Principles of Marketing

Chapter#1
Marketing: Creating and Capturing
Customer Value
 What is Marketing?
• Marketing is a process by which companies create
value for customers and build strong customer
relationships to capture value from customers in
return
• Marketing is the creation & satisfaction of
demand for your product or service. If all goes
well, this demand should translate into sales and,
ultimately, revenue.
• More simply: Marketing is the delivery of
customer satisfaction at a profit.
 What is Marketing?
 “Marketing is the process of planning and executing the
conception, pricing, promotion, and distribution of ideas,
goods, and services to create exchanges that satisfy
individual and organizational objectives.”
 Marketing Involves having the Right Product available
in the Right Place at the Right Time and making sure
that the customer is Aware of the Product.
 Mantra of Marketing

CCDVTP
C- Create
C- Communicate
D- Deliver
V- Value
T- Target market
P- Profit
Create communicate and deliver value to a
target market at a profit.
 CCDVTP Continued...

• Creating Value is PRODUCT

MANAGEMENT
• Communicating Value is BRAND
MANAGEMENT
• Delivering value is CUSTOMER
MANAGEMENT
 Marketing’s 4 P’s
Marketing Mix

 Product
 Price
 Place
 Promotion
 What Can Be Marketed?

 Goods  Places
 Services  Properties
 Experiences  Organizations
 Events  Information
 Persons  Ideas
 Actors and Forces in a
Modern Marketing System

Environment

Company
(marketer)
Marketing End-user
Suppliers inter- market
mediaries

Competitors
Core Marketing Concepts
 Pr
t s , od
uc
a n s Se and ts
, w nd rvi
e ds ma ce
Ne d de
s

an

Core
Core

satisfaction,
Marketing

and quality
Marketing

Value,
Concepts
Concepts
M
ar

Exchange,
ke

transactions,
st

and relationships
 Core Marketing Concepts
• States of deprivation

Needs
• Physical—food, clothing, warmth, safety
• Social—belonging and affection
• Individual—knowledge and self-expression

Wants
• Form that needs take as they are shaped by culture
and individual personality

Demands • Wants backed by buying power

 Core Marketing Concepts
A product is
• ‘anything that can be offered to a market for
attention, acquisition, use or consumption and
that may satisfy a need or want’
Includes:
physical goods, services, people, places, organizations,
activities, ideas etc
 Core Marketing Concepts

Customer Value:
• Is the value the individual customer places
on a product or service.
 Core Marketing Concepts
Exchange is ...
• ‘...the act of obtaining a desired object from
someone by offering something in return’
Five conditions
1. Two parties
2. Something of value to offer each other
3. Willing to deal
4. Free to accept or reject offer
5. Able to communicate and deliver
 Core Marketing Concepts

A Market is…
 ‘...a set of actual and potential buyers of a
product’
 A place
 Marketing satisfies the needs of markets by
facilitating the exchange process
 Marketing Management

 Marketing management is “the art and science of choosing target

markets and building profitable relationships with them.”
 Creating, delivering and communicating superior customer

value is key.
 CRM

CRM – Customer relationship management . . .

“is the overall process of building and maintaining profitable
customer relationships by delivering superior customer value
and satisfaction.”
 Marketing Process
Capture
value from
customers
Create value for customers and build customer in return
relationships
understand Construct an Capture
Design a Build
the integrated value from
customer- profitable
marketplace marketing customers to
relationships
and driven program that create profits
and create
customer marketing delivers and
customer
needs and strategy superior customer
delight
wants value equity
 Principles of Marketing
Chapter#2
Company and Marketing Strategy
Partnering to Build Customer Relationships
Strategic planning
• Planning--what are we going to do and how
are we going to do it?
• Strategic Planning is the process of developing
and maintaining a strategic fit between the
organization’s goals and capabilities and its
changing marketing opportunities.
Steps in Strategic Planning
Steps in Strategic Planning
This process involves:
– Defining a Mission: Statement of an organization’s
purpose; should be market oriented.
– Setting Company Objectives: Supporting goals and
objectives to guide the entire company.
– Designing a Business Portfolio: Collection of businesses
and products that make up the company.
– Planning Functional Strategies: Detailed planning for each
department designed to accomplish strategic objectives.
 Defining a (Market-Oriented) Mission

• Shaping a sound mission begins with the

following questions:
– What is our business?
– Who is the customer?
– What do consumers value?
– What should our business be?
• The mission statement is the
organization’s purpose, what it wants to
accomplish in the larger environment
• Market-oriented mission statement defines
the business in terms of satisfying basic
customer needs
Defining a (Market-Oriented) Mission
 Setting Company Objectives and Goals

M is s io n
S ta te m e n t

M a r k e t in g M a r k e t in g M a r k e t in g
O b je c t iv e # 1 O b je c t iv e # 2 O b je c t iv e # 3

M a r k e t in g M a r k e t in g M a r k e t in g M a r k e t in g M a r k e t in g
S tra te g y S tra te g y S tra te g y S tra te g y S tra te g y
 Designing the Business Portfolio

• The business portfolio is the collection of

businesses and products that make up the
company.
• Business portfolio planning involves two
steps:
– First, the company must analyze its current business
portfolio and decide which businesses should receive
more, less , or no investment.
– Second, it must shape the future portfolio by
developing strategies for growth and downsizing.
 Designing the Business Portfolio

• Portfolio analysis is a major activity in strategic

planning whereby management evaluates the
products and businesses that make up the
company.
• Strategic business unit (SBU) is a unit of the
company that has a separate mission and
objectives that can be planned separately
from other company businesses
– Company division
– Product line within a division
– Single product or brand
Analyzing the Current Business Portfolio

Identify key businesses (strategic business

units, or SBUs) that make up the company

Assess the attractiveness of its various

SBUs

Decide how much support each SBU

deserves
 The Boston Consulting Group’s Growth-Share
Matrix (BCG Matrix)

Question marks
(high)

Stars
4
3
?2 ? 1
?
Market growth rate

?
Cash cow Dogs
8
6 7
(Low)

(high) Relative market share (low)

 Developing Strategies for Growth and
Downsizing

• Product/market expansion grid is a tool

for identifying company growth
opportunities through market penetration,
market development, product
development, or diversification.
 The Boston Consulting Group’s Growth-Share
Matrix (BCG Matrix)
 Stars: They often need
heavy investments to finance
their rapid growth. Eventually
their growth will slow down
and they will turn into cash
cows.
 Cash Cows: These
established and successful SBUs
need less investment to hold
their market share. They produce
lot of cash that the company
uses to pay bills and that need
investment.
• Question Marks: They
require a lot of cash to hold their
share, let alone increase it.
Management has to think hard
about which question marks it
should try to build into stars and
which should be phased out.
• Dogs: They may generate
enough cash to maintain
themselves but do not promise to
be large sources of cash.
Product/market expansion grid

Existing products New product

Existing Market Product

market Penetration Development

New
Market
market Diversification
Development
 Product/market expansion grid

Market penetration is a growth strategy increasing sales

to current market segments without changing the product.
 How? Add new stores in current market areas, improve advertising,
adjust prices, service or store design.
 National foods limited (redesigned distribution system, enhanced
marketing communication to consumers by using the internet)

Market development is a growth strategy that identifies

and develops new market segments for current products.
 How? Identify new demographic or geographic markets.
 National foods limited (expanded into Middle East , North America and
Indian market )
 Product/market expansion grid

Product development is a growth strategy that offers

new or modified products to existing market segments.
 How? New styles, flavors, colors, or modified products.
 National foods limited (started as a spice producer but over the
years added condiments such as tomato ketchup, Chinese sauces
and variety of pickles)

Diversification is a growth strategy through starting up

or acquiring businesses outside the company’s current
products and markets.
 How? Start up or buy new businesses.
 National foods limited (introduced the Ronaq brand of ready-to-eat
meals)
 Developing Strategies for Growth and
Downsizing

