The 7 Ps of Marketing (VCE SSCE Business Management): Revision Notes

The 7 Ps of Marketing

Introduction to the marketing mix

The marketing mix consists of seven key elements that businesses use to successfully market their products and services. These are known as the 7 Ps: Product, Price, Place, Promotion, People, Physical evidence, and Process. Each element plays a crucial role in ensuring a business can effectively reach and satisfy its target market.

Understanding how these elements work together allows businesses to create comprehensive marketing strategies that address all aspects of bringing a product or service to market. The 7 Ps model is particularly important for service-based businesses, as it extends beyond the traditional 4 Ps (Product, Price, Place, Promotion) to consider the human and experiential aspects of service delivery.

P1 – product

What is a product?

A product is a good or service in its final state after having gone through all stages of the production process. Products can take many forms – they include physical goods, services, experiences, events, places, properties, organisations, information, and even ideas. Essentially, a product is anything that can be offered to a market to satisfy a customer's need or want.

When businesses develop their products, they must consider the consumer profile – a statistical picture of the typical consumer based on demographic data such as income, age, gender, and occupation. Understanding the consumer profile helps businesses determine the most appropriate form of marketing for their product category.

Classifying business goods

Business goods and services are classified according to their characteristics, which helps determine the appropriate marketing strategies. The main categories include:

Raw materials and manufactured parts: These are the basic inputs for production, such as minerals, agricultural products, and component parts. Marketing for these products typically focuses on reliability, quality, and consistent supply.

Capital items: These are significant purchases such as buildings, equipment, computers, and office equipment. Because these are expensive and long-term investments, marketing emphasises durability, efficiency, and return on investment.

Supplies: These are consumable items like paint, petroleum products, paper, and cleaning materials. Marketing focuses on availability, price competitiveness, and convenience of purchase.

Services: These include professional services such as engineering, surveying, maintenance, accounting, and legal services. Marketing emphasises expertise, reliability, and the value of professional advice.

Classifying consumer goods

Consumer goods are classified based on purchasing habits and characteristics. This classification helps businesses tailor their marketing approach to match consumer behaviour.

Convenience goods are purchased frequently and with minimal effort. These include:

• Staples: Items bought regularly such as newspapers, bread, milk, toothpaste, and shampoo
• Impulse items: Products bought without planning, like chocolate bars, chewing gum, and magazines
• Emergency goods: Items purchased when the need is urgent, such as umbrellas during rain or shopping bags

Marketing strategies for convenience goods focus on wide product exposure through mass media like television advertising, prominent display in stores (especially at checkout counters), and ensuring products are easily accessible.

Shopping goods are products where consumers invest time comparing options based on suitability, quality, price, and style. Examples include clothes, shoes, furniture, household appliances, and cars (both new and used).

Marketing for shopping goods requires a broad range of strategies to cater to different purchasing styles. Sales personnel need excellent product knowledge and strong selling techniques because consumers are actively comparing alternatives and seeking advice.

Speciality goods have unique characteristics or strong brand identification that makes consumers willing to make special purchasing efforts. Examples include luxury cars, high-end photographic equipment, and premium computers.

Because these products are often produced in limited quantities with exclusive distribution rights, marketing strategies can be highly targeted towards specific consumer segments. The focus is on exclusivity, quality, and brand prestige.

Unsought goods are products that consumers don't regularly think about purchasing. Examples include smoke detectors, life insurance, encyclopaedias, prepaid funerals, and financial planning services.

Marketing for unsought products must be specific and educational, clearly communicating the benefits of the product or service. Personal selling and direct marketing are particularly important for promoting these products because consumers need to be convinced of their value.

Developing the product

Businesses must continually develop their product range to keep it appealing to the marketplace. Several factors contribute to product success, including commitment to developing unique and superior products, staying aware of changes in consumer tastes, monitoring new competitors, and keeping pace with technological advances. Products can fail due to small market segments, poor marketing strategy choices, changing consumer preferences, or forecasting errors.

The product development process involves five key stages:

Stage 1: Idea development involves generating ideas from various sources including staff input, customer feedback, and market research. Ideas might involve modifying, enhancing (innovating), or extending current products. They can also come from analysing consumer trends or studying competitors' products.

