MARKETING NOTES

Chapter 1 and 2
Marketing
Definition: Organisational function and a set of processes for creating, communicating and
delivering value to customers and for managing customer relationships in ways that benefit
the organisation and its stakeholders.

Goal: - attract new customers by promising superior value

Keep and grow current customers by delivering satisfaction

Social marketing: Application of commercial marketing technologies to the analysis,

planning, execution and evaluation of programs designed to influence voluntary behaviour of
target audiences in order to improve their personal welfare and that of society.
Demarketing: Aim is to reduce demand/ temp or permanent
CORE CONCEPTS OF MARKETING
1. Customer Needs and Wants
Need- State of felt depravation
Wants-The form human needs take as they are shaped by culture and indiv.personality
Demands- Human wants, backed by buying power.
2. Market Offerings
-Combination of physical G&S, info or experiences offered to satisfy a need/want.
-Marketing Myopia~ mistake of paying more attention to specific products a company
offers than to the benefits and experiences produced by these products.
3. Customer Satisfaction and Value
Customer satisfaction- Conscious evaluation of product or service feature/ product
itself.
Customer value- Benefits a customer gains- costs of obtaining it
4. Exchanges and Relationships
Exchange- Act of obtaining a desired object by offering smth in return.
5. Market
Market- set of all actual or potential buyers of a G&S.
Potential- Share a need or want tht can be satisfied thru exchange
Actual- those that exhibit the need, have resources and authority in exchange and are
willing to offer resources in exchange.

Marketing Process
1. Understand the Marketplace and customer Needs and Wants

Research the customers and marketplace

Manage marketing info. And customer data.

CREATING VALUE FOR

CUSTOMERS

2. Design a Customer-driven Marketing

Strategy
Select customers to serve: Market
Segmentation & Targeting
Decide on Value Proposition:
Differentiating and Positioning

3. Construct Integrated Marketing

Program that delivers superior value
Product and service design- build strong brands
Pricing- create real value
Place- Manage demand and supply chains
Promotion- Communicate value proposition
4. Build Profitable Relationships
Customer relationship management: Build strong r/s w chosen consumers
Partner r/s management: Build strong r/s w marketing partners.
_______________________________________________________________

5. Capture Value from Customers to Create Profit and Customer Equity

Create satisfied loyal customers
Capture customer lifetime value
Increase share of market and share of customer

CAPTURING VALUE
FROM CUSTOMERS

MARKETING MANAGEMENT PHILOSOPHIES

Inside out view- Sell what company makes rather than what customer wants
Outside in view- Focus on satisfying customer needs and wants as pathway to profits

Production Concept
Consumers favour products that are available and highly affordable
FOCUS: improve production and distribution efficiency
Product Concept
Consumers favour products that offer most in:

Quality
Performance
Innovative features

FOCUS: continuous product improvements and technical innovations

Can lead to marketing myopia

Selling Concept

Consumers wont buy enough of the products unless company undertakes large-scale selling
and promotion effort.
FOCUS: Selling and promotion effort. Short term sales. Aggressive selling (Risk: no focus on
building long term cust. r/s)
-Typically practiced with unsought goods (insurance or consultancy services)

Marketing Concept
Achieving org. goals depends on knowing needs and wants of target markets and delivering
satisfaction better than competitors.
Starts with

Well defined market

Focus on cust. Needs and wants
Integrates all marketing activities that affect customers
Yield profit by creating lasting r/s with customers

Societal Marketing Concept

Questions whether the pure marketing philosophy overlooks conflicts between consumer
short run wants and consumer long run welfare.
Def: The idea that a companys marketing decisions should consider consumers wants,
companys requirements and societys long run interests.
Considerations:

Society (Human welfare)

Company (Profits)
Consumers (Want satisfaction)

FOCUS: Sustainable marketing, socially and environmentally responsible marketing that

meets present needs of consumers and businesses while preserving/enhancing ability of
future generations to meet their needs.

Chapter 5
Marketing environment- Actors and forces outside marketing that affects marketing
managements ability to develop and maintain successful transactions with its target
customers.

The Microenvironment

- The forces close to the org. that affects ability to serve its customers

The organisation
Take other company groups into account- forms internal environment.
Top management sets goals, company mission, broad strategies and policies.
Marketing managers make decisions within strategies made by top. Must work
closely with other departments.

Marketing intermediaries
Help company promote, sell and distribute finals products to buyers.
Resellers
Distribution channel firms that help company find customers and make sales to
them
Physical Distribution Firms
Stock and move goods from points of origin to destination. Warehouse.
Transportation.
Marketing Services Agencies
-Marketing research firms
-Advertising agencies
-Media firms
-Marketing consulting firms
Help company target and promote products to right market.
Financial intermediaries
-Banks, credit companies, insurance companies
Help finance transactions or insure against the risks associated with buying and
selling of goods.

Customers
Consumer markets
Indiv. & households that buy for personal consumption
Business markets
Buy G&S for further processing or use in their production processes.
Reseller markets
Buy G&S to resell at profit
Government markets
Gov agencies buy G&S to produce public services or transfer to those who need
them.
International markets
These buyers (above) in other countries.

Competitors
Company must provide greater customer value and satisfaction than competitors.
Must gain strategic advantage by positioning offerings strongly against
competitors offerings in mind of consumers. Firm size and industry position
should be considered.

Publics
Any group that has actual or potential interest in or impact on an organisations
ability to achieve its objectives.
Financial publics
Influences companys ability to obtain funds. Banks/Investment
Analysts/Shareholders
Media publics
Carries news, features and editorial opinion. Newspapers/Magazines/Television
Stations/Blogs
Government publics
Must take government developments into account. Marketers must consult lawyer
on issues of product safety, truth in advertising etc.
Citizen-action publics
Marketing decisions may be questioned by consumer organisations, environmental
groups, minority groups etc. PR department can help in stay in touch.
Local public
Includes neighbourhood residents and community organisations.
Large companies normally create departments and programs that deal with local
community issues and provide community support.
General public
Need to be concerned about general public attitude towards product and activities.
Public image will affect buying behaviour.
Internal public
Includes workers, managers, volunteers and BOD. Newsletters etc can be used to
motivate internal publics. Positivity spills over to external publics.

Suppliers
Provide resources needed by company to produce G&S. Must watch supply
availability and costs. Supply shortages/delays, labour strikes etc can cost sales in
short run and damage customer satisfaction in long run.

The Macroenvironment
The larger societal forces that affect the whole MICROenvironment.

Demographic
-The study of human populations (size, age, gender, density, location etc.)
E.g factors:

Changing age structure of population, the changing family, geographic shifts in

population, better educated, more white-collar population, increasing ethnic
diversity

Economic
-Factors that affect consumer buying power and spending patterns. Total buying
power depends on current income, prices, savings and credit
E.g factors:
Changes in income, changing consumer spending patterns (Engels laws)

Natural
-Involves natural resources that are needed as inputs by marketers or are affected
by marketing activities.
E.g factors:
Shortages of raw materials, increased costs of energy, increased pollution, gov.
intervention in natural resource management.

Technological
-Forces that affect new technologies, creating new product and market
opportunities.
E.g factors:
Fast pace of technological change, high R&D budgets, increased regulation.

Political
-Law, government agencies and pressure groups that influence and limit various
organisations and individuals in a given society.
E.g factors:
Legislation regulating business, increased emphasis on ethics and socially
responsible actions.

Cultural
-Made up of institutions and other forces that affect societys basic values,
perceptions, preferences and behaviours.
E.g factors:
Persistence of cultural values
Subcultures- groups of people with shared value systems based on common life
experiences or situations. Shifts in secondary cultural values

Chapter 6
Marketing Information System (MIS) consists of people, equipment and procedures
used to gather, sort, analyse, evaluate and distribute the needed, timely and accurate
information to marketing decision makers.

Information needed can be obtained from:

Internal data
Electric collections of consumer and market information obtained from data
sources within company network.
Can be accessed more quickly and cheaply.
May be incomplete/In wrong form for making marketing decisions.

Marketing Intelligence
Competitive marketing intelligence: The systematic collection and analysis of
publically available info about competitors and developments in the marketing
environment.

Marketing Research
Marketing research: The systematic gathering, recording and analysing of data
relevant to a particular market.

Marketing Research
Marketing research process:
1. Defining problem and research objectives.
Types of objectives:

Exploratory research- Gather preliminary info/ help define problems better/suggest

hypothesis
Descriptive research- To describe marketing problems/ situations or markets better
Causal research- To test hypotheses about cause-and-effect relationship.
2. Developing research plan for collecting information.
Outlines:
Sources of existing data
Research approaches
Contact methods
Sampling plans
Research instruments
Gathering Secondary Data
Information that already exists somewhere, having been collected for another purpose.
Quickly and at lower cost. Make sure its relevant, impartial, accurate and current.
Gathering Primary Data
Research often separated into Qualitative, Quantitative and Mixed-Methods
research.
Quantitative-using numbers and scores
Qualitative- based on analysis of what people say or do
Mixed-methods research- combining qualitative and quantitative.
Research Approaches

Observational Research- Gather primary data by observing relevant people,

actions and situations.
Ethnographic research- sending observers to watch and interact with
consumers in their natural environments.

Survey Research- By asking people questions about their knowledge,

attitudes, preferences and buying behaviour. Direct/Indirect. Flexible.

Experimental Research- By selecting matched groups of subjects, giving

them different treatments, controlling unrelated factors, checking for
differences in group responses. Causal info.

Contacts Methods

Mail
Telephone
Personal Interview
Individual/ Group (focus group)

Online

Sampling Plans
Probability Sample
Simple random- Every member has a known and equal chance of selection.
Stratified random- Population divided into mutually exclusive groups, random samples
drawn.
Cluster (area)- Divided into mutually exclusive groups, draws samples of groups to interview.
Non-Probability Sample
Convenience sample- Selects easiest population members
Judgement sample- Use his/her judgement to select population who are good prospects.
Quota sample- Finds and interviews a prescribed number of people in each of the several
categories.

Research Instruments
-Questionnaire or Survey~ Open-ended (allow to write in own words) or closed questions
(include all possible ans; choose from them).
- Mechanical instruments~ monitor consumer behaviour. Search advertising and search
advertising optimisation.

3. Implementing the research plan- collecting and analysing data.

Data collection phase- Most expensive, most subject to error
Data should be processed and analysed- isolate important findings
Summarised- Understand what might predict outcome of interest
4. Interpreting and reporting findings
Draw conclusion- Report to management.
Chapter 7
Consumer behaviour- The behaviour that consumers engage in before and after purchase;
finding out about products, searching for information, choosing between products, buying &
using & recommending/criticising G&S.
Factors Influencing Consumer Behaviour

CULTURAL FACTORS
-Exert broad and deep influence
-Culture: Set of basic values, perceptions, wants and behaviours learned by a member of
society from family and other important institutions.
-Subculture: A group of people with shared value systems based on common life
experiences/situations.
-Social class: Relatively permanent and ordered divisions in a society whose members share
similar values, interests, behaviours.

