International Marketing in Germany – From a cultural perspective

 
2.2
 
The Marketing Mix 
The marketing mix is one of the most dominating ideas in modern marketing. It includes 
everything that a firm can do to influence the demand for its product. It is used to control and 
arrange companies’ marketing actions in a tactical way in the subgroups: price, promotion, 
place and product.
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To be able to fully understand the issues of this thesis it is important to have a basic 
knowledge regarding the marketing mix and its components. An overview over its ingredients 
is presented in figure 2.1
14
Kotler, P. et al., 
Principles of Marketing,
(2005),
 
p. 34 

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Figure 2.1 The Theoretical Marketing Mix
PROMOTION
-Advertising 
-Personal selling 
-Sales pro motion 
-Pub licity
PRODUCT
-Quality 
-Fea tures 
-Optio ns 
-Style 
-Brand name
-Packaging 
-Sizes 
-Services 
-Warranties 
-Returns
PRICE
-L ist p rice 
-Discoun ts 
-Allowances 
-Paymen t period 
-Credit terms
PLACE
-Chan nels 
-Coverage 
-L ocation 
-Inven tory 
-Transport
TM M
Targe t marke t
Source:
Molnár, J. & Nilsson Molnár M., 
International Marketing, Negotiations and 
Business Deals,
(2003), p. 4 
2.2.1
 
Price 
The first P in the marketing mix represents the price. Kotler et al. define it in the following 
way: 
“The amount of money charged for a product or service, or the sum of the values 
that consumers exchange for the benefits of having or using the product or 
service.”
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The price as a marketing mix tool includes factors like list price, discounts, allowance, 
payment period and credit terms to be able to reach to the target market.
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It has to be 
coordinated with the rest of the marketing mix since the price is a strong signal. For example 
if positioning in the premium market the price also has to signal it. The price is also an 
indicator of the quality, which means that consumers tend to believe that the higher price the 
higher quality.
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It differs with regard to the rest of the marketing mix, since it creates 
revenues whereas the others are about spending money.
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List price is the price without any discounts.
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Discounts are a price reduction of the list price. 
Allowance is a deduction of the list price with a certain amount of money.
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Payment period is 
the time until the invoice has to be paid. Credit terms are the conditions that the buying 
company needs to follow regarding a credit. 
15
Kotler, P. et al., 
Principles of Marketing,
(2005), p. 665 
16
Molnár, J. & Nilsson Molnár, M., 
International Marketing, Negotiations and Business Deals,
(2003) p. 4 
17
Kotler, P. et al., 
Principles of Marketing,
(2005), p. 668 
18
Kotler, P., 
Kotlers Marknadsföring, 
(1999), p. 127 
19
Ibid, p. 128
20
Kotler, P. et al., 
Principles of Marketing,
(2005), p. 693 

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The pricing decisions are affected by external environmental factors as well as internal 
company factors. Internal can be: marketing objectives, marketing mix strategies, costs and 
organization for pricing. External can be: nature of the market and demand, competition, other 
environmental factors such as economy, resellers and government.
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A company can apply different pricing strategies such as cost-based pricing, value-based 
pricing or competition-based pricing. In cost-based pricing, costs decide the lowest price 
producers should charge for the product. Production, distribution, selling and rate of return 
which all have to be covered by the price. This means that a company with lower costs can 
sell their products cheaper. This cost based pricing strategy is commonly used.
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In value-
based pricing, pricing occurs according to perceived value. This means that the company 
starts by setting a target price according to perceived value of the product for the customer 
and thereupon the rest of the product decisions such as product design, features and afforded 
costs etc. are derived from the price (See figure 2.2).
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In competition-based pricing, the 
company sets the price with regard to competitors’ similar products.
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