Stage 2: Idea screening evaluates how well the idea aligns with the business's objectives and profile. Key questions include whether the new idea fits within the current product range or represents an extension into new territory.

Stage 3: Idea evaluation involves testing the concept through market analysis to determine demand and customer reaction. This stage includes identifying target markets, calculating production costs, and forecasting potential sales and profits.

Stage 4: Developing the product is where the actual product is produced and market-tested. Marketing strategies are determined during this stage, and alterations may still be made to the final product based on feedback from market testing.

Stage 5: Commercialisation is when the product enters the marketplace through a product launch and accompanying marketing campaign. The product's success is then measured against the forecasts made during the evaluation stage.

Understanding product mix

Many businesses offer more than one product for sale. The product mix refers to the full set of all products being sold by a business. The mix has two main dimensions:

Breadth is measured by the number of different product lines the business carries. For example, an electrical retail store might carry refrigerators, freezers, washing machines, dryers, microwaves, and dishwashers (collectively known as 'white goods').

Depth is determined by the variety of sizes, colours, and models offered within each product line. For instance, within the refrigerator product line, depth would be measured by the number of different brands stocked and the various models available for each brand.

A product line is a broad group of products intended for similar uses with reasonably similar physical characteristics. Understanding product mix helps businesses manage their inventory and marketing strategies effectively across their entire range of offerings.

The role of branding

A brand is the distinguishing name, term, symbol, or design used to identify one manufacturer's product and differentiate it from competitors. Branding is highly influential in marketing, creating either positive or negative images in consumers' minds. Through product differentiation, businesses develop and advertise products to make them appear distinct from others on the market.

The business with the largest market share is known as the brand leader or market leader. A successful brand is an extremely powerful asset – it has been estimated that a strong brand may account for between 50% and 70% of a business's total value. This demonstrates why businesses invest heavily in building and protecting their brands.

What makes a brand connect with consumers? It could be emotional appeal, market leadership, perceived high quality, or being seen as value for money. Successful brands typically embody several characteristics that resonate with their target audience.

Importance of brand meanings

Brands can convey multiple layers of meaning to consumers. Taking luxury car manufacturers like Mercedes-Benz, BMW, and Tesla as examples:

Attributes refer to the product's physical and performance characteristics. All three car brands suggest expensive, well-built, well-engineered, long-lasting, and high-prestige automobiles.

Benefits include both functional and emotional advantages. Functionally, these cars are durable and long-lasting. Emotionally, owning one can make people feel important and admired. The availability of zero-emission models also provides environmental benefits.

Values reflect what the manufacturer stands for. These car brands communicate values of high performance, safety, and prestige.

Culture represents the organisational culture of the business. Mercedes-Benz, BMW, and Tesla project cultures of efficiency, precision, and high quality.

Personality gives the brand human-like characteristics. Mercedes-Benz projects safe and conservative motoring, BMW emphasises high status and on-road performance, while Tesla conveys quiet innovation and environmental consciousness.

Type of user creates an image of who typically uses the product. Each of these brands attracts different consumer profiles based on lifestyle, values, and personal identity.

Brand stretching and leverage

Brand stretching occurs when businesses use an established brand name as an umbrella for a range of unrelated products. Leverage means using something to maximum advantage. Luxury car manufacturers exemplify both concepts by marketing branded clothing, key chains, and other trinkets. These non-car product lines can actually be more profitable than selling cars themselves, demonstrating the power of strong brands.

Businesses can also register brand names to protect their use. Over time, some brand names become so successful they enter common language as the generic name for a product type. Examples include "gladwrap" for plastic cling wrap, "texta" for felt-tip pens, "esky" for portable coolers, and "blu tack" for reusable adhesives. This level of brand recognition provides significant marketing advantages.

Colour as a branding tool

Businesses increasingly want to monopolise specific colours as part of their brand identity. Several legal cases have involved disputes over colour use in branding. For example, Red Bull successfully won the right to exclusive use of red, blue, and silver in their product category, while Clark Rubber secured protection for their blue and red on yellow background colour scheme.

The choice of packaging

Product packaging serves multiple important purposes:

Advertising function: Packaging acts as a mobile advertisement, attracting attention and drawing in new customers. Eye-catching design can make products stand out on crowded shelves.

