Marketing Chapter Summaries

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Chapter 3:Understanding Consumer Behavior

To understand consumer behavior, we need to answer the following corequestions:

- Who is important in the buying decision?- What are their choice criteria?- How do they buy?- Where do they buy?- When do they buy?

Who buys?5 roles in decision making process:

1. Initiator2. Influencer

3. Decider4. Buyer5. User

One person may perform multiple roles.The role played by different household members vary with the type of productunder consideration and the stage of the buying process.

How they buy?Consumer decision-making process:

1. Need recognition/problem awareness: 2 issues govern the degree towhich the buyer intends to resolve the problem:

o the magnitude of gap between the desired and present situationo the relative importance of the problem

2. Info search- The search can be internal (memory)/external (Personal sources

such as friends, family, and Commercial sources)- Objective is to build up the array of brands that may provide

solution to the problem3. Evaluation of alternatives

- Consumer‟s level of involvement is a key determinant of the extentto which they evaluate brand

-4 factors that affect involvement:

o Self-imageo Perceived risko Social factorso Hedonistic influences (pleasure)

- High-involvement situation suggests that marketing managers needto provide a good deal of information about the positiveconsequences of buying

- Low-involvement situations: gaining top-of-mind awareness,providing positive reinforcement through advertising, and seeking togain trial are more important than providing masses of info about

consequences of buying the brand.4. Purchase



5. Post-purchase evaluation of decisionSome customers may experience some post-purchase concerns,known as Cognitive Dissonance

What are the choice criteria?

1. Technical criteria - relates to the performance of the products/services2. Economic criteria - cost aspects of purchase3. Social criteria - impact that the purchase makes on the person‟s

perceived relationship with other people4. Personal criteria - emotions are important element of decision-making

Influences on consumer behaviorComprises of 3 elements:

1. The buying situation: 3 kinds of situationsa. Extended problem solving – high degree of info search + close

examination of alternatives

b. Limited problem solving – the consumers have some experience info search through memory

c. Habitual problem solving – consumers repeat-buy products little/no evaluation

2. Personal influencesa. Info processing: 2 key aspects are

i. Perception = means by which we select, organize andinterpret sensory stimulation into a meaningful picture ofthe world. 3 processes used to sort the masses of stimulithat could be perceived into a manageable amount areselective attention, selective distortion and selectiveretention.

ii. Learningb. Motivation – can be grouped into 5 categories:

i. Physiological – fundamental of survivalii. Safetyiii. Belongingness and loveiv. Esteemv. Self-actualisation

c. Beliefs and attitudes – attitude is an overall favorable orunfavorable of a product. The consequence of a set of beliefs

may be a positive or negative attitude toward the product.Changing attitude is important in convincing consumers to try abrand.

d. Personalitye. Lifestyle

i. Mainstreamers – habitual purchase behavior, brand loyalii. Aspirer – buy fads, are impulse shoppersiii. Succeedersiv. Transitionals – impulsive behavior, unique productv. Reformers – have eclectic taste, authenticity and ecology

concerned

vi. Struggling poor – price-based but also look for instantgratification



vii. Resigned poor – price-based but also look for instantreassurance of branded goods

f. Life cycle3. Social influences

a. Culture – there has been a strong trend of increased

internationalization of cultures (e.g. sushi and Korean barbecueavailable around the world now)

b. Social class – in UK social class based on occupationc. Reference groups – a group of people that influences an

individual‟s attitude or behavior (opinion leader can exertenormous power over purchase decision)

Influences on organizational buying behavior3 influencing factors are:

1. The buy class – org purchases may be classified asa. New task – little/no experience, thus a lot of info is required

b. Straight buy – buy previously purchased itemsc. Modified rebuy – some change has occurred to require

alteration to the normal purchase procedureThe buy classes affect organizational buying in the following ways:- Membership of the Decision-Making Unit (DMU) changes- Decision-making process can be longer as the buy class changes

from a straight to a modified rebuy and to a new task- DMU members are more likely to be receptive to new task and

modified rebuy than straight buy2. The product type

a. Materialsb. Componentsc. Plant and equipmentd. Products and services for MRO (maintenance, repair and

operation)3. The importance of purchase – important when it involves large sum of

money, high cost of making wrong decision, and high uncertaintyabout the outcome of alternative offerings