SOCIAL FACTORS

-Groups and social networks: Influenced by many small groups like

Reference groups: Direct or indirect points of comparison/ reference in forming

attitudes and behaviours.
Membership groups: Group with direct influence on person and to which person
belongs. (More often influenced by ref. groups to which they DONT belong)
Aspirational groups: Group that an individual wishes to belong to .

- Must figure out how to reach opinion leaders (people who, because of their special skills,
knowledge, personality etc, exert influence on others).
- Buzz marketing- Cultivating or even creating opinion leaders, getting them to spread
information about a product or service to others.
-Online social networks: Online social communities like blogs, social networking websites,
where people socialise & exchange information & opinions.
-Family and Household: Roles in buying process

Initiator
Influencer
Decider
Buyer
User

-Roles and Status:

-Role: Activities a person is expected to perform. Each role carries a status reflecting the
general esteem given to it by society.

PERSONAL FACTORS
-Age and lifecycle stage
-Occupation
-Economic situation
-Lifestyle

A persons pattern of living; expressed in their activities, interests and opinions.

Marketers measure psychographics: measuring lifestyles and developing lifestyle
classifications. Measure major AIO Dimensions (activities, interests, opinions).

-Personality & Self concept

Personality: Distinguishing psychological characteristics that lead to relatively consistent and

lasting responses to own environment
-Self concept: Peoples possessions contribute & reflect their identities we are what we
have.
Develop Brand Personality
-Specific mix of human traits that are attributed to a particular brand.
- Sincerity, Excitement, Competence, Sophistication, Ruggedness.

PSYCHOLOGICAL FACTORS
-Motive/Drive: A need that is sufficiently pressing to direct person to seek satisfaction of the
need.
-Need becomes motive when subjects to sufficient level of intensity.

-Perception: Process by which people select, organise, interpret info to form a meaningful
picture of world.
-Marketers have to work hard to get message through.

Selective Attention- Tendency to screen out most information to which they are
exposed.
Selective Distortion- Tendency to adapt info to personal meaning.
Selective Retention- Tendency to likely remember good points about brand they like
and forget good points about competing brands.

-Learning- Changes in an individuals behaviour arising from experience.

Generalisation & Discrimination against brands.

-Beliefs and Attitudes

Belief: Descriptive thought/conviction a person has about something

Brand Image: A set of beliefs a consumer holds about a certain brand.
Attitude: A persons relatively consistent evaluations, feelings and tendencies towards
an object or idea.

Four Types of Buying Decision Behaviour

Involvement: Importance of product for consumer.

Complex
Marketers need to help buyers learn product features and relative importance. Must
understand info gathering and evaluation behaviour. Must influence final choice

Dissonance-reducing
Might experience post-purchase dissonance. After sale communications must be good,
provide support.
Habitual
Use price and sales promo to stimulate interest.
Ad repetitions create brand familiarity rather than brand conviction.
Variety Seeking
Consumers a lot of brand switching. Market leader try to encourage habitual buying
behaviour.

Buyer Decision Process

1. Problem/Need Recognition
Buyer recognises problem/need. Buyer senses difference between actual state and
desired state. Can be triggered by internal stimuli or external stimuli.
2. Information Search
Consumer aroused to search for more information (Heightened attention or active
information search). Amount of searching depends on strength of drive, amount of info
started with, ease of obtaining info and value placed on additional info. Information
can be obtained from:
Personal sources: family friends neighbours (most effective)
Commercial sources: advertising salespeople dealers packaging
Public sources: mass media online comparison websites
Experiential sources: Handling examining using product

3. Evaluation of Alternatives
Consumer uses information to evaluate alternative brands in the choice set. How
consumer processes info to arrive at decision. Based on how they evaluate attributes,
ranking of importance of attributes.
4. Purchase Decision
Consumer actually buys the product. TWO factors come in between purchase
intention & purchase decision;
Attitude of others
Unexpected situations (e.g economy, ringgit slide)

5. Post-purchase Behaviour

Consumers take further action after purchase- based on satisfaction or dissatisfaction.

Assess product performance, discuss with others, recommend/complain.
Almost all purchases result in cognitive dissonance. Buyer discomfort caused by postpurchase conflict. Uneasy about acquiring drawbacks of chosen brand.
Marketers can reduce this by good product performance, good after-sales service & by
advertising.
Chapter 8
Players in Business-to-Business Market (B2B)

1. Business/Industrial Market
All organisations that buy G&S to be used in production of other products and
services.

2. Reseller Market
All individual and organisations that acquire G&S to resell or rent to others at a
profit.
3. Government Market
Government units- federal, state and local- that purchase/rent G&S for carrying
out the main functions of government.
-Marketers must locate key decision makers, identify factors that affect buyer
behaviour and understand buyer decision process.
4. Institutional Market
Schools, hospitals, nursing homes, prisons etc. that provide G&S to the people in
their care.
-Low budget and captive patrons
-Marketers can set up special division to meet special characteristics and needs of
institutional buyers.
Characteristics of B2B markets

Main Types of Buying Situations

1. Straight rebuy
An industrial buying decision when a buyer routinely reorders something without
modification
Handled on routine basis by procurement officers. Simply chooses from supplier list
based on past buying satisfaction.

Suppliers often propose automatic reordering systems to save reordering time. Offer
something new to get foot in the door, secure larger share of purchases over time.
2. Modified rebuy
An industrial buying decision when a buyer wants to modify product specifications,
prices, terms or suppliers.
Involves more decision participants than straight rebuy.
In suppliers want to protect account, pressured to present best value proposition.
Out suppliers see as opportunity to make better offer and gain new business.
3. New task
An industrial buying decision in which buyer purchases a product/service for the first
time.
*Many business buyers prefer to buy a packaged solution from a single seller.
Systems buying- buying a packaged solution to a problem, avoids making separate
decisions involved in buying each item separately.

The Business Buying Process

1. Problem Recognition
Consumer recognizes problem/need. External (buyer new ideas at trade show/ad/call
from salesperson) or internal (machine breakdown/launch new product) stimuli.

2. General Need Description

Stage in industrial buying process in which company describes general
characteristics and quantity of needed item. For complex items, may have to work
with others like consultants, engineers- to define item.
The business marketer can- help define needs and provide info about value of different
product characteristics.
3. Product Specification
Stage in industrial buying process when organisation decides on and specifies best
technical product characteristics for needed item.
Often with help of value analysis team. Value analysis is an approach to cost
reduction in which components are studied carefully to determine can redesign,
standardise or made by less costly method of production.
Sellers can use this as tool to help secure new account by showing buyers better way
to make object.
4. Supplier Search
Stage where buyer finds best vendors. Compiles list of qualified suppliers-review
trade directories, computer search or phone other companies for recommendation.
Suppliers challenged- listed in major directories, build good reputation in marketplace.
5. Proposal Solicitation
Buyer invites qualified suppliers to submit proposals.
Complex items- detailed proposals- formal presentations
Business marketers- skilled in researching, writing and presenting proposals.
6. Supplier Selection
Buyer reviews proposals and selects supplier(s).
List desired supplier attributes, relative importance.
Supplier evaluation form.
7. Order Routine Specification
Stage in which buyer writes final order with chosen supplier(s), listing:
- Technical specs
- Quantity needed
- Expected time of delivery
- Return policies
- Warranties etc.
Blanket contract (maintenance, repair, operating items) creates long term r/s,
supplier promises to resupply buyer at set price for given period.
Vendor managed inventory- Buyer turns over ordering and inventory responsibilities
to suppliers- supplier monitor and replenish stock as necessary- sale and inventory
info is shared.
8. Post Purchase Performance Review
Buyer rates satisfaction with suppliers, decide to continue/modify/drop relationship.
Seller should monitor same factors used by buyer to ensure delivering expected level
of performance.

Participants in Business Buying Process

Users: Members of org who use prod/service. Usually initiates buying proposal, help define
product specs.
Influencers: Affect buying decision. Help define specs, provide info for evaluating
alternatives. Technical personnel important.
Buyers: Formal authority to select supplier & arrange terms of purchase. Help shape product
specs, MAJOR role is in selecting vendors & negotiating.
Deciders: Formal/informal power to select & approve final suppliers. In routine buying,
buyers are often deciders/approvers.
Gatekeepers: Control flow of info to others. E.G Purchasing agents have authority to prevent
salespersons from engaging users or deciders. Can inclu. Technical personnel personal
assistants and executive secretaries.

Major Influences on Business Buying Behaviour

Chapter 9
Customer Driven Marketing Strategy
SELECT CUSTOMERS TO SERVE
Market segmentation is dividing the market into smaller segments of buyers with distinct
needs, characteristics or behaviours who might require separate products or marketing
mixes.

Market targeting is evaluating each segments attractiveness and selecting one or more
markets to enter.
DECIDE VALUE PROPOSITION
Market Positioning is arranging for a product to occupy a clear, distinctive and desirable
place relative to competing products in the minds of target consumers.
Differentiation is differentiating the market offering to create superior customer value.
Requirement for Effective Segmentation
1. Measurable
The size and purchasing power of segments must be able to be measured. E.g left
handed people
2. Accessible
The segments must be able to be effectively reached and served. E.g heavy users of a
certain brand are single women, stay out, socialise. Difficult to reach, nthn much in
common.
3. Substantial
Segments must be large enough and profitable enough to serve. Should be largest
possible homogeneous group worth going after w/ a tailored marketing program. E.g
developing cars for people over 220cm tall.
4. Differentiable
Segments must be conceptually distinguishable and respond differently to different
marketing mix elements and programs. E.g men and women respond same to soft
drinks so they are not separate segments.
5. Actionable
Effective programs must be able to be designed for attracting and serving the
segments. E.g Small airline develop seven market segments but staff too small to
develop separate marketing programs for each.

Variable for Segmenting

Geographic

Dividing market into different geographical units like nations, regions, states,
municipalities, cities or neighbourhoods.
Mobile marketing- marketing through mobile electronic device. Location-based
marketing (geomarketing) when target messages are based on ones location.
E.g: Region, city size, density, climate

Demographic

Dividing market into groups based on variables like age, life cycle stage, gender,
family size, income, occupation, education, religion etc.
Psychographic

Dividing market into groups based on social class, lifestyle or personality

characteristics.
E.g: Socioeconomic status, values, attitudes, lifestyle groupings, personality.

Behavioural

Dividing market into groups based on different benefits consumers seek from a
product.
E.g: Purchase occasion, benefits sought, usage rate, user status, loyalty status, online
behaviour, attitude towards product.

4 Basic Market Targeting Strategies

Undifferentiated (Mass Marketing)

Market-coverage strategy in which company decides to ignore market segment

differences and go after whole market with ONE market offer.
Designs marketing program that appeals to largest number of buyers
Relies on mass distribution & mass advertising
Give product superior image in consumer minds.
Provides cost economies- narrow product line keeps down production, inventory and
transport costs. Undifferentiated advertising keeps down advert costs.
Heavy competition, less profit in large segments.

