The marketing mix

Business AS · Marketing. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.

Test this topic free All Business AS topics

The idea

The marketing mix is the set of four decisions a business makes to sell a product: Product, Price, Promotion and Place. The four must fit together. A luxury product needs a high price, selective shops and promotion that builds an exclusive image.

Product decisions use two tools. The product life cycle shows how sales change over time: introduction, growth, maturity, decline. The Boston Matrix sorts a firm's products by market share and market growth, so managers can see which to invest in and which to drop.

Price, promotion and place then follow from the product, the customers and the competition. Learn what each pricing method, promotion method and distribution channel is for, and when it suits a business.

Rules to remember

Goods are tangible (can be touched and stored); services are intangible and are used as they are produced. A USP is a feature that no rival product offers.
Life cycle: introduction (low sales, usually a loss), growth (sales rise fast, profit appears), maturity (sales level off, competition is strong), decline (sales fall). An extension strategy, such as a new market or a new version, delays decline.
Boston Matrix: star = high share, high growth; cash cow = high share, low growth; question mark (problem child) = low share, high growth; dog = low share, low growth. Cash from cash cows funds stars and question marks.
Skimming = high launch price, lowered later. Penetration = low launch price to win market share. Competitive = price set in line with rivals. Psychological = e.g. $9.99 instead of $10.
Price discrimination = different prices to different groups for the same product. Dynamic pricing = price changes as demand changes.
Cost-based pricing: selling price = unit cost + (mark-up % × unit cost).
Advertising informs or persuades through paid media; sales promotion is a short-term incentive to buy (e.g. a discount). Channels: producer → consumer (direct), producer → retailer → consumer, producer → wholesaler → retailer → consumer.

Common mistake

Students mix up skimming and penetration, and stars and cash cows. Skimming starts high; penetration starts low. A cash cow has a high share of a slow-growing market, so it earns cash without needing heavy investment.

Worked example

A product has sales of $6m. Its largest rival has sales of $4m. The market is growing at 12% a year, which is high. Where does the product sit in the Boston Matrix?

Relative market share = firm's sales ÷ largest rival's sales = 6 ÷ 4 = 1.5.
A value above 1 means the firm is the market leader, so market share is high.
Market growth of 12% is high.
High share and high growth together describe a star.

Answer: It is a star: it needs investment to keep its lead in a growing market.

Ask about this

Type what you are stuck on. The helper finds the explanation, worked examples and the notes to read, free and instant.

Read the full notes

Keep going

← Market research The nature of operations →Take a Business AS test