Chapter Thirteen

Dimensions of
Marketing Strategy
The Marketing Mix: Product, Price,
Promotion, and Distribution

Product

Promotion Target Market Price

Distribution
 A Marketing Mix and the
Marketing Environment
Political, Legal, and Social
Regulatory Forces
Forces Product

Promotion Customer Price

Distribution Competitive
Technological
and Economic
Forces
Marketing Environment Forces
 The Key to Successful
Marketing Strategy

• The Right Marketing Mix to

Satisfy the Customer:
– The Right Product
– The Right Promotion
– The Right Price
– The Right Distribution
The Product Mix or Strategy
A company’s product mix
or strategy includes:

all products and product lines

from idea development to phase
out.
 The Right Product
Mix or Strategy
• To satisfy the target market
• To create long-term relationships
with customers

FAST FACT:
Domino’s is the largest privately held restaurant chain in the world.
In one year in the US, Domino’s used 25.5 million pounds of
pepperoni and 146 million pounds of mozzarella cheese.
Source: Domino’s Web site, http://www.dominos.com/About/PR98Usage.cfm (accessed August 24, 2001).
What is a Product?

Distinguish between a Product

Line and Product Mix.
 Product Line and
Product Mix
•• Product
ProductLine •• Product
Line ProductMix
Mix
–– Closely
Closelyrelated –– All
products
related Allofofthe
the
productsthat
thatare
are products
treated
treatedasasaaunit
unit productsoffered
offered
because by
byan
becauseofofsimilar
similar an
marketing
marketingstrategy,
strategy, organization
organization
production,
production,ororend-
end-
use
useconsiderations.
considerations.
What is a Product?

Kleenex—9 kinds
Colgate toothpaste—19 varieties
Eggo waffles—16 flavors
 PepsiCo Product Mix
Soft Drink Snack Food Restaurant
Line Line Line
Pepsi Cola Fritos corn Pizza Hut
Slice chips Taco Bell
Mountain Dew Ruffles potato Kentucky
chips Fried Chicken
Doritos tortilla
chips
PepsiCo Product Mix
Frito-Lay Brands Nibb-It Sticks and Rings Tropicana Brands
Lay's Potato Chips Niknaks Cheese Sticks Tropicana Pure Premium
Baked Lay's Potato Crisps Quavers Potato Snacks Tropicana Season's Best
Ruffles Potato Chips Sabritas Potato Chips Tropicana Twister
Baked Ruffles Potato Chips Twisties Cheese Snacks Dole (Under license)
Doritos Tortilla Chips Walkers Potato Crisps Pure Tropics
3D's Snacks Jack's Snacks Outside the U.S.
Tostitos Tortilla Chips Simba Snacks Loóza
Baked Tostitos Tortilla Chips Pepsi-Cola Brands Copella
Santitas Tortilla Chips Pepsi-Cola Fruvita

 
Fritos Corn Chips Diet Pepsi
Cheetos Cheese Flavored Snacks Pepsi One
Rold Gold Pretzels Mountain Dew
Funyuns Onion Flavored Rings Wild Cherry Pepsi
Sunchips Multigrain Snacks Slice
Cracker Jack Candy Coated Popcorn Mug
Chester's Popcorn Sierra Mist
Grandma's Cookies Fruitworks
Munchos Potato Crisps All Sport
Smartfood Popcorn Lipton Brisk (Partnership)                                           
Baken-ets Fried Pork Skins Lipton's Iced Tea (Partnership)
Obertos Meat Snacks Aquafina
Frito-Lay Dips & Salsas Frappuccino (Partnership)
Outside the U.S. SoBe
Bocabits Wheat Snacks Outside the U.S.
Crujitos Corn Snacks Mirinda
Fandangos Corn Snacks 7UP
Hamkas Snacks Pepsi Max
 PepsiCo Product Mix
Tropicana Brands
• Tropicana Pure Premium • Tropicana 100% Pure
Juices Juices
• Tropicana Season’s Best Juices • Copella Juices
• Tropicana Pure Tropics Juices • Fruvita Juices
• Tropicana Twister Juice • Hitchcock Juices
Beverages • Kirin-Tropicana Juices
• Dole Juices • Looza Juices
• Fruit Smoothies and Healthy • Looza Nectars
Shakes • Juice Bowl Juices
• Juice Bowl Nectars
 PepsiCo Product Mix
Frito-Lay Brands
• Baked Lay’s Brand Potato Crisps
• Baked Tostitos Brand Tortilla Chips
• Cheetos Brand Cheese flavored
Snacks
• Chester’s Brand Popcorn
• Doritos Brand Crackers
• Doritos Brand Dips
• Doritos Brand Tortilla Chips
• Fritos Brand Corn Chips
• Funyons Brand Onion flavored Rings
• Grandma’s Brand Cookies
• Lay’s Brand Potato Chips
• Munchos Brand Potato Chips
• Rold Gold Brand Pretzels
• Ruffles Brand Potato Chips
• Santitas Brand Tortilla Chips
• Smartfood Brand Popcorn
• Sunchips Brand Multigrain
Snacks
• Tostitos Brand Crackers
• Tostitos Brand Dip
• Tostitos Brand Tortilla Chips
• Baken-ets Brand Fried Pork
Skins
 PepsiCo Product Mix
Pepsi-Cola Brands

