Course Title

PRINCIPLES OF MARKETING
MKTM1022
 Course Description

• This course is primarily designed to provide

students with some preliminary insights of
marketing management. It deals with the basic
concepts of marketing: marketing management; the
role and importance of marketing department in an
organization; the main functions of marketing
which include the product designing, promoting,
pricing, and distributing want satisfying products.
 
 Course Objectives
• Marketing touches all of our everyday lives. Market oriented thinking is
thus a necessity in today’s competitive world. Hence, this course is
designed with the following objectives.
• Up on completion of the course, students will be able to:
• To develop the themes of marketing management as a process function
and people management activity with respect to the four strategic
elements of marketing its product, pricing strategy, distribution system
and promotional activities.
• To develop the students’ abilities to apply their marketing knowledge
and skills in their special field.
• To familiarize students with the concepts and principles of marketing
and the significance of different forces that influence the marketing
effort.
 Course content
• Chapter one: introduction to marketing management
• Chapter two: marketing environment
• Chapter three: market segmentation, targeting and positioning
• Chapter four: product management
• Chapter five: price management
• Chapter six: channel management
• Chapter seven: promotion management
• Chapter eight: e-marketing
 References:

• 1. Kotler, Philip, (2001) Marketing Management: 10th ed. (The Millennium

Edition), Prentice-Hall.
• 2. Kotler, Philip, (1998) Marketing Management: Analysis, Planning,
Implementation and Control. 6th ed. Hnglewood cliffs, Prentice –Hall.
• 3. Baker, James, (1990) Marketing: An Introductory Text, 4th ed, London,
Macmillan Education Limited.
• 4. McCarthy, E. Jerome. And William D. Perreault (1987), Jr. Basic Marketing.
9th ed. Hom Wood, Richard D. Erwin, Inc.
• 5. J. Stanton, William. Kenneth E. Miller, and Roger A. Laton. (1985)
Fundamentals of Marketing.
• 6. Jobber, David, (1995) Principles and Practices of Marketing, England,
McGrow-Hill Book Company Europe.
 Part I
Understanding marketing,
marketing environment and
target marketing
 CHAPTER-1
Introduction To marketing
management
 Definition

 Marketing: The process of creating

consumer value in the form of goods,
services, or ideas that can improve
the consumer’s life.
 What is marketing ?
 More than selling and advertising

 Identifying and satisfying customers needs

 Range of activities (marketing mix - 4P’s)

 Simple Marketing System

Communication

Product/Service
Producer/Seller Consumer
Money

Feedback
Activity -1
 What is marketing?
• There are 100’s of definitions of marketing available on the
internet and even different marketing textbooks use different
variations of what marketing is all about. And even in the business
world, you will find that different firms and even different
managers have a somewhat unique view of the role of marketing.
• As you probably know already, the key goals of marketing are to
generate long-term profits, deliver customer satisfaction, and
improve the competitive strengths of the organization over time.
• But let’s have a very simple look at the role of marketing. The
above marketing goals are really all about getting and keeping
customers.
 Discussion Questions

• Do you agree that the goals of marketing can be

simplified down to just three words (that is, get,
build, hold)? Why, why not?
• Outside of these customer goals, does marketing
have any other purpose? Please outline your
thoughts.
• How would you define marketing in simple terms
for a non-business person?
Marketing’s 4 P’s

 Product

 Price

 Place

 Promotion
Core Marketing Concepts
 Pr
ts , 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,
ts

and relationships
 Needs
‘...a state of felt deprivation’

 Wants
needs ‘...shaped by culture and individual personality’


Demands
wants ‘...backed by purchasing power’
 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
 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
 A transaction is...
 ‘...a trade between two parties that involves:
 at least two things of value;
 agreed upon conditions;
 a time of agreement; and
 a place of agreement’

 may be monetary or barter

 A market is...
 ‘...a set of actual and potential buyers of a product’
 Marketing satisfies the needs of markets by facilitating the exchange
process
Marketing Philosophies
 PRODUCT SOCIETAL
CONCEPT MARKETING
CONCEPT

