Chapters 10 & 11

Marketing: Creating, Communicating, and Delivering

Value for Customers

© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/IrwinIntroduction to Business

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2. For Monday, please read the article “ABC: An Introduction to ERP”

3. Guest Speaker on Monday – Room 1011

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Marketing Unit, Slide No. 3

Construct An Integrated Marketing Program

Step 3 in the Marketing Process

Marketing Unit, Slide No. 4

The Marketing Mix

• After developing a customer-driven marketing strategy outlining the customers the company will serve and how it will create value for them, the marketer must develop an integrated marketing program that will deliver the intended value to target customers.

• This program consists of the firm’s marketing mix, also known as the 4Ps of marketing.

• As shown on the left, the marketing mix is the combination of a product’s features and qualities, its price, the way it is promoted and sold, and the place at which it is sold.

Marketing Unit, Slide No. 5

Marketing Message and Product Branding

• When a product’s marketing mix is well-designed and properly implemented, it sends a strong marketing message to consumers about how and why the product will satisfy their needs better than competitors’ products.

• One means of sending a message to consumers product branding, the process of using a unique name, design, symbol, or other elements of the marketing mix to identify the maker of a product and distinguish the product from its competitors.

…continued on next slide

Marketing Unit, Slide No. 6

Marketing Message and Product Branding (continued)

• Brand name:- the specific name, sign, or symbol a company uses to distinguish and

legally protect the identity of its products.

• Brand loyalty: - the tendency of consumers to consistently purchase a particular product

over time because they believe it can best satisfy their needs.

• Product positioning:- the process of customizing or tailoring a product relative to its competitors

for a specific market segment. As mentioned earlier, the idea is to create a superior image or identity for the product in the minds of the consumers in the particular market segment.

Next, we explore the elements of the marketing mix in greater detail and how these elements are blended to send a strong marketing message to consumers.

Marketing Unit, Slide No. 7

Product

The Marketing Mix

Marketing Unit, Slide No. 8

Classifying Products

• The term “product” includes anything that can be offered to a market for purchase, use, or consumption. Not limited to tangible goods. Includes services, events, places, people, organizations, ideas, or any combinations thereof.

• Can be classified as either consumer or business/industrial products.

• Consumer Products: - Purchased for personal or household use. Fall into the three categories listed

below, based on the consumer’s buying behavior.• Convenience products: Low-priced items bought frequently by consumers; little shopping

effort involved. Examples: milk, bread, tooth paste.

• Shopping products: Higher-priced items purchased after consumers have compared competitive products and “shopped around.” Price, product features, quality, style, and service can all influence purchase decision. Includes appliances, clothing, and furniture.

• Specialty products: Higher-priced that consumers are will to go to more effort to buy. Will not accept substitutes. Examples: designer clothes, high-end jewelry, and art.

…continued on next slide

Marketing Unit, Slide No. 9

Classifying Products (continued)

• Business/Industrial Products: - Products used directly or indirectly in the operation or

manufacturing processes of businesses or for resale.

- Several categories:

• Raw materials

• Major equipment used in production

• Accessory equipment, e.g., computers, hand tools, etc.

• Component parts

• Processed materials

• Industrial services

• Supplies

• Goods for resale

Marketing Unit, Slide No. 10

Individual Product Decisions

Marketing Unit, Slide No. 11

Product & Service AttributesCreating Real vs. Perceived Differences

• Real differences:- Quality/reliability

- Innovation

- Customer service

- Style and design

• Perceived differences- Appealing to psychological

needs of consumers

- Value to consumer

Typically, companies try to create both real and perceived differences between their products and their competitors’ products.

Marketing Unit, Slide No. 12

Branding

As discussed earlier, branding is the process of using a unique name, design, symbol, or other elements of the marketing mix to identify the maker of a product and distinguish the product from its competitors.

Marketing Unit, Slide No. 13

Packaging

• Packaging is a marketing mix choice that concerns the “look” or physical appearance of a product when it is presented and sold to consumers.

• Factors such as the shape, color, and look of the packaging, and the way the product is presented in a store display affect consumers’ perceptions of a product’s quality, value, etc.

• Good packaging:- Helps market the product;- Protects the product; - Ensures product safety, e.g., tamper-proof

or child-proof packaging; and - Addresses environmental concerns.