Differentiated (segmented) Marketing

Target several segments, different offers for each.

Created more sales than undifferentiated. Higher market share.
Increased costs- Modifying product involved high R&D and special
engineering/tooling costs. Extra marketing research, increased promotion with
different advertisements for different segments.
Must weigh increased sales over increased costs when deciding on strategy.

Concentrated (niche) Marketing

Goes after a large share of one or few sub-markets.

Appealing when company resources limited
Can gain strong market position- greater knowledge of segment needs- special rep.

Niches are less competitive- companies start as nichers, gain foothold over stronger
competitors then grow into broader competitors.

Micromarketing

Tailoring products and marketing programs to needs and wants of specific

individuals and local customer segments- includes local marketing and individual
marketing.
LOCAL MARKETING- Tailoring to local customer groups e.g cities
neighbourhoods.
Can drive up manufacturing costs by reducing economies of scale
Create logistics problems as companies try to meet requirement of diff regional
and local markets.
INDIVIDUAL MARKETING- Tailoring to needs and preferences of individual
customers. One-to-one marketing. Mass customisation. Markets-of-one marketing.
Mass customisation- Using flexible manufacturing processes to produce products
and services tailor-made to individual specs.
Added value to cust but added costs also so marketing mix needs to reflect any
extra cost of customisation.

Positioning Strategies

Product attributes
Like low price, basis of performance, style and engineering.
Benefits offered
Like Sensodyne reduces pain associated with sensitive teeth etc.
Usage occasions
Like Gatorade- Summer, replace athletes body fluids. Winter- Drink to use when
doctor recommends drinking more fluids.
Classes of Users
Like Head and Shoulders shampoo, repositioned as suitable for everyday use rather
than medicated shampoo.
AGAINST a competitor
E.g Avis car rental Were number two so we try harder against larger competitor.
AWAY from competitor
Comparing product with competitors product.
Different product classes
E.g margarine positioned against butter, some against cooking oils. Dove against bath
oils rather than soap.
*Marketers often use a combination of these positioning strategies.

Ways to Differentiate Market Offerings/ Identifying Possible Competitive Advantages

Competitive advantage- An advantage over competitors gained by offering greater customer
value than they do.

1. Product Differentiation
Can differentiate based on consistency, durability, reliability, performance,
reparability.
2. Services Differentiation
Speedy, reliable or careful delivery.
Installation (Hyundai unlimited km 5 year warranty)
Customer training service- in equipment (General Electric)
Free/Paid consulting services
3. Personnel Differentiation
Hiring and training better people than competitors.
4. Image Differentiation
Work to establish image that differentiates company from competitors.
Need creativity- should be supported by everything the company says or does.
Symbols
Type of events sponsored.
Chapter 10
Product Anything that can be offered to the market for attention, acquisition, use or
consumption that might satisfy a want/need. Includes physical objects, services,
persons, places, organisations and ideas.
Service An activity, benefit or satisfaction offered for sale that is essentially
intangible and does not result in ownership of anything.
Levels of Product & Services
Core Product
The problem solving service or core benefit that consumers are really buying when
they obtain a product.
Actual Product
A products parts, styling, features, brand name, packaging and other attributes that
combine to deliver core product benefits.
From customers perspective, the actual product delivers solution to their problem.
Augmented Product
Additional customer service and benefit built around the core and actual product.
Provide a product that customers value before and after.
The augmentations- important part of total product- contributes to choice of final
product.
Companies use augmentation to create competitive advantage.

Types of CONSUMER products

Consumer products are those bought by final consumers for personal consumption.

1. Convenience Products
Consumer product/service that customer usually buys frequently, immediately
and with minimum of comparison and buying effort.
Low priced, widely available.
Can be further divided into:
- Staples: Products a customer buys on a regular basis (coffee, tea, toothpaste)

Impulse products: Purchased with little planning or search effort. Normally

available in many different places bc more likely to buy on impulse when seen.
Emergency products: Purchased when need is urgent (umbrella-sudden
downpour)

2. Shopping Products
Less frequently purchased consumer products/services that customers compare
carefully on suitability, quality, price and style.
Spend more time and effort gathering info and making comparisons.
Can be divided into:
- Uniform: Seen as similar in quality but different enough in price to justify
making comparison. Seller has to talk price to consumer
- Non-uniform: Seller must carry wide assortment to satisfy individual tastes
and must have well trained salespeople to give info. E.g furniture, clothes.

3. Specialty Products
Consumer products/services that have superior, distinctive and unique
characteristics/brand identification for which a significant group of buyers is
willing to make special purchase effort.
Buyers normally dont compare specialty products.
E.g Porsche cars, Mont Blanc pens.
4. Unsought Products
Consumer products/services that the customer either doesnt know
about/knows about but doesnt normally consider buying.
Require a lot of advertising, personal selling & other marketing efforts.
E.g prepaid funeral, life insurance, blood donations.

Types of BUSINESS/INDUSTRIAL products

Industrial products are those bought for further processing or for use in conducting business.
Industrial products can be classified according to how they enter the production process and
according to what they cost.
1. Materials and Parts
-Industrial goods that become part of buyers product. That enter the manufacturers
product completely (Inclu. Raw materials, manufactured materials, components,
parts).
-Mostly sold direct to industrial users.

-Price & Service main factors; Branding & Advertising less important.
-Fall into two classes:
- Raw materials
Include farm products and natural products, each marketed somewhat
differently.
-Farm products supplied by many small producers, then turned over to
marketing intermediaries who process and sell them.
Rarely advertised and promoted.
Can attempt to differentiate by increasing quality and by branding
-Natural products (commodities) often limited in supply. They are usually
bulky, low unit value and require lots of transportation to move from producer
to user.
Producers are fewer and larger- tend to market directly to industrial users
(Long term supply contracts common).
Price and delivery main factors affecting supplier selection- Concentrate on
lowering prices.
-

Manufactured materials and parts

Include component materials (iron, yarn, cement) and component parts (small
motors, circuit boards, casing).
Component materials usually processed further- pig iron into steel, yarn into
cloth.
Important purchase factors : Price and Supplier Reliability.
Component parts enter finished product completely without change in form.

2. Capital Items
Industrial product/service that contributes to production of finished products.
Includes installations and accessory equipment.
- Installations
Consists of buildings (factories, offices) and fixed equipment (generators, mainframe
computers, lifts)
Major purchases, bought directly from producer after long decision period.
Use technical sales force
Producer willing to design to specs, supply after-sales service.
Rely more on personal representation than advertising.
- Accessory equipment
Includes portable factory equipment and tools (hand tools, lift trucks) and office
equipment (personal computer, desks).
Aid in production process ONLY.
More accessory equipment sellers use resellers, market spread out geographically,
buyer numerous, order small.
Major factors in supplier selection: Price, Quality, Features, Service.
Sales force more important than advertising (but ads can be used effectively)
3. Supplies and Service
Industrial G&S that dont enter finished product at all.

-Supplies
Includes operating supplies (lubricants, fuel, pencils) and maintenance & repair items
(paint, nails, brooms).
~Convenience products of the industrial market: Usually purchased with min. effort
and comparison.
Marketed through resellers due to low unit value of products, large spread of
customers.
Price and Service important purchasing factors.
-Business services
Include maintenance and repair services (window cleaning, computer maintenance
and repair) and business advisory services (legal, management consulting, advertising
agency).
Usually supplied under contract
Normally new task buying situations, choose supplier on basis of supplier reputation
and personnel.
Product & Services Decision

1. Product and Services Attributes

Defining benefits that will be offered to the marketplace. Delivered through
quality, feature, design.
Product Quality
- The characteristics of a product that affects its ability to satisfy customer needs.
- Narrowest sense : freedom from defects
- Broader: In terms of creating customer value and satisfaction.
- Can be used as strategic weapon to gain edge over competitors.
- Total Quality Management (TQM) : approach in which all companys people
involved in constantly improving quality of products, services and business
processes.
Product quality has two dimension: level and consistency
- Marketer must first choose quality level that can support products positioning.
Here it means performance quality- ability of product to perform its functions.
-

High quality can also mean high levels of quality consistency.

Here it means conformance quality- zero defects and consistency in delivering
target level of performance.

Product Features

Product can be offered with varying features. Used as differentiating tool, first to
introduce valued feature is effective way to compete.
A stripped down (base) model without any extras normally starting point.
Company can create higher-level models by adding more features.
Selling features- tool to differentiate customer who dont want to pay more and
those who will.
To identify new features, decide on which to add
Survey buyers who have used product- provide rich list of future ideas.
Can assess customer value against company cost.
Product Design
Can add product distinctiveness through this
E.g Apple, Bang & Olufsen etc.
2. Branding
Brand is a name, term, sign, symbol/design, or a combination of these, intended to
identify the G&S of one/group of sellers and to differentiate them from those of
competitors.
Identifies maker of product or service. Can command strong consumer loyalty.
Branding helps consumers by:
- Identifying products that may benefit them
- Saying something about product quality and consistency.
Gives seller several advantages:
-

Become basis on which whole story of products special qualities.

Brand name and trademark becomes protection for unique product features
that otherwise might be copied.
Helps seller segment markets (e.g Toyota Motor can offer Lexus, Toyota
and Scion, each with their own sub-brands like Camry, Land Cruiser etc.

3. Packaging
Packaging involves the activities of designing and producing the container or
wrapper for product. Creates instant consumer recognition of the company/brand.
Highly competitive- Packaging may be last thing to influence consumer decision.
Now it must perform many functions like
- Attracting attention
- Describing the product
- Meeting legal requirements concerning contents
- Making the sale
Developing a good packaging requires many decisions- Establish packaging
concept (what it should be/do)- Elements must work together to support
products positioning and marketing strategy, products advertising, pricing and
distribution.
Must also heed growing environmental concerns- sustainability strategy.
4. Labelling

Labels may range from a simple tag attached to product or complex graphics that
are part of packaging.
Must contain all info required in countries in which products are sold.

5. Product Support Services

Should design product support services to meet needs of consumers- determine
which services are valued by consumers and relative importance of it.
An active customer service operation coordinates company operation, creates
consumer loyalty and satisfaction, and differentiates itself from competitors.

Product Line & Product Mix Decisions

Product Line = A group of products that are closely related because they function in a
similar manner, sold to the same customer and are marketed through same types of outlets/
fall within same price range.
*Influenced by company resources and objectives.
Managing Product Line Length
1. Product Line Stretching
Downward Stretching
Companies at higher end of market- stretch lines downward
May find faster growth taking place at lower end OR enter at higher end to
establish quality image and intended to roll downward.
Company may add low-end product to plug market hole OR attacked at high
end, respond by invading low end.
Risks
1. Low end item may provoke competitors to move into higher end
2. Company dealers may not be willing to handle low-end products
3. Might damage companys quality high-end rep.

