Professional Documents
Culture Documents
Describe the roles of product and service branding, packaging, labeling, and product
support services.
Explain the decisions companies make when developing product lines and mixes.
What is a Product?
(schools and
Levels of a Product
Product Classifications
Products and services fall into two broad classes based on the types of
consumers that use them:
Consumer products
Convenience products
Shopping products
Specialty products
Unsought products
Industrial products
Capital items
Consumer Products
Convenience products
Low price
Mass advertising
Shopping products
Higher price
Specialty products
Have unique characteristics, brand identification, brand loyalty
High price
Exclusive distribution
Targeted promotions
Examples: luxury goods such as Rolex watches
Unsought products
Little product awareness (consumer does not know about or knows about but
does not normally think of buying).
New innovations
Require a lot of advertising, personal selling, and other marketing efforts.
Examples: life insurance, cemetery plots, blood donation
Industrial products
Capital items
Product Decisions
Three level of decisions:
Individual product
Product line
Product mix
Quality:
Features
Brand
Advantages to buyers:
Product identification
Product quality
Advantages to sellers:
Packaging
Environmental concerns
Can range from simple tags to complex graphics that are part of the package
Steps involved:
A product line: a group of products that are closely related because they
The major product line decisions involve product line length, which is the
number of items in the product line.
Product line filling is the process of adding more items within the
present range of the line.
Downward: initially
compete in the higher
price market and
subsequently catering
to a lower market
Two-way: entering
higher and lower end
Product Mix (or product assortment) : all of the product lines and items that a
particular seller offers for sale.
Length: the total number of items the company carries within its
product lines.
Consistency: how closely related the various product lines are in end
use, production requirements, distribution channels, or some other
way.
It can add more versions of each product and deepen its product mix.
Branding Strategy
Brands
Brand equity
the positive differential effect that knowing the brand name has on
customer response to a product or service.
the extent to which customers are willing to pay more for the brand
Brand Positioning
When positioning a brand, the marketer should establish a mission for the
brand and a vision of what that brand must be and do.
Can position brands clearly in the customers mind at any of three levels:
Product Attributes
Product Benefits
It should be distinctive
It should be extendable
Brand Sponsorship
licensing a brand;
Brand Development
Line Extension
Brand Extension
Multibranding
New Brands
Services Marketing
External marketing:
Internal marketing:
Interactive marketing:
Describe how marketing strategies change during the products life cycle.
Design problems
Development costs
Competition
Internal sources
External sources
Product Idea: idea for a possible product that the company can see
itself offering.
The first part describes the target market, the planned product
positioning, and the sales, market share, and profit goals for the first
few years.
The second part outlines the products planned price, distribution, and
marketing budget for the first year.
The third part describes the long-run sales, profit goals, and marketing
mix strategy.
Involves a review of the sales, costs, and profit projections to assess fit with
company objectives.
products will undergo rigorous tests to make sure that they perform safely
and effectively
Gives the marketer experience with marketing the product before going to
the great expense of a full introduction
Can be expensive and time consuming, but better than making major
marketing mistake.
Step 8: Commercialization
Sequential Approach:
Simultaneous Approach:
PLC shows the course that a products sales and profits take over its lifetime.
Product development begins when the company finds and develops new
product ideas. Sales are zero in this stage and the companys
investment costs mount.
Decline is the period when sales fall off and profits drop.