KEY
MARKETING
PHILOSOPHIES
MARKETING
MARKETING
PRODUCTION CONCEPT
CONCEPT
CONCEPT

SELLING
CONCEPT
 The Production Concept

..Holds that consumers will favor products that are available

and affordable.
Implies work towards mass production and low cost
 The Product Concept
…Assumes customers favor products that offer the most quality,
performance, and features.
Implies firm should strive to continually upgrade product and product
features.
 The Selling Concept

…The idea that customers will not buy enough of the

organization’s products unless the organization undertake a
large scale selling and promotion efforts.

..Business assumption that consumers will resist purchasing

nonessential goods and services with the attitude toward
marketing that only creative advertising and personal selling
can overcome consumers’ resistance and convince them to
buy.
 The Marketing Concept

…Holds that achieving organizational goals depends upon

determining the needs and wants of target markets and
delivering the desired satisfactions more effectively and
efficiently than do competitors.
 Marketing Concept Components

• Means of achieving goals

• determine needs and wants
• implies research and/or appropriate assumptions
• Target markets
• implies clear target groups: people whose needs/want you will try to fill
• Satisfaction
• Competitors acknowledged
SOCIETAL MARKETING CONCEPT: ….in a way that
maintains or improves the consumer’s and the society’s well-
being.

Typical thinking in 1990

Marketer must act in a socially responsible manner.
External environment’s influence on firm’s marketing program.
 Society
Society
(Human
(Human Welfare)
Welfare)

Societal
Societal
Marketing
Marketing
Concept
Concept

Consumers
Consumers Company
Company
(Satisfaction)
(Satisfaction) (Profits)
(Profits)
Relationship Era
 Relationship marketing: development and maintenance of long-term,
cost-effective exchange relationships with individual customers,
suppliers, employees, and other partners for mutual benefit.
 Strategic alliances: partnerships with vendors and retailers play
major roles in relationship marketing.4
Effective relationship marketing relies heavily on information
technologies such as computer databases that record customers’ tastes,
price preferences, and lifestyles along with the increase of electronic
communications. Some examples are frequent buyer clubs/cards.)
Evolving Views of Marketing’s Role
 Finance
Production
Production Finance
Human
resources
Marketing Human
resources Marketing

a. Marketing as an b. Marketing as a more

equal function important function
 Production i on
ct

Fi
d u

na
ro

nc
P

e
Marketing Customer
re
Hu ur

ce M

ur an
ar
so

s
n
ma ces

ce
a ke

so m
n
Fi tin

re Hu
n

c. Marketing as the d. The customer as the

major function controlling factor
 Production

Marketing

Customer
re
Hu ur
so
ma ces

ce
n
n

na
Fi

e. The customer as the controlling

function and marketing as the
integrative function
Activity - 2
Which Marketing Orientation is Be
st?
• In the following activity, you are presented with an
extract of a discussion from a manager’s meeting
for a newly formed firm that is setting up as a
manufacturer of bicycles. Essentially, they are
discussing which marketing orientation/philosophy
they should adopt. Your task is to determine which
orientation/philosophy that you think would be
most appropriate approach for this firm.
• James:
• As you all know, I’ve been a keen cyclist for many years. And I think that
there’s a real opportunity for innovative state-of-the-art bikes. There’s
always someone out there who wants the latest gadget. We’ve all seen that
in the entertainment market (with PlayStation and iPod for instance). So I
think that we can easily pick up on that trend in the bike market.