Marketing Unit, Slide No. 14

Marketing in Action

Innovative Packaging

Dutch Boy’s packaging innovation offers paint in

plastic containers with twist-off tops. The paint container is

easy to carry, doesn’t need a screwdriver to pry open,

doesn’t dribble when poured, and doesn’t take a hammer to

bang the lid shut.

Marketing Unit, Slide No. 15

Labeling

• Printed information appearing on or attached to the package.

• Performs several functions:

- Identifies the product or brand.

- Provides important information, such as when and where the product was made, the contents, nutritional value, expiration date, how to use it, warnings, and what to do if a problem occurs.

- Helps promotes the sale of the product.

Marketing Unit, Slide No. 16

Product Support Services

• In addition to the core features and benefits of the product, firms must offer additional services and benefits. These so-called product support services create additional value for the consumer and increase customer satisfaction.

• Can include such as items as:- Delivery

- Disposal of original product (e.g., buying your old car)

- Installation

- Credit/financing

- Warranty/after-sale service and repair

- Product/technical support

• Sometimes product support services can be a source of supplemental revenue for the company.

Marketing Unit, Slide No. 17

Price

The Marketing Mix

Marketing Unit, Slide No. 18

Price

• Pricing is a complex issue in the marketing mix. For example, if a company chooses to differentiate itself based on quality, innovation, and customer service, marketing costs increase. The company will need to charge a higher price under these circumstances (a “more for more” value proposition), but how much higher?

• It is marketing’s job to find out how much consumers are willing to pay for a particular product. The target price is the price a typical customer will be willing to pay for a product with a particular set of qualities and features.

• How much consumers are willing to pay—the perceived value they place on a product and how variations in price affect their demand—are one set of factors companies use to set their prices.

• The company’s costs and its pricing objectives are two other important factors, as are competitors’ prices.

Marketing Unit, Slide No. 19

Pricing Objectives

• There are six alternative pricing objectives. The first three are considered profit-oriented, next two are sales-oriented, and the final one is based on the status quo:

- Maximize profits: setting prices so that total revenue is as large as possible relative to total costs.

- Satisfactory profits: a reasonable level of profits; reasonable or satisfactory in the eyes of the stockholders.

- Target return on investment: the most common profit-oriented pricing objective. Here the company tries to determine the price at which the firm will make the target profit—usually stated in terms of return on total assets—it is seeking.

- Maximize market share: set prices so as to boost market share.

- Maximize sales: disregard profits and focus exclusively on increasing sales and generating cash.

- Maintain the status quo: seek to maintain existing price levels or to meet the competition’s prices.

Marketing Unit, Slide No. 20

Pricing Strategies

Pricing strategies can vary as the firm faces different situations:

•New Product Pricing Strategies: Setting prices when a new product is introduced is challenge. Typically companies choose between two broad strategies:

- Market-skimming pricing: Charging the highest possible price buyers will pay. For situation where companies need to generate revenue to help offset high R&D costs and buyers are insensitive to high prices (a “must-have” product. The original iPhone)

- Market-penetration pricing: Charging a low price initially in order to enter a market and quickly build market share. Intended to create a barrier to entry to competitors.iTunes??

…continued on next slide

Marketing Unit, Slide No. 21

Pricing Strategies (continued)

• Price-Adjustment Strategies: Companies usually adjust their basic prices to account for various customer differences and changing situations. For example:

- Psychological Pricing: Encourages consumers to make purchases based on emotional responses to price, not strictly economics. For example:

• Prestige Pricing: Higher prices often connote higher quality, thereby increasing the desirability of a product.

• Odd/Even Pricing: Based on the belief that consumers will buy more of a product priced at $9.99 than $10, because it seems like a bargain at the odd price.

…continued on next slide

Marketing Unit, Slide No. 22

Pricing Strategies (continued)

• Price-Adjustment Strategies (continued):- Discount and Allowance Pricing: Most

companies adjust their prices to reward customers for certain responses. For example:• Quantity discounts for buyers who

purchase large quantities.• Seasonal discount to buyers who purchase

out-of-season to even out production capacity.

- Promotional Pricing: Goal is to improve sales in the short-term by advertising price reductions on selected products. However, some companies, most notably Wal-Mart, have shunned promotional price discounts, in favor of everyday low pricing, intended to generate customer loyalty.

- Pricing/Branding story