonly include the following;
What should the product range be? Should we standardize on a few items, offer a wide selection or make to customers’ requirements? How much stock should we carry? How many variations should we make available?

What is our pricing policy? Shall we offer products that are ‘expensive’ or those that are ‘economical’? Shall prices be standard or subject to negotiation in view of customers’ special requirements? What about wholesaler / retailer margins, and quantity discounts?

How shall we sell? Shall we sell direct to customers or through wholesaler / agents / retailers? Which retailers / what kind of salesmen, and how many? What after – sales service shall we offer?
How shall we distribute the product? Shall we use our transport? Or send by road / rail / air / sea? Can we dispatch direct from the factory or do we need regional warehouses (build our own or rent)? How important is speedy delivery and how shall we achieve it?

An example of how these questions interact with each other is the physical distribution decision. There is a whole complex of interlinking factors. If customers do not expect quick delivery, the problems may be relatively small. Deliveries can be made from a stock held at the factory or even delayed until a new batch of the product is made. Already, though, we have to balance the cost of holding stock so as to meet orders fairly quickly against possible problems arising from cutting costs by not holding stock. So if we hold no stock, either customers must wait (and perhaps choose to buy elsewhere), or production schedules must be disrupted (adding to costs) in order to meet an acceptable delivery date.

If delivery time is really important, we will certainly have to carry stocks, and they may have to be held near our customers. Supermarkets have a high turnover, and carry small stocks, which need replenishing regularly and at short intervals. This leads many major food packagers to establish regional warehouses from which the appropriate mixed loads can be taken for delivery to supermarkets and other customers over a relatively small radius. The decision must be taken on whether this system (where goods must be handled twice) is cheaper than direct deliveries from the factory or perhaps several different factories. Obviously, there is no standard answer, and the ‘right’ answer may well change with circumstances.

The kind of product will have a great bearing on the kind of selling and the distribution channels used. Some standard household goods – nylon sheets, for example – can be sold direct to customers through the post. The purchasing decision is an uncomplicated one – cost is low, quality is not difficult to establish, styles are standard, color range limited. Cars, on the other hand, represent a very difficult and complicated purchasing decision by the customer, for a great deal of money changes hands (after their house it is the biggest single expense most people make). There is a wide choice of prices, styles and performance, and generally a used car is being sold as well as a new one bought. After the purchase is made, it will need servicing. All this point to the need for personal selling as a key element in the marketing mix; and clearly it is logical to link after sales servicing with this part of these process. So we have a need for each main centre of population to have a sales / servicing point. The decision still has to be made whether the company marketing the cars sets up units of its own to do this or whether it employs independent distributors to do so. This is partly a matter of cost; either the manufacturer must find the capital to operate these distribution points or, through substantial discounts on the retail price, make it attractive for others to do so.