Upward Stretching
Companies at lower end of market- stretch lines upward
Attracted by faster growth rate, higher margins, or to position as full-time
manufacturers. Add prestige to current products.
Risks
1. High end competitors may strike back by entering lower end of market
2. Prospective customers may not believe a newcomer can produce quality
goods.
3. Company salespeople and distributer may lack training and talent to serve
more complex and sophisticated high end market.

Two-way Stretching
Middle range companies- stretch in both directions
Eg: Apple ipod nano (middle), shuffle (low) and touch (high).

2. Product Line Filling

A product line can be extended by adding more items within current range of the
line.
Overdone if results in cannibalism & customer confusion. New items should be
noticeably different from current items.

Product Mix Decisions

Product mix/ Product assortment The set of all product lines and items that a particular
seller offers for sale to buyers.
Four important dimensions of Product Mix- Breadth, Length, Depth and Consistency.
1. Product Mix Breadth
The number of different product lines the company carries.
2. Product Mix Length
The total number of items within its product lines.
3. Product Mix Depth
The number of versions offered for each product in the line.
4. Product Mix Consistency
How closely related the various product lines are in end use, production requirements,
distribution channels or some other way.
Company can increase business in 4 ways:

Add new product lines- widening its product mix

Lengthen its existing product lines- become more full-line company
Add more product versions to each product- deepen product mix
Pursue more product line consistency- or less if want strong rep in only one
field.

Branding
Brand Equity & Value
Brand Equity- The differential effect that knowing the name has on customer response to
product and its marketing. It is a measure of the brands ability to capture customer
preference and loyalty.
Brand Valuation- The process of estimating the total financial value of a brand.
High brand equity- many competitive advantages
-

High consumer awareness and loyalty.

Defence against fierce price competition.

Forms basis for building strong and profitable customer r/s.

*Fundamental asset for brand equity = customer equity (value of customer r/s that brand
creates). Profitable set of loyal customers.

Brand Strategy Decisions

1. Brand Positioning
Can position brand at any 3 levels (low-high):
Product attributes
Least desirable level as can be easily copied. Customers more interested in
what attributes can do for them.

Desirable benefit
Go beyond brands ingredients and attributes.

Strong beliefs and values

Communicate emotive issues, creating surprise, passion, excitement
surrounding a brand.

Should establish mission for the brand when positioning and vision of what it must be or do.
A brand is a companys promise to consumers. A brand contract with customers- simple &
honest.
2. Brand Name Selection
Begins with review of product & benefits, target market and proposed marketing
strategies.
Suggest something about products benefits & qualities
Easy to pronounce, recognise, remember.
Distinctive
Easily translated into foreign languages.
Capable of registration and legal protection.
3. Brand Sponsor Decision
FOUR sponsorship options:
i.
National brand/ Manufacturers brand (e.g Heinz)
ii.
Store brand- sold to marketing intermediaries (private label-e.g
$mart Buy)
iii.
Licencing- Pay licence fees to use brands of others.
iv.
Co-brand Two well-known brands in one product.

Manufacturers brand VS Store brand

Manufacturers brand- A brand created and owned by manufacturer of a product/service.

Store brand (private label) - A brand created or owned by a reseller of a product/service.
Store brand boom- More consumers turning to store brands, bad for manufacturers brand.
Store brand
Hard to establish, costly to stock & promote.
Much more profitable- Intermediaries can source manufacturers with excess capacity that will
produce private label at low cost, resulting in higher profit margin for intermediaries.
Competition between these two brands- Intermediaries many advantages:

Control scarce shelf space

Charge suppliers a fee to stock new products
Can give better display to their own brands- better stocked
Priced lower than national brands
Often made by one of larger manufacturers.

Licensing
For a fee, can provide instant, proven brand name. E.g Nickelodeon.
Co-Branding
The practice of using an established brand names of two different companies on the same
product. Must trust each other to take good care of brand.
Advantages:
-

Broader consumer appeal and greater brand equity

Expand existing brand into category it might have difficulty entering alone.

Limitations:
-

Complex, legal contracts and licences.

Carefully coordinate advertising, sales promotion and other marketing efforts.

4. Brand Development

i.

Line extensions
Using a successful brand name to introduce additional items in given product
category under the same brand name such as new flavours, forms, colours, added
ingredients or package sizes.
Reasons: To command more shelf space, excess manufacturing capacity, consumer
desire for variety, match competitors successful line extension.
Risks: Might lose specific meaning, Wont sell enough to cover development and
promo costs, cannibalise other company items.

ii.

Brand extensions
A new/modified product launched under an already successful brand name in new
category.
Advantages: Capture greater market share, realise greater advertising efficiency
than individual brands, enter new product categories easily with faster acceptance
and brand recognition.
Risks: Harm consumers attitude towards other products carrying same brand
name, may lose special position in consumers mind through overuse. Brand
dilution (when consumers no longer associate a brand with a certain product or
even similar products) might occur.

iii.

Multibranding
Seller develops two or more brands in same product category.
A way to establish different features and appeal to different buying motives,
introducing additional brands in same category.
*Product category- grouping of products, often at retail level, which may be
substituted for each other/ supplement each other in some way.
Advantage: command more shelf space, project its major brand by setting up
flanker or fighter brands.
Drawback: Each brand obtain small market share, none may be very profitable,
could end up spreading resources over many brands than build a few to highly
profitable level.

iv.

New brands

New brand name when entering new product category for which none of current
brand names are appropriate.
Or may believe power of current brand name is waning, want to create new one.

Brand Repositioning
- Altering the product and image to better meet customers expectations with its brand(s) due
to competitive action or strategy change. (can choose to alter either one as well )
- Must be careful not to lose/ confuse current loyal users.

Services Marketing
Nature and Characteristics of Service

Intangibility- Looks for signals of service quality. From place, people, price, equipment &
communications they can see. To manage, send right message = evidence management.
Inseparability- cant separate production of service from consumption of service. Providercustomer interaction = both affects outcome of service.
Variability- Unforeseen circumstances like staff having bad day, sick, may affect service.
Technology increasingly used- reduce service variability & costs.
Perishability- No problem when demand steady. When demand fluctuates, service firms
design strategies to produce better match between demand and supply.

Chapter 11
New product- A good, service or an idea that is perceived by some potential customers as
new.
Categories of new products
- New to the world
- New category entries
-Additions to product lines
- Product improvements
- Repositioning

New Product Development

The development of original products, product improvements, product modifications and new
brands through firms own product development efforts.

1. IDEA GENERATION
The systematic search for new product ideas.
Internal Idea Sources
- Through formal R&D
-Encourage employees provide ideas

- Intrapreneurial programs- encourage employees envision & develop new product

ideas.
External Idea Sources
-Distributor (close to market, pass info about consumer probs and new possibilities) &
suppliers (new concepts, techniques and materials) can contribute.
- Competitors ( ads : clues about new products) : Buy competing products, take them
apart and see how it works, analyse and determine if new product is needed or not,
-Trade magazines, shows & seminars, gov agencies, ad agencies, marketing research
firms.
- Customers: analyse their answers, find better products to solve their problems.
Crowdsourcing
- Posing a question/problem to large group of people, try get best answer quickly.
Lead Users
-In some product areas (e.g scientific instruments), expert customers are lead users,
best source for new product ideas, prime innovators.
- Because : They have the general market needs but confront them earlier or before the
market. They are positioned to gain substantial benefits by having solutions to the
problem.
-Can reduce cost of development
- Their strong needs likely to be widely felt, serve as need-forecasting benchmark for
market research, can provide new concept and design data.

2. IDEA SCREENING
Screening new product ideas to spot good ideas and drop poor ones a.s.a.p.
Purpose: To reduce ideas cause product and development costs rise greatly in later
stage.
-Reviewed by new product committee. Evaluates idea against general criteria
- R-W-W (real, win, worth doing) framework.
3. CONCEPT DEVELOPMENT & TESTING
Product idea An idea for possible product that company can see itself offering to
market.
Product concept- A detailed version of new product idea stated in meaningful
consumer terms.
Concept Development
Develop products into alternative product concepts, find out how attractive
each is to consumers, choose best one.
Concept Testing
Testing new product concepts with groups of target consumers. Find out if
have strong consumer appeal or not.
Identifying Optimal Product Concepts
Choosing features that will be included in new product.
Compare different product concepts using conjoint analysis.

-Estimates tradeoffs in preferences, intentions to buy and simulating how

consumers might react to changes in current products or new products.
4. MARKETING STRATEGY DEVELOPMENT
Designing an initial marketing strategy for a new product based on product concept.
-3 parts;
1. Describe target market, planned value proposition and sales, market share and profit
goals for first few years.
2. Outlines products planned price, distribution and marketing budget for first year.
3. Describes planned long run sales, profit goals and marketing mix strategies.

5. BUSINESS ANALYSIS
A strategic and/or financial evaluation of the expected return on investment (ROI) in
new product.
-Evaluation of new product proposals
-Long term financial analysis/ Comprehensive analysis of whole situation
- Early in development process/ Late in product development cycle during
commercialisation.
-Followed by marketing plan
- Business analysis- whether to launch ; Marketing plan how to launch.
6. PRODUCT DEVELOPMENT
Developing the product concept into a physical product to ensure product idea can be
turned into workable market offering.
-R&D tests more than one physical versions
-involve actual customers most times
-New product must have required functional features and convey the intended
psychological characteristics.

7. TEST MARKETING
Stage of new product development in which product and marketing program are
introduced into more realistic market settings.
-Lets marketer experience marketing the product, find pot. probs, learn where more
info is needed before going to expense of full introduction.
-Provides info on how consumers will react, company can test entire marketing
program.
-Amount of testing varies with product, cost is huge, and it takes time (competitors
can gain advantage).
-can test using simulated test markets
Test marketing business products
-May conduct product-use tests. Select small group of customers to use for lim.
time. Watch and observe. Asks about purchase intent & other reactions.

-Can test in trade shows

-Distributor dealer rooms
-Standard controlled test markets to measure potential of their new products.
Limited supply, sold in limited geographical areas with full advertising and
sales promo.

8. COMMERCIALISATION
Introducing new product into the market.
Must make 4 decisions:
When to launch
Where to launch
Whom to target
How to launch- action plan for intro. Detailed marketing plan.

Stages in the Adoption Process

Adoption process- Mental process through which an individual passes from first
learning about an innovation to final adoption.
1. Awareness
Consumer becomes aware of the product, but lacks info about it.
2. Interest
Consumer seeks info about new product
3. Evaluation
Consumer considers whether trying new product makes sense.
4. Trial
Consumer tries new product on small scale to improve estimate of value.
5. Adoption
Consumer decides to make full & regular use of new product.

Marketer aims to move consumer swiftly through these stages. Marketing strategy that
results in faster adoption and faster diffusion of innovation- faster spread within
market group over time & various categories of adopters.
Diffusion process- Process by which the use of the innovation is spread within a
market group, over time and various categories of adopters.