Key features of organizational purchasing practice- JIT purchasing

-Online purchasing – creates vertical electronic marketplaces(industry specific) and horizontal electronic marketplace (crossindustry boundaries)

- Relationship marketing – create, develop and enhance relationshipswith customers and other stakeholders

- Reverse marketing – the buyer attempts to persuade the supplier toprovide exactly what the org wants



Chapter 5Market Segmentation, Targeting and Positioning

Market segmentation is the identification of individuals or organizations withsimilar characteristics that have significant implications for the determination

of market strategy.

The benefits of market segmentation: Better matching of customer needs; Enhanced profitability; Enhanced opportunities for growth; Improved customer retention; More effective targeting of communications;

Opportunities for segment dominance.

Consumer segmentation methods:

Variable Examples

Behavioural

Benefits sought

Purchase occasion

Purchase behaviour

Usage

Perceptions and beliefs

Convenience, status, performanceSelf-buy, giftSolus buying, brand switching,innovatorsHeavy, light or non-users of selectedproduct categoryFavourable, unfavourable

Psychographic

Lifestyle Personality

Trendsetters, conservatives,sophisticatesExtroverts, introverts, aggressive,submissive

Profile

Age

Gender

Life cycle

Social class

Terminal education age

Income Geographic

Geodemographic

Under 12, 12-18, 19-25, 26-35, 36-49,50-64, 65Female, maleYoung single, young couples, youngparents, middle-aged empty-nesters,retired

Upper middle, middle, skilled working,unwaged16, 18, 21 yearsIncome breakdown according to studyobjectives and income levels per countryNorth vs south, urban vs rural, countryUpwardly mobile young families living inlarger owner-occupied houses, olderpeople living in small houses, Europeanregions based on language, income, ageprofile and location

Segmenting organizational markets:



Organizational markets could be segmented by the following criteria: Organizational size; Industry; Geographic location; Choice criteria (key criteria used by organizations when they are

evaluating suppliers‟ offerings); Purchasing organization (decentralized versus centralized purchasing).

Criteria for successful segmentation:1) Effective;2) Measurable;3) Accessible (the company must be able to formulate effective marketing

programmes for the segments that it identifies);4) Actionable (the company must have resources to exploit the

opportunities identified through the segmentation scheme);5) Profitable.

Target marketing:Once the market segments have been identified, the next important activity isthe selection of target markets. Target marketing refers to the choice ofspecific segments to serve, and is a key element in market strategy. Anorganization need to evaluate the segments and decide which ones to serveusing the five criteria outlined above.

Positioning is the act of designing the company‟s offering so that it occupiesa meaningful and distinct position in the target customer‟s mind.

Developing a positioning strategy:Deciding what position to try to occupy in the market requires consideration ofthree variables, namely the customers, the competitors and the companyitself.

Once the overall positioning is agreed, the next step is to develop apositioning statement. A positioning statement is a memorable, image-enhancing, written summation of the product‟s desired stature. The statementcould be evaluated using the criteria shown in the figure below.



Repositioning involves changing the target market, the differential advantageor both. There are four repositioning strategies:

image repositioning and/or product repositioning;

intangible repositioning (e.g. retaining the product but changing themarket segment) or tangible repositioning (e.g. moving up- ordownmarket by introducing a new range of products to meet the needsof new customers).

CHAPTER 6:

BRANDS

PRODUCTS VS BRANDS Products can be anything that has a capacity to satisfy customer

needs. Distinguish between products (being tangible, e.g. car) andservices (being intangible, e.g. medical examination).

Branding is the process by which companies distinguish their productofferings from the competition.

o Building and maintaining a brand is one of the critical tasks ofthe marketing manager.

o The power of brands to affect perceptions is particularlynoticeable in blind product testing.

o Understanding core benefits provided by products is importantterm to identifying potential source if competition.

