The Marketing Mix: Product and Price Strategies Explained

The Core Components of the Marketing Mix

The marketing mix is the combination of policies concerning the four basic elements of marketing: product, price, promotion, and distribution.

Product Strategy

A product is anything that has value to a user or consumer because it satisfies one of their needs and can be commercialized.

Product Features

• Tangible: The set of physical characteristics that can be perceived by the senses.
• Intangible: A set of features that are not detectable by the senses.

The two basic product strategies involve selecting the brand and managing the product life cycle.

Types of Brands

• Single Brand: All of the company's products, however different, are marketed under the same brand. This is also known as an umbrella brand.
• Multi-brand: The company creates a distinct brand for each product or product range.
• Second Brand: The company creates another brand for the same product to market it in other segments, where it may not be desirable to use the original brand but it is still beneficial to have a presence.
• Distributor's Brand: The commercial distributor contracts with manufacturers and markets products under its own brand, also known as a private label.
• Vertical Brand: A brand of products identified by the point of sale. These products are sold exclusively in branded stores that do not sell other products.
• Brand Alliance: Agreements between brands to manufacture and market products that are identified with several brands, mutually reinforcing each other.

Product Life Cycle

The typical stages in a product's life cycle are:

• Launch
• Growth
• Maturity
• Decline

Pricing Strategy

The price is the monetary value of a product, which equals the buyer's satisfaction balanced with the seller's profitability. There are three primary methods for setting prices: based on costs, competition, and demand.

Pricing Based on Costs

Based on the estimation of the product's cost, the price is fixed in terms of the profit sought by the company. The two main calculation strategies are:

• Cost-Plus Pricing: The unit cost of production is estimated, and a trade margin is applied to obtain the desired profit.
• Target Pricing: The price is determined to obtain a specific profit with a concrete sales turnover.

Cost Categories

• Fixed Costs: Costs that occur regardless of the amount produced (e.g., salaries, taxes).
• Variable Costs: Costs that depend on the quantity produced, increasing as production increases.

Pricing Based on Competition

This method involves setting the price of a product based on the prices set by competitors. The strategy is competitive pricing, which can be:

• Similar to Competition: Matching the price of competitors.
• Premium Price: Setting a price above the competition.
• Discounted Price: Setting a price below the competition.

Pricing Based on Demand

This method is based on the price that the market demand can support in a given context. The main strategies are:

• Price Differentials: Charging different prices for the same product depending on the type of customer, market, or time of sale.
• Psychological Pricing: The price is set to influence the customer's perception of the product (e.g., odd-even pricing).
• Retail Pricing: Maintaining the same price per unit but decreasing the amount of product when costs increase.