Individual differences in adoption of innovations

Innovators- Venturesome, try at risk. Higher than average income, well educated,
obtain info from scientific sources and experts. Not reliant on group norms.
Early adopters- More reliant on group norms & values. More likely to be opinion
leaders.
Early majority- Deliberate-rarely leaders, adopt new ideas before average person.
Tend to gather more info and evaluate more carefully. *Key to successful diffusion
Late majority- Skeptical, rely heavily on norms, adopt after majority have tried it.
Rely on word of mouth, tend to adopt because of friends. Older, below average
income & education.
Laggards- Likely to have low socioeconomic status, tradition bound, suspicious of
changes and adopt innovation when it has become smth like a tradition itself. Dont
rely on group norms.

Product-Life Cycle Strategies

The product life cycle is the course of a products sales and profits during its lifetime.
It involves 5 distinct stages; Product development, introduction, growth, maturity and
decline.
1. Product development: When company finds and develops a new product idea.
Sales zero, investment costs add up.
2. Introduction: Period of slow sales growth as it is still being introduced to market.
No profits- heavy expenses of product introduction.
3. Growth: Rapid market acceptance, increasing profits.
4. Maturity: Period of slowdown in sales growth- acceptance achieved by most pot.
buyers. Profits level off/decline because of increasing marketing outlays to defend
product against competition.
5. Decline: Period when sales fall off and profits drop.
Marketing Strategies through PLC

Introduction
- Product first distributed, made available.
- Set high or low level for each marketing variable (price, promotion, product,
place). E.g high price with low promo.
- Low price, high promo- faster market penetration and largest market share.
-If choose to max. short term profits, sacrifice long term.

Growth
-Products sales start climbing quickly
- Promo costs spread over larger number profits increase.
-Add product features, improve quality. Enter new segments & distribution
channels.
- Advertising from building product awareness to building product conviction.
-Lowers prices to attract buyers
-Tradeoff : High market share vs high current profit

Maturity
-Sales growth levels off or slows.
-Normally lasts longer- most prod. in this stage now.
-Three strategies:
i) Market Modification
Try to increase consumption of current product. Looks for new users & new
market segments.
Reposition brand to appeal to larger/faster-growing segments

ii) Product Modification

Develop new product- changing characteristics-attract more users & usage.
Quality improvement increase prod. performance. Effective when quality can
be improved, when buyer believe it and when they want higher quality.
Feature improvement adds new features, expands product usefulness, safety
or convenience.
Style improvement increases attractiveness of product.
iii) Marketing Mix Modification
Change one or more marketing mix elements. E.g: Cut prices, better ad
campaign launched, aggressive sales promo, move into larger market channels
Offer new and improved services.

Decline
Product sales decline. Weak product costly to firm.
Identify product in this stage by regularly reviewing sales, market share, cost
& profit trends, decide to harvest, maintain or drop.
Can sometimes be reinvigorated with effective marketing.
Can still provide profits and introduce new customers to brand.
Harvest: Reduce various costs, hope sales holds up.
Drop: Sell it, liquidate to salvage value. *Wont run down value by harvesting.

Chapter 12
4 Internal Factors Affecting Pricing Decisions
1. Marketing Objectives
Before set price- strategy must be set.
Target market & positioning set- price fairly straightforward.
Company may seek additional objectives e.g : survival, profit max., market share
leadership & product-quality leadership.
The clearer the objective, the easier to set price.
Survival
Facing eco. Downturn, too much capacity or face heavy competition, or
changing consumer wants.
Profits less important than survival. As long it covers AVC & AFC.

Current Profit Maximisation

Estimate demand and costs at diff prices and choose profit max one. Want
current financial returns than long run growth.

Market Share Leadership

Company with largest share- low costs, highest long run profit.
Set prices as low as possible.
Variation: Pursue a specific market share gain by searching for price and
marketing program that will achieve this goal.

Product-Quality Leadership
Want highest quality product on market.
Charge high price to cover high quality & R&D cost.

Other Objectives
Set prices low- Prevent competition
At competitors level- Stabilise market
Keep loyalty and support of resellers or avoid gov. intervention
Temp. reduced Create excitement. Draw more customers.

2. Marketing Mix Strategy

Make pricing decisions first- base other marketing mix decisions on that price.
Target costing- support price-positioning strategy. Starts with target cost, works
backwards. What costs HAVE to be in order to charge target price. Firm able to set
target price and establish desired price position.
Works for established products: Departments work tgt, reduce costs to enable price
reductions in the future.
De-emphasize price- Use other marketing mix tools to create non-price positions.
Differentiate market offer, make it worth the price.
Total cost of ownership includes all costs associated with purchasing and using a
product over its life.
Thus, marketer has to consider total marketing mix when setting prices.

3. Costs
Companies with low cost, can set low prices = sales and profits
Costs also fall as result of cumulative experience over time from learning and better
processes.

Experience curve= Drop in average per unit production cost that comes with
experience.
Downward sloping curve- Good for company. Unit prod. cost will fall faster if sells
more during given period. Market needs to be ready for higher output*.
Should set price low, sales increase, costs decrease through more experience, can
lower prices more.
Information based products costing
IT products with large sunk costs- priced for volume so rapid penetration of market in
shortest time.
4. Organisational Considerations
WHO within org. sets prices.
3 External Factors Affecting Pricing Decisions
1. Market & Demand
Pricing in Different Types of Markets
Pure competition
- Market in which many buyers and sellers trade in uniform commodityno single buyer or seller has much effect on going market price.
- Marketing research, pricing, ads, promotions little to no role
- Not much time on marketing strategies
Monopolistic competition
-

Many buyers and sellers, each offering a slightly diff product,

trading over a range of prices, rather than single market price.
Sellers can differentiate offers to buyers- buyers see diff, so will
pay diff price
Develop differentiated offers for diff customer segments, use
branding, ads and personal selling to set themselves apart.
Less affected by competitors marketing strategies than
oligopolistic markets.

Oligopolistic Competition
-

Few sellers who are highly sensitive to each others pricing and
marketing strategies.
Product can be uniform or non-uniformed.
Alert to competitors strategies & moves.
Never sure it will gain anything permanent through price cut.
If price raised, competitors might not follow.

Pure Monopoly
-

Single seller, can be government monopoly (postage

stamps), private-regulated monopoly (power) or privatenon regulated monopoly (diamond)

Government monopoly: Pricing below cost because

important to buyers who cannot afford to pay in full OR
Pricing enough to cover cost/ to produce good revenue OR
High to slow down consumption.
Regulated monopoly: Gov permits company to set rates that
will yield fair return, to let company expand operations as
needed.
Non-regulated monopoly: Free to price whatever market
will bear. Dont always charge full price- not attract
competition, penetrate market faster with low price, fear of
gov regulation.

Consumer Perceptions of Price & Value

- Understand consumers reasons for buying product, then set price
according to their perceptions of products value.
- Vary pricing strategies for different price segments- different prod
features for diff price.
- Buyer-oriented pricing: Marketer cannot design product & marketing
program THEN set a price. Price must be considered w other marketing
mix variables before marketing program is set.

Pricing & Consumption

- Consumption of a product/service increases at time when consumers
pay for it
- Suggests timing of customer payments should be made as close to
consumption period as possible, stimulates further consumption &
buying.

Analysing the Price-Demand Relationship

- Demand curve- shows num of units market will buy in a given time
period, at different prices that might be changed.
- Mostly slope down in curve/straight line but prestige goods, it is a
reverse C shape
- In measuring price-demand r/s, cannot allow other factors to vary

Price Elasticity of Demand

- Price elasticity- how responsive will demand be to change in price.
- Demand drops greatly due to change in price- elastici
- Drops slightly-inelastic.
- Price elasticity of demand=
Per cent change in quantity
demanded
Per cent change in price

2. Competitors Prices & Offers

- Another factor affecting pricing decision is competitors prices possible
reactions against it.

May affect nature of competition it faces.

Must learn price and quality of each competitors offer.

3. Other External Factors

- Economic conditions (inflation, boom, recession, interest rates) affect cost of
production and consumers perception of products price and value.
- How resellers will react
- Government: Need to know laws and legal pricing policies.

5 Major Pricing Strategies

1. Cost-Based Approach- Product driven
Cost Plus Pricing
~Adding a standard markup to the cost of the product.
Ignored demand and competition, dont take advantage of buyers when
demand is great.

Breakeven Analysis and Target Profit Pricing

~Setting price to break even on the costs of making and marketing product, or
to make the desired profit.

2. Value-Based Pricing- Based on consumer perception of product value.

~Setting price based on buyers perception of value, rather than sellers costs.
Uses non-price variables in marketing mix to build up perceived value in
buyers mind. Price set to match value.
3. Competition Based Pricing
Economic-Value Pricing
- Differentiate themselves by economic value they give, not price itself
- E.g : price is higher than competitors, but cost of using it overall lower.
Therefore more worth it.

Going-Rate Pricing
- Setting prices largely based on following competitors price, rather than
company costs & demand.
- Like in oligopolistic competition, smaller firms follow leader.

Sealed-Bid/ Tenders
- Based on how firm thinks competitors will price, rather than its own costs
or demand- used when bidding for jobs!
- Cannot price below cost without harming position, if higher than costs,
lower chance of getting contract.
- Net effect of two opposite pulls- expected profit for particular bid
- Company profit x probability of winning = expected profit.

4. Performance Based Pricing

1. Seller paid on basis of actual performance of its offer.
2. Service industries like legal consulting, transport etc
3. Enhances communication and leads to next type of pricing- r/s based.

5. Relationship Pricing- 3 step model

i.
Special Relationship
No sig change in flow of money but supplier and customer work
together to reduce time and cost while increasing quality.
ii.
Enrichment
Price established as a function of the enrichment the customer
sees.
Effective when customers afraid of innovative new approaches tat
seem risky.
Deeper r/s are formed that take advantage of interactivity.
iii.
Shared risk & reward
Price is replaced by a sharing arrangement, based on value
provided to enrichment chain.
Ties supplier & customer tgt in alliance or joint venture.
Require pricing strategies that enable partners to take advantage
of time-based opportunities.

2 New Product Pricing Strategies

- Market Skimming Pricing
1. Setting a high price for a new product to skim max revenue from segments willing to
pay higher price; makes fewer but more profitable sales.
2. Set high, then drop to skim other segments paying less also.
3. *Product quality and image must be consistent with high price, must have enough
buyers to purchase at high price, cost of producing a small volume must not be so
high. (demand assumed inelastic)
- Market Penetration Pricing
1. Setting a low price for new product to attract a large number of buyers and larger
market share.
2. Market must be sensitive to different price levels, so more rapid market growth.
Production & distribution costs must fall as sales volume increases. Must help keep
out competition.

5 Product Mix & Service Mix Pricing Strategies

1. Product/Service-line Pricing
Setting the price steps between various products in product line based on costs
differences between products, customer evaluations of different features &
competitors prices.