• Downsizing is the reduction of the

business portfolio by eliminating products
or business units that are not profitable or
that no longer fit the company’s overall
strategy
 Marketing Strategy & The Marketing Mix
• Marketing strategy: The marketing logic by which the
business unit hopes to create customer value and
achieve profitable customer relationship.
• Market segmentation is the division of a market into
distinct groups of buyers who have distinct needs,
characteristics, or behavior and who might require
separate products or marketing mixes.
• Market segment is a group of consumers who respond
in a similar way to a given set of marketing efforts.
• Market targeting is the process of evaluating each
market segment’s attractiveness and selecting one or
more segments to enter.
 Marketing Strategy & The Marketing Mix

• Market positioning is the arranging for a

product to occupy a clear, distinctive, and
desirable place relative to competing
products in the minds of the target
consumer
• Marketing mix is the set of controllable
tactical marketing tools—product, price,
place, and promotion—that the firm blends
to produce the response it wants in the
target market
Developing an Integrated Marketing Mix
Managing the Marketing Effort
(SWOT Analysis)
 Principles of Marketing
Chapter#4
Managing Marketing Information to Gain Customer Insights
Marketing Information System
(MIS)

• People, equipment, and procedures to

gather, sort, analyze, evaluate, and
distribute needed, timely, and accurate
information to marketing decision makers.
Marketing Information System
 Purpose of MIS

– Assessing decision makers’ information

needs
– Developing needed information
– Distributing information to the users
 Steps of MIS

• Assessing the Marketing Information Needs

• Developing the Marketing Information
• Analyzing Marketing Information
• Distributing and using Marketing Information
Assessing Marketing Information
Needs

MIS provides information to the

company’s marketing and other managers
and external partners such as suppliers,
resellers, and marketing service agencies
Developing Marketing Information
Marketers obtain information from

Internal data

Marketing intelligence

Marketing research
 Internal Data

Internal databases are electronic

collections of consumer and market
information obtained from data
sources within the company network
 Marketing Intelligence

Marketing intelligence is the systematic

collection and analysis of publicly available
information about consumers, competitors,
and developments in the marketplace.
 Competitors
 Suppliers
 Resellers
 Customers
 Published Information
 Marketing Research

Marketing research is the systematic

design, collection, analysis, and reporting
of data relevant to a specific marketing
situation facing an organization.
 Why Research?

• Provides information for aid in making

business related decisions
– Identify opportunities
– Generate & refine actions
• Systematic & objective process
– designing, gathering, analyzing & reporting
information
– used to solve a specific problem
• Helps reduce risk inherent in decision
making
 Follow-up

Writing
Writing and
and Creation
Creation of
Presenting the
the the
the Research
Research
Report Design
Design

Problem/
Opportunity
Choice of Method
Analysis of Identification &
of Research
Formulation
Formulation
the Data

Selection of the
Collection
Collection of
of the
the Sampling
Sampling
Data
Data Procedure
Steps in the Marketing
Research Process
 Step 1:
Problem Definition and the Research Objectives

The research process begins with the recognition of a marketing

problem or opportunity.

As changes occur in the firm’s external environment, marketing

managers are faced with the questions, “Should we change the
existing marketing mix?” and, “If so, how?”
 Role of the Marketing Researcher

The first responsibility of the researcher is to work with the

marketing manager to clearly articulate the management
decision problems whose symptoms have been observed and
then to define precisely the marketing research problem.
 Definition of Research Objectives

These objectives are stated in terms of the precise information

necessary to answer the marketing research problem/opportunity.
Objectives must be as specific and unambiguous as possible. The
entire research effort is geared toward achieving the objectives.
 Step-2
Developing the Research Plan

 The research design is the plan to be followed to answer the research objectives or
hypotheses.
 There is no single, best research design. Instead, the investigator faces an array of
choices, each with certain advantages and disadvantages.

 Research objectives guide the determination of specific

information needs.
 Research proposals outline the type of data needed and the
research plan.
 Primary data
 Secondary data
• Secondary data consists of information
that already exists somewhere, having
been collected for another purpose.

• Primary data consists of information

gathered for the special research plan.
 Exploratory Research

– Exploratory research is usually small-scale research undertaken to

define the exact nature of the problem and to gain a better
understanding of the environment within which the problem has
occurred.
 Descriptive Research

– Implicit in descriptive research is the fact that management already

knows or understands the underlying relationships of the problem
area.
– Descriptive studies are limited to answering who, what, when,
where, and how questions.
e.g. Market potential for a product
 Causal Research

– In causal studies the researcher investigates whether one variable causes or

determines the value of another variable.
A dependent variable is a variable expected to be predicted or explained.
An independent variable is a variable in an experiment that the market
research can, to some extent, manipulate, change, or alter.
 Choosing a Basic Method of
Research

 A research design, either descriptive or causal, is chosen according

to a project’s objective.
 The next step is to select a means of gathering data (or research
methods).
Basic Research Methods/ Approaches

Survey
• Research in which an interviewer interacts with respondents
(except in mail surveys) to obtain facts, opinions, and
attitudes.
Observation
• Descriptive research that monitors respondent’s actions
without direct interaction.
Ethnographic research
– Involves sending trained observers to watch and interact with
consumers in their natural environment
Basic Research Methods/ Approaches

Experiments
– The objective of experiments is to measure causality.
Cause-and-effect relationship.
– An experiment is distinguished by the researchers
changing one or more variables -- price, package, design
while observing the effects of those changes on another
variable (usually sales).
 Contact Methods

• Mail questionnaires
• Telephonic Interview
• Personal interview
– Group interview…Focus group interview
• Online Research
 Sampling plan

Sample is a segment of the population selected

for marketing research to represent the
population as a whole.
– Who is to be surveyed? (sampling unit)
– How many people should be surveyed? (sample size)
– How should the people be chosen? (sampling procedure)
 Sampling plan-Types of Samples

Probability Sample
Simple random sample Every member of the population has a known and equal
chance of selection
Stratified random The population is divided into mutually exclusive groups
sample and random samples are drawn from each group
Cluster (area) sample The population is divided into mutually exclusive groups
and the researcher draws a sample
Nonprobability Sample
Convenience sample The researcher selects the easiest population members
Judgment sample The researcher uses his/her judgment to select
population members
Quota sample The researcher finds and interviews a prescribed number
of people in each of several categories
 Research Instruments

– Questionnaires
• Include open-ended and closed-ended questions
• Phrasing and question order are key
– Mechanical instrument
• People meters
• Checkout Scanners
• Neuro-Marketing
 Step-3
Implementing the Research Plan

Collecting the Data

 Analyzing the Data

 After the data have been collected, the next step in the research
process is data analysis.
 The purpose of data analysis is to interpret and draw conclusions
from the data that has been collected.
 Step-4
Interpretation and Reporting of Findings

• After data analysis is completed, the researcher must prepare the

report and communicate the conclusions and recommendations to
management.
• The research will ordinarily be required to present both written and
oral reports on the project.
 Distributing and Using Marketing
Information

Information distribution involves entering

information into databases and making it
available in a time-usable manner
• Intranet provides information to
employees and other stakeholders
• Extranet provides information to key
customers and suppliers
 Chapter Five

Consumer Markets and Consumer

Buyer Behavior
 Consumer Markets and
Consumer Buyer Behavior
Topic Outline
• Model of Consumer Behavior
• Characteristics Affecting Consumer
Behavior
• Types of Buying Decision Behaviors
• The Buyer Decision Process
• The Buyer Decision Process for New
Products
 Model of Consumer Behavior

Consumer buyer behavior refers to the buying

behavior of final consumers—individuals and
households who buy goods and services for
personal consumption

Consumer market refers to all of the personal

consumption of final consumers
 Model of Consumer Behavior

Copyright © 2010 Pearson Education, Inc.  