• Julie:                    
• Sure, that’s an option, but you’re talking about a pretty small market. I
think that we should go mass market. These days some kids own two or
three bikes, or get a new one every year. Success in that large market is
simply price. If we make the bikes efficiently and sell them at a low price
– then the bikes will roll off the shelves as fast as we can make them.
• John
• Yeah – maybe that will work. But today’s world is celebrity and brand crazy. For
many kids today, it’s all about image and status. So I think that we should get a
high-profile celebrity to endorse our product, and then get out there and really
build a strong brand. This is a real opportunity – I mean, you can list a dozen
brands of cereal, but how many brands of bicycles do you know?

• Jane:
• But do people really choose a bike based on the brand? Or do they choose a bike
that really suits them and has a good range of features. You know what I think – I
think we should run some focus groups with kids, teenagers, and young adults and
find out what they really want in a bike. Meeting customer needs is the key to
success.
• Jenny:                  
• Well, of course, we should meet customer needs! But
wouldn’t it be great if we could make a difference to the
environment as well. You know, encourage people to cycle
(not drive) whenever they can. And we could also generate a
lot of free publicity by using this approach.
 Discussion Question

• Which marketing orientation/philosophy is each

person essentially referring to? (Choose from the
list below.)
• Based on the information you have, which
particular orientation do you think that the firm
should follow? Why?
• Which orientation approach do you think is
adopted by most large firms?
Activity -3
 Shift to societal concept

• the following exercise contains is a list of questions

facing particular industries, where there is
increasing expectations on them to move to a more
socially responsible position. Identify the
arguments for and against – what would you
recommend in each case?
 
 ACTIVITY/TASK
• Should car manufacturers only produce vehicles that have maximum speed of the legal
speed limit, as speeding is dangerous?
• Should supermarket chain cease selling cigarettes, as they are harmful to consumers?
• Should mobile phone companies restrict young people (under 25 years) from entering
phone contracts, so that these customers do not get into financial difficulties?
• Should banks remove their ATMs from clubs and casinos so that problem gamblers
cannot access cash on the premises?
• Should fast-food chains decide NOT to market products to children (via advertising and
merchandised toys with meals), particularly after they have invested millions in kid-
friendly premises, menu items and in-store playgrounds?
• Should telephone directory pages continue to be produced physically? They both use
enormous quantities of paper and many people utilize the internet to find firms and
phone numbers.
• Should department stores, car dealers, and other retailers required to disclose how much
commission their sales people earn on sales?
 QUESTIONS

• Which of the above statements do you agree with

(that is, the firm should move in this direction)?
• What are the for/against arguments, from a firm’s
perspective, of implementing some of these
actions?
• If you were the CEO of one of the above firms,
what would you actually do?
 CHAPTER-2
Marketing Environment
What is marketing environment?

All the actors and forces influencing the company’s ability to transact
business effectively with it’s target market.
Includes….
Microenvironment - forces close to the company that
affect its ability to serve its customers.

Macroenvironment - larger societal forces that affect

the whole microenvironment.
 The Marketing Environment

Marketing Environment- consists of the actors and forces outside

marketing that affect marketing management’s ability to develop and
maintain successful relationships with its target customers.
 Demographic

Company
Cultural Economic
Publics Suppliers
Company

Political Competitors Customer Natural

s
Intermediaries

Technological
The Microenvironment
 Company
Company
Publics
Publics Suppliers
Suppliers
Forces
Forces Affecting
Affecting aa
Company’s
Company’s Ability
Ability to
to
Serve
Serve
Customers
Customers
Competitors
Competitors Intermediaries
Intermediaries
Customers
Customers
The Macroenvironment
 Demographic
Demographic

Cultural
Cultural Economic
Economic
Forces
Forces that
that Shape
Shape
Opportunities
Opportunities
and
and Pose
Pose Threats
Threats
to
to aa Company
Company
Political
Political Natural
Natural

Technological
Technological
 Responding to the Marketing Environment

• Reactive: Passive Acceptance and Adaptation

• Companies design strategies that avoid threats and capitalize upon
opportunities.