• Pepsi-Cola • All Sport

• Diet Pepsi • Lipton (Partnership)
• Mountain Dew • Aquafina
• Slice • Josta
• Mug Root Beer • Frappuccino
• Mug Crème
Product Mix

Where do product ideas come

from?
Product Mix

Where do product ideas come

from?
31,000 new consumer products
each year.
 Developing New
Products
Idea
IdeaDevelopment
Development

Screening
ScreeningNew
NewIdeas
Ideas

Business
BusinessAnalysis
Analysis

Product
ProductDevelopment
Development

Test
TestMarketing
Marketing
FAST FACT:
In 2001, Microsoft planned to spend
Commercialization
Commercialization
$4 billion on R&D.

Source: Rebecca Buckman, “Window into the future,” Wall Street Journal, June 25, 2001, p. R19.
 Classifying Products
• Consumer • Industrial
Products Products
 Classifications of
Consumer Products
•Convenience products--Products bought
frequently without a lengthy search and bought
for immediate consumption.
 Classifications of
Consumer Products
•Convenience products--Products bought
frequently without a lengthy search and bought
for immediate consumption.

•Requires a long distribution channel

 Types of Market Coverage
Intensive Makes a product available in
Distribution as many outlets as possible.
 Classifications of
Consumer Products
Convenience Products bought frequently without a
products lengthy search and bought for
immediate consumption.
Shopping Products purchased after buyer has
products compared competitive products.
 Types of Market Coverage
Selective Uses only a small proportion
distribution of all available outlets to
expose products
 Classifications of
Consumer Products
Convenience Products bought frequently without a
products lengthy search and bought for immediate
consumption.
Shopping Products purchased after buyer has products
compared competitive products.
Specialty Products which consumers
products will go out of their way to find and
will accept no substitute.
 Types of Market Coverage
Exclusive Exists when a manufacturer gives
distribution a middleman the sole right to sell
a product in a defined geographic
territory.
 Types of Market Coverage
Intensive Makes a product available in as many
outlets as possible.
Selective Uses only a small proportion of all
distribution available outlets to expose products.
Exclusive Exists when a manufacturer gives a
distribution middleman the sole right to sell a
product in a defined geographic territory.
 Classifications of
Industrial Products
•• Raw
RawMaterials
Materials
•• Major
MajorEquipment
Equipment
•• Accessory
AccessoryEquipment
Equipment
•• Component
ComponentParts
Parts
•• Processed
ProcessedMaterials
Materials
•• Supplies
Supplies
•• Industrial
IndustrialServices
Services
 The Life Cycle of a Product
Sales $
Introduction Growth Maturity Decline
Sales
Volume
Profit