Sales
Cost
Profits
Marketing objectives
Product
Price
Distributions
Promotion
Low
High cost per customer
Negative
Create product awareness and trial
Offer a basic product
Use cost-plus formula
Build selective distribution
Heavy to entice product trial
Sales
Cost
Profits
Marketing objectives
Product
Price
Distributions
Promotion
Rapidly rising
Average cost per customer
Rising
Maximize market share
Offer extension, service, warranty
Penetration strategy
Build intensive distribution
Reduce to take advantage on demand
Sales
Cost
Profits
Marketing objectives
Product
Price
Distributions
Promotion
Peak
Low cost per customer
High
Maximize profits while defending market
share
Diversify brand and models
Match or best competitors
Build more intensive distribution
Increase to encourage brand switching
E.g.: Look for new users and market segments, reposition the brand to
appeal to larger or faster-growing segment or look for ways to increase
usage among present customers
E.g.: Cut prices, launch a better ad campaign, move into larger market
channels and offer new or improved services to buyers
Sales
Cost
Profits
Marketing objectives
Product
Price
Distributions
Promotion
Declining
Low cost per customer
Declining
Reduce expenditures and milk the brand
Phase out weak items
Cut price
Selective: phase out unprofitable outlets
Reduce to minimum level
Identify and explain the external and internal factors affecting a firm's pricing
decisions.
Describe the major strategies for pricing imitative and new products.
Explain how companies find a set of prices that maximizes the profits from
the total product mix.
Discuss how companies adjust their prices to take into account different
types of customers and situations.
Discuss the key issues related to initiating and responding to price changes.
Pricing
Price
the sum of all the values that consumers exchange for the benefits of
having or using the product or service.
It may refers to: rent, fee, rate, commission. Assessment, tuition, fare,
toll, premium, retainer, bribe, salary, wage, interest and tax.
Pricing strategies:
Right Pricing
Pure Competition: Many buyers and sellers where each has little effect
on the going market price
Demand curve: A curve that shows the number of units the market will buy in
a given time period, at different prices that might be charged.
Cost-based Pricing
Product driven
Value-based Pricing
Uses buyers perceptions of value, not the sellers cost, as the key to
pricing.
Customer driven
Competition-based Pricing
Cost-based Pricing
Cost-Plus Pricing:
Break-even pricing:
determine the price at which it will break even or make the target profit
it is seeking.
Target-profit pricing:
determine the price at which it will break even or make the target profit
it is seeking
Competition-Based Pricing
Going-Rate Pricing:
Firm bases its price largely on competitors prices, with less attention
paid to its own costs or to demand.
The firm might charge the same as, more than, or less than its major
competitors
Sealed-Bid Pricing:
Firm bases its price on how it thinks competitors will price rather than
on its own costs or on demand.
Set a high price for a new product to skim revenues layer by layer from the
market.
When to use:
Competitors should not be able to enter market easily and undercut the
high price.
Market Penetration
Set a low initial price in order to penetrate the market quickly and deeply.
Can attract a large number of buyers quickly and win a large market share.
When to use:
The strategy for setting a products price often has to be changed when the
product is part of a product mix.
The firm looks for a set of prices that maximizes the profits on the total
product mix.
Pricing is difficult because the various products have related demand and
costs and face different degrees of competition
Pricing strategies:
Optional-Product Pricing
Captive-Product Pricing
By-Product Pricing:
Optional-Product Pricing
Pricing optional or accessory products sold with the main product (e.g.,
ice maker with the refrigerator).
Captive-Product Pricing
By-Product Pricing
Pricing products that must be used with the main product (e.g.,
replacement cartridges for Gillette razors).
Price-Adjustment Strategies
Companies usually adjust their basic prices to account for various customer
differences and changing situations.
Types of strategies:
Segmented Pricing
Psychological Pricing
Promotional Pricing
Geographical Pricing
International Pricing
adjust the basic price to reward customers for certain responses, such as
early payment of bills, volume purchases, and off-season buying by offering
discounts and allowances.
forms of discounts:
Forms of allowances:
trade-in allowances: given for turning in an old item when buying a new
one.
Segmented Pricing
sells a product or service at two or more prices, even though the difference in
prices is not based on differences in costs.
time pricing: a firm varies its price by the season, the month, the day,
and even the hour.
Psychological Pricing
Consumers use price less when they can judge product quality.
Promotional Pricing
temporarily price the products below list price and sometimes even below
cost to create buying excitement and urgency.
Geographical Pricing
price its products for customers located in different parts of the country.
Zone pricing: company sets up two or more zones. All customers within
a given zone pay a single total price; the more distant the zone, the
higher the price.
