A drive through !

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Marketing Mix
Produ ct Pric e
Target Market

Plac e

Promoti on

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Key Strategic Marketing Activities

Consumer Analysis Product Planning Pric e Distributi on Planning Promoti on

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Key Strategic Marketing Activities

Consumer Analysis Examination and evaluation of consumer characteristics, needs, and purchase processes Development and maintenance of products, product assortments, product positions, brands, packaging, options, and deletion of old products Outlines price ranges and levels, pricing techniques purchase terms, price adjustments, and the use of price as an active factor

Product Planning

Pric e
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Key Marketing Activities

Distributi on Planning Promotion Planning
Establishment of channel relations, physical distribution, inventory management, warehousing, transportation, allocation of goods, and wholesaling Combination of advertising, publicity, personal selling, and sales promotion to drive sales revenue

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Product/Market Matrix
Existing Products Existing Markets Market Penetration Market Development New Products Product Development Diversification

New Markets

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Product/Market Matrix The firm seeks to achieve

Market Penetration

growth with existing products in their current market segments, aiming to increase its market share Effective when the market is growing or not yet saturated The firm seeks growth by targeting its existing products to new market segments Effective when a local or regional business looks to wider its market, new market segments are emerging due to changes in consumer life-

Market Development

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Product/Market Matrix
Development

Product

The firms develops new products targeted to its existing market segments Effective when the firm has a core of strong brands

Diversification

The firm seeks growth by targeting its existing products to new market segments Diversification is utilized so that the firm does not become overly dependent on one product line

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Market Segmentation
Market Segment The division of a market into different homogeneous groups of consumers

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Should be: measurable accessible by communication and distribution channels different in its response to a marketing mix durable (not changing too quickly) substantial enough to be profitable

Types of Market Segmentation

Geographic

Based on regional variables such as region, climate, population density, and population growth rate. Based on variables such as age, gender, ethnicity, education, occupation, income, and family status

Demographic

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Types of Market Segmentation

Psychographi c

Based on variables such as values, attitudes, and lifestyle

Behavioral

Based on variables such as usage rate and patterns, price sensitivity, brand loyalty, and benefits sought

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Step in Planning A Segmentation Strategy

Determining characteristics and needs of consumers for the product category of the company Analyzing consumer similarities and differences Developing consumer group profiles

Selecting consumer segment (s)

Positioning companys offering in relation to competition.

Establishin g an appropriate marketing plan

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Types of marketing warfare

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Position Defense

Defense Strategy

Least successful of the defense strategies e.g. Mercedes was using a position defense strategy until Toyota launched a frontal attack with its Lexus.

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Mobile Defense

By market broadening and diversification For marketing broadening, there is a need to

Defense Strategy

Redefine the business (principle of objective), and Focus efforts on the competition (the principle of mass)

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e.g. Legend Holdings, the top China PC maker Legend has announced a joint

Flanking Defense:

Defense Strategy

Secondary markets (flanks) are the weaker areas and prone to being attacked Pay attention to the flanks e.g. Automobile manufacturers coming with different comparable product in the same segment of competitors

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Contraction Defense

Defense Strategy

Withdraw from the most vulnerable segments and redirect resources to those that are more defendable By planned contraction or strategic withdrawal e.g. Indias TATA Group sold its soaps and detergents business units to Unilever in 1993

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Pre-emptive Defense

Defense Strategy

Detect potential attacks and attack the enemies first Let it be known how it will retaliate Product or brand proliferation is a form of pre-emptive defense e.g. Seiko has over 2,000 models

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Counter-Offensive Defense

Defense Strategy

Responding to competitors head-on attack by identifying the attackers weakness and then launch a counter attack e.g. Toyota launched the Lexus to respond to Mercedes attack

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The market challengers strategic objective is to gain market share and to become the leader eventually Market Challenger Strategies How?

By attacking the market leader By attacking other firms of the same size By attacking smaller firms

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Types of Attack Strategies

Market Challenger Strategies

Frontal attack Flank attack Encirclement attack Bypass attack Guerrilla attack

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COMPETITIVE POSITION TACTICS

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Which Attack Strategy should a Challenger Choose?