-Price diff small, will buy advanced model, if big, less advanced.
2. Optional Product/Service Pricing
The pricing of optional or accessory products along with main product.
E.g car with GPS & Bluetooth- have to pay extra
3. Captive Product/Service Pricing
The pricing of products that must be used along with main product
E.g razor blades, inkjet printers.
Services: Two-part pricing
Price of service= Fixed fee + Variable Usage Rate (profit made here)
e.g hotel and service like food.
4. By Product Pricing
Setting a price for by-products in order to make main products price more
competitive.
e.g feathers are by products of chicken processing.
Accept any price that covers more than the cost of storing and delivering them.
5. Product/Service-Bundle Pricing
Combining several products and offering bundle at reduced price
e.g burger, fries, drink in a set.

7 Price Adjustment Strategies

Discount pricing & Allowances

Reducing prices to reward customer responses like paying early or promoting
product/service.
Cash discounts
A price reduction to buyers who pay their bills promptly.
Quantity discounts
A price reduction to buyers who buy large volumes.
Functional discounts/ Trade discounts
Offered by seller to trade channel members (retailers & wholesalers) who
perform functions like storing, selling and record keeping.
Seasonal discounts
Price discount to buyers who buy merchandise or services out of season.
Allowances
Trade in allowances- given for turning in old item for new one
Promotional allowances- given to reward dealers for participating in
advertising or sales support programs.

Segmented Pricing
Selling a product/ service at two or more prices where difference in prices is not based
on diff in costs. Market should be segmentable and show diff degrees of demand.
Members paying lower price should not be able to sell to segment paying higher price.
Competitor should not be able to undersell firm in segment paying higher price.
Differentiated practice should be legal.
Customer segmented pricing
Diff customers pay diff prices for same product/service.
Product form pricing
Diff versions of product are prices diff, NOT according to difference in costs.
(e.g evian water cheap but the aerosol spray exp eventhough diff in packaging
only small)
Location pricing
Diff locations are priced differently even though cost of offering is same
(e.g in cinema, diff seat diff price)
Time pricing
Prices varied seasonally, monthly, by month, day, or hour.

Psychological Pricing
A pricing approach that considers the psychology of prices not simply the economics.
The price is used to say something good about the product.
Perceived higher price as higher quality
Reference prices are prices buyers carry in their minds and refer to when looking at
given product. E.g: can display products next to more expensive ones so it seems
higher quality.

Promotional Pricing
Temporarily price products below price list, sometimes even below cost to increase
short run sales.
Loss leaders- supermarkets price some products as this, hoping to attract customers in
and buy other items at markup.
Special event pricing
Cash rebates
Low-interest financing longer warranties or free maintenance to reduce
consumers price.
Discounts- to increase sales and reduce inventories.

Value Pricing
Adjusting pricing to the right combination of quality & good service at fair price.

Geographical Pricing
FOB-Origin Pricing
Good are placed free on board carrier and customer pays freight from factory
to destination.

Uniform Delivering Pricing

Exact opposite of FOB pricing.
Charges same price plus freight to all customers regardless of location.
Zone Pricing
In which company sets up two or more zones- all customers within a zone pay
same price, price is higher in more distant zones.
Basing-Point Pricing
Seller designates a city as basing point and charges all customers the freight
cost from that city to customer location, regardless of the city from which
goods are actually shipped.
Freight Absorption Pricing
The company absorbs all or part of the actual freight in order to get business.
Used for market penetration and to hold on to increasingly competitive
markets.

7. International Markets
Companies must decide what prices to charge different countries. Most adjust to match local
market conditions and cost considerations.

Chapter 13
Upstream partners are firms that supply raw materials, components, parts, information,
finances, and expertise needed to create a product or service.
Downstream partners include the marketing channels or distribution channels that look
toward the customer, including retailers and wholesalers.
Value delivery network is composed of the company, suppliers, distributors, and, ultimately,
customers who partner with each other to improve the performance of the entire system.
Nature and Importance of Marketing Channels
Marketing channel (distribution channel) is a set of interdependent organizations that help
make a product or service available for use or consumption by the consumer or business user.
How they add value?

Transform the assortment of products into assortments wanted by consumers

Bridge the major time, place, and possession gaps that separate G&S from
users.

Marketing Channel Functions

1)
2)
3)

Information- Gather, distribute marketing research and intell info about players &
external forces in environment- for company to plan and facilitate exchange.
Promotion- Develop & communicate info about a product/service.
Contact- Finding & communicating with prospective buyers

4)
5)
6)
7)
8)

Matching- Shaping & fitting offer to buyer needs in areas.

Negotiation- Reaching agreement on prices and other terms of offer so ownership &
possession can transfer.
Physical distribution- Transport/Store goods
Financing- Covering costs of channel work.
Risk taking- Assuming risks of carrying out channel work.

Marketing Logistics & Supply Chain Management

Nature & Importance of Marketing Logistics
Marketing logistics network (physical distribution) efficiently & effectively making &
getting products/services to end users.
Planning, implementing & controlling the physical flow of materials, final goods and related
info from point of origin to point of consumption, to meet customer requirements at a profit.
Supply chain management- managing upstream & downstream value added flows of
materials, final goods and related info among suppliers, company, resellers and final
consumers.

The 8 Marketing Logistics Decisions

How to best utilise the five main logistic functions: warehousing, inventory control, transport
costs, order processing, conversion lot costs.
1)

The Cycle Time Reduction

-Time taken to design, manufacture & distribute new products. Faster= key market
position.

2)

Conversion Operations Location Decisions

-Conversion operation includes services production & physical product manufacturing
operations.
-To place it close to raw materials or not.

3)

Manufacturing and Operations Process Decisions

-Line, batch, continuous process.

4)

Order Processing Decisions

-Order processing is all of the activities included in receiving, processing and
fulfilling sales-order information.
-Quickly and accurately
- steps : order entry, picking, verification, transport loading, delivery & invoicing.

5)

Warehousing Decisions
- Decide on best number of stocking locations. More= quicker delivery. But costs
increase. Must balance desired level of cust. service against distribution costs.

-May use either storage warehouses or distribution centres.

- Distribution centres: Large highly automated warehouse to receive goods from
various plants and suppliers, take orders, fill them efficiently, and deliver goods asap.
6)

Inventory Decisions
-3 kinds of inventory: Raw materials/ input supplies to a conversion process, work-inprocess and finished goods.
- Finished goods most exp inclu all costs.
- Decisions involve knowing when to order and how much to order.
-When: Balance risks of running out of stock vs cost of too much
-How much: Balance order processing costs vs inventory carrying costs.

7)

Transport Decisions
-Affects pricing, delivery performance, condition of goods when arrive.
- Can choose from : Rail transport, road, water, air, pipeline.
- intermodal transportation methods: Two or more used.

8)

Choosing Transportation Modes

-Cost is a factor.
-Containerisation is putting goods in boxes/trailers that are easy to transfer between 2
transport modes. Used in multimode system.

Channel Behaviour & Organisation

Channel Behaviour
Channel conflict refers to disagreement among channel members over goals, roles, and
rewards.

Horizontal Conflict
Conflict between firms at same level of the channel- insurance agent w
insurance agent, franchise w franchise.
Vertical Conflict
Conflicts between different levels of same channel

Vertical Marketing Network (VMN)

Conventional distribution systems consist of one or more independent producers,
wholesalers, and retailers, each separate business seeking to maximize its own profits, perhaps
even at the expense of profits for the system as a whole.
Vertical marketing systems (VMSs) provide channel leadership and consist of producers,
wholesalers, and retailers acting as a unified system.

3 Types of VMNs
1.

Corporate VMN
Combine successive stages of production and distribution under single
ownership.
Channel leadership established through common ownership.

2.

Contractual VMN
Consist of independent firms at different levels of production and distribution
who join together through contracts.
Three types:
Wholesaler sponsored voluntary chains
Wholesalers organise voluntary chains of independent retailers to help compete
with large corporate chain organisations.
Retailer cooperatives
Retailers organise new, jointly owned wholesale business.
Franchise Organisations
A channel member called a franchiser links several stages in the productiondistribution process.

3.

Administered VMN
Coordinates successive stages of production and distribution through the size
and power of one of the parties.

Horizontal Marketing Network

A channel arrangement in which two or more companies at one level join together to follow a
new marketing opportunity.
Multichannel Network
Multimarketing channel networks- A single firm sets up 2 or more marketing channels to
reach one or more segments.
3 Strategies to Determine Number of Marketing Intermediaries
1.

Intensive Distribution
Stocking the product in as many outlets as possible

2.

Exclusive Distribution
Giving a limited number of dealers the right to distribute the companys
products in their territories.

3.

Selective Distribution

The use of more than one BUT fewer than all of the intermediaries
who are willing to carry the product.

Chapter 14
The main types of retailers:
Amount of Service
-

Self Service Retailers

Provide few/no services to shopper; shoppers perform their own locate,
compare, select process.

Limited-service Retailer
Provides only a limited number of services to shoppers.
Like hardware chains

Full-service Retailers
Provide full range of services to shoppers.
Like specialty stores and first class department stores.

Product Line Sold

-

Specialty Stores & Combination Stores

Specialty store: Carries a narrow product line with deep assortment within
that line.
Like sporting goods, furniture, books and electronics.
Combination store: Sells a combination of products normally associated with
specialty stores. Combined grocery & merchandise stores.

Department Stores
Carries a wide variety of product lines, typically- clothing, home furnishing
and household.
Each line operated as separate department which may be managed by
specialist buyers or merchandisers, or may be performed centrally.

Supermarkets
Large, low cost, low margin, high volume, self service store, that carries wide
variety of food, laundry and household products.

Convenience Stores
A small store, located near residential area, open long hours seven days a
week, carrying a limited line of high turnover convenience goods.

Superstores, Hypermarkets & Category Killers

- Superstores
Almost twice the size of a regular supermarket, carrying a large
assortment of routinely purchased food and non-food items, and
offering services like dry cleaning, photo developing, cheque cashing,
bill paying, car care & pet care.

Hypermarkets
Huge store that combines supermarket, discount & warehouse
retailing. Other than food, also carries- furniture, appliances, clothing
etc.

Category Killer
Giant specialty store, carries a very deep assortment of particular line,
staffed by knowledgeable employees.

Control of Outlets
- Corporate Chains
A group of retail outlets with common ownership and control, using
central buying and merchandising, and selling similar lines of
merchandise, usually with national (and sometimes international)
coverage.
-

Voluntary Chain
Wholesaler sponsored group of independent retailers that engages in
group buying and common merchandising.

Retailer Cooperative
A contractual association of independent retailers who engage in group
buying and merchandising
-Franchising
A contractual association between manufacturer, wholesaler or
service organisation (franchiser) and independent business people

(franchisees) who buy the right to own/operate one or more units in the
franchise system

The Functions of Wholesalers

1.

Selling and Promoting

Help manufacturers reach small customers at low cost. Wholesalers have more
contacts, buyer trust them more than distant manufacturer.

2.