Chapter 5- slide 75
Publishing as Prentice Hall
 Characteristics Affecting
Consumer Behavior
Factors Influencing Consumer Behavior
 Types of Buying Decision Behavior

Complex buying behavior

Dissonance-reducing buying behavior

Habitual buying behavior

Variety-seeking buying behavior

Copyright © 2010 Pearson Education, Inc.  

Chapter 5- slide 77
Publishing as Prentice Hall
 Types of Buying Decision Behavior
Four Types of Buying Behavior

Copyright © 2010 Pearson Education, Inc.  

Chapter 5- slide 78
Publishing as Prentice Hall
 The Buyer Decision Process

Steps of Buyer Decision Making Process

Copyright © 2010 Pearson Education, Inc.  

Chapter 5- slide 79
Publishing as Prentice Hall
 The Buyer Decision Process
Need Recognition

• Occurs when the buyer recognizes a

problem or need triggered by:
– Internal stimuli
– External stimuli
 The Buyer Decision Process
Information Search
Sources of Information
• Personal sources—family and friends
• Commercial sources—advertising,
Internet
• Public sources—mass media, consumer
organizations
• Experiential sources—handling,
examining, using the product
 The Buyer Decision Process
Evaluation of Alternatives
• How the consumer processes information
to arrive at brand choices
 The Buyer Decision Process
Purchase Decision

• The act by the consumer to buy the most

preferred brand
• The purchase decision can be affected
by:
– Attitudes of others
– Unexpected situational factors
 The Buyer Decision Process
Post-Purchase Behavior
• The satisfaction or dissatisfaction that the
consumer feels about the purchase
• Relationship between:
– Consumer’s expectations
– Product’s perceived performance
• The larger the gap between expectation
and performance, the greater the
consumer’s dissatisfaction
• Cognitive dissonance is the discomfort
caused by a post-purchase conflict
The Buyer Decision Process
Post-Purchase Behavior

Customer satisfaction is a key to

building profitable relationships with
consumers—to keeping and growing
consumers and reaping their customer
lifetime value
 The Buyer Decision Process
for New Products

Adoption process is the mental process an

individual goes through from first learning about
an innovation to final regular use.
• Stages in the process include:

Awareness Interest Evaluation Trial Adoption

 The Buyer Decision Process for New
Products
Influence of Product Characteristics
on Rate of Adoption

Relative
Compatibility Complexity
advantage

Divisibility Communicability

Copyright © 2010 Pearson Education, Inc.  

Chapter 5- slide 87
Publishing as Prentice Hall
Principles of Marketing
Chapter#7
Customer-Driven Marketing Strategy:
Creating Value for Target Customers
 Topic Outline

• Market Segmentation
• Market Targeting
• Differentiation and Positioning
 Two Basic Approaches

 Market Segmentation Approach

– The needs and preferences of the global market are viewed as
heterogeneous varying from one group to another.
 Total/Mass Market Approach
– The needs and preferences of the entire, global market are
regarded as relatively homogeneous.
Market Segmentation
 Major Steps in Target Marketing

 Segmentation
 Target Marketing
 Market Positioning
 Market Segmentation

Dividing a market into distinct groups with distinct needs,

characteristics, or behavior who might require separate products
or marketing mixes.
 Segmentation is breaking down heterogeneous mass market into more
homogeneous submarkets
 Consumers within segments should respond similarly to particular
marketing actions
 Consumer response should be different between segments
 Target Marketing

The process of evaluating each market segment’s

attractiveness and selecting one or more
segments to enter.
 Market Positioning

Arranging for a product to occupy a clear,

distinctive, and desirable place relative to
competing products in the mind of target
consumers
Segmenting Consumer Markets

Geographic Demographic
segmentatio segmentatio
n n

Psychographi Behavioral
c segmentatio
segmentation n
 Geographical Segmentation

• Dividing a market into different geographical

units such as nation, province, regions,
countries, cities or neighborhoods
 Geographic Segmentation
Variables

• World Region or Country
• Region
• Province
• City
• Neighborhood
• City or Metro Size
• Density
• Climate
 Demographic Segmentation

Dividing the market into groups based on demographic variables

such as age, gender, etc.
Demographic Segmentation Variables

 Age  Occupation
 Gender  Education
 Family size  Religion
 Family life cycle  Race
 Income  Generation
 Nationality
 Psychographic Segmentation

Dividing a market into different groups based on social class,

personality etc.
 Psychographic Segmentation
Variables

• Social class
• Lifestyle
• Personality
 Behavioral Segmentation

Dividing a market into groups based on consumer knowledge, attitude etc .

 Behavioral Segmentation
Variables

 Occasions  Usage Rate

 Benefits  Loyalty Status
 User Status  Readiness Stage
 Attitude Toward the Product
 Market Segmentation
Requirements for Effective Segmentation
• To be useful, market segments must be:
Measurable Accessible
(size, purchasing power, (segments must be
profiles of segments can effectively reached and
be measured ) served)

Substantial Differentiable
(segments must be (segments must respond
differently to different
large or profitable marketing mix elements &
enough to serve) actions )

Actionable
(must be able to attract and
serve the segment)
Target Marketing
 Steps in the Target Marketing Process

•Evaluating Market Segments

•Selecting Target Market Segments
 Evaluating Market Segments

Segment Size and Growth

– (Collect data and )Analyze sales, growth rates and expected profitability.

Segment Structural Attractiveness

– Consider effects of: Competitors, Availability of Substitute Products
and, the Power of Buyers & Suppliers.

Company Objectives and Resources

– Company skills & resources relative to the segment (s).
– Look for Competitive Advantages.
Target Marketing Strategies
 Market Coverage Strategies

Mix
Marketing Mix
Marketing
Company Market
Market
Company

A. Undifferentiated Marketing
 targets the whole market with one offer.
 mass marketing
 Focuses on common needs rather than what’s
different.
 position.
 Goal is to achieve higher sales and stronger
and designs separate offers for each.
 targets several different market segments
B. Differentiated Marketing
Segment Company
Company
Segment 33
Marketing
Marketing Mix
Mix 33
Company
Company
Segment
Segment 22 Marketing
Marketing Mix
Mix 22
Segment
Segment 11 Company
Company
Marketing
Marketing Mix
Mix 11
 Segment 11
Segment
Mix
Mix
Marketing
Marketing Segment 22
Segment
Company
Company Segment 33
Segment

C. Concentrated Marketing
 targets a large share of one or few smaller
segments or niches
 Limited company resources
 Knowledge of the market
 More effective and efficient
 Mix
Mix Customer
Customer
Marketing
Marketing
Company Individual
Individual
Company

D. Custom Marketing Strategy or Micromarketing Strategy

 the practice of tailoring products and marketing programs to
suit the tastes of specific individuals and locations.
 Local marketing
 Individual marketing
Local marketing involves tailoring brands and
promotion to the needs and wants of local
customer groups
– Cities
– Neighborhoods
– Stores
Individual marketing involves tailoring products and
marketing programs to the needs and preferences of
individual customers
Also known as:
 One-to-one marketing
 Mass customization
 Markets-of-one marketing
Positioning for Competitive Advantage

• Product’s Position - the place the product occupies in consumers’

minds relative to competing products.

• Marketers must:
– Plan positions to give products the greatest advantage
– Develop marketing mixes to create planned positions
Differentiation and Positioning
Choosing the Right Competitive Advantage

Difference to promote should be:

Important Distinctive
(difference delivers a (competitors do not offer the
difference or the company
highly valued benefit to can offer it in a more
target buyers) distinctive way)
Superior
(difference is superior to
other ways that customers
might obtain the same
benefit)

Communicable Preemptive Affordable

(difference is communicable (competitors can not easily (buyers can afford to pay
and visible to buyers) copy the difference) the difference)

Profitable
(the company can introduce
the difference profitably)
 Choosing and Implementing
a Positioning Strategy

• Step 1. Identifying a set of possible competitive advantages:

Competitive Differentiation.