Use a combination of several strategies to improve market share over time

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MarketFollower Strategies

Theodore Levitt in his article, Innovative Imitation argued that a product imitation strategy might be just as profitable as a product innovation strategy Product innovation--

e.g. Sony

Product-imitation-Panasonic

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Each follower tries to bring distinctive advantages to its target market--location, services, financing Four broad follower strategies:

Market-Follower Strategies

Counterfeiter (which is illegal) Cloner e.g. the IBM PC clones Imitator e.g. car manufacturers imitate the style of one another Adapter e.g. many Japanese firms are

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Market-Nicher Strategies

Smaller firms can avoid larger firms by targeting smaller markets or niches that are of little or no interest to the larger firms e.g. Logitech--mice

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Nichers must create niches, expand the niches and protect them

Market-Nicher Strategies

e.g. Nike constantly created new niches-cycling, walking, hiking, cheerleading, etc

What is the major risk faced by nichers?

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Market niche may be attacked by larger firms once they notice the niches are successful

Firm should `stick to its niching but not necessarily to its niche. Multiple Niching Multiple niching is preferable to single niching. By developing strength in two or more niches the company increases its chances for survival. Challenger Superstore is a

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Product Planning and Development

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Products : Types of Goods

Convenience Goods

Types of Goods

Shopping Goods

Specialty Goods

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Convenience Goods

Convenien ce Goods

Those purchased with a minimum of effort, because the buyer has knowledge of product characteristics prior to shopping The consumer does not want to search for additional information (because the item has been bought before) and will accept a substitute rather than have to frequent more than one store

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Convenience Goods

Staplef ood are low-priced items that are routinely purchased on a regular basis, such as detergent, milk, and cereal Impulse goods are items that the consumer does not plan to buy on a specific trip to a store, such as candy, a magazine, and ice cream Emergency goods are items purchased out of urgent need, such as an umbrella during a rainstorm, a tire to replace a flat, or aspirin for

Convenienc e Goods

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Shopping Goods
Shopping Goods

Those for which consumers lack sufficient information about product alternatives and their attributes, and therefore must acquire further knowledge in order to make a purchase decision

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Shopping Goods
Shopping Goods

For attribute-based shopping goods, consumers get information about and then evaluate product features, warranty, performance, options, and other factors. The goods with the best combination of attributes is purchased. Sony electronics and Calvin Klein clothes are marketed as attribute-based shopping goods For price-based shopping goods, consumers judge product attributes to be similar

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Specialty Goods
Specialty Goods

Those to which consumers are brand loyal. They are fully aware of these products and their attributes prior to making a purchase decision. They are willing to make a significant purchase effort to acquire the brand desired and will pay a higher price than competitive products, if necessary. For specialty goods, consumers

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Service s
Rented- goods Service

Type of Services

Owned-goods service

Non-goods

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Service s
Rented- goods Service

Involves the leasing of a good for a specified period of time. Examples include car, hotel room, apartment, and tuxedo rentals Involves an alteration or repair of a good owned by the consumer. Examples include repair services (such as automobile, watch, and plumbing), lawn care, car wash, haircut, and dry cleaning Provides personal service on the pan of the seller; it does not involve a goods. Examples include accounting, legal, and consulting services

Owned-goods service

Non-goods

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Characteristics of Services

The intangible nature of many services makes the consumer's choice more difficult than with goods The producer and his or her services are often inseparable The perishability of services prevents storage and increases risks Service quality may be variable

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Product Life Cycle

Maturity

Decline Growth

Deman d
Introduction
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Time

Product Life Cycle

Characteristics Marketing objective

Introduction

Growth Expand distribution and product line Rapidly increasing Some Increasing Affluent mass market

Attract innovators and opinion leader to new product Increasing None or small Negative Early adopters

Industry sales Competition Industry profits Customers Product mix Distribution Pricing Promotion 5/6/12