 Proactive: Environmental Management

– Use of lobbyists, PR, advertorials, lawsuits, complaints, and

contractual agreements to influence environmental forces.
Activity - 4
 Macro environment

• Review the following list of macro-environment

changes/trends. For each one, work out how it is
changing and then determine whether (and how) it
will impact marketing activities. As we know, there
are three key aspects to an environmental scan;
identify the environmental change, determine its
likely impact, and how firms can turn this
challenge into a market opportunity.
 List of macro changes
Changes Which macro Its impact on
force is it? marketing
internet/PC usage

Use of Smart phones

Education levels

Spending power of teenagers

Attitude to the natural (green)

environment
Economic development in BRICS
countries (Brazil, Russia, India, China,
and south Africa)
Increasing life expectancy of people in
Ethiopia
More disposable income
 Discussion questions
• Fill the table properly
• Based on your assessment, which environmental
trends represent a market opportunity and which
ones represent significant threats for
• Apple
• Toyota
• Ethio telecom
• Shoa supermarket
 CHAPTER-3
Market Segmentation, targeting and
positioning
 Shift from…

Mass Marketing ………. Segmented Marketing

 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 Market Approach

• The needs and preferences of the entire, global market are regarded as relatively
homogeneous.
 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.

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
 Why segment the market?
 Diverse needs, wants and buying behaviors differ
 One firm cannot satisfy everyone’s needs
 Different strengths and competitive advantages
 Focus on what they do best
 Better marketing opportunities
 More profitable
Segmentation
 Segmentation Variables

• Geographical segmentation
• Demographic segmentation
• Psychographic segmentation
• Behavioral segmentation
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
 User Rates
 Benefits
 Loyalty Status
 User Status
 Readiness Stage
 Attitude Toward the Product
How Segments are Developed?
Segmentation plans developed through a 3-stage process
• survey
• analysis
• interpretation
Requirements for Effective Segmentation
 • Size, purchasing power, profiles
Measurable
Measurable of segments can be measured.

• Segments must be effectively

Accessible
Accessible reached and served.

• Segments must be large or

profitable enough to serve.
Substantial
Substantial
• Segments must respond
differently to different marketing
Differential
Differential mix elements & actions.

• Must be able to attract and serve

Actionable
Actionable the segments.
Target Marketing
 Steps in the Target Marketing Process

•Evaluating Market Segments

•Selecting Target Market Segments

Evaluating Market Segments
Segment Size and Growth
• 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.
Choosing a Market-Coverage/Target-Marketing
Strategy
Target Marketing Strategies
 Market Coverage Strategies

Company
Company
Marketing Market
Market
Marketing Mix
Mix

A. Undifferentiated Marketing
 Company
Company
Marketing
Marketing Mix
Mix 11 Segment
Segment 11

Company
Company Segment
Segment 22
Marketing
Marketing Mix
Mix 22
Company
Company
Marketing Segment
Segment 33
Marketing Mix
Mix 33

B. Differentiated Marketing
 Segment
Segment 11
Company
Company
Marketing
Marketing Segment
Segment 22
Mix
Mix Segment
Segment 33

C. Concentrated Marketing
 Company
Company
Marketing Individual
Individual
Marketing Customer
Mix
Mix Customer

D. Custom Marketing Strategy or

Micromarketing Strategy
 Positioning for Competitive Advantage
• Product’s Position - the place the product occupies in consumers’
minds relative to competing products; i.e. Volvo positions on
“safety”.