BRANDING Developing a brand is difficult , expensive and takes time The benefits of brands, strong brands deliver:

o Company value: The financial value of companies can begreatly enhanced by the possession of strong brands.

o Consumer preference and loyalty: can have positive effects onconsumer perceptions and preferences.

o Barrier to competition: the impact of the strong, positive

perception held by customer about top brands.

SuccessfulPositionin

g

Clarity

Consistency

Competetiveness

Creditibilit y



o High profits: strong, market-leading brands are rarely thecheapest; because brand equity means that consumers receiveadded value over their less powerful rivals.

o Base for brand extensions: A strong brand provides a foundationfor leveraging positive perceptions and goodwill from the core

brand to brand extensions.

BUILDING BRANDS Involves making decisions about: brand name and how the brand is

developed and positioned.

Naming brands: Good brands give industrial manufacturers the opportunity to compete

on bases other than price. Brand name should be memorable and easy to pronounce. Brand name may suggest product benefits.

Be distinctive. Market research is used to test associations, memorability,pronunciation and preferences.

Ensure that brand name does not infringe an existing brand name. 3 brand name strategies:

Family brand nameo Used for all productso The goodwill attached to the family brand name benefits

all brands.o Use it in advertising helps the promotion of all.o Risk: If one of brands receives unfavourable publicity or

unsuccessful the reputation of the whole range of brandscan be tarnished.

Individual brand nameo Doesn‟t use its company name on its brands. o This may be necessary when it is believed that each

brand requires a separate, unrelated identify. Combination

o Family and individual brand names are combined.o Capitalize on the reputation of the company while

allowing the individual brands... to be distinguished andidentified.

o One criterion for deciding on a good brand name is that itevokes positive associations.

Developing brands: Brand building involves a deep understanding of both the functional

(e.g. case of use) and emotional (e.g. confidence) values thatcustomers use when choosing between brands

Successful brand becomes established, it tends to endure for a verylong time.

Management must be prepared to provide a consistently high level ofbrand investment to establish and maintain the position of a brand in

the marketplace. Brand building is expensive.



Analytical framework can be used to dissect the current position of abrand in the marketplace and to form basis of a new brand positioningstrategy. The brand‟ position is built on six elements:

o Brand domain Brand‟s target market o Brand heritage the background and its culture

o Brand values core values and characteristicso Brand assets what makes the brand distinctiveo Brand personality the character described in terms of other

identities.o Brand reflection how the brand relates to self identity.

Brand domain corresponds to the choice the target market; and theother elements provide avenues for creating a clear differentialadvantage.

BRANDS MANAGEMENT ISSUESManufacturer brands versus own-label brands

Manufacturer brands are created by producers and bear their ownchosen brand names.

Own-label brands are created and owned by distributors. E.g. : the power of low-price supermarket own-label brands has

focused many producers of manufacturer brands on introducing so-called fighter brands

Brand extension and stretching tangible value is added to a company by the goodwill associated with

respected brand name. The higher financial value is called BRAND EQUITY. Brand names

with high brand equity are candidates to be used on other new brands. A brand extension is the use of an established brand name on a new

brand within the same broad market. E.g. Unilever expanded Dovesoap brand into deodorants, shower gel and bodywash. McCafe hasbeen a successful extension of the McDonald's.

o Important marketing tool.o 2 key advantages: it reduces risk in releasing new products and

less costly than alternative launch strategies.o Distributors and consumers may perceive less risk if the new

brands comes with an established brand name.o The task of building awareness of the new brand is eased.o Cannibalization, where new brand gains sales at the expense of

the established brand.o If the new brand name is extended too far there can be a loss of

credibility and this is something that management needs toguard against.

A brand stretching is when an established brand name is used forbrands in unrelated markets. e.g.: Celebrities extend their brand into avariety of product categories.

Pan-european and global branding A pan-European brand is one that has successfully penetrated the

European market. Global brand is one that has achieved global penetration levels.