One or two basic models Expanding line Depends on product Depends on product Informative Rising number of outlets Greater range of prices Persuasive

Characteristics

Product Life Cycle

Maturity

Decline (a) cut back, (b) revive, (C) terminate Decreasing Limited Decreasing Laggards Best-sellers Decreasing number of outlets Selected prices Informative

Marketing objective

Maintain differential advantage as long as possible Stable Substantial Decreasing Mass market Full product line Greatest number of outlets Full line of prices Competitive

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Human product life cycle in a bottle

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New Product Planning

Idea Generation Product Screening Concept Testing Business Analysis

Product Development

Test Marketing

Commercialization

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New Product Planning

Idea Generation

A continuous, systematic search for new product opportunities It involves delineating sources of new ideas and methods for generating them

Product Screening

After the firm identifies potential products, it must screen them Many companies use a newproduct screening checklist for preliminary evaluation

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Screening Checklist
GENERAL CHARACTERISTICS OF NEW PRODUCTS Profit potential Existing competition Potential competition Size of market Level of investment Patentability Level of risk

MARKETING CHARACTERISTICS OF NEW PRODUCTS Fit with marketing capabilities Effect on existing products (brands) Appeal to current consumer markets Potential length of product life cycle Existence of differential advantage Impact on image Resistance to seasonal factors

PRODUCTION CHARACTERISTICS OF NEW PRODUCTS Fit with production capabilities Length of time to commercialization Ease of product manufacture Availability of labor and material resources Ability to produce at competitive prices

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New Product Planning Concept testing presents the consumer

Concept Testing

with a proposed product and measures attitudes and intentions at this early stage of development Concept testing is a quick and inexpensive way of measuring consumer enthusiasm Business analysis for the remaining product concepts is much more detailed than product screening Because the next step is expensive and time-consuming product development, critical use of business analysis is essential to eliminate marginal items

Business Analysis

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Business Analysis Variables

Factors Demand projections Cost projections Considerations Price/sales relationship; short- and long-run sales potential; speed of sales growth; rate of repurchases; channel intensity Total and per unit costs; use of existing facilities and resources; startup vs. continuing costs; estimates of future raw materials and other costs; econo-mies of scale; channel needs; break-even point

Competition

Short-run and long-run market shares of company and competitors; strengths and weaknesses of competitors; potential competitors; likely competitive strategies in response to new product by firm

Required investment

Product planning (engineering, patent search, product development, testing); promotion; production; distribution

Profitability

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Time to recoup initial costs; short- and long-run total and per-unit profits; control over price; return on investment (ROI)

New Product Planning

Product Developmen t

Product development converts a product idea into a physical form and identifies a basic marketing strategy

Test Marketing

It involves product construction, packaging, branding, product positioning, and attitude and usage testing. Test marketing involves placing a product for sale in one or more selected areas and observing its actual performance under the proposed marketing plan. The purpose is to evaluate the product and pretest marketing efforts in a real setting prior to a full-scale introduction

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New Product Planning

Commercialization

After testing is completed, the firm is ready to introduce the product to its full target market. This is commercialization and corresponds to the introductory stage of the product life cycle Commercialization involves implementing a total marketing plan and full production

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Promotion Mix : Advertising, Publicity, Personal Selling and Sales Promotion

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Promotion Mix
Advertisi ng Publicit y Target Market Personal Selling Sales Promotio n

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Factor AudienceMass

Advertising

Promotion Mix
Publicity Mass Uniform

Personal Selling Small (one-to-one) Specific

Sales Promotion Varies Varies Moderate per customer

MessageUniform CostLow per viewer or reader

Can be moderate costs for High per customer press releases and publicity materials

SponsorCompany

No formal sponsor in that media. Low None High

Company

Company

FlexibilityLow Control over content andHigh placement CredibilityModerate

High High Moderate

Moderate High Moderate To stimulate short-run sales, to increase impulse purchases