• Marketers must:
• Plan positions to give products the greatest advantage
• Develop marketing mixes to create planned positions
 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.
 Positioning Strategy
Development Process
 Identify the competitors.
 Assess perceptions of them.
 Determine their positions.
 Analyze consumer preferences.
 Make the positioning decision.
Product
Product Service
Service

Areas
Areas for
for Competitive
Competitive
Differentiation
Differentiation

Personnel
Personnel Image
Image
 Identifying Possible Competitive
Advantages
Product Services
Differentiation Differentiation
i.e. Features, i.e. Delivery, Installation,
Performance, Style & Repair Services, Customer
Design, or Attributes Training Services

Image Personnel
Differentiation Differentiation
i.e. Symbols, i.e. Hiring, Training
Atmospheres, Events Better People Than
Competitors Do
 Six Positioning Questions
What position do we have now?
What position do we want to own?
From whom must we win this position?
Do we have the money to do the job?
Do we have the tenacity to stay with it?
Does our creative strategy match it?
Activity - 5
Poor Target Market or Poor Positioning
?
• The following case study outlines a new retail store
concept, which has proved somewhat disappointing
for the two owners.
• Your task in this activity is to evaluate, in your
opinion, whether they adequately identified a
viable target market and also to evaluate the
appropriateness of their positioning.
• Julie and Anna opened their store – “Hot Coffee,
Cool Clothes” – just 12 months ago. The concept
was based on a store that they saw when they
visited New York on holidays in 2010. The idea of
the store is quite simple – they wanted to combine
a gourmet coffee shop and a ladies clothes shop
into the SAME store. They believed that this new
type of store would be highly suited to young
fashion-oriented females, who regularly shop with
friends as a social activity.
 Their Research
• As this was to be a major financial investment for them, they gathered the
following information prior to deciding to open their first store:
•  There were only a few smaller stores in Sydney that had a similar approach to
combining a coffee lounge and a fashionable clothes store
• It appears that around 30% of young females (15-30 years) could be described as
”recreational” shoppers (that is, they enjoy shopping)
• Research with a small sample of their friends (25 in total) indicated that their
target market spend around 4 hours per week clothes shopping and spend from
$100 to $200 per week on clothes – they also buy around 5 gourmet coffees per
week
• There was research to suggest that the atmosphere (that is, the layout, feel, colors,
lighting, music, and so on) of the store could influence the consumer to shop
longer and generally purchase mo
• Chain coffee stores were rapidly increasing their outlet numbers.
• The Outcome
• The first 12 months didn’t go as well as anticipated. While they had a loyal
core of customers, which had grown through word-of-mouth promotion, the
number of purchases was much lower than initially forecasted. This was
because most of their customers appeared to make coffer purchases only
and very few of their customers bought clothes.
• As this situation became apparent, Julie and Anna tried a number of things.
Firstly, they invested $10,000 in radio advertising, however this did not
appear to be effective as sales did not increase sufficiently to cover the cost.
• They then introduced a loyalty program. It gave customers who bought 10
coffees and free coffee AND 10% off clothes purchases. Unfortunately, only
a small percentage of customers regularly used the program.
• The Future
• Julie and Anna are concerned about the future of the store.
Although the store is profitable, they have to split it two ways
and they are both able to earn more in a normal job
(particularly given that they have a major loan to repay).
However, for the time being, they had another four years of
their lease to run. In the back of their minds, they had the idea
of eventually franchising the store. However, they needed the
store to be more successful for this to be a serious option. The
question was how they could make it more successful?
•  
 DISCUSSION QUESTIONS

• Did they gather appropriate (research) on the

market prior to their launch?
• Do you think that have identified a true/valid target
market?
• Do you think that have selected an appropriate
marketing positioning?
• What do you think they should do now (that is,
continue or revise their strategy)? If revise, how?
 Part II
Marketing mix/4p’s
Marketing is the involved process of determining the 4
P’s of the Marketing Mix
• Product
• Price
• Promotion
• Place (Distribution)
The Marketing Mix
• Four marketing activities—product, Price, Place and Promotion—that a firm can
control to meet the needs of customers within its target market

Product

Price
Target
Place Market

Promotion
 Marketing Mix Variables

Goods, services, or ideas that

Product satisfy customer needs

Decisions and actions that establish

Pricing pricing objectives and policies and set
product prices

The ready, convenient, and timely

Place availability of products

Activities that inform customers about

Promotion the organization and its products
 CHAPTER
FOUR
Product management
 WHAT IS A PRODUCT?