• Step 2. Selecting the right competitive advantage.

• Step 3. Effectively communicating and delivering the chosen position

to the market.
Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy

Identifying a set of possible competitive

advantages to build a position by
providing superior value from:
Product differentiation
Service differentiation
Channel differentiation
People differentiation
Image differentiation
 Differentiation and Positioning
Selecting an Overall Positioning Strategy

Value proposition
is the full
positioning of a
brand -the full mix
of benefits upon
which a brand is
positioned
 Principles of Marketing
Chapter#8
Product, Services, and Brands: Building
Customer Value
Benefits

 Consumers don’t buy products; they buy benefits

 Functional benefits: relating to the practical purpose a

product serves

 Psychological benefits: relating to how a product makes

one feel
What is a Product?

Whatever is offered for “sale” in a marketing exchange

Can be tangible goods (Laptop), services (VU education),
ideas (Don’t smoke), places (Muree hills ), persons
(sportsman).
 What is a Product ?

• Products, Services, and Experiences

• Market offerings, pure tangible goods, pure services,
experiences
Definitions

Product
– Anything offered to a market for attention, acquisition,
use, or consumption that might satisfy a need or want.
Service
– Any activity or benefit that one party can offer to another
that is essentially intangible and does not result in
ownership of anything.
Levels of Products
 Core
Core Actual
Actual
Product
Product Product
Product
Warranty
Quality
Design
Level
Service
After-
Service
Delivery
Sale
or
Benefit or
Benefit
& Credit
Service
Core
Core
Brand
Features Name
Packaging
Installation
Augmented
Augmented
Product
Product
Product Classifications

Consumer
products

Industrial
products
 Product Classifications
Consumer Products

Consumer products are products and

services for personal consumption
• Classified by how consumers buy them
– Convenience products
– Shopping products
– Specialty products
– Unsought products
 Product Classifications
Consumer Products

Convenience products are consumer products and

services that the customer usually buys frequently,
immediately, and with a minimum comparison and
buying effort
• Low price
• Widespread distribution
• Mass promotion by producer
E.g:
• Newspapers
• Candy
• Fast food
 Product Classifications
Consumer Products
Shopping products are consumer products and services
that the customer compares carefully on suitability, quality,
price, and style
*less frequent purchases
*higher price
*selective distribution in fewer outlets
*advertising & personal selling by both producer and
resellers
• Furniture
• Clothing
• Major Appliances
 Product Classifications
Consumer Products
Specialty products are consumer products and services with
unique characteristics or brand identification for which a
significant group of buyers is willing to make a special
purchase effort
*strong brand preference and loyalty
*little comparison of brands
*high price
*exclusive distribution
*more carefully targeted promotion by producers and resellers
• Luxury goods
• Designer clothes
• High-end electronics
 Product Classifications
Consumer Products
Unsought products are consumer products that the
consumer does not know about or knows about but does
not normally think of buying
*little product awareness
*price varies
*distribution varies
*aggressive advertising & personal selling by producer &
reseller
• Life insurance
• Funeral services
• Blood donations
 Product Classifications
Industrial Products
Industrial products are products purchased for
further processing or for use in conducting a
business
• Classified by the purpose for which the
product is purchased
– Materials and parts
– Capital items
– Supplies and services
 Product Classifications
Industrial Products
Capital items are industrial products that aid in the
buyer’s production or operations, including installations
and accessory equipment.
Materials and parts include raw materials and
manufactured materials and parts usually sold directly to
industrial users
Supplies and services include operating
supplies(lubricants, coal, paper, pencil), repair and
maintenance items(window cleaning, computer repair),
and business services(legal, management consulting,
advertisement)
 Individual Product Decisions

The important decisions in the development and marketing of individual

products and services.
 Product Attributes

Product attributes are the benefits of the

product or service
• Quality
• Features
• Style and design
 Freedom
Freedom from
from defects,
defects,Ability
Ability of
of aa Product
Product to to
Perform
Perform Its
Its Functions,
Functions, “Quality
“Quality isis when
when our our
Product
Product Quality
Quality customers
customers come
come back
back and
and our
our products
products don’t”;
don’t”;
Includes
Includes Level(
Level(performance quality)) &
performancequality &
Consistency(
Consistency(conformance quality))
conformancequality

Help
Help to
to Differentiate
Differentiate the
the Product
Product from
from
Product
Product Features
Features Those
Those ofof the
the Competition
Competition

Style
Style describes
describesthetheappearance
appearanceof ofthe
theproduct
product
Design
Design contributes
contributestotoaaproduct’s
product’susefulness
usefulnessasaswell
wellas
asto
Product
Product Style
Style its
to
itslooks.Design
looks.Designisismore
moreconcerned
concernedwithwiththe
thebasic
basic
&& Design
Design layout
layoutofofaaproduct
productwith
withits
its core
corefunctionality
functionalityand
and
user
userexperience
experience ininmind.
mind.
 Branding

A name, term, sign, symbol, or design, or a combination of these,

intended to identify the goods or services of one seller or group of
sellers and to differentiate them from the competitors.
 Packaging

 Activity of designing and producing the container or

wrapper for a product.
 Packaging used to just contain and protect the product.
 Labeling

Printed information appearing on or with the package.

Performs several functions:
– Identifies product or brand
– Describes several things about the product
– Promotes the product through attractive graphics.
 Product - Support Services

Companies should design its support services to

profitably meet the needs of target customers and gain
competitive advantage.
How?
Step1.Survey customers to assess the value of current services
and to obtain ideas for new services.
Step2.Assess costs of providing desired services.
Step3.Develop a package of services to delight customers and
yield profits to the company.
 Product Line Decisions

A product line is a group of products that

are closely related because they function in
a similar manner, are sold to the same
customer groups, are marketed through the
same types of outlets, or fall within given
price ranges
 Product Line Decisions

Product line length is the number of items in

the product line. A company can expand its
product line in two ways:
• Line stretching (change of quality- upward,
downward or both way)
• Line filling (change size or style)
 Product Line Decisions

Product mix consists of all the products and items

that a particular seller offers for sale
• Width (no. of diff. product lines a company carries)
• Length (total no. of items the company carries within its product
lines)
• Depth (no. of versions offered of each product in the line)
• Consistency (how closely related the various product lines
are in end use, production requirements, distribution
channels, or some other way.)
 Branding Strategy: Building Strong
Brands

The major brand strategy decisions involve brand positioning,

brand name selection, brand sponsorship, and brand
development

Brand Brand name Brand Brand

positioning selection Sponsorship Development

• Attributes • Selection • Manufacturer’s • Line extension

• Benefits • Protection brand • Brand extension
• Beliefs and • Private brands • Multibrands
values • Licensing • New Brands
• Co branding
 Brand Positioning

Companies can position brands at any of the

three levels:
• Product attributes (pamper: absorption, fit,
disposable)
• Product benefits (pamper: skin-health
benefits from dryness, ”there are fewer wet
bottoms in the world because of us” )
• Product beliefs and values (pamper:
helping mom with her baby’s development)
 Brand Name Selection

Desirable qualities
1. Suggest benefits and qualities
2. Easy to pronounce, recognize, and
remember
3. Distinctive
4. Extendable
5. Translatable for the global economy
6. Capable of registration and legal protection
 Brand Sponsorship

• Manufacturer’s (National) brand

• Private (store) brand
• Licensed brand
• Co-brand
Brand Development Strategies

Product Category
Existing New
Line Brand
Existing

Extension Extension
(Colgate (Colgate:
Brand Name

toothpaste, Toothpaste &

different Toothbrush)
flavors)