Time
 Identifying Products
• Branding
– The process of naming and identifying products. Can
use a brand mark or trademark
• Packaging
– The external container that holds and describes the
product.
• Labeling
– The presentation of important information on a package.
 The 10 Most Valuable
Brands in the World
Rank: Brand: 2001 Brand Value ($billions)
1 Coca-Cola 68.9
2 Microsoft 65.1
3 IBM 52.8
4 GE 42.4
5 Nokia 35.0
6 Intel 34.7
7 Disney 32.6
8 Ford 30.1
9 McDonald’s 25.3
10 AT&T 22.8
Source: Gerry Khermouch, Stanley Holmes, and Moon Ihlawn, “The Best Global Brands,”
Business Week, August 6, 2001, p. 50.
Categories of Brands

• Manufacturer Brands
– Kellogg’s, Ford, Sony
• Private Distributor Brands
– Kenmore appliances (Sears)
• Generic Brands
– Peanut Butter, Dog Food, Kitty
Litter
Packaging
 Packaging
• The external container that holds and
describes the product inside.
• Packaging Functions:
– Protection
– Economy
– Convenience
– Promotion
FAST FACT:
While shopping, the average time a consumer
looks at a package is 2.5 seconds.
Labeling
 Labeling
• The presentation of important
information on a package:
– Product content information may be
required by law
– Useful information – manufacturer’s toll-
free number and address
– Directions and suggestions for use
 Product Quality
• The degree to which a good, service, or
idea meets the demands and
requirements of customers.
• In the global marketplace, product
quality is a key means of
differentiating products and
positioning them above the
competition in the consumer’s mind.
 The Product* Mix

• Questions on the first “P”?

* Total Product Concept

The Marketing Mix: Product, Price,
Promotion, and Distribution

Product

Promotion Target Market Price

Distribution
Pricing Strategies
 Pricing Strategies

• Pricing Objectives
• Pricing Strategies
 Pricing Objectives

Four Common Pricing Objectives:

1. Maximize Profits and Sales
2. Boost Market Share
3. Maintain the Status Quo
4. Survival
 Pricing Strategies
Implement • New-product strategies
Pricing Price skimming
Penetration pricing
Strategies
• Psychological pricing strategies
Odd/Even
Prestige pricing
• Price Discounting
Quantity discounts
Seasonal discounts
Promotional discounts
The Marketing Mix: Product, Price,
Promotion, and Distribution

Product

Promotion Target Market Price

Distribution
Distribution Strategy
Distribution Strategy
• Marketing Channels
– Retailers (Wal-Mart, Sears)
– Wholesalers (food brokers to restaurants)
– E-tailers (Amazon.com)
• Supply Chain Management
– Long-term partnerships among channel
members to reduce costs, waste, and
unnecessary movement through the channel to
satisfy customers.
 Distribution Strategy

• Channels of distribution
• Intermediary involvement
Marketing Channels for
Consumer Products
Producer Producer Producer Producer

Agents
(Middlemen)
Wholesalers Wholesalers
(Middlemen) (Middlemen)
Retailers Retailers Retailers
(Middlemen) (Middlemen) (Middlemen)

Consumers Consumers Consumers Consumers

 Physical Distribution
Producer

Inventory Planning & Control

Transportation

Warehousing

Materials Handling

Consumer
Distribution Decisions are
the Least Flexible
Marketing Decisions

•• Distribution
Distributiondecisions:
decisions:
––Use
Usecommitted
committedresources
resources
––Establish
Establishcontractual
contractualrelationships
relationships
––Are
Arebound
boundbybytime
time
The Marketing Mix: Product, Price,
Promotion, and Distribution

Product

Promotion Target Market Price

Distribution
The Promotion Mix

Publicity

Sales
Advertising
Promotion

Personal
Selling
Objectives of Promotions

• Stimulate demand
• Stabilize sales
• Inform, remind, and reinforce
customers
 Promotional
Positioning

The use of promotion to create and

maintain an image of a product in the
buyer’s mind.
A natural result of market segmentation.
Assists in product differentiation.
 Push and Pull Strategies
Pushing Strategy

Producer Wholesalers Retailers Consumers

Pulling Strategy

Producer Wholesalers Retailers Consumers

Flow of Communications
The Promotion Mix

Publicity

Sales
Advertising
Promotion

Personal
Selling
 Advertising

A paid form of non-personal

communication transmitted through a
mass medium, such as television
commercials or magazine
advertisements.
 Advertising Media
Print media • Newspapers
• Magazines
• Direct mail
• Outdoor advertising