In marketing, a product is anything that can be

offered to a market that might satisfy a want or
need.
 Product levels
Augmented
Augmented Product
Product

Installation

Packaging
Brand Features
Name Core
Core After-
Delivery
Benefit
Benefit or
or Sale
& Credit
Quality Service
Service Design
Service
Level

Warranty

Actual
Actual Product
Product Core
Core Product
Product
 Product classification
Based on durability
• Durable
• Non-durable
Based on tangibility
• Goods
• Services
Based on purpose
• Industrial
• Consumer
• Convenience
• Shopping
• Specialty
• Unsought
 Branding decisions
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 those competitors
 What is a Brand?

It’s who you are...and what you stand for.

 Why?

Because...A Strong Brand is the Heart and Soul

of an Organization!
Good Brand Names:
• Suggest something about the product or its benefits
• Are easy to say, recognize and remember
• Are distinctive
• Are extendable
• Translate well into other languages
• Can be registered and legally protected
 Brand Sponsorship

• Manufacturer brands
• Private (store) brands
• Licensed brands
• Co-branding
 Branding
Focus:
Rejection Change Position

Focus:
Nonrecognition Increase Awareness

Focus:
Recognition Continue Education

Focus :
Preference Maintain Availability

Focus : Develop High

Insistence Brand Equity
Generic name:
A brand name that has become a generally
descriptive term for a class of products.

• If this occurs, the original owner loses exclusive

right to the brand name (which is very bad for
marketers).
• Examples: nylon, aspirin, escalator, kerosene, etc.
 Packaging
 Activity of designing and producing
the container or wrapper for a
product.

 Packaging used to just contain and

protect the product.
 Goals of Packaging

Protection against damage, spoilage, tampering

etc.

Assistance in marketing the product

Cost effectiveness (and good for the

environment)
 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.
Labeling examples
Activity - 6
The most valuable brands in the wo
rld
• As you probably know, brand equity is becoming increasingly important factor to successful brands. Brand
equity has the ability for firms to to gain additional market share, at a price premium, with increased customer
loyalty, and greater acceptance of new products. It also provides significantly more access to more retailer
channels and easier ability to enter new markets.
Professional valuation companies that rank firms on the brand equity value consider how much the brand
contributes to additional profitability. Here are the top 10 brands for 2015 as determined by Millward Brown.
•  Apple
• Google
• Microsoft
• IBM
• Visa
• AT&T
• Verizon
• Coca-Cola
• McDonalds
• Marlboro
 Discussion Questions
• Most professional brand valuation firms consider the impact of brand’s
contribution to overall profitability to measure brand equity, rather than
softer emotional metrics, such as likability – do you agree with this
profit-focused approach?
• Have a look at the top 10 brands in the world, what similarities can you
see in regards to their marketing activities?
• Only a few years ago Coca-Cola was the most valuable brand in the
world, a position it had held for a long time. Do you think it is possible
for Coca-Cola to every regain the number one spot?
• How is it possible that the Marlboro (cigarette) brand is still in the top 10
most valuable brands in the world – given it is prohibited from
advertising in many countries? Therefore, to what extent do you think
that advertising spend influences overall brand equity?
 New Product Development

The development of original products, product improvements,

product modifications, and new brands through the firm’s own
R&D efforts.
 Major Stages in New-Product
Development
Marketing Business
Strategy Analysis

Concept
Product
Development
Development
and Testing

Idea Test
Screening Marketing

Idea Commercializatio
Generation n
Stage 1: Idea Generation
• Internal idea sources:
• R&D
• Sales force

• External idea sources:

• Customers, competitors, distributors, suppliers
Sources of New-Product Ideas
 Employees  Marketing research firms
 Customers  Other manufacturers
 Resellers  International
 Suppliers/ vendors
 Competitors
 Advertising agencies
Stage 2: Idea Screening
• Product development costs increase substantially in later stages.

