ESSENTIALS OF MARKETING

CHAPTER 5
 2. INTRODUCTION

• The goal of marketing is to attract new customers, as well as, retain current
customers.
• Marketing is the process by which companies create value for customers
and build strong customer relationships in order to capture value from
customers in return.
• This marketing process is made up of five steps.
 2. INTRODUCTION

• Understand the marketplace and customer needs and wants

1

• Design a customer-driven marketing strategy

2

• Construct and integrated marketing program that derives superior products

3

• Build profitable relationships and create customer delights

4

• Capture value from customers to create profits and customer equity

5
 2. INTRODUCTION

• Customer Relationship Management (CRM) is an organized method that a

firm uses to build better connections with clients, so that stronger company-
client relationships are developed.
• Customer Gap is the difference between customer expectations and
perceptions.
• Customer expectations consist of what a customer believes should or will
happen, while customer perceptions are subjective evaluations of actual service
experiences.
• The aim of any organization is to close the gap between what a customer
expects and what a customer perceives.
 NEEDS AND WANTS

• While human needs are states of felt deprivation that can be

physical, social or individual, wants are the form that human
needs take, they can be shaped by culture or personality.
• For example, someone might be hungry (need for food), to
satisfy the hunger someone may want to eat a salad, a pizza or a
hamburger.

• market offerings: are combinations of products, services,

information, or experiences offered to a market
 NEEDS AND WANTS

• In a marketplace, for people to satisfy their wants and needs,

an exchange should take place, which is a transaction in
which two or more organizations or people give and receive
something of value.

• The concept of exchange leads to the concept of market,

which is the set of actual and potential buyers of a product.
 THE 4 PS AND THE INTEGRATED
MARKETING STRATEGY
• The integrated marketing strategy is a strategy that blends together the four Ps of
marketing to ensure their compatibility with one another, as well as with the company’s
non-marketing activities. The four Ps are:
 Product is anything that is marketed to satisfy consumers’ needs and wants, it can be a
good, a service or an idea.
 Price is the sum of money paid for a product or service.
 Place or distribution is concerned with getting products from producers to consumers.

 Promotion is concerned with the most effective techniques for communicating

information about products.
• The combination of product, price, promotion and place strategies used is called
marketing mix.
 3. TARGET MARKETING AND MARKET
SEGMENTATION
• People might have similar needs but not necessarily similar wants. This led marketers to
think in terms of target markets.
• A target market is a group of people who have similar wants and needs and can be
expected to show interest in the same products.
• On the other hand, target marketing requires market segmentation, which is the process
of dividing a market into categories of customer types or segments.
• To identify the consumer segments, the researchers try to detect the different influences
on consumer behavior.
• Consumer behavior can be defined as the study of the processes involved when
individuals or groups select, purchase, use or dispose of products, goods or services, to
satisfy needs and desires.
 3. TARGET MARKETING AND MARKET
SEGMENTATION
• Here are some of the most important variables used to identify the market segments:
 Geographic Variables: geographic units from countries to neighborhood.
 Demographic Variables: characteristics of populations, like age, income, gender,
religion and so on.
 Geo-Demographic Variables: combination of geographic and demographic traits.
 Psychographic Variables: consumer characteristics, such as lifestyles, opinions,
interests, and attitudes.
 Behavioral Variables: behavioral patterns, like heavy users or situation buyers.
 4. PRODUCT

• Products include goods and services. Services, like the ones offered by a law firm, bank,
hotel, airline, are mainly intangible and do not result in the ownership of anything. On
the contrary, goods are tangible products, like soap, pens or tables.
• Goods are tangible, standardized, nonperishable, and their production is separate from
their consumption.
• While services are intangible, heterogeneous, perishable, and their production and
consumption are simultaneous.
• One of the various companies’ goals is product differentiation, which is the creation a
product feature or product image that differs enough from existing products to attract
customers.
GOODS AND SERVICES CLASSIFICATIONS

• Products can be classified under two large groups: consumer products and industrial
products.
 Consumer products which are products purchased by consumers for personal use are
classified by how consumers go about buying them.
• Convenience products are bought frequently, immediately and with a minimum
comparison and buying effort, like newspapers, milk, or fast food.
• Shopping products are compared carefully on suitability, quality, price, and style like
furniture, cars or television set.
• Specialty products have unique characteristics or brand identification for which buyers are
willing to make a special purchase effort, like medical services, designer clothes or
jewelry.
• Unsought products are products that the consumer does not normally think of buying, like
life insurance or blood donations.
GOODS AND SERVICES CLASSIFICATIONS

 Industrial products which are purchased by companies to produce other products.