Major goalTo appeal to a mass To reach a mass audience To deal with individual audience at a reasonable with an independently consumers, to resolve cost, and create reported message questions, to close sales awareness and favorable attitudes ExampleTelevision ad for a Kodak Newspaper article Retail sales personnel video camera reporting on the unique explaining how a Kodak features of a Kodak video video camera works camera 5/6/12

A Kodak video camera displayed at consumer photography shows

Four Key Steps to Advertise

Determine message content and devise an ad Specify the location of an ad (media placement) Outline a promotion schedule

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Choose how many variations of a basic message to utilize

Things to Consider in Advertising

Waste

Reach

Waste is the portion of an audience that is not in a firm's target market. Because media appeal to mass audiences, waste is a significant factor in advertising. Reach refers to the number of viewers or readers in the audience

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Things to Consider in Advertising

Frequency

Message permanence

Frequency is how often a medium can be used. It is greatest for newspapers, radio, and television, where ads may appear daily and advertising strategy may be easily changed Message permanence refers to the number of exposures one advertisement generates and how long it remains with the audience

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Things to Consider in Persuasive impact is the ability of a Advertising

Persuasive impact

medium to stimulate consumers. Television often has the highest persuasive impact because it is able to combine audio, video, color, animation, and other appeals. Clutter involves the number of ads that are contained in a single program, issue, etc. of a medium. Clutter is low when a limited number of ads is presented and high when many ads are presented.

Clutter

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Publicity : Poor and Good Situation Poor Response Good Response Response Fire breaks out in aRequests for information by Company spokesperson explains the cause of the
company plantmedia are ignored. New productAdvertising is used without introducedpublicity News story aboutRequests for information by media are product defectsignored, blanket denials are issued, hostility is exhibited toward reporter of story. CompetitorThe advertising campaign is introduces newstepped up. product fire and company precautions to avoid it and answers questions. Pre-introduction news releases, product samples, and testimonials are used. Company spokesperson states that tests are being conducted on products, describes procedure for handling defects, and answers questions.

Extensive news releases, statistics, and spokespeople are made available to media to present company's competitive features.

High profits reportedProfits are rationalized and positive effects on the economy are cited.

Profitability is explained, data (historical and current) are provided, uses of profits are detailed: research, community development.

Overall view ofThere is an infrequent need for publicity; There is an ongoing need for publicity, strong publicitycrisis fighting is used when bad reports planning, and contingency plans for bad reports. are circulated.

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Developing a Publicity Plan

Setting objectives Outlining types of publicity Creating publicity messages Timing publicity messages

Selecting media

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Publicity Type

Publicity Type

Example

News publicityDell describes its decision to sell PCs through stores Tier 2 cities. Business feature articleToyota explains its goals and objectives for the 2020. Service feature articleCREDA I offers 10 tips on how to property purchases.

Finance releaseInfosys distributes quarterly financial data about the company.

Product releaseIntel announces its new, fast-speed microprocessor Pictorial releaseApple distributes photos showing all of its personal computer products and related software

Background editorial releaseMc Kinsey presents a biography of its president and his rise through the company.

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Emergency publicityThe Red Cross makes a request for aid to tornado victims.

Specific Personal Selling Type of Objective Illustrations Objectives

Demand-Oriented Information To fully explain all good and service attributes To answer any questions To probe for any further questions To clearly distinguish good or service attributes from those of competitors To maximize the number of sales as a per cent of presentations To convert undecided consumers into buyers To sell complementary items, e.g., film with a camera To placate dissatisfied customers

Persuasion

Reminding

To ensure delivery, installation, etc. To follow up after a good or service has been purchased To follow up when a repurchase is near To reassure previous customers when making a new purchase

Image-Oriented Industry and company

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To maintain a good appearance by all personnel in contact with consumers To follow acceptable sales practices

Personal Selling Process

Prospecting
(blind, lead)

Approac h

Customer Wants

Answering Sales Presentation Questions

(questions and objections)

Clos e
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Follow up
(satisfaction, referrals, repurchase)

called the 4 Ps of marketing, or the marketing mix Product/

Where does sales fit into marketing? These are Market

ing Place

Service

Promotio n Advertisi ng Sales Promotio n

Price

(distribution )

Public Relations Personal Selling

This is called the promotio nal mix

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Type

Types of Sales Characteristics Promotion

Illustration P&G mails consumers a 25-cents-off coupon for Sure deodorant, which can be redeemed at any supermarket.