Brand building: Packaging builds image and brand recognition while positioning the product in the marketplace. Consistent packaging design across a product range creates strong brand identity.

Product differentiation: Well-designed packaging helps distinguish the product from competitors' offerings.

Protection: Packaging protects products through primary wrappers, secondary packaging, and transportation packaging, ensuring products reach customers in good condition.

Tamper-proofing: Secure packaging provides safety assurance to consumers and protects product integrity.

Information provision: Packaging communicates essential details including ingredients, manufacturer information, country of origin, and usage instructions.

Colour choice is one of the most critical packaging considerations. Consumers associate specific colours with particular feelings and products, influencing their purchasing decisions.

Labels provide additional information about the product, manufacturer, trademark, or retailer. They can be attached directly to products or integrated into packaging. When designing labels, businesses must comply with the Competition and Consumer Act 2010, which prohibits false, misleading, or deceptive information.

P2 – price

Understanding price

Price is the amount of money customers pay for a product or service. While businesses set prices, customers ultimately determine whether those prices are correct through their purchasing decisions. Pricing levels significantly influence revenue and profit, helping determine a business's financial success or failure.

Correct pricing decisions are among the most important issues facing marketing managers. Businesses often apply different pricing methods across their product portfolio, depending on production costs, the product's stage in its life cycle, and competitive market conditions.

Methods of determining price

There are three main approaches businesses use to set prices:

Cost-based or cost-plus pricing enables businesses to recover all costs (both fixed and variable) associated with getting products ready for the marketplace. Businesses calculate their break-even point, then work out costs on a per-unit basis. A standard percentage mark-up (representing the desired profit margin) is added to the unit cost to arrive at the sale price. This method ensures costs are covered while generating profit.

Competition-based pricing recognises that customers compare prices and quality between competing products. To remain competitive, businesses must price products within a similar range to competitors – this is called establishing the going rate. While price matters, businesses also focus on other differentiators like customer service and loyalty programs to attract customers. Businesses wanting to become market leaders may adopt a price leadership strategy, effectively setting prices that competitors follow.

Marketing strategy pricing varies depending on whether a business is introducing a new product or selling an established one. For new products, businesses might use:

Penetration pricing sets prices lower than competitors or the normal price level to encourage customers to try the product and establish long-term relationships. The hope is that customers will remain loyal when prices eventually rise to normal competitive levels. This strategy might include introductory discounts like "two for the price of one" offers or free samples.

Skimming pricing applies to high-quality products with strong image associations. The market is typically small without significant growth potential. Prices are set high relative to competitors to "skim" the cream of the market – capturing customers willing to pay premium prices.

For established products, businesses might employ:

Loss leader pricing sets prices low on specific products to attract customers who will then purchase other products with higher profit margins. Supermarkets commonly use this strategy to drive foot traffic.

Psychological pricing makes prices appear lower than they actually are. For example, $19.99 seems significantly cheaper than $20.01, even though the difference is only two cents. Consumers also associate certain products with high prices based on image and quality expectations – perfume and cosmetics often carry high prices despite relatively low production costs, largely due to expensive packaging that creates an exclusive image.

Complementary pricing sets low prices on one item and high prices on related items normally purchased together, such as a suit sold with a shirt and tie, or a coat paired with a scarf.

Factors affecting price

Multiple factors influence pricing decisions:

Costs form the foundation of pricing, as businesses must cover expenses to survive. Understanding both fixed and variable costs is essential for setting viable prices.

Business objectives particularly profit targets, drive pricing decisions. Businesses must price products to achieve their financial goals.

Marketing strategies influence pricing approaches. Different strategies (penetration, skimming, etc.) result in different price points.

Competition affects pricing as businesses must remain competitive within their market. Understanding competitors' pricing helps inform pricing decisions.

Customer perception of value matters because customers must believe they're receiving fair value. If prices seem too high relative to perceived benefits, customers will seek alternatives.

Supply and demand dynamics impact pricing, particularly for seasonal products like fresh fruit and vegetables. When supply is high, prices typically fall to encourage purchasing. Demand relationships vary by product type:

Price inelastic products experience little change in demand when prices fluctuate. These are typically essential items like milk, bread, and eggs – people continue buying them regardless of modest price increases.

Price elastic products see significant demand changes when prices change. These are usually non-essential items like movie tickets, leisure travel, and restaurant meals – people can easily reduce consumption when prices rise.