Buying & Assortment Building

Wholesalers can select items and build assortments as needed by customers,
saving much work for consumers.

3.

Bulk Breaking
Wholesalers can save customers money by buying in carload lots & breaking
bulk (breaking large lots into small quantities).

4.

Warehousing
Wholesalers hold inventories, reducing inventory costs and risks of suppliers
and customers.

5.

Transportation
Can provide quicker delivery to buyers, cause closer than producers.

6.

Financing
Finance customers by giving credit. And to suppliers- by ordering early and
paying promptly.

7.

Risk bearing
Absorb risk by taking title & bearing cost of theft, damage, spoilage and
obsolescence.

8.

Market Information
Give info to suppliers & customers about competitors, new products and price
development.

9.

Management Services & Advice

Help retailers train staff, improve store layouts and displays, set up accounting
& inventory systems.

3 Types of Wholesalers
1)

Merchant Wholesalers
Independently owned business that takes title to merchandise it handles.
- Full service Wholesalers
Provide set of full services- carrying stock, using sales force, offering credit,
making deliveries, management assistance.
Either wholesale merchants or industrial distributor:
Wholesale merchants- Sell mostly to retailers, provide full range services.
Vary in breadth of product line.
Industrial distributors- Sell to producers. Provide inventory, credit, delivery
etc. B2B may concentrate on lines like maintenance and operating supplies,
original equipment goods or equipment.
-

Limited service Wholesalers

Offers only limited services to suppliers & customers
Several types:
Cash-and-carry wholesalers- Limited line of fast moving goods, sell to small
retailers for cash, normally no delivery.
Truck wholesalers (cash van operators)- Perform selling & delivery function.
Limited line of goods, sell for cash as they make their rounds.
Drop shippers- Operate in bulk industries (coal, timber, heavy equip). Dont
carry inventory/ handle product. When receive order, find producer who ships
goods directly to customer.
Producers cooperative- Owned by farm members, assemble farm produce to
sell in market, Profit divided among members.
Mail-order wholesalers- Send catalogues to retail, industrial and institutional
customers (offer jewellery, cosmetics, special foods etc). Main customers are
businesses in small outlying areas. No sales force, orders filled and sent by
mail, truck etc.

2)

Brokers & Agents

Dont take title to goods, perform only few functions.
- Brokers
Bring buyer and sellers together, assist in negotiation.

Earn commission on selling price. Specialise by product line or customer type.

-

Agents
Represents buyer and sellers on more permanent basis
Several types:
Manufacturers agents- Represent two or more manufacturers of related lines.
Have formal agreement w manufacturer, know each product line, use contacts
to sell. Hired by small producers who cant afford to maintain field sales force
or by large producers who want to open new territories/sell in areas that cant
support full time sales person.
Selling agents- Contract to sell producers entire output. Serves as sales
department, much influence over prices and T&C of sale. No territory limits.
Purchasing agents- Make purchases for buyers, receive, inspect, warehouse &
ship goods to buyers. Know a lot about product line, helpful info and can
obtain best goods and prices.
Commission merchants- Take physical possession of products, negotiate
sales. Not on long term basis. Typically agriculture.

3)

Manufacturers Sales Branches & Offices

Wholesaling by sellers or buyer themselves, not through independent wholesalers.
Set up own sales office, improve inventory control, provide faster access to products.
Similar functions to broker/ agents but part of buyers org.

Chapter 15, 16 & 17- IMC

Integrated Marketing Communications (IMC)

Definition: The concept of a company carefully integrating and coordinating its online and
offline communication channels to deliver a clear, consistent and compelling message about
the organisation & its products.

Elements in Communication Process

9 Elements in Communication Process using MCD as example:

1.
2.

3.
4.

5.

6.

7.

8.

9.

Sender
The party is sending the message to another party (McDonalds)
Encoding
The process of putting thought into symbolic form (Mcd ad agency assembles
words and illustrations into ad to convey intended message)
Message
The set of symbols the sender transmits (Mcds advertisement)
Media
The communication channels through which the message moves from sender
to receiver (TV channels chosen by Mcds agency)
Decoding
The process of which the receiver assigns meaning to symbols encoded by
sender (consumer notices ad, interprets the words & illustrations)
Receiver
The party receiving the message sent by another party (the consumer who
watched the ad)
Response
The reaction of consumer after being exposed to the message (any hundreds of
possible responses)
Feedback
Part of the receivers response communicated back to sender (Mcd research
that shows customers like the ad)
Noise
The unplanned static/distortion (competing stimuli) during communication
process that results receiver getting diff message than intended one.

6 Steps In Developing IMC

Marketer must address the following issues:

1.

Identify Target Audience

Start with clear audience in mind
Target audience can be potential buyers/current users, those who influence/make
buying decision.
They may be individuals/groups, special public/general public.

2.

Determine the Communication Objective(s)

Desired response: purchase
Target audience may be in any 6 Buyer-Readiness States; Awareness, Knowledge,
Liking, Preference, Conviction & Purchase.
- Awareness
Must gauge their awareness of product/service or company.
If unaware: Build awareness- Simple name recognition

3.

Knowledge
Need to know what knowledge they have.
Might then decide to select product knowledge as first comm. objective.

Liking
Can be measured- market research.
If dislike- learn why, develop marketing comm. campaign create favourable
feeling.

Preference
Measure- Ask sample to rate.
Try build customer preference
Promote quality, value, performance- Measure again to check.

Conviction
Build conviction that it will be valuable so they buy

Purchase
Have conviction but not enough to buy- Promote, offer at lower price, offer
premium, let them try on daily basis.
Effective marketing comm. needs good design.

Design a Message
Get attention, hold interest, arouse desire, obtain action (AIDA method)
- Message Content
Rational Appeal- Relate to audiences self interest, show product will produce
desired benefits; quality, economy, value, performance.
Emotional Appeal- Stir up negative/positive emotions that motivate
purchase ; fear, guilt, shame, love, humour.
Moral Appeal- Sense of right & wrong, Urge to support social causes.
-

Message Structure

Draw conclusion/leave to audience

Present strongest argument first/last
One sided argument (strengths only) or two sided (strengths &
weaknesses)
-

4.

Message Format
Need strong format
Illustration, Headline & Copy(main block of text)- must work well tgt.
Choose Media
Must choose a channel of communication
Two types:
Personal
- Two or more people communicate directly with each other (inclu. face to face,
person to audience, telephone, mail or elec media)
- Effective: Allow for interaction.
- Word of mouth- Most effective- personal influence
- Target opinion leaders, engage in buzz marketing
Non-Personal

1.
5.

6.

Media that carry messages without personal contact/feedback- major media,

atmospheres & events.
Select Message Source
-Credible source- depends how target audience view
- Wrong can result in embarrassment
Collect Feedback
Whether they rmb the msg, research effect on target audience.
Need satisfaction not only awareness.

Elements in Promotion Mix

1.

2.
3.

4.

5.

Advertising~ broadcast, print, internet, outdoor

Any paid form of non personal presentation and promotion of ideas, G&S by
an identified sponsor.
Sales promotion~ discounts, coupons, displays
Short-term incentives to encourage purchase or sale of a product/service.
Personal Selling~ sales presentations, trade shows, incentive programs.
Personal presentation by firms sales force for the purpose of making sales and
building customer relations.
Public Relations~ press releases, sponsorships, special events
Building good relations with companys various publics by obtaining
favourable publicity, building up good corporate image, handing/heading off
unfavourable rumours, stories & events.
Direct Marketing~ catalogues, telephone marketing, kiosks, mobile marketing

Direct connections with carefully targeted individual consumers to obtain

immediate response & cultivate lasting customer r/s.
Element of Promotion Mix

Advantages

Advertising

1.

2.
3.
4.
Sales Promotion

1.

2.

3.

Limitations

Can reach masses of

geographically dispersed
buyers
Low cost per exposure
Enables seller repeat
message many times.
Television networks- gain
audience fast.
Attracts customer
attention- incentives w
additional value.
Stronger & quicker
response- urgency & value
for money perceived
Dramatise product offers

1.
2.
3.

4.
Personal Selling

1.
2.

3.
4.
Public Relations

1.
2.
3.
4.

Direct Marketing

1.
2.

3.

4.

Build up customers pref,

conviction & actions.
Personal interaction
between 2 people-can
observe needs and make
adjustments.
Range of r/s can emerge.
Build meaningful long
term r/s.

1.

2.

3.

Effects short lived

Not effective in building
long run brand pref.
If constantly promoted,
buyers who would have paid
full price- stockpile during
promo
Decrease in profits
Sales force requires longer
term commitment than
advertising.
Hard to change size of
sales force; ineffective
advert can just remove. This
cannot.
Most exp IMC tool.

Believability
Reach prospects who
avoid salespeople & ads.
Can dramatise a
company/product.
Effective, economical- tgt
with other promo mix.
Non-public- directed at
specific person
Immediate & customisedprepared quickly, tailored
to appeal to specific
consumers.
Interactive- allows
dialogue between
marketing team &
consumer.
Highly targeted marketing

1.

Limitations on how
customer data can be used.

5.

efforts
Build customer
relationships.

Promotion Mix Strategies/Communications Mix Strategies

1. Type of Product And Market
Consumer goods market- more on advertising then sales promotion, personal selling,
PR.
B2B- more on personal selling, then sales promo, ad and PR.
(In b2b, ad & personal selling must coexist- ad can build prod awareness, sales lead,
reassure buyers. Personal selling- add to consumer goods marketing effort)
2. Push VS Pull Strategy
Push strategy- A promo strategy that uses sales force and trade promotion to push
product through channels (producer promo product to wholesalers, then they promote
to retailers, retailer to consumers)
Pull strategy- A promo strategy that spends a lot on advertising and consumer
promotion to build up customer demand, if successful, consumers will ask retailer for
product, retailers ask wholesalers, then they ask producer.

3. Buyer-Readiness Stage
Marketing comm. tools vary effect at diff stages of buyer readiness.

Advertising & PR- Awareness & knowledge

Personal selling & Ads- Customer liking, preference, conviction.
Direct marketing, sales calls, sales promo- Close the deal.

4. Product-Life Cycle Stage

Introduction- Ads, direct marketing, online marketing, PR- high awareness
Early trials- Sales promo, personal selling
Growth- ads, direct & online marketing, PR. Can reduce sales promo-fewer incentive
needed.
Maturity- Sales promo, ads.
Decline- Ads (as reminder), PR drop, personal selling drop. Sales promo strong.
5. Integrating The Promotion Mix
Ensure comm. efforts occur when, where & how customers need them- at touch point.

The Promotion Mix

1.