Pan-European and Global brands have advantages:o They can attain tremendous economies of scale.o Standardized.o The uniform image of many global brands is reassuring to

consumers

o Ability to offer a worldwide service. Difficult to implement a standardized branding strategy across

countries. The questions is which parts of the brand can bestandardized and which must be varied across countries.

Co-branding Where to brands are combined Product-based co-branding or communications-based co-branding Product-based co-branding, involves the linking of 2 or more existing

brands from different companies to form a product.o Two variants:

Parallel co-branding , 2 independent brands join forces toform a combined brand.

Ingredient-co-branding , where one supplier explicitlychooses to position its brand as an ingredient of aproduct.

o Advantages about alliance Can capture multiple resources of brand equity and add

value and provide a point of differentiation . Can position a product for a particular target market Can reduce the cost of product introduction sinces two

well-known brands are combined, accelerating

awareness, acceptance and adoption. Communications -based co-branding, involves the linking of 2 or more

existing brands from different companies or business units for thepurposes of joint communications.

o Very popular in sponsorship deals. (Shell‟s brand nameappearing on Ferrari cars).

MANAGING BRAND AND PRODUCT PORTFOLIOS The process of managing groups of brands and product lines is called

PORTFOLIO PLANNING. Management needs to decide which brands to invest in, hold or

withdraw support from. The Boston consulting Group‟s (BCG‟s) growth-share matrix is a

technique borrowed from strategic management in helping companiesto make product mix and/or product line decisions. The axes of whichare based on market growth rate and relative market share



o Stars

The market leaders in High-growth are known as stars. Resources should be invested to maintain/increase the

leadership position.o Problem Children or Question marks.

Cash drains because they have low profitability andrequire investment to enable them.

o Cash cows High market share in low-growth markets means that

cash cows should be defended. Can be allocated as necessary to the different products

line to ensure that a balanced portfolio is maintained.o Dogs

Weak products that compete in low-growth markets.

MANAGING BRAND AND PRODUCT LINES OVER TIME: THE PRODUCT

LIFE CYCLE Product life cycle is a useful tool for conceptualizing the changes that

may take places during the time. It has 4 stages:o Introduction

When product is first introduced on to the market its salesgrowth is typically low and losses are incurred as a resultof heavy development and initial promotional cost.

Companies will be monitoring the speed of productadoption.

The strategy marketing objective is “to build sales by expanding the market for the product ”.

The brand objectives will be to create product awareness so that customers will become familiar with benefits.

Promotion will support the brand objectives. Typically, price will be high.

o Growth Period of faster sales and profits growth The strategy marketing objective is “to build sales and

market share ”. The strategic focus will be to penetrate the market by

building brand preference. Product will be redesigned tocreate differentiation

Promotion will be stress the functional and/orpsychological benefits.



Price will fall.o Maturity

Sales will eventually peak and stabilize as saturationoccurs, hastening competitive shakeout.

The survivors now battle for market share by introducing

products improvements, using advertising and salespromotional offers, dealer discounting and price cuttingbut the result is strain on profit margins.

The need for effective brand building is felt most acutelyduring maturity as brand leaders are in the strongerposition.

o Decline When new technology or changes in consumer tastes

work to reduce demand for the product, sales and profitsfall.

Promotional and product development budget may be

slashed.

Observations: Not all products follow the classic S-Shaped curve, theduration of the PLC is unpredictable, It is the result of marketingactivities, not the cause.

NEW PRODUCT DEVELOPMENT Introduction of new products to the marketplace is the life blood of

corporate success. Companies have to work on new product development programmes

and nurture an innovative climate. 4 broad categories of new product:

o Product replacement: new products are launched, and includerevisions and improvements to existing products, repositioningand cost reductions.

o Additions to existing products: new products that add to acompany's existing product lines.

o New product lines: new products launches and represent amove into a new market.

o New-to-the-world products: new product launches, and createentirely new markets. Carry the highest risk.