Multibrands
New Brand
(Unilever: Lux,
(Olper’s(milk),
New

Dove &
Olfrute(juices)
Sunsilk
)
Shampoo)
Services Marketing
Nature and Characteristics of a Service
Marketing Strategies for Service Firms

In addition to traditional marketing strategies,

service firms often require additional
strategies
• Service-profit chain
• Internal marketing
• Interactive marketing
 Marketing Strategies for Service Firms

Service-profit chain links service firm profits with

employee and customer satisfaction
• Internal service quality
• Satisfied and productive service employees
• Greater service value
• Satisfied and loyal customers
• Healthy service profits and growth
Three types of service marketing

Company

Internal External
Marketing Marketing

Employee Customer

Interactive
Marketing
Marketing Strategies for Service Firms

Internal marketing means that the service firm

must orient and motivate its customer contact
employees and supporting service people to work
as a team to provide customer satisfaction

Internal marketing must precede external marketing

 Marketing Strategies for Service Firms

Interactive marketing means that service quality

depends heavily on the quality of the buyer–seller
interaction during the service encounter
• Service differentiation
• Service quality
• Service productivity
 Marketing Strategies for Service Firms

Managing service differentiation creates a

competitive advantage from the offer, delivery, and
image of the service
• Offer can include distinctive features
• Delivery can include more able and reliable
customer contact people, environment, or process
• Image can include symbols and branding
Marketing Strategies for Service Firms

Managing service quality provides a

competitive advantage by delivering
consistently higher quality than its
competitors
Service quality always varies depending on
interactions between employees and
customers
 Marketing Strategies for Service Firms

Managing service productivity refers to

the cost side of marketing strategies for
service firms
• Employee recruiting, hiring, and training
strategies
• Service quantity and quality strategies
 Principles of Marketing
Chapter#9
New-Product Development and Product
Life-Cycle Strategies
New-Product Development Strategy

Two ways to obtain new products

 Acquisition refers to the buying of a whole
company, a patent, or a license to produce
someone else’s product.
 New product development refers to original
products, product improvements, product
modifications, and new brands developed from
the firm’s own research and development
Reasons for new product failure

Overestimation of market size

Poor design
Incorrect positioning
Wrong timing
Priced too high
Ineffective promotion
Management influence
High development costs

Competition
New-Product Development Process

Idea generation

Idea Screening

Concept Development
& testing
Marketing Strategy
Development

Business Analysis

Product Development

Test Marketing

Commercialization
1. Idea Generation
Idea generation is the systematic search for new-product ideas
Sources of new-product ideas
• Internal Sources
– R&D
– Sales force/employees
• External Sources
– Customers
– Resellers
– Suppliers
– Competitors
– Advertising Agencies
– Marketing research firms
2. Idea Screening

Identify good ideas and drop poor ideas.

• R-W-W Screening Framework:
– Is it real?
– Can we win?
– Is it worth doing?
3. Concept Development and Testing
Product idea is an idea for a possible product
that the company can see itself offering to the
market

Product concept is a detailed version of the

idea stated in meaningful consumer terms

Product image is the way consumers perceive

an actual or potential product

Concept testing refers to testing new-product

concepts with groups of target consumers
4. Marketing Strategy Development
Marketing strategy development refers to the
initial marketing strategy for introducing the
product to the market
• Marketing strategy statement includes:
– Description of the target market
• The target market, product positioning, and sales, share, and
profit goals for the first few years.
– Value proposition
• Product price, distribution, and marketing budget for the first
year.
– Sales and profit goals
• Long-run sales and profit goals and the marketing mix
strategy.
5. Business Analysis

Business analysis involves a review of

the sales, costs, and profit projections to
find out whether they satisfy the
company’s objectives.
6. Product Development

Product development involves the creation

and testing of one or more physical versions
by the R&D or engineering departments

• Requires an increase in investment

7. Test Marketing

Test marketing is the stage at which the product and

marketing program are introduced into more realistic
marketing settings.
Provides the marketer with experience in testing the
product and entire marketing program before full
introduction
Types of Test Marketing
1. Standard Test Marketing
– (full marketing campaign in a small number of representative cities)
2. Controlled Test Marketing
– (A few stores that have agreed to carry new products for a fee)
3. Simulated Test Marketing
– (Test in a simulated shopping environment to a sample of consumers)
8. Commercialization

Commercialization is the introduction of the

new product.

• When to launch
• Where to launch
• Planned market rollout
Product Life Cycle
Product Life Cycle

The Typical Product Life Cycle (PLC) Has Five

Stages
– Product Development, Introduction, Growth, Maturity, Decline
– Not all products follow this cycle
– The four basic stages through which a successful product
progresses-introduction, growth, maturity, and decline.
– Some products move rapidly through the product life
cycle, while others pass through those stages over long
time periods.
Product Life Cycle

• Style is a basic and distinctive mode of expression.

• Fashion is a currently accepted or popular style in a given field.
• Fads are temporary periods of unusually high sales driven by
consumer enthusiasm and immediate product or brand popularity.
Product Life-Cycle Strategies
 PLC Stages
 Begins when the company
develops a new-product
idea
 Product development
Introduction  Sales are zero
Growth  Investment costs are high
Maturity  Profits are negative
Decline
Product Life Cycle Stages
 PLC Stages
 Low sales
Product development
 High cost per customer
acquired
 Introduction
Growth
 Negative profits
Maturity  Innovators are targeted
Decline  Little competition
 Sales
Sales Low
Low sales
sales

Costs
Costs High
High cost
cost per
per customer
customer

Profits
Profits Negative
Negative

Create
Create product
product awareness
awareness
Marketing
Marketing Objectives
Objectives and
and trial
trial

Product
Product Offer
Offer aa basic
basic product
product

Price
Price Use
Use cost-plus
cost-plus

Distribution
Distribution Build
Build selective
selective distribution
distribution

Build
Build product
product awareness
awareness among
among early
early
Advertising
Advertising adopters
adopters and
and dealers
dealers
Product Life Cycle Stages
 PLC Stages  Rapidly rising sales
 Average cost per
Product development customer
Introduction
 Rising profits
 Growth  Early adopters are
Maturity targeted
Decline
 Growing competition
 Sales
Sales Rapidly
Rapidly rising
rising sales
sales

Costs
Costs Average
Average cost
cost per
per customer
customer

Profits
Profits Rising
Rising profits
profits

Marketing
Marketing Objectives
Objectives Maximize
Maximize market
market share
share

Product Offer
Offer product
product extensions,
extensions, service,
service,
Product warranty
warranty

Price
Price Price
Price to
to penetrate
penetrate market
market

Distribution
Distribution Build
Build intensive
intensive distribution
distribution

Build
Build awareness
awareness and
and interest
interest in
in the
the
Advertising
Advertising mass
mass market
market
Product Life Cycle Stages
 PLC Stages  Sales peak
 Low cost per customer
Product development
Introduction  High profits
Growth  Middle majority are
 Maturity targeted
Decline  Competition begins to
decline
 Sales
Sales Peak
Peak sales
sales

Costs
Costs Low
Low cost
cost per
per customer
customer

Profits High
High profits
profits
Profits

Maximize
Maximize profit
profit while
while defending
defending
Marketing
Marketing Objectives
Objectives market share
market share

Product
Product Diversify
Diversify brand
brand and
and models
models

Price
Price Price
Price to
to match
match or
or best
best competitors
competitors

Distribution
Distribution Build
Build more
more intensive
intensive distribution
distribution

Advertising
Advertising Stress
Stress brand
brand differences
differences and
and benefits
benefits
Product Life Cycle Stages
 PLC Stages
 Declining sales
Product development  Low cost per customer
Introduction  Declining profits
Growth
Maturity  Laggards are targeted
 Decline  Declining competition
 Sales
Sales Declining
Declining sales
sales

Costs
Costs Low
Low cost
cost per
per customer
customer

Profits
Profits Declining
Declining profits
profits

Marketing
Marketing Objectives
Objectives Reduce
Reduce expenditure
expenditure and
and milk
milk the
the brand
brand

Product
Product Phase
Phase out
out weak
weak items
items

Price
Price Cut
Cut price
price

Distribution
Distribution Go
Go selective:
selective: phase
phase out
out unprofitable
unprofitable outlets
outlets

Advertising
Advertising Reduce
Reduce to
to level
level needed
needed to
to retain
retain
hard-core
hard-core loyal
loyal customers
customers
Product Life Cycle
 Principles of Marketing
Chapter#10
Pricing:
Understanding and Capturing Customer
Value
 What is Price?
Price Has Many Names

 Rent  Tuition  Bribe

 Fee  Fare  Salary
 Rate  Toll  Wage
 Commission  Premium  Interest
 Tax
Definition

Price
The amount of money charged for a product or service, or the
sum of the values that consumers exchange for the benefits of
having or using the product or service.

