The 5 P’s product, price, promotion, placement, and packaging are interdependent and need to work in synchronization with each other. If one element changes it means that the whole marketing mix will alter. This can be seen in how the marketing mix varies when different marketing strategies are implemented. If the firm wants to adopt a skimming price strategy then the price will be high. It means that the product will have to be technically advanced; trendy or having a strong USP.
This strategy will be followed if the product has, or is anticipated to have an inelastic demand due to brand loyalty or market leadership or if the company is operating in a niche market. Less competition, patents and copyrights and a boom in the economy are some of the other factors why skimming might be adopted. The Apple iPod is adopting a skimming price strategy first of all because it is technologically advanced, patented, and its producers want to recover the money spent of intensive R&D.
Skimming strategies are mostly adopted at the introduction, because with the passage of time competition increases as the features of the product are copied. But some firms may want to develop loyalty at first without skimming, and then skim the market at the maturity stages of the PLC. Firms which are operating in a niche market, are market leaders or are following market leaders will most likely adopt the skimming strategy.
The promotion will be a fusion of both above and below the line methods. The firm would most likely advertise through specialist magazines and internet sites, as this will reduce wastage and reach the target audience. For example Lufthansa, in order to appeal to business executives advertises in The Economist. If the audience is dispersed then the product may also advertise through television, this will have an audio/visual impact, but it may lead to wastage, as unrelated people would be watching the ad.
Below the line promotion plays an important part in the skimming price strategy. The firm can indulge in direct mail and personal selling. Personal selling is done if the product is technologically advanced and needs demonstration. Victoria’s Secret is an example of a company who successfully used mail catalogues to exploit a niche market. The products can also be displayed at exhibitions and trade fairs, for example many new high-priced cars were shown at the recent New York Annual Automobile Fair.
Companies can also indulge in sales promotion through loyalty cards, product placement (Ferrari in Fast & Furious), Sponsorship (Rolex – Wimbledon), product endorsement (Elizabeth Hurley _ Estee Lauder). Branding plays an important role in the skimming price strategy in order to have a high price product differentiation has to created, and this is done through building a certain brand personality and brand loyalty. ‘Be Delicious’ launched by Donna Karan was a success mostly because of the image of the DKNY label. The product can also have a launch party for socialites, journalists etc, and it can be an effective form of public relationing.
For a product that is adopting a skimming price strategy, the most viable form of placement can direct from the manufacturer to the customer (Emporio Armani outlets) or through retailers (BlackBerry available at mobile outlets) and agents. Wholesalers would not be a feasible option, as there will not be a mass market, so it will lead to wastage. The packaging of a product that is being skimmed, should be attractive and of good quality. The design and colours should be in accordance to the target market (Apple Green ‘Be Delecious – DKNY’ for younger people/ white packaging of Chanel No. 5 for older women). It should carry the brand name and logo if there is one, and should give ingredients, warnings, usage instructions, quantity etc. If the company is indulging in CSR, then it should use recycled material, and inform if the product was not tested on animals.
If the company is indulging a penetration pricing strategy then it means that the product has an elastic demand, is an FMCG, has mass market appeal, intense competition or the economy is in a recession. A product can be penetrated from the introduction stages, or it can first skim the market, and at the time of growth, penetrate, as in the case of Mobilink. An established company with finances should use penetration, because it is an expensive strategy.
The promotional mix should again be a fusion of both above and below the line method. In above the line the company should use mass media such as television, radios, newspapers, billboards and posters. As there is a mass market, there will be less wastage. The advertisements will be persuasive, as the firm will try to build product loyalty because of the threat of intense competition. The below the line methods which should be used are merchandising, as the firm is trying to encourage impulse buying. This can be done through placing the products in a prominent place such as cash counters, getting window displays, or in shelves which are between the eye and waist level, however for this there may be a high slotting fee.
For example Gillette has its own attractive display exclusively for Gillette products in many departmental stores. Another below the line method which is important is sales promotion. This can be done through discount coupons (Pizza hut), loyalty cards (Stop & Shop), Sponsorship (Milk Pak- Cricket matches), product placement (Blackberry in Alicia Keys song) and Product Endorsement (Pepsi – David Beckham).
Public relationing can also be carried out, for example Tetra Pak visits various schools and teaches them the importance of milk in their diets. Branding also plays an important role, because in the FMCG market there are so many substitutes, a certain degree of brand loyalty and product differentiation is important. That is why the new flavours of coke, such as cherry and vanilla carry the Coca Cola logo.
The packaging of a good that is being penetrated should be attractive, but not too expensive. It should be light, and should not add bulk, because the product may have to be transported over long distances. It should carry the ingredients, usage, warnings, expiry date (if it is a perishable good), quantity, and customer service centre contact. It is a good idea for the packaging to be made of recycled material, as this will appeal to ethically conscious people, but recycling would only be done if the company has enough finances, and it does not add to the cost of the product.
The ideal channel of placement is through wholesalers, as the burden is taken of the producer, who concentrates on his core activities. However in some cases, the manufacturer may supply the goods himself to big retail outlets in order to undercut the retailer’s commission (Gillette supplies directly to Al-fateh). Also if an export market is being entered then the mode of distribution would be through agents. For example, even though Clairol products are not produced in Pakistan, they have agents here.