MANAGING THE NEW PRODUCT DEVELOPMENT PROCESS

New product development is expensive, risky and time consuming.A seven-step new product development process consists in:

Idea generationo Internal source: Some companies can be use brainstorming

technique.o External soured: Examining competitors‟ products, distributors

can also be a source of new ideas directly, keeping in closecontact with customers.

Screeningo The ideas need to be screened in order to evaluate their

commercial value.o Other companies may use: more flexible open discussion

among members of the new product development committee.



Concept testingo Allows the views of customers to enter the new product

development process at an early stage. Business analysis

o Estimates of sales, costs and profits will be made, based on the

results of the concept test, as well as on considerablemanagerial judgement; this is known as the business analysis.

Product developmento Usually necessary to integrate the skills of designers, engineers,

production, finance and marketing specialists.o Two reasons why product development is being accelerated:

Consumer electronic and cars change so fast. Cutting time to market can lead to competitive advantage.

o Marketing testing: Takes measurement of customer acceptance.Exist 2 methods:

Simulated market: set up a realistic market situation in

which sample of customers choose to buy goods from arange provided by the organizing company.

Test Marketing: when the new product is launched in one,or a few, geographical areas chosen to be representativeof its intended market. It's an acid test, more realistic,give more accurate sales penetration and repeatpurchasing estimates. Potential problems: test towns andareas may not be representative of the nation market,need to run for long enough to enable the measurement.

Commercializationo Commercialization strategy relies on marketing management

making clear choices regarding the target marketing.o An understanding of the diffusion of innovation process is a

useful starting point for choosing a target market. The actors‟curve are: innovators, early adopters, early majority, latemajority and laggards

PRODUCTS MANAGEMENT ISSUES Product safety: one of major concerns about product safety has been

that of the safety of genetically modified products. Planned obsolescence: the main thrust is to know “what is an

acceptable length of time before replacement is necessary”. Deceptive packaging: Happen when a product is presented in an

oversized package, giving the impression that the consumer is gettingmore than is actually the case.

CHAPTER 7SERVICE MARKETING MANAGEMENT



Marketing of service enterprises presents additional challenges, i.e. servicesare produced and consumed at the same time

Unique Characteristics of Services (see Figure 7.1)

IntangibilityInseparabilityVariabilityPerishability

Service Marketing Mix7-Ps: product, promotion, price, place, people, physical evidence, process

Product4 characteristics of successful brand names:1. Distinctiveness: identifies service provider and differentiates from

competition2. Relevance: communicates nature of service and benefit3. Memorability: easily understood and remembered4. Flexibility: covers current business as well as foreseeable new ventures

PromotionCowell‟s 4 approaches: 1. Persuade satisfied customer to inform others2. Develop materials that customers can pass on3. Target opinion leaders in advertising campaigns4. Encourage potential customers to talk to current customers Also target communication at employees

PriceKey marketing tool for 3 reasons:1. Indicator of perceived quality2. Controlling demand3. Price sensitivity as segmentation variable

Place Expansion means multi-site strategy, therefore store location is critical

People Personnel influence customer perception of product quality; „moments of

truth‟ Complex relationship between staff satisfaction and customer satisfaction

Physical evidence Layout of service operation can be a compromise between the operation‟s

need for efficiency and marketing‟s desire for effectively servicing thecustomer

Process Procedures, mechanisms and flow of activities



Drive for efficiencies could mean outsource parts of service process, whichincreases risks for service performance and reputation (in-flight meal)

Barriers to Matching of Expected and Perceived Service Levels Misconceptions

Inadequate resources (cost reduction, inconvenience) Inadequate delivery Exaggerated promises

Meeting Customer Expectations10 criteria used to evaluate outcome and experience of a service encounter:1. Access2. Reliability3. Credibility4. Security5. Understanding the customer

6. Responsiveness7. Courtesy8. Competence9. Communication10. Tangibles

Relationship Marketing Ongoing or periodic desire for the service by customer (insurance) Customer controls selection of service provider (select hotel vs. random

taxi) Customer has alternatives to choose (restaurants vs. one utility provider)