International Pricing
can set a uniform worldwide price or adjust their prices to reflect local market
conditions and cost considerations.
Price Cuts
Excess Capacity; Falling Market; Share; Dominate Market; Through Lower;
Costs
Price Increases
Cost Inflation; Over-demand: Cannot Supply All Customers Needs
Explain why companies use distribution channels and discuss the functions
these channels perform.
Discuss how channel members interact and how they organize to perform the
work of the channel.
Discuss the nature and importance of marketing logistics and supply chain
management.
Supply Chain
Change into a better term: demand chain because it suggests a sense-andrespond view of the market.
Channel functions: Intermediaries usually offer the firm more than it can
achieve on its own.
Channel Functions
Bridging the major time, place, and possession gaps that separate goods and
services from those who would use them.
Financing: acquiring and using funds to cover the costs of the channel
work.
Risk taking: assuming the risks of carrying out the channel work.
Channel Behavior
Horizontal Conflict occurs among firms at the same level of the channel
(e.g., retailer to retailer).
Channel Development
Four major trends are:
One channel member owns the others, has contracts with them, or
wields so much power that they must all cooperate.
Channel Development
Disintermediation
A corporate VMS
A contractual VMS
The franchise organization is the most common type. There are three
types of franchises:
An administered VMS
Involve 4 steps:
Number of intermediaries:
Selective distribution: use of more than one, but fewer than all, of
the intermediaries who are willing to carry a companys products.
Responsibilities of intermediaries
Patterns of Distribution
Exclusive distribution
Exclusive dealing
the seller requires that these dealers not handle competitors products.
producer agree not to sell to other dealers in a given area or the buyer
agree to sell only in its own territory.
Tying arrangements
producers of a strong brand sell to dealers only if the dealers will take
some or all of the rest of the line.
Marketing Logistics
getting the right product to the right customer in the right place at the
right time.
Includes
Marketing Logistics
Warehousing
Inventory management
Transportation
Warehousing
decide on how many and what types of warehouses it needs and where
they will be located.
New, single-storied automated warehouses have advanced, computercontrolled materials-handling systems requiring few employees.
Computers and scanners read orders and direct lift trucks, electric
hoists, or robots to gather goods, move them to loading docks, and
issue invoices.
Inventory management
maintain the delicate balance between carrying too little inventory and
carrying too much.
Transportation
Trucks
The logistics concept that emphasizes teamwork, both inside the company
and among all the marketing channel organizations, to maximize the
performance of the entire distribution system.
Involves:
Third-party logistics
Retailing
Amount of Service
Self-Service Retailers
Serve customers who are willing to perform their own locate-compareselect process to save money.
Limited-service retailers
provide more sales assistance because they carry more shopping goods
about which customers need information.
Full-service retailers
Specialty stores
Department stores
Supermarkets
Convenience stores
Superstores
Category killers
small stores located near residential areas that are open long
hours 7 days a week and carry a limited line of high-turnover
convenience goods.
Hypermarkets
A discount store
An off-price retailer
Factory outlets
sometimes group together in factory outlet malls and valueretail centers, where dozens of outlet stores offer prices as
low as 50% below retail on a wide range of items.
Organizational Classification
The major types of retail organizations are:
Chain stores
A voluntary chain
Franchise
A retailer cooperative
two or more outlets that are owned and controlled, have central buying
and merchandising, and sell similar lines of merchandise.
Merchandising conglomerates
Strategy: define their target markets and then decide how they will
position themselves in these markets.
Marketing mix:
Price policy must fit its target market and positioning, product
and service assortment, and competition.
New retail forms continue to emerge to meet new situations and consumer
needs, but the life cycle of new retail forms is getting shorter.
Retail convergence: selling the same products at the same price to the same
consumers in competition with a wider variety of other retailers.
Wholesaling
Bulk breaking
Warehousing
Transportation
Financing
Risk bearing
Market information
Merchant wholesalers
Types of Wholesalers
Merchant wholesalers
2 broad categories:
do not take title to goods, and they perform only a few functions.
Trends in Wholesaling