The 7Ps of the marketing mix

The marketing mix is the set of controllable variables the business uses to position its product. The traditional 4Ps extend to 7Ps for services:

• Product — features, quality, design, branding, packaging.
• Price — the strategy and tactics used to set price.
• Place — distribution channels: direct, retailer, wholesaler, e-commerce, multichannel.
• Promotion — advertising, sales promotion, PR, personal selling, digital and social media.
• People — staff skills and service; critical where staff are the product.
• Process — how the service is delivered: queueing, booking, ordering, returns.
• Physical evidence — the tangible cues of an intangible service: the store, uniforms, packaging, website.

Integration is the mark-scoring point: the Ps must be consistent. A premium price with cut-price packaging, sold in a discount shed, destroys the positioning. Judge the mix as a whole.

The product life cycle and extension strategies

The product life cycle plots sales over time: development → introduction → growth → maturity → decline.

Extension strategies delay decline: new packaging, new flavours/variants, a new target market, price cuts, added features, more promotion.

Link to finance: a launch consumes cash (heavy promotion, low sales). Mature products fund the launches. That is exactly the logic behind the Boston matrix.

The Boston matrix

The Boston (BCG) matrix analyses a portfolio of products on two axes: relative market share and market growth.

A healthy portfolio is balanced: cash cows generate the cash that funds stars and selected question marks, so there is a pipeline of tomorrow's cash cows.

Quick check

Pricing strategies

• Cost-plus (mark-up) pricing — add a percentage mark-up to unit cost. Simple, guarantees a margin; ignores competitors and demand.
• Penetration pricing — launch low to win share fast; relies on price-elastic demand and later price rises.
• Price skimming — launch high to recoup R&D from early adopters, then fall (new tech).
• Competitive / price-matching — set price by reference to rivals; common in oligopoly.
• Predatory pricing — price below cost to drive rivals out. Illegal in the UK under competition law.
• Price discrimination — different prices to different groups for the same product (peak rail fares, student tickets).
• Psychological pricing — £9.99 rather than £10.
• Dynamic pricing — algorithmic, real-time pricing by demand (airlines, ride-hailing).

Your turn — cost-plus pricing

Price elasticity of demand (PED)

• |PED| > 1 — price elastic: demand is sensitive. Cutting price raises total revenue; raising price cuts it.
• |PED| < 1 — price inelastic: demand is insensitive. Raising price raises total revenue.
• |PED| = 1 — unitary: revenue unchanged.

Demand is more inelastic when there are few substitutes, the brand is strong, the product is a necessity or addictive, and the price is a small share of income.

Your turn — price elasticity

Your turn — the revenue test

Quick check

Income elasticity of demand (YED)

• YED positive → normal good. If YED > 1 it is a luxury (demand rises faster than income: restaurant meals, new cars).
• YED negative → inferior good: demand falls as incomes rise (value-range food, bus travel).

Why it matters: a business selling luxuries is highly exposed to recession. Knowing YED helps a firm forecast demand across the economic cycle and balance its product portfolio.

Sort the pricing strategies

Tap a description, then tap the strategy it describes.

Sales forecasting — moving averages

A time series of sales contains a trend, seasonal variation, cyclical movements and random shocks. A moving average smooths out the noise so the trend is visible.

Extrapolation projects the past trend forward. It is quick and cheap, but assumes the future behaves like the past — dangerous after a shock, a new entrant or a change in tastes.

Your turn — moving average

Judging marketing performance

Marketing spend must be justified. Common measures:

• Sales volume and value growth against target.
• Market share — the sharpest test, because it strips out market-wide growth.
• Customer acquisition cost and customer retention rate (retaining is far cheaper than acquiring).
• Conversion rate and click-through rate for digital campaigns.
• Brand awareness and customer satisfaction / NPS scores.

Evaluation: a rise in sales does not prove the campaign worked — the whole market may have grown, or a rival may have withdrawn. Compare against market share and the counterfactual.

Match the concept to its meaning

Tap a card on the left, then its partner on the right.

Quick check

Quick check

Measuring the customer experience

Alongside sales and market share, H436 expects you to interpret customer-facing measures:

• Complaints — the number and type; a falling complaint rate suggests improving quality, but silence can also mean customers have simply left.
• Customer feedback and reviews — public, powerful and hard to control; a single viral complaint can outweigh a year of advertising.
• Net promoter score (NPS) — the percentage of promoters minus the percentage of detractors: how likely customers are to recommend you. It links directly to the advocacy stage of the customer journey.