6 Benefits of Developing Customer Relationships1. Increased purchases2. Lower costs3. Lifetime value4. Sustainable competitive advantage5. Word-of-mouth6. Employees‟ job satisfaction

2 Aspects of Building Relationships

Bonding1. Level 1: financial incentives (discounts); easy to copy hence lowsustainable competitive advantage

2. Level 2: financial + social bonds (customize service)3. Level 3: financial + social + structural bonds (design service to solve

customers‟ problems, e.g. logistics)

Service Recovery Solve problem, restore customer‟s trust, and improve service system Set up tracking system, train staff, encourage learning

Non-profit Organizations Segment into donors and clients



Same marketing procedures and short distribution systems, but differentpricing

Political parties: focus groups provide feedback mechanism Event marketing to raise funds Use further promotion (direct mail) and publicity to attract sponsorship,

which is vital income source

See pg.185 for glossary

Marketing Chapter 8 Pricing Strategy1. Three basic approaches to setting prices

Shapiro and Jackson identified three methods of setting prices and inpractice, it is sensible for a company to adopt an integrated approach topricing, paying attention not only to customer needs but also to cost levels(cost-based pricing) and competitor prices.

1.1. Cost: (See Action 8.2 for the French motor company, Renault‟s Logan)

1.1.1. Strengths:-give an indication of the minimum price (break even)-applicable after other pricing methods are used to check ifworthwhile to launch the product.

Note 1: direct cost pricing or marginal cost pricing which refers to set pricebelow full costs (used commonly in services companies such as aircraft orhotel rooms to cover direct costs and contribute to overheads. Not a long termsustainable approach.Note 2: Once direct and fixed costs have been measured, „break-evenanalysis‟ can be used to estimate the sales volume needed to balancerevenue and costs at different price levels.1.1.2. Limitations:

-leads to an increase in the price as sales fall-illogical because a sales estimate is made before a price is

set-focuses on internal costs instead of customers‟ willingness

to pay-technical problem in allocating overheads in multi-product

firms1.2. Competition: price levels set by competitors. Some firms are happy

simply to benchmark themselves against their major competitors,

setting their prices at levels either above, the same as or below them.Three forms:1.2.1. Firms follow the prices charged by leading competitors1.2.2. Producers take the going-rate price1.2.3. Contracts are awarded through a competitive bidding process

Advantage: simple and easy to use (except for competitive bidding whereguessing competitive bids prices might be difficult)Flaws:1) Differential advantages of the firm are not taken into account which might justify the price differences

2) Risky if a firm‟s cost position is weaker than that of its competitors.



1.3. Marketing: focuses on the value that customers place on a product inthe marketplace and the nature of the marketing strategy used tosupport the product. Three useful techniques to uncover customers‟value perceptions

1.3.1. Trade-off/conjoint analysis: measurement of the trade-off between

price and other product features which enable their effects on productpreference to be established. Respondents are asked to choosepreferred product profile consisting of product features and prices.Using computer model to analyze the answers and measure the impacton preferences of increasing or reducing the price. Ex: 3M use thistechnique at the test marketing stage for new products. Risk: No cash expenditure is involved so respondent may actdifferently in real purchase.

1.3.2. ExperimentationOvercome Trade-off analysis risk by placing a product on sale atdifferent locations with varying prices. Test marketing is often used to

compare the effectiveness of varying prices.Restrictions: the areas would need to be matched in terms of targetcustomer profile so the result can be comparable and the test needs tobe long enough (suggested 6-12 months) for trial and repeat purchaseat each price can be measured.More useful when pricing consumer products.

1.3.3. Economic value to the customer (EVC) analysisCommonly used in industrial markets where economic valueconsiderations such as reducing costs/increasing revenue are primeobjectives. Revealing for products whose purchase price represents asmall proportion of the lifetime costs to the customer. EVC figure is thetotal amount a customer would have to pay to make the total life cyclecosts of a new and a reference product the same.

2. Key factors that influence price-setting decisionsIn addition to above mentioned, marketing decisions below will alsoinfluence price levels.