Legal constraints also affect pricing. The government may regulate maximum prices for staple goods like milk, bread, eggs, and petrol. The Competition and Consumer Act 2010 prohibits certain pricing practices including:

• Price fixing: Suppliers formally arranging with competitors to fix the same price for products
• Resale price maintenance: Product suppliers specifying minimum prices below which retailers cannot sell
• Misuse of market power: Dominant suppliers using their position to eliminate competitors, prevent market entry, or deter competitive practices

Product life cycle position influences pricing strategies. New products might use skimming or penetration pricing, while mature products might employ different approaches to maintain market share.

P3 – place

Understanding place

Place encompasses the distribution channels businesses use to market products to customers. It's crucial that businesses position their products correctly so they're accessible to end users when and where customers want them. Place decisions ensure the right quantity of product reaches the right location at the right time. It also involves how products are displayed to consumer groups, whether in physical shop windows or online.

Distribution channels provide the link between manufacturers and customers. There are two main types: direct and indirect.

Direct distribution channel

A direct distribution channel enables manufacturers or producers to sell products directly to customers without intermediaries. This method typically requires businesses to invest in facilities and staff for selling, but provides complete control over the marketing function. The internet has significantly increased the popularity of this distribution channel, particularly for services like insurance and banking where customers can research options and make purchases entirely online.

Indirect distribution channel

An indirect distribution channel involves using retail outlets or other intermediaries where products are stored and displayed. This is popular when consumers want to purchase an assortment of items, purchasing transactions are relatively low in value, and the market is fragmented and dispersed.

Online department stores have become an established business model. Examples include Kogan.com, recognised as Australia's premier online shopping destination offering 24/7 access to products ranging from electronics to homewares, and Temple & Webster, Australia's leading online-only furniture and homeware retailer.

Many retailers now adopt a multi-channel approach, selling products both online and in physical "bricks-and-mortar" stores. Some use the "click-and-collect" model to serve time-poor customers who order online and pick up in-store. These distribution models allow retailers to implement different pricing strategies across channels.

Advantages of indirect distribution:

• Manufacturer passes holding and storage costs to retailers
• Manufacturer gains freedom to focus on production
• Customers can view wider ranges and make price comparisons
• Retailers can create online presence complementing physical stores
• Online retailers can provide 24/7 access unavailable in physical stores

Disadvantages of indirect distribution:

• Profit margin is shared with retailers or intermediaries
• Customers can easily compare prices across multiple sources
• Marketing decisions, particularly pricing, move out of manufacturer control
• Retailers must maintain appealing web presence if selling online

Logistics

The process of planning and organising transportation, warehousing, and storage of goods is known as logistics. Having an efficient logistics operation provides businesses with strong competitive advantages by ensuring products reach the right place at the right time in optimal condition.

P4 – promotion

Understanding promotion

Promotion is the most public aspect of marketing, involving businesses communicating with actual or potential customers. It informs people about the business's products or services while convincing them of the product's ability to satisfy their needs or wants.

For promotion to be effective, businesses must establish clear objectives – either short-term or long-term. Short-term objectives might promote an end-of-season sale, while long-term objectives might aim to change the entire business image. Other promotional objectives include:

• Raising consumer awareness of new or existing products
• Reminding consumers of a product or service's existence
• Promoting distinctive features or superior quality compared to competitors
• Creating and reinforcing brand image or personality
• Correcting misleading reports or reassuring the public after crises

Once promotional objectives are set, businesses decide on the appropriate promotional mix – the combination of promotional techniques used to sell particular products or services.

Advertising

Advertising is a powerful mass communication medium designed to inform, compare and persuade, or remind and reinforce.

Informative advertising provides potential customers with technical details, product use, key features, price, and purchase locations. It may also communicate social good the company does. This approach is particularly important when introducing new products.

Comparative and persuasive advertising creates distinct image or brand identity for products. It persuades consumers to buy one product over competitors when there's little actual difference between options. Marketers build quality perceptions and differentiation in consumers' minds. Larger, established brands use this strategy to encourage brand switching.

Reminder and reinforcement advertising applies to entrenched market products. It reminds consumers of the product's presence and reinforces what it offers, preventing switches to competitors' products.