Electronic media • Television

• Radio
• Cyberads
Ad Spending per American
U.S. ad spending per capita this year is $946 and is expected
to be $1,202 by 2003. Per-capita spending in leading media
and expected spending in 2003:

$370 1998
$303 $304
$229
2003 $246 $241

$94 $104
$74 $89
$69
$25

Newspaper Television Magazines Radio On-line All others

 Who’s Watching Commercials
Americans are exposed to about 270 ads a day1 in
all media, but few seem to notice. How many ads a
day they thing they saw/heard:

15% 9%
1-30 17%
31-50 15% 25%
51-100 18% 20%

101-300 27% 25%

30%
300 or more

Men Women
1
McKinsey & Co.
 Internet Advertising

Total revenues from advertising, paid

content, and e-commerce on mobile
devices in the U.S. is projected to grow
from $100 million today to $3.3 billion in
2005.

Source: “E-MONEY,” American Demographics, June, 2001, p. 32.

 Internet Advertising

Internet advertising Web sites that

spending $1.3 accept advertising 1,345
($billions) 1,050
735
$0.5
$0.2
$0.03
‘95 ‘96 ‘97 ‘98 ‘96 ‘97 ‘98
The Promotion Mix

Publicity

Sales
Advertising
Promotion

Personal
Selling
 Personal Selling

• Direct, two-way communication with

buyers and potential buyers.

FAST FACT:
A typical sales call on an industrial customer
can cost between $200 and $300 per call.
 Personal Selling

Three Categories of Salespersons:

1. Order Takers
2. Creative Salespersons
3. Support Salespersons
 Personal Selling is a
Six Step Process

1. Prospecting
2. Approaching
3. Presenting
4. Handling Objections
5. Closing – Asking for the Order
6. Following Up
 In Personal Selling,
Appearance Sells

• Sales managers tell what personal attributes

they feel work against a salesperson’s ability
to sell:
– Sloppy dresser 94%
– Unstylish dresser 75%
– Physically unattractive 59%
– Overweight 54%
– Heavy accent 54%
– Young looking 32%
Source: “Appearance sells,” USA Today Snapshots, October 9, 2001, p. B1.
The Promotion Mix

Publicity

Sales
Advertising
Promotion

Personal
Selling
 Publicity
• Non-personal communication
transmitted through mass media
but not paid for directly by the
firm.
• May be done by the Public
Relations Department or an
outside PR firm.
Principal Publicity Mechanisms

• News releases
• Feature articles
• Captioned photographs
• Press conferences
• Interviews
The Promotion Mix

Publicity

Sales
Advertising
Promotion

Personal
Selling
Major Tools of Sales Promotion

• Point-of-purchase displays
• Premiums
• Sampling and demonstrations
• Coupons
• Consumer contests and sweepstakes
• Refunds
• Trade shows
 Coupon Clippers

Income % that Clip Coupons

Less than $15,000 79%
$15,000-$24,999 91%
$25,000-$49,000 78%
$50,000 or more 83%

Source: NCH NuWorld 1998 Consumer Behavior Study,

American Coupon Council from USA Today Snapshot, October 28, 1998.
 Per Contact Cost

Method Cost
ad in specialized business publication $0.32
the Internet $0.98
direct mail $1.68
business letters $13.60
telemarketing $31.16
trade shows $162.00
industrial sales calls $277.00

Source: Matthew J. Cravatta, “Goodwill Targeting,” Marketing Tools,

June 1998.
The Marketing Mix: Product, Price,
Promotion, and Distribution

Product

Promotion Target Market Price

Distribution
Chapter Thirteen
Dimensions of
Marketing Strategy

Next Class–Exam 5
 Comparison of Transportation
Modes
Type of Total Intercity
Carrier Volume Speed Cost
Expend.
Truck 74% 28% Fast High
Rail 13% 37% Average Medium
Water 6% 15% Very Slow Very Low
Air 4% 1% Very Fast Very High
Pipeline 3% 19% Slow Low
back