1) Position strategies: Aldi and Lidl target cost-conscious groceryshoppers with a policy of lowest prices on a range of frequently purchasedhousehold goods. VS yachts, luxury cars, golf club memberships etc. Price

is an indicator of quality.Psychological pricing: $2.99 instead of $3.00

2) New product launch strategiesFigure 8.2 New product launch strategies



Rapid Skimming: Microsoft‟x Xbox, Apple‟s iPod

Slow Skimming: BoschRapid penetration: easyJet, RyanairSlow penetration: own-label brands

A skimming strategy is most suitable in situations where customers areless price-sensitive while penetration pricing strategies are more likely to

be driven by company circumstances where the company is seeking todominate the market, where it is comfortable to establish a position in themarket initially and make money later, and/or where it seeks to create abarrier to entry for competitors.

3) Production-line strategiesEconomy cars, family saloons, executive cars, and so on.

4) Competitive marketing strategiesFour strategic objectives relating to pricing:

BuildHold

Harvest: implies the maintenance or raising of profit margins.Reposition

5) Distribution channel strategiesProducts sold through intermediaries such as distributors or retailers.Price strategy is dependent on understanding not only ultimate customerbut also the needs of distributors and retailers.

6) International marketing strategies Challenges: price escalation for shipping and transporting cost, marginspaid to local distributors, customs duties or tariffs, sales taxes, exchangerates, inflation rates difference. Be careful with parallel importing (products destined for an international market are re-imported back intothe home market and sold through unauthorized channels at levelslower than the company wishes to charge)

3. Managing price changes3.1. Initiating price changes

Table 8.3 Initiating price changes



3.2. Reacting to competitors’ price changes

Table 8.4 Reacting to competitors' price changes

Background knowledge (read if you have more time):Companies decide the price V.S. Consumers decide how much to pay (music

industry: Radiohead, a band offered fans to download their album, InRainbows from Radiohead.com and paid whatever they liked in Oct. 2007. Bydoing so, margin eaters such as record company, distributors, and retailerswere cut off. In Nov. average amount fans paid was US$6, substantially lessthan the regular CD price but better than nothing, which is what bands receivefor illegal downloads.)

Price is revenue earner which is different from other marketing mix elementssuch as product, promotion, place, physical evidence and etc. which arecosts.

Price is just one element of the marketing mix which should be blended withproduct, promotion and place to form a coherent mix that provides superiorcustomer value.

Price is an important part of positioning strategy since it often sends qualitycues to customers.

Use of technology, greater levels of globalization and retail competition help todrive down cost. Internet development and euro introduction gives greaterlevels of price transparency. Thus price setting and management are key

activities that influence firms‟ profitability.



CH 9

Promotion mix, 7 technique tools:1. Advertising2. Sales promotion

3. Publicity4. Sponsorship5. Direct marketing6. Internet marketing7. Personal selling

In addition to these seven tools, other techniques: exhibitions; productplacement in movies, songs or video games.

The promotional mix used must be aligned with the decisions made withregard to product, pricing and distribution, in order to communicate benefits to

target market.

Integrated marketing communications(IMC)

Five considerations will have major impact on the choice of the promotionalmix1. Resource availability and the cost of promotional tools2. Market size and concentration3. Customer information needs4. Product characteristic5. Push versus pull strategies: a)distribution push b) consumer pull

Table 9.1



The communication process

Stages in developing an integrated communications campaign



Advertising Developing advertising strategy: direct marketing; sales promotion Defining advertising objectives Setting the advertising budget

Message decisions: advertising message; advertising platform Media decisions



Choice of media class and media vehicle are two key decisionsMedia class options1. Television2. Press

National newspaper

Regional newspaperTrade and technicalMagazines

3. Posters4. Cinema5. Radio

Other factors affect the media class decision: size of advertising budget;competitive activity; the views of the retail trade

Media vehicle is the choice of a particular newspaper, magazine,

television spot, poster site, etc.

Executing the campaignThe key organizational issue is to ensure that the right advertisementsreach the