• Price is the sum of all the values that consumers exchange for
the benefits of having or using the product or service.
• Price is the only element in the marketing mix that produces
revenues; all others represent costs.
 Customer Perceptions of Value

Understanding how much value consumers place

on the benefits they receive from the product and
setting a price that captures that value
 Value-based pricing uses the buyers’ perceptions of
value, not the sellers’ cost, as the key to pricing. Price
is considered before the marketing program is set.
 Value-based pricing is customer driven
 Cost-based pricing is product driven
Cost-based pricing Vs. Value-based pricing
 Value based pricing
 Good-value pricing offers the right combination of quality and
good service at a fair price
 Existing brands are being redesigned to offer more quality for a
given price or the same quality for a lower price
 Everyday low pricing (EDLP) involves charging a constant
everyday low price with few or no temporary price discounts
 High-low pricing involves charging higher prices on an
everyday basis but running frequent promotions to lower prices
temporarily on selected items
 Value-added pricing attaches value-added features and
services to differentiate offers, support higher prices, and build
pricing power
 Pricing power is the ability to escape price competition and to
justify higher prices and margins without losing market share
 Cost-based pricing

Cost-based pricing involves setting prices based on

the costs for producing, distributing, and selling the
product plus a fair rate of return for its effort and risk

Cost-based pricing adds a standard markup to the

cost of the product
Factors Affecting Price Decisions
Internal & External factors
affecting pricing decisions
 Internal
Internal External
External
Factors
Factors Factors
Factors
Nature
Nature ofof the
the

Marketing
Marketing market
market and
and demand
demand
Objectives
Objectives
Pricing Competition
Competition

Marketing
Marketing Mix
Mix Pricing
Strategy Decisions
Decisions Other
Other
Strategy
environmental
environmental

Costs
Costs
factors
factors (economy,
(economy,

Organizational
Organizational resellers,
resellers,
considerations
considerations government)
government)
Organizational
Considerations
Costs
Decisions
Pricing
Marketing-Mix Affecting
Strategy Factors
Internal
Marketing
Objectives
Marketing Objectives that Affect Pricing
Decisions
 Survival
Survival
Low
Low Prices
Prices to
to Cover
Cover Variable
Variable Costs
Costs and
and
Some
Some Fixed
Fixed Costs
Costs to
to Stay
Stay in
in Business.
Business.

Current
Current Profit
Profit Maximization
Maximization
Choose
Choose the
the Price
Price that
that Produces
Produces the
the
Marketing
Marketing
Maximum
Maximum Current
Current Profit,
Profit, Cash
Cash Flow
Flow or
or ROI.
ROI.

Objectives
Objectives Market
Market Share
Share Leadership
Leadership
Low
Low as
as Possible
Possible Prices
Prices to
to Become
Become
the
the Market
Market Share
Share Leader.
Leader.

Product
Product Quality
Quality Leadership
Leadership
High
High Prices
Prices to
to Cover
Cover Higher
Higher
Performance
Performance Quality
Quality
Marketing Mix Variables that Affect Pricing
Decisions
 Product
Product Design
Design
and
and Quality
Quality

Non-Price
Non-Price Marketing-Mix
Factors Distribution
Distribution
Factors Strategy

Promotion
Promotion
Costs

• Set the floor for the price

• Cover total costs - fixed plus variable
costs
– Fixed costs
• do not vary with production volume
– Variable costs
• vary directly with production volume
Types of Cost Factors that Affect Pricing
Decisions

Total
TotalCosts
Costs
Sum
Sumof
ofthe
theFixed
Fixedand
andVariable
VariableCosts
Costsfor
foraaGiven
Given
Level of Production
Level of Production

Fixed
FixedCosts
Costs Variable
VariableCosts
Costs
(Overhead)
(Overhead)
Costs
Coststhat
thatdon’t
don’t Costs
Coststhat
thatdo
dovary
vary
vary
varywith
withsales
salesor
or directly
directlywith
withthe
the
production
productionlevels.
levels. level
levelof
ofproduction.
production.

Executive
ExecutiveSalaries
Salaries Raw
Rawmaterials
materials
Rent
Rent
Sales commissions Insurance
Packaging & freight Property taxes
Hourly wages Manager’s salaries
Component parts Depreciation
Raw materials Rent
Variable Costs Fixed Costs
 Other External Factors
Economic Conditions
Reseller Needs
Government Actions
Social Concerns
Competitors’ Costs,
Prices, and Offers
Market and
Demand
External factors affecting Pricing decisions
 Pure Oligopolistic
OligopolisticCompetition
Competition
Pure Monopoly
Monopoly Few
Single FewSellers
SellersEach
EachSensitive
Sensitiveto
toOther’s
Other’s
SingleSeller
Seller Pricing/
Pricing/Marketing
MarketingStrategies
Strategies
Different
Different Types
Typesof
ofMarkets
Markets
Monopolistic
MonopolisticCompetition
Competition Pure
PureCompetition
Competition
Many
ManyBuyers
Buyersand
andSellers
SellersTrading
Trading Many
ManyBuyers
Buyersand andSellers
SellersWho
Who
Over
OveraaRange
RangeofofPrices.
Prices. Have
HaveLittle
LittleAffect
Affecton
onthe
thePrice.
Price.
Pricing decisions
The Market and Demand factors that affect
 Price-Demand Relationship

The demand curve shows the number of units the

market will buy in a given period at different prices

 Normally, demand and price are inversely related

 Higher price = lower demand
 For prestige (luxury) goods, higher price can equal
higher demand when consumers perceive higher
prices as higher quality
 Price Elasticity of Demand
How quantity demanded responds to price changes
A. Inelastic Demand -
Price Demand Hardly Changes With
a Small Change in Price.
P2
P1

Q2 Q1
Quantity Demanded per Period
B. Elastic Demand -
Price

Demand Changes Greatly

With a Small Change in Price.
P’2
P’1

Q2 Q1
Quantity Demanded per Period
 Elastic demand
– price changes affect demand
– total revenue falls when price increases
– total revenue increases when price falls

 Inelastic demand
– price changes do not affect demand
– total revenue increases when price increases
– total revenue falls when price falls
 Other environmental elements

 Economic conditions
– Affect production costs
– Affect buyer perceptions of price and value
 Reseller reactions to prices must be considered
 Government may restrict or limit pricing options
 Social considerations may be taken into account
Principles of Marketing
Chapter#11
Pricing Strategies
Pricing Strategies

Topic Outline

New-Product Pricing Strategies

Product Mix Pricing Strategies

Price Adjustment Strategies

New-Product Pricing Strategies

• Market-skimming pricing
• Market- penetration pricing
 Market-skimming pricing

Market-skimming pricing is a strategy with high initial

prices to “skim” revenue layers from the market.