CouponsManufacturers or retailers advertise special discounts for customers who redeem coupons.

Refund orA consumer submits proof-of-purchase ACER gives rebates on accessories to rebate(usually to the manufacturer) and receives consumers submitting proof of purchase. an extra discount.

SamplesFree merchandise or services are given consumers, generally for new items.

When Sunlight dishwashing liquid was introduced, free samples were mailed to consumers.

Contests orConsumers compete for prizes by sweepstakesanswering questions (contests) or filling out forms for random drawings of prices (sweepstakes).

Publishers Clearinghouse sponsors annual sweepstakes and awards automobiles, houses, and other prices.

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Types of Sales Promotion Type Characteristics

Illustration

Bonus orConsumers receive discounts for Consumer buys two shirts and gets multipackspurchasing in quantity the third one for Rs 100. Point-of-In-store displays remind Chewing gum sales in supermarkets purchasecustomers and generate impulse are high because displays arc placed displayspurchases. at checkout counters. SpecialManufacturers or retailers eventssponsor celebrity appearances, fashion shows, and other activities. Virtually every major league baseball team has an annual "Old Timers' Day," which attracts large crowds.

You buy the jwellary product and get a GiftsConsumers are given gifts for making a purchase or opening a silver coin free. new account.

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Sales Promotion Advantages

It helps attract customer traffic and maintain brand or store loyalty Quick results can be achieved Some forms of sales promotion (calendars, t-shirts. Pens, etc) provide value to the consumer and are retained by them; and these forms can provide a reminder function Impulse purchases can be increased through in-store displays

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Sales Promotion Disadvantages

The image of the firm may be lessened if it continuously runs promotions. Consumers may view discounts as representing a decline in product quality and believe the firm could not sell its offerings without them. When coupons, rebates, or other special deals are used frequently, consumers may not make purchases if the items are sold at regular prices. Instead, they will stock up each time there is a promotion.

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Sales Promotion Disadvantages

Sometimes sales promotions shift the focus away from the product onto secondary factors. Consumers may be attracted by calendars, coupons, or sweepstakes instead of by product quality, functions, and durability. In the short run this generates consumer enthusiasm. In the long run this may have adverse effects on a brand's image and on sales, because a productrelated differential advantage has not

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been developed.

Distribution Planning and Pricing Strategy

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Distribution Planning Distribution planning is systematic decision

making regarding the physical movement and transfer of ownership of a product from producer to consumer.

It includes transportation, storage, and customer transactions. Distribution functions are carried out through a channel of distribution, which is comprised of all the organizations or people involved in the process. These organizations or people are known as channel members or middlemen.

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Intensity of Channel Characteristics Exclusive Selective Distribution Coverage Distribution

Objectives Prestige image, Moderate market channel control and coverage, solid image, loyalty, price stability some channel control and high profit margins and loyalty, good sales and profits

Intensive Distribution Widespread market coverage, channel acceptance, sales volume and profits

Channel members

Few in number, well- Moderate in number, Many in number, all established reputable well-established, better types stores stores of outlets Few in number, trend Moderate in number, setters, willing to travel brand conscious, to store, brand loyal somewhat willing to travel to store Many in number, convenience-oriented

Customers

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Intensity of Channel Characteristics Exclusive Distribution Selective Coverage

Distribution Marketing Emphasis Personal selling, pleasant shopping conditions, good service Promotional mix, pleasant shopping conditions, good service

Intensive Distribution Mass advertising, nearby location, items in stock

Major Disadvantages

Limited sales potential May be difficult to carve out a niche

Limited channel control

Examples

Automobiles, designer Furniture, clothing, clothes, Watches and watches jwellary

Groceries, household products, magazines

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Methods of Channel Factor Manufacturer Action Cooperation