Types of advertising media

Selecting appropriate media is crucial for targeting particular market segments effectively. Common advertising media include:

Newspapers (national, state, and local, both print and online) provide space for large amounts of detailed information. Advertisement sizes vary from full-page to very small. Full-page colour advertisements in major newspapers like the Herald-Sun cost over $70,000 on weekdays, more on Saturdays. Newspapers run special-interest sections targeting particular markets (e.g., travel sections) and operate multi-media platforms extending to desktop, mobile, and tablet coverage.

Television is a very expensive medium providing high impact through visual elements, movement, sound, and special effects. It suits simple messages delivered in 30-second time frames and allows product demonstrations. However, potential audiences can easily skip advertisements through channel surfing, time-shifting with digital video recorders, or streaming services.

Radio provides wide reach and ability to target market segments, particularly based on age, music style, and interests. However, it often plays in the background while people work, study, or drive, meaning attention levels can be low.

Magazines appeal due to high-quality print and colour reproduction. They're ideal for fashion items, food, and glamour-associated products. Magazines are usually read leisurely and passed to multiple readers, extending advertisement longevity.

Internet is the fastest-developing advertising medium, providing businesses opportunities to advertise to both local and global markets. It gives customers easy access to product details and prices with comparison capabilities. Pop-up and pop-under advertising can interrupt user sessions to display messages or products.

Social media platforms are extremely popular, with more than 17 social networks worldwide having active users. Businesses must create social media marketing strategies to reach these audiences effectively.

Direct mail is the most personal and selective advertising form. Businesses can purchase pre-sorted mailing lists based on demographic or target segmentation characteristics. While printing and postage costs are incurred, there's less waste circulation compared to mass media.

Outdoor advertising includes billboards, neon signs, bus and tram shelter displays, railway stations, taxi backs, and bus sides. It can reach large percentages of the population but is only appropriate for very simple or reminder messages.

Yellow Pages available in print and electronic formats, is a low-cost medium used particularly by smaller businesses. The print format has greater penetration in regional areas.

Direct marketing and selling

Direct marketing develops closer relationships with customers through targeted communication. Marketing tools include direct mail, directed catalogues, mail-outs, phone calls, personal visits, and emails. Telemarketing has expanded direct selling, with sales staff selling products over the telephone rather than face-to-face.

Telemarketing saves money and time by eliminating travel requirements with no guarantee of sales. Sales personnel work through larger portions of target markets in less time, arranging both payment and delivery details simultaneously. It's cost-efficient with all staff located at central call centres without needing transport. Commission-based payment motivates sales staff to increase performance.

Advantages of direct marketing/selling:

• Allows one-to-one personalised communication with targeted markets
• Increases opportunities for generating customer loyalty and higher frequency
• Provides flexibility in approach

Disadvantages of direct marketing/selling:

• May be perceived as invasion of privacy
• Creates negative image with unwanted phone calls, particularly at meal times
• Relatively expensive due to high costs of making direct contact rather than broad advertising approach

Sales promotion

Sales promotion techniques entice customers to purchase products by believing they're gaining economic advantages. Incentives may be immediate (bonus packs, free samples) or delayed (collecting coupons, saving points for rewards). Promotional objectives must clearly define whether businesses want short-term sales increases or long-term customer relationships.

Advantages of sales promotion:

• Provides additional support reinforcing advertising campaigns
• Offers short-term incentives increasing sales without long-term pricing implications
• Provides immediate feedback on effectiveness

Disadvantages of sales promotion:

• Can be easily copied and improved upon by competitors
• Short-term solution not generally leading to long-term sales improvement

Sales promotion techniques target both consumers and retailers. Economic advantages for retailers may include buying allowances, cooperative advertising, point-of-sale materials, trade shows, and training to motivate staff for improved sales performance.

Personal selling

Personal selling can be the largest single operating expense for businesses. To make this cost-effective, sales personnel require adequate training in product knowledge and interpersonal skills. Modern professional salespeople act as problem-solvers whom customers trust for accurate product advice and ethical behaviour, forming the basis of relationship marketing.