• Product quality and image must support the price

• Buyers must want the product at the price
• Costs of producing the product in small volume
should not cancel the advantage of higher prices
• Competitors should not be able to enter the market
easily
 Market- penetration pricing
Market-penetration pricing sets a low initial price in order
to penetrate the market quickly and deeply to attract a large
number of buyers quickly to gain market share
• Price sensitive market
• Inverse relationship of production and distribution cost to
sales growth
• Low prices must keep competition out of the market
Product Mix Pricing Strategies

Optional- Captive-
Product line
product product
pricing
pricing pricing

Product
By-product
bundle
pricing
pricing
Product line pricing

Product line pricing takes into account

the cost differences between products in
the line, customer evaluation of their
features, and competitors’ prices.
• Setting prices across an entire product line.
• In tourism hospitality industry the same category of rooms having
different rates because of amenities and facilities.
Optional product pricing

Optional-product pricing takes into

account optional or accessory products
sold with the main product.

• Accessories (like carry bags, cooling fan) with laptops.

Captive-product pricing

Captive-product pricing involves

products that must be used along with the
main product.
Two-part pricing involves breaking the price into:
– Fixed fee
– Variable usage fee

•Gillette often price the razor at or below cost and make the profit on
the blades.
By-product pricing

By-product pricing refers to products

with little or no value produced as a result
of the main product. Producers will seek
little or no profit other than the cost to
cover storage and delivery.

• Pricing low-value by-products to get rid of

them.
• Some garments manufacturers sell waste
cut-pieces of cloth to car-washing industry.
Product bundle pricing

Product bundle pricing combines

several products at a reduced price.

• Pricing bundles of products sold together

• Value meals at fast food restaurants
Price Adjustment Strategies
Companies usually adjust their basic prices to account
for various customer differences and changing
situations. We will discuss the following price
adjustment strategies in this chapter:
• Discount and Allowance Pricing
• Segmented Pricing
• Psychological Pricing
• Promotional Pricing
• Geographical Pricing
• Dynamic Pricing
Discount and Allowance Pricing
Reducing prices to reward customer responses such as
paying early or promoting the product
Discount: A straight reduction in price on purchases
during a stated period of time or of larger quantities.
Allowance: Promotional money paid by manufacturers
to retailers in return for an agreement to feature the
manufacturer’s products in some way.
 Discount and Allowance Pricing
• A quantity discount is a price reduction to buyers
who buy large volumes.
• A seller offers a functional discount (also called a
trade discount) to trade-channel members who
perform certain functions, such as selling, storing,
and record keeping.
• A seasonal discount is a price reduction to buyers
who buy merchandise or services out of season.
 Discount and Allowance Pricing
• Trade-in allowances are price reductions
given for turning in an old item when buying a
new one.

• Promotional allowances are payments or price

reductions to reward dealers for participating
in advertising and sales support programs.
 Segmented Pricing
Selling a product or service at two or more
prices, where the difference in prices is not based
on differences in costs.
 Segmented Pricing
• Under customer-segment pricing, different customers pay
different prices for the same product or service.
• Under product-form pricing, different versions of the product
are priced differently but not according to differences in their
costs.
• Using location-based pricing, a company charges different
prices for different locations, even though the cost of offering
each location is the same.
• Using time-based pricing, a firm varies its price by the season,
the month, the day, and even the hour
 Psychological Pricing
Pricing that considers the psychology of prices, not simply the
economics; the price says something about the product.
• When customers cannot judge quality because they
lack the information or skill, price becomes an
important quality signal.
• Another aspect of psychological pricing is reference
prices—prices that buyers carry in their minds and
refer to when looking at a given product.
 Promotional Pricing
Temporarily pricing products below the list price, and sometimes
even below cost, to increase short-run sales.
• A seller may simply offer discounts from normal
prices to increase sales and reduce inventories
• Sellers also use special-event pricing in certain
seasons to draw more customers.
• Some manufacturers offer low interest financing,
longer warranties, or free maintenance to reduce the
consumer’s “price.”
 Geographical Pricing
Setting prices for customers located in different parts of
the country or world
 Geographical Pricing
• FOB-origin pricing: A geographical pricing strategy in
which goods are placed free on board a carrier; the customer pays the
freight from the factory to the destination.
• Uniform-delivered pricing: A geographical pricing
strategy in which the company charges the same price plus freight to all
customers, regardless of their location.
• Zone pricing: A geographical pricing strategy in which the
company sets up two or more zones. All customers within a zone pay the
same total price; the more distant the zone, the higher the price.
• Basing-point pricing: A geographical pricing strategy in
which the seller designates some city as a basing point and charges all
customers the freight cost from that city to the customer.
 Dynamic Pricing
Adjusting prices continually to meet the
characteristics and needs of individual customers
and situations.
Principles of Marketing
Chapter#12
Marketing Channels: Delivering
Customer Value
 Supply Chains and the Value Delivery
Network
Supply Chain Partners

• Upstream partners include raw material

suppliers, components, parts, information,
finances, and expertise to create a product
or service

• Downstream partners include the

marketing channels or distribution
channels that look toward the customer
Marketing channel (Definition)
• A marketing channel (or distribution
channel) is a set of independent
organizations that help make a product or
service available for use or consumption
by the consumer or business user.
The Nature and Importance of
Marketing Channels
How Channel Members Add Value

• Intermediaries offer producers greater

efficiency in making goods available to target
markets. Through their contacts, experience,
specialization, and scale of operations,
intermediaries usually offer the firm more than it
can achieve on its own.
• From an economic view, intermediaries
transform the assortment of products into
assortments wanted by consumers
• In making products and services available to
consumers, channel members add value by
bridging the major time, place, and possession
gaps that separate goods and services from
How Channel Members Add Value
How Channel Members Add Value

Information Promotion Contact

Physical
Matching Negotiation
distribution

Financing Risk taking

 How Channel Members Add Value

Information: gathering and distributing marketing research & intelligence

information about actors and forces in the marketing environment needed for
planning and aiding exchange.
Promotion: developing and spreading persuasive communication about an
offer.
Contact: finding and communicating with prospective buyers.
Matching: shaping and fitting the offer to buyer’s needs, including activities
such as manufacturing, grading, assembling, and packaging.
Negotiation: reaching an agreement on price and other terms of the offer so
that the ownership or possession can be transferred.
Physical distribution: transporting and storing goods.
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 Design Decisions

Analyzing Setting
consumer channel
needs objectives

Identifying
major
channel Evaluation
alternative
s
1. Analyzing Consumer Needs

• Do customers want to buy from nearby

locations or are they willing to travel to more
distant centralized locations?
• Would they rather buy in person, by phone, or
online?
• Do they value breadth of assortment or do they
prefer specialization?
• Do consumer want many add-on services
(delivery, repair, installation), or will they
obtain these elsewhere?
2. Setting Channel Objectives

Companies should state their marketing

channel objectives in terms of:
• Targeted levels of customer service
• What segments to serve (out of several
segments wanting different levels of
services)
• Best channels to use
• Minimizing the cost of meeting customer-
service requirements
2. Setting Channel Objectives

Companies channel objectives are also

influenced by:
• Nature of the company
• Its products
• Its marketing intermediaries
• Its competitors
• The environmet
3. Identifying Major Alternatives

After defining channel objectives, the

company should identify its major channel
alternatives in term of
• Types of intermediaries
• Number of marketing intermediaries
• Responsibilities of channel members
 Identifying Major Alternatives

Intensive distribution
• Candy and toothpaste

Exclusive distribution
• Luxury automobiles and prestige
clothing

Selective distribution
• Television and home appliance
 4. Evaluating the Major Alternatives

Each alternative should be evaluated

against:
– Economic criteria
– Control
– Adaptive criteria
 Principles of Marketing
Chapter#14
Communicating Customer Value: Integrated Marketing Communications
Strategy
 The Promotion Mix

