Business Costs and Marketing Mix Strategies Explained

Types of Business Costs

• Fixed costs: These are costs that do not change when the enterprise changes the level of production. For example, a company pays the same amount for local rent every month.
• Variable costs: These are costs that change when the enterprise changes the level of production. For example, a language academy pays the salary of an English teacher depending on the hours worked.
• Average variable cost: This is the variable cost per unit. To calculate it, we must divide the variable cost by the units produced. If the selling price is higher than the average variable cost, it is profitable; if it is lower, it would mean losses.
• Direct costs: These costs are directly related to the product produced. The factors of production that are the source of the direct cost are part of the product or the production process.
• Indirect costs: These costs are indirectly related to the product produced. The factors of production that are the source of the indirect cost are not included in the product but take part in the production process.

Definition of Marketing

Marketing is the discipline that studies the exchange between the company and the market. It is also an exchange process which is mutually beneficial for the buyer and the company. It aims to identify and anticipate customer needs, and entrepreneurs need to understand customers to know what to offer them. In certain markets, such as fashion and film, firms have to anticipate what customers will want in the future. Another aim is to delight customers, as sometimes satisfying them is not enough. The more effective the marketing is, the better value will be provided for customers and the greater rewards the business will be able to make.

The Marketing Mix

In order to achieve these goals, we use the marketing mix, which is a group of elements that affect whether or not the customer decides to buy. Improving the mix involves changing the combination of elements affecting the customer's buying decision. As the marketing mix is very extensive, it is often simplified and commonly described as "the 4 Ps." This approach identifies four elements in the mix:

• Price: Related to how much consumers are charged for the product and the terms of payment. How the price compares to other rivals is a factor to take into account.
• Product: Includes the many different aspects of a product such as design, quality, reliability, features, and function.
• Place: It is important to know if the product is sold directly to the customer or through retail outlets. The possibility of buying online is also remarkable.
• Promotion: The way in which the firm communicates information about the product to the customer, for example, through advertising. Promotion will affect the image that customers have of the product.