New-product introduction

Channel Member Action

Thorough testing, adequate promotional Good shelf location and support space, enthusiasm for product, assistance in test marketing Prompt filling of orders, adherence to scheduled dates Proper time allowed for delivery, shipments immediately checked for accuracy Attractive in-store displays, knowledgeable salespeople, participation in cooperative programs Proper installation and servicing of products

Delivery

Promotion

Sales force training, sales force incentives, development of national advertising campaign, cooperative programs

Product quality Product guarantees

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Pushing Strategy Manufacture r

Pushing and Pulling Strategy

Pulling Strategy Manufacture r

Channel members

Channel members

Consumers
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Consumers

Price Planning
A Price

Represents the value of a good or service for both the seller and the buyer

Price Planning
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Systematic decision making by an organization regarding all aspects of pricing

Factors Affecting Pricing Decisions

Consumers Competitors Cost

Channel Members

Government Total Effects on Price Decisions

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Consumers and Price Decisions

Consum ers

The relationship between price and consumer purchases and perceptions is explained by two economic principles the law of demand and price elasticity of demand The law of demand states that consumers usually purchase more units at a low price than at a high price The price elasticity of demand defines the sensitivity of buyers to price changes in terms of the quantities they will purchase

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Consumers and Price Decisions

Elastic Demand

Elastic demand occurs if relatively small changes in price result in large changes in quantity demanded Numerically, price elasticity is greater than 1 With elastic demand, total revenue goes up when prices are decreased and goesdemand takes place if price Inelastic down when prices rise changes have little impact on quantity demanded

In-elastic Demand

Price elasticity is less than 1 With inelastic demand, total revenue goes up when prices are raised and goes down when prices decline

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Consumers and Price Decisions

Unitary Demand

Unitary demand exists if changes in price are exactly offset by changes in quantity demanded, so that total sales revenue remains constant. Price elasticity is 1

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Competitors and Price Decisions

Competit ors

Another element contributing to the degree of control a firm has over prices is the competitive environment within which it operates

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Competitors and Price Decisions

Marketcontrolled price environme nt

Characterized by a high level of competition, similar goods and services, and little control over price by individual companies

Companycontrolled priced environme nt

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Characterized by moderate competition, welldifferentiated goods and services, and strong control over price by individual firms

Competitors and Price Decisions

Governmen tcontrolled price environme nt

Characterized by prices set by the government. Examples are public utilities, buses, taxis, and state universities

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Channel Members and Price Decisions

A wholesaler or retailer can gain stronger control over price by stressing its importance as a customer to the manufacturer, refusing to carry unprofitable product, stocking competitive items, and developing strong dealer brands so that consumers are loyal to the seller and not the manufacturer Sometimes retailers engage in selling against the brand, whereby they stock merchandise, place high prices on it, and then sell other brands for lower prices. This is often done to increase the sales of their

Chann el Membe rs

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Channel Members and Price Decisions

To ensure channel member cooperation with price decisions, the manufacturer needs to consider four factors: channel member profit margins, price guarantees, special deals, and the impact of price increases

Chann el Membe rs

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Government and Price Decisions

Price fixing regulations Prohibitions against price discrimination among channel members Unfair sales acts : predatory pricing
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Governm ent

Cost and Price Decisions Co st

Cost of raw materials and supplies

Labor cost

Advertising Cost

Pricing Decision s

Distribution Cost

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Price Strategy
Cost-based Price Strategy

Price Strategy

Demandbased Price Strategy Competitionbased Price Strategy

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Price Strategy
Cost-based Price Strategy

Demandbased Price Strategy

With a cost-based price strategy, the marketer sets prices by computing merchandise, service, and overhead costs, and then adding the desired profit to these figures The marketer sets prices after researching con sumer desires and ascertaining the range of prices acceptable to the target market

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Price Strategy

Competitio n-based Price Strategy

The marketer sets prices in accordance with competitors Prices may be below the market, at the market, or above the market, depending on customer loyalty, services provided, image, real or perceived differences between brands or stores, and the competitive environment

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