The promotion mix is the specific blend of

advertising, public relations, personal
selling, and direct-marketing tools that the
company uses to persuasively
communicate customer value and build
customer relationships
Major Promotion Tools
Advertising
Advertising is any paid form of non-
personal presentation and promotion of
ideas, goods, or services by an identified
sponsor
• Broadcast
• Print
• Internet
• Outdoor
Sales promotion
Sales promotion is the short-term
incentives to encourage the purchase or
sale of a product or service
• Discounts
• Coupons
• Displays
• Demonstrations
Public Relations
Public relations involves building good
relations with the company’s various publics
by obtaining favorable publicity, building up
a good corporate image, and handling or
heading off unfavorable rumors, stories, and
events
• Press releases
• Sponsorships
• Special events
• Web pages
Personal Selling
Personal selling is the personal
presentation by the firm’s sales force for the
purpose of making sales and building
customer relationships
• Sales presentations
• Trade shows
• Incentive programs
Direct Marketing
Direct marketing involves making direct
connections with carefully targeted individual
consumers to both obtain an immediate
response and cultivate lasting customer
relationships—through the use of direct mail,
telephone, direct-response television, e-
mail, and the Internet to communicate
directly with specific consumers
• Catalog
• Telemarketing
• Kiosks
 The New Marketing Communications
Landscape

• Consumers are better informed

• More communication
• Less mass marketing
• Changing communications technology
 Integrated Marketing Communications

Integrated marketing communications

is the integration of a company’s
communication channels to deliver a
clear, consistent, and compelling
message about the organization and its
brands
Steps in Developing Effective
Marketing Communication

Identify the target audience

Determine the communication objectives

Design the message

Choose the media

Select the message source

Step1: Identifying the Target audience

A marketing communicator starts with a clear target audience

in mind.

The audience may be current users or potential buyers, those

who make the buying decision or those who influence it. The
audience may be individuals, groups, special publics, or the
general public.

The target audience will heavily affect the communicator’s

decisions on what will be said, how it will be said, when it will
be said, where it will be said, and who will say it.
Step1: Identifying the Target audience

What will How it will

be said be said

When it will Where it

be said will be said

Who will
say it
Step2: Determining the Communication
Objectives

Marketers seek a purchase response that

results from a consumer decision-making
process that includes the stages of
buyer readiness
Step3: Designing a message

AIDA Model
• Get Attention
• Hold Interest
• Arouse Desire
• Obtain Action
Step3: Cont...

Message content is an appeal or theme that

will produce the desired response
• Rational appeal
– relates to the audience’s self-interest
• Emotional appeal
– an attempt to stir up positive or negative
emotions to motivate a purchase
• Moral appeal
– directed at the audience’s sense of what is
“right” and “proper”.
Step3: Cont...
Message structure : three issues..
• Whether to draw a conclusion or leave it to
audience
• Whether to present the strongest
arguments first or last
• Whether to present a one-sided argument
or a two sided argument
Message format:
In a print ad, the communicator has to
decide on the headline, copy, illustration,
and colors
Step4: Choosing Media

Personal communication involves two or

more people communicating directly with
each other
• Face to face
• Phone
• Mail
• E-mail
• Internet chat
Step4: Cont...
Control of personal communication
• Company
• Independent experts
• Word of mouth

Opinion leaders are people within a reference group who,

because of their special skills, knowledge, personality, or
other characteristics; exerts social influence on others
Buzz marketing involves cultivating opinion leaders and
getting them to spread information about a product or
service to others in their communities
Step4: Cont...
Non-personal communication is media that carry messages
without personal contact or feedback, including major media,
atmospheres, and events that affect the buyer directly
• Major media include print, broadcast, display, and online
media
• Atmospheres are designed environments that create or
reinforce the buyer’s leanings toward buying a product
• Events are staged occurrences that communicate
messages to target audiences
– Press conferences
– Grand openings
– Exhibits
– Public tours
Step5: Selecting the message source
The message’s impact on the target
audience is affected by how the audience
views the communicator
• Celebrities
– Athletes
– Entertainers
• Professionals
– Health care providers
Principles of Marketing
Chapter#15
Advertising and Public Relations
Advertising

Advertising is any paid form of non-personal

presentation and promotion of ideas, goods, or services
by an identified sponsor.
Developing an Advertising Programs
Setting Advertising Objectives

An advertising objective is a specific communication

task to be accomplished with a specific target
audience during a specific time
Objectives are classified by primary purpose
• Inform
• Persuade
• Remind
Setting Advertising Objectives
Informative advertising is used when introducing a
new product category; the objective is to build
primary demand
Comparative advertising directly or indirectly
compares the brand with one or more other brands
Persuasive advertising is important with increased
competition to build selective demand
Reminder advertising is important with mature
products to help maintain customer relationships
and keep customers thinking about the product
Setting the Advertising Budget

Factors to consider when setting the budget

• Product life-cycle stage
• Market share
Setting the Advertising Budget

Product life-cycle stage

• New products require larger budgets
• Mature brands require lower budgets
Market share
• Building or taking market share requires larger
budgets
• Markets with heavy competition or high
advertising clutter require larger budgets
• Undifferentiated brands require larger budgets
Developing Advertising Strategy

Advertising strategy is the strategy by

which the company accomplishes its
advertising objectives and consists of:
• Creating advertising messages
• Selecting advertising media
Creating the Advertising Message

Advertisements need to break through the

clutter:
• Gain attention
• Communicate well

Advertisements need to be better planned,

more imaginative, more entertaining, and more
rewarding to consumers
Creating the Advertising Message

Message strategy

Creative concept

Message execution
Creating the Advertising Message

Message strategy is the general message that

will be communicated to consumers
• Identifies consumer benefits
Creating the Advertising Message

Creative concept is the idea that will bring the

message strategy to life and guide specific
appeals to be used in an advertising campaign

Characteristics of the appeals include:

• Meaningful
• Believable
• Distinctive
Creating the Advertising Message

• Message execution is when the advertiser

turns the big idea into an actual ad execution
that will capture the target market’s attention
and interest.
• The creative team must find the best
approach, style, tone, words, and format for
executing the message.
Creating the Advertising Message

Message execution also includes:

• Tone
– Positive or negative
• Attention-getting words
• Format
– Illustration
– Headline
– Copy
Creating the Advertising Message

• YouTube videos
• Brand Web site contests
• Positives
– Low expense
– New creative ideas
– Fresh perspective on brand
– Boost consumer involvement
Selecting Advertising Media

Major steps include:

• Deciding on reach-frequency-impact
• Selecting media vehicles
• Deciding on media timing
Selecting Advertising Media

Reach is a measure of the percentage of

people in the target market who are
exposed to the ad campaign during a given
period of time
Frequency is a measure of how many times
the average person in the target market is
exposed to the message
Impact is the qualitative value of a message
exposure through a given medium
Selecting Advertising Media

Selecting media vehicles involves decisions

presenting the media effectively and
efficiently to the target customer and must
consider the
message’s:
• Impact
• Effectiveness
• Cost
Selecting Advertising Media

Narrowcasting focuses the message on

selected market segments
• Lowers cost
• Targets more effectively
• Engages customers better
Selecting Advertising Media

When deciding on media timing, the planner

must consider:
• Seasonality
• Pattern of the advertising
– Continuity—scheduling within a given period
– Pulsing—scheduling unevenly within a given
period
Evaluating the Effectiveness and
Return on Advertising Investment
Communication effects indicate whether the
ad and media are communicating the ad
message well and should be tested before
or after the ad runs
Sales and profit effects compare past sales
and profits with past expenditures or through
experiments
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

Copyright © 2010 Pearson Education, Inc.  

Publishing as Prentice Hall