• Materials and parts include raw materials and manufactured materials and parts
usually sold directly to industrial users, like loads of tea processed into tea bags.
• Capital items are industrial products that aid in the buyer’s production or operations,
like buildings or equipment.
• Supplies and services include operating supplies, repair and maintenance items, and
business services, like building maintenance or legal services.
 PRODUCT DECISIONS

• Product decisions focuses on:

 Product attributes
 Branding
 Packaging
 Labeling
 PRODUCT DECISIONS

Product • Are the benefits of the product or service, like quality features,
attributes style and design.

• Branding is the process of creating a meaning for a product that

Branding makes it different. Brand is the name, term, sign or design that
identifies the product of service.

• It involves designing and producing the container or wrapper for

Packaging a product.

• Labels identify the product or brand, describe attributes and

Labeling provide promotion.
 PRODUCT LIFE CYCLE

• A product life cycle (PLC) is a series of stages in a product’s commercial life.

There are five different stages:
 Product development: Sales are zero and investment costs mount.

 Introduction: Slow sales growth and profits are nonexistent.

 Growth: Rapid market acceptance and increasing profits.

 Maturity: Slowdown in sales growth and profits level off or decline.

 Decline: Sales fall off and profits drop.

PRODUCT LIFE CYCLE
 5. PRICE

• Price is what consumers give up in order to gain the benefits of having or using a
product or service. There are two types of costs: fixed and variable.
• Fixed costs are the costs that incurred regardless of the quantity of product produced
and sold, like rent or executive salaries.
• Variable costs are the costs that vary with the level of production, like packaging and
raw materials.
• The total costs are the sum of the fixed and variable costs for any given level of
production.
NEW-PRODUCT PRICING STRATEGIES

• Every business has to review the price of its product at each stage of the product life
cycle. The most challenging stage is the introductory stage. At this phase, two strategies
can be used:
 Market-skimming pricing is setting an initially high price to cover new product costs
and generate a profit.
 Market-penetration pricing sets a low initial price in order to enter the market quickly
to attract a large number of buyers and to gain a large market share.
 PRICING EXISTING STRATEGIES

• Three pricing options can be used in case of existing products:

 Pricing above current market prices for similar products to benefit out of the common
belief that higher price means higher quality.
 Pricing below market prices while offering a product of comparable quality to higher-
priced competitors.
 Pricing at or near market prices.
PRODUCT MIX PRICING STRATEGIES
• Managers can use several strategies when pricing products that are part of a product mix.

 Product line pricing takes into account the cost differences between products in the entire
product line, as for pricing a collection of different sizes of Samsonite bags.
 Optional-product pricing takes into account optional or accessory products along with the
main product, like a GPS navigation system in a new car.
 Captive-product pricing involves products that must be used along with the main product,
like printer cartridges.
 By-product pricing refers to products with little or no value produced as a result of the main
product. For example pieces of wood resulting from a carpenter’s work can be sold to
customers who have fireplaces.
PRODUCT MIX PRICING STRATEGIES
 Product bundle pricing combines several products at reduced prices, for example burger,
fries and soft drink can be all offered at a combo price.
 6. PLACE (DISTRIBUTION)

• Few producers sell their products directly to the final users. The majority uses
intermediaries as a link between them and the customer.
• Companies try to build marketing distribution channels, which are a set of
interdependent organizations that help make a product or a service available for user or
consumption.
6. PLACE (DISTRIBUTION)
 WHOLESALING AND RETAILING

• A retailer is an intermediary who sells products directly to consumers, while a

wholesaler is an intermediary who sells products to other businesses for resale to final
consumers.
• Retailers can self-service, limited service, or full service. It depends on the different
types of customers or products. Retailers include:
 Specialty stores which carry a narrow product line whit a deep assortment within that
line.
 Supermarkets which are large, low-cost, and self-service stores that carry a variety of
products.
 Convenience stores which are small stores located in a residential area and are usually
open long hours seven days a week.
 7. PROMOTION

• The promotion mix or marketing communication mix is the combination of

advertising, public relations, personal selling, sales promotion, and direct-marketing
tools that can be used by a firm to communicate customer value and build customer
relationships.
 Advertising is any paid form of non-personal presentation and promotion of ideas,
goods or services, it can be broadcast, print, internet or outdoor.
 Public relations involve building good relations with the company’s different publics.
This can be performed through press releases or events.
 Personal selling is a promotional tool in which a salesperson communicates one-on-one
with potential customers.
 Sales promotion, it can be in the form of discounts or coupons.
 Direct Marketing, this is done through direct mail, telephone or e-mail.