• Ideas are evaluated against criteria; most are eliminated.

Stage 3:

Concept Development and Testing

• Product concepts provide detailed versions of new product ideas.

• Concept tests ask target consumers to evaluate product concepts.

Stage 4:

Marketing Strategy Development

• Strategy statements describe:
– The target market, product positioning, and sales, share, and profit goals for the
first few years.

– Product price, distribution, and marketing budget for the first year.

– Long-run sales and profit goals and the marketing mix strategy.
Stage 5: Business Analysis
– Sales, cost, and profit projections

Stage 6: Product Development

– Prototype development and testing
Stage 7: Test Marketing
Standard test markets

Controlled test markets

Simulated test markets

 Standard
Standard
Test Controlled
Controlled
Test Market
Market Test
Test Market
Market
Full
Full marketing
marketingcampaign
campaign
in AAfew
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storesthat
thathave
have
inaasmall
smallnumber
numberof of agreed
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representative cities.
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Simulated
Simulated
Test
Test Market
Market
Test
Testininaasimulated
simulated
shopping
shoppingenvironment
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to
toaasample
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• Stage 8: commercialization
• Mass production
• Mass distribution
• Stage 9: post introduction
evaluation
 Product Life-Cycle
(PLC)
Sales and
Profits ($)

Sales

Profits

Time
Product Introduction Growth Maturity Decline
Development
Stage

Sales and Profits Over

the Product’s Life
From
Inception to Demise
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 Strategies
 PLC Stages
 Begins when the company
develops a new-product idea

Product development  Sales are zero

Introduction  Investment costs are high
Growth  Profits are negative
Maturity
Decline
 PLC Stages
 Low sales
Product development  High cost per customer
acquired
 Introduction
Growth  Negative profits
Maturity  Innovators are targeted
Decline  Little competition
 PLC Stages
 Rapidly rising sales
Product development
 Average cost per customer
Introduction
 Rising profits
Growth  Early adopters are targeted
Maturity
 Growing competition
Decline
 PLC Stages
 Sales peak
Product development  Low cost per customer
Introduction  High profits
Growth
 Middle majority are targeted
Maturity  Competition begins to decline
Decline
 PLC Stages
Declining sales
Product development Low cost per customer
Introduction
Growth
Declining profits
Maturity Laggards are targeted
Decline Declining competition
Activity - 7
 New Coke Case Study
• The New Coke story in a nutshell
• In 1985, Coca-Cola completely withdrew their flagship
product from the market and replaced it with a “new”
Coke in the US and some international markets. This
product is often referred to as “New Coke”, but the
intention of the packaging was to indicate that Coke was
new.
• The product was developed and launched after years of
R&D and taste testing and focus groups with
consumers. The new flavor outperformed both
traditional Coke and Pepsi in market research taste tests.
• However, within a few days of traditional Coke being
withdrawn and replaced by “new” Coke, there was a
backlash from consumers and the media and their brand
image was damaged. Many consumers saw Coke as a
cultural icon and were angry that it was no longer
available.
• Primarily due to media and consumer lobby group
pressure, within 80 days Coke re- introduced “Coke
Classic” and offered two Coke variations along with
“new” Coke. Today they no longer offer “new” Coke in
the US market.
After the “coal wars”
 Discussion Questions

• It’s 1985 again at Coca-Cola, what is the best marketing

strategy for Coke to pursue to improve their position
and increase the overall profitability of the Coke brand?
(Note: Your suggested solution may or may not include
a “new” Coke product solution.)
• Outline why your proposed competitive strategy will be
successful in this aggressive period of the Cola Wars.
• In what ways, do you think, that Pepsi may respond to
your proposed strategy?