ADVERTISING
Definition: Any paid form of non-personal presentation & promotion of ideas, G&S by
identified sponsor.
Decisions developing Advertising program

Setting Advertising Objectives

Informative Advertising- Used to inform consumers about a new

product/feature to build primary demand
Importance: When introducing a new product category
Objective: Build primary demand
Communicating customer value
Building a brand & company image
Telling market about new product
Explain how it works

Suggest new uses for product

Informing of price change
Describing available services & support
Correct false impressions & fear perceptions

Persuasive Advertising- Used to build selective demand by persuading

consumers it offers best quality for their money.
Can become comparison advertising- Directly/indirectly compare with
one/more brands.
Importance: When competition increase
Objective: Build selective demand.
Building brand pref
Encourage switching to a brand
Changing customer perceptions on
attributes

Persuade to purchase now

Persuade to receive sales call
Convince them to tell others

Reminder Advertising- Used to keep consumers thinking about the product

Importance: mature products.
Objectives: Maintain customer r/s and keep them thinking about product.
Maintain customer r/s and product awareness
Remind consumers that prod may be needed in
near future

Remind where to buy product

Keep it in customers mind during off season

Setting the advertising budget

Factors to consider:

Stages in product life cycle

Market share
Competition & clutter
Advertising frequency
Product differentiation

Developing the Advertising Strategy

The strategy by which the company accomplishes its advertising objectives. Two main
elements: creative advertising messages and selecting advertising media.
Creating the Advertising Message
Effective messages.
Selecting Advertising Media
1.

Deciding on the reach, frequency & impact.

Reach- percent of people in target market exposed to ad campaign in a given

period.
Frequency- number of times the average person in market is exposed to the
message in given period.
Media impact- qualitative value of message exposure through given medium.
2.

Select media types

Medium
Television

Newspapers

Internet

Direct Mail

Magazines

Advantages
Good mass marketing
coverage
Low cost per exposure
Combines sight, sound &
motion
Appealing to senses
High attention & reach
Flexibility
Timeliness
Good local coverage
Broad acceptance
High believability
High selectivity
Immediacy
Interactive capabilities
Easy to measure number
of exposures

Limitation
High absolute cost
High clutter
Fleeting exposure
Less audience selectivity

Radio

Outdoor/cinema

High audience selectivity

Flexibility
No ad competition
within same medium
Allow personalisation
High geo & demo
selectivity
Credibility & prestige
High quality
reproduction
Long life
Good pass along
readership
Mass use
High geo & demo
selectivity
Low cost
Flexibility
High repeat exposure
Low cost
Low competition

Short life
Poor reproduction quality
Small pass along audience

Pot. low impact

Demographically skewed
audience
Audience controls exposure
Less effective at conveying
message
High cost per exposure
junk mail image

Long ad purchase lead times

Some waste circulation
No guarantee of position

Audience presentation only

Lower attention than TV
Non standardised rate struct
Fleeting exposure
No audience selectivity
Creative limitations.

2.

3.

Select specific media vehicle

Media vehicle- specific media within general media type, like specific
magazines, tv shows etc.

4.

Decide on media timing

Pattern of ads:
Continuity scheduling- scheduling ads evenly within given period
Pulsing- scheduling ads unevenly during time period.

5.

Evaluating advertising effectiveness & ROadvertisingI

Evaluate communication effect & sales effect on target.

PUBLIC RELATIONS (PR)

Definition: Building good relations with companys various publics by obtaining
favourable publicity, building good corporate image, handling and heading off
unfavourable rumours, stories & events.
Publicity- Activities to promote company/products by planting news in media not paid
by sponsor.
Forms of PR

Press Relations Place newsworthy info into news media to attract attention to
a person, product/service.
Product Publicity- Publicising specific products.
Corporate Communication- Create internal & external comm. to promote
understanding of company/institution to shareholders/financial institutions.
Lobbying- Dealing with legislators & gov. officials to promote/defeat legislation
& regulation.
Counselling- Advise management about public issues, company position &
image.
Development: Working with donors/members of non profit org to gain
financial/volunteer support.

Tools of PR

News
Find/create favourable news about company/products/people

Special Events
News conference, press tours, grand openings with spectaculars that interest
public.

Written Materials

To reach and influence target markets like annual reports, brochures, articles,
newsletters and magazines.

3.

Audiovisual tools
Films, slide-and-sound programs also used. Like Will it Blend

Corporate Identity Materials

Logos, stationery, brochures, signs, business forms, cards, buildingsmemorable, distinctive, attractive.

Community Services
Improve public goodwill by contributing time and money.

SALES PROMOTION
Definition: Short term incentives to encourage purchase/sale of a product/service.
Sales Promotion Objectives
Consumer promotions objectives:
Urge short term customer buying
Enhance customer brand involvement.
Trade promotions objectives:
Getting retailers to carry new items & more inventory
Buy ahead promote companys products
More shelf space.
Setting Sales Promotion Objectives
Rather than create short term sales only or temp. brand switching, it should
reinforce product position and build long term customer r/s.

Entice customers to try new product/brand

Lure customers away from competitors product/brand
Get customers to stock up on mature product.

Sales Promotion Tools

Consider type of market, sales promo objectives, competition, cost & effectiveness.
1.

Consumer Promotion Tools

Samples
Free/discounted goods provided at store level or through media, like
inserts to facilitate product trial.
Effective but expensive.

Redeemable Coupons
Coupons carried on-pack or other media, when forwarded to marketer
or appointed agent, can be redeemed for a product/service, or discount
on next purchase.

Cash-back offers (rebates)

Cash discounts usually received by forwarding proof of purchase
where state legis. permits.

Money-off deals & price packs

Money-off deals are temp price discounts usually offered at retail level;
also by direct marketers.
Price packs are reduced prices that are marked by producer directly on
label/package.

Premium Offers
Goods offered FOC/ at reduced price as incentive to buy a product.

Advertising Specialties
Useful articles imprinted with advertisers name, given as gifts to
consumers.

Patronage Rewards (loyalty schemes)

Cash, merchandise or service rewards offered to consumers who make
continual use of companys product/service
e.g. frequent flyer programs.

Point of Purchase Promotions (POP)

Offers ranging from theme promotions in store to specially arranged
selling areas.

Contests & games of chance & skill

Promo events that give consumer a chance to win something of value
by luck or skill.

2.

3.

Event sponsorship/ Event marketing

Marketers create their own brand marketing events/ serve as sole or
participating sponsors of events by others.
Trade Promotion Tools
Many tools from consumer tools can also be used here like- contests,
premiums, displays.
Manufacturers can also offer:
Straight discount off listed price on each purchase during a given time
(price off, off invoice, off-list)
Allowance- In return for retailers agreement to feature manufacturers
products in some way (Advertising allowance or display allowance).
Free goods- when pre-set quantity is purchased.
Free specialty advertising items- carry companys logo.
B2B Promotion Tools
Conventions & Trade Shows

B2B Sales contest- incentive to firms sales force/ distributor/ dealer

network to increase sales.

Developing Sales Promotion Programs

1.
2.
3.
4.
5.

4.

Size of incentive
Set conditions for participants
How to promote, distribute the promotion program itself.
Length of promotion
Evaluation

PERSONAL SELLING
Definition: Involves personal presentations by the firms sales force for the purpose of
making sales and building customer relationship
Types of Personal Selling

Face to Face communication

Telephone communication
Video/ Web conferencing

The Personal Selling Process

1.

Prospecting & Qualifying

Identifying qualified potential customers.
Avoid wasting money.
Ask for referrals, search in directories/online or unannounced in various
offices.
Look at financial ability, volume of business, special needs, location, growth
possibility.

5.

2.

Pre-Approach
Salesperson learns as much as possible about prospect before making call.
Set call objectives and decide best approach.

3.

Approach
Salesperson meets and greets buyers to get r/s off to good start.

4.

Presentation & Demonstration

Salesperson tells the product story to customer, show how it will make/save
money.
Use technology, know how to listen & build strong r/s.

5.

Handling Objections
Seeks out, clarifies & overcomes customer objections to buying.

6.

Closing
The salesperson asks customer for an order.
Know how to recognise closing signals. Start of relationship.

7.

Follow-Up
Last step in selling process, follow up after sale to ensure satisfaction & repeat
business.
Must say thank you.

DIRECT MARKETING
Definition: Connecting directly with targeted segments/individual customers, often on
one-to-one, interactive basis, to effect trackable & measurable responses/transactions.
Benefit to buyers:
- Convenient, easy, private
- Give access to a wealth of comparative info about competitors, companies &
products.
- Immediate & interactive.
Benefit to seller:
-

Can target small groups or individual customers.

Can interact and learn more about needs
Low cost, efficient, speedy alternative for reaching markets
Speedier handling of channel & logistics functions

Forms of Direct Marketing

1.

2.

3.

4.

Personal Selling
A companys sales force creates and communicates customer value through
personal interactions with customers and build customer relationship.
A form of selling associated with more B2B transactions. It is personal in
nature and may be on a one-to-one or one to many basis.
Direct Mail Marketing
Printed materials sent by mail and conveying offers to customers, whether
targeted to the recipient by name, or to the business or householder by a
broader targeting method.
High target market selectivity, one-to-one comm. Junk
Direct Print & Reproduction Marketing
The use of printed materials such as mail and catalogues to convey offers to
existing and high value prospective customers.
Not junk,
Catalogue Marketing
Printed listing of products, often featuring high-quality reproduction of the
items on sale.
More going digital. Best way to drive online sales.
Perception that must be held by consumers for this to be successful:
- Unique product offers

Air of authority by seller

Value for money offering
Guarantee of satisfaction

5.

Direct Response Television (DRTV) and Radio and Print Marketing

Television and radio commercials to air that persuasively describe product
and then give a toll free number for viewers to call and place an order.
Used to build database, make immediate sales.
Two forms: Direct response television advertising (60 secs approx.) and
Infomercials (30 mins approx.).

6.

Telemarketing (Telephone Marketing)

Using the telephone to sell to, and contact directly, existing and potential new
customers.
Viewers invited- inbound marketing or operator seeks an order- outbound
marketing.

7.

Telesales
Routine order taking by operator.

8.

Electronic Dispensing & Kiosk Marketing

Electronic dispensing machines- Machines that dispense products (food) and
services (cash), usually by inserting a cash or transaction or store valued card.
Kiosks- Electronically networked mini offices, staffed or unstaffed, capable of
dispensing info, products & services, as well as receiving payments by
instalment or full.

9.

Direct Selling
Selling directly to customers by impersonal means, such as online, by mail
order, and so on.

10.

New digital direct marketing technologies

Mobile marketing
Ads on phone. Use responsibly or risk angering consumers
Podcasts & Vodcasts
Podcast- A compressed multimedia digital file distributed on internet
for later playback on computer.
Vodcast- Video podcast. Online video on demand clip/file.
Ad supported podcasts, downloadable ads etc.
Interactive TV
Interact with tv programming & ads using remote controls.

11.

Online Marketing
Marketing via the Internet using company Web sites, online ads and
promotions, e-mail, online video, and blogs to achieve marketing objectives.
Blogs
Online journals where people and companies post their thoughts and
other content, usually related to narrowly defined topics.
Social Media
Independent and commercial online communities where people
congregate, socialize, and exchange views and information.