Advantages of personal selling:

• Customers deal with knowledgeable salespeople
• Customers can ask questions and receive immediate answers
• Customers get immediate feedback, even through body language or facial expressions

Disadvantages of personal selling:

• Requires trained staff and adequate staffing levels to satisfy customer needs
• Largest single operating expense, costly on per-customer basis
• May only reach limited numbers of customers unless large sales force is employed

Internet marketing (website)

Business websites are often customers' first experience with the business, making good impressions crucial. This promotion technique involves all online marketing activities used to promote and sell goods and services in business-to-business (B2B) or business-to-consumer (B2C) transactions. Web addresses should be included in all promotional activities and communications such as advertisements, sales brochures, specification sheets, letterheads, business cards, and even delivery vehicles.

Mobile marketing

With more mobile phones than people in Australia, mobile phones have become important marketing tools. Smartphones and sophisticated handsets enable businesses to use location-based services (GPS functions) for target marketing to people in specific geographic areas.

Publicity and public relations

Publicity is a "free" form of mass communication different from paid advertising. Publicists attract favourable attention to businesses and their offerings without paying media costs. Common tools include press releases, product launches, special events, lobbying, and sponsorships. Public relations activities involve communication aimed at developing favourable corporate and product images through advertising and/or publicity, supporting other marketing strategies.

Advantages of publicity and public relations:

• Low cost, as business generates the communication
• High credibility compared to paid advertising
• Allows businesses to build positive brand image

Disadvantages of publicity and public relations:

• Difficult to maintain total control over publicity received
• Can be negative as well as positive

P5 – people

The importance of people in marketing

Every person in a business who has contact with customers makes an impression. Customers often find it difficult to separate the product or service from the staff member providing it. Staff can therefore have profound effects – positive or negative – on customer satisfaction levels.

Staff must be appropriately trained and motivated, have the right attitude, and be suited to their roles. When customers are happy with how they're treated, they can become powerful advocates for the business and its brand. Pre-sales support and advice combined with the same level of post-sale service can often become more important to customers than the price paid for products.

Examples of people-focused marketing

Australian businesses recognising the importance of well-trained staff include paint manufacturer Dulux Group. To support customers (hardware stores), Dulux has established a training academy providing on-site courses run by qualified and experienced trainers knowledgeable about Dulux Group products. Recognising the importance of not taking staff away from retail outlets, the Dulux Training Academy brings courses to shop premises, delivering training from mobile training trailers.

P6 – physical evidence

Understanding physical evidence

Physical evidence takes various forms in marketing:

Evidence showing service performance: This reminds or reassures consumers that services took place, whether experiences were positive or negative. Physical elements exist for almost all services, even when customers don't pay for physical products. For example, doctor visits result in updated medical records and Medicare claims. Hairdresser visits involve recorded contact details, treatment records (such as foil and dye colours), and future appointment bookings. Insurance companies provide printed advertising material followed by formal quotes, either in print or via email.

Physical environment: This is where consumers experience services. For air travel, this includes aircraft type, ambient conditions (temperature, smell, sound, colour, music, noise), seating layout, and directional signs. Ambient conditions impact consumers both positively and negatively during service experiences. Marketers must match ambience to service delivery – bakery smells in supermarkets, relaxing music in health spas, or loud music and bright lights at pop concerts.

Business signs and symbols: These support business image and identity, including buildings, offices, or shops and how they're furnished. Are premises prestigious, purely functional, or minimalistic? Physical evidence also appears in brochures, packaging, web pages, signage, business cards, and paperwork (invoices, tickets). For example, AFL matches provide numerous physical evidence examples – tickets with team logos, players in team colours and clothing, and iconic stadiums like the MCG with their own physical presence and atmosphere.

P7 – process

Understanding process

Customer satisfaction is increasingly important to marketing success. The process through which customers find out about businesses, research products, choose and purchase products, receive delivery, and experience staff behaviour are all crucial factors for customer satisfaction.

First impressions are always important – whether gained offline by visiting shops or offices, or online via websites. Either way, businesses must strive to make impressions "good". Processes within businesses should be designed for customers' benefit, meaning:

• Keeping customers fully informed either personally or via electronic media
• Keeping wait times to a minimum, whether face-to-face or via business websites
• Ensuring staff are knowledgeable, courteous, and helpful
• Providing efficient customer service

Well-designed processes enhance customer experiences, build loyalty, and create positive word-of-mouth marketing that attracts new customers.