Page 336 - Introduction to Business

310 PART 3 Marketing

elasticity. When pricing products to be sold internationally, companies need to cope
with the concepts of transfer pricing and dumping. Retailers also need to pay close
attention to markups and markdowns when developing their pricing strategies.

Guidelines for Developing the Marketing Mix

LEARNING OBJECTIVE 1
Explain how a marketing mix is developed.
The product or service being marketed and the markets to which it is directed are
important factors that must be considered as a marketing mix is developed. Indus-
trial products, for example, are not usually marketed through channels of distribu-
tion, but consumer products will ordinarily use such channels as wholesalers and
retailers. If women prefer to buy perfume in department stores, then perfume had
better be available in department stores. If men will not pay more than $39.95 for a
certain type of shoes, then shoe stores should price this item below $39.95.
All elements of the marketing mix decision must be made together; they cannot
be made separately. While a price of $10 for a product might generate a certain level
of revenue, a price of $8 and an advertising expenditure of $100,000 might result in
greater revenues. The point is that in considering two elements of the marketing
mix—price and promotion—the company has improved its performance.
A company cannot use the same marketing mix forever; the mix must be mod-
ified over time as changes in the markets to which products and services are
directed occur. For example, if customers now prefer to purchase a certain product
at discount stores like Wal-Mart instead of at department stores, then channels of
distribution should be changed to discount stores. This scenario is exactly what
happened in Japan over the last decade as that economy stagnated. Japanese
housewives would not buy on a price basis when the economy was robust; this was
an admission that their husbands could not adequately provide for them. As the
economy continued to be sluggish, many Japanese housewives switched buying
from pricey department stores to lower-priced discounters.

reality The next time you see a television advertisement for an automobile, jot
CH ECK down the elements of the marketing mix that were contained in the
advertisement.

Developing the Product Mix

product mix The combination of design, When executives put together a product mix—the combination of design, quality,
quality, brand name, package, warranty,
brand name, package, warranty, and product-line width and depth—they need to
and product line width and depth a
company uses for its product lines make decisions about specific elements of products, provide a process for develop-
ing new products, and have a framework for managing existing products.

Product Elements

LEARNING OBJECTIVE 2
Describe the basic elements of a product.
product design The tangible aspects of Product design refers to the tangible aspects of a product: its materials, shape,
a product, including materials, length,
length, width, height, hardness or softness, and so on. These tangible aspects affect
width, height, and hardness or softness
how a product looks and how it performs; they are important aspects in determin-
ing how well a product will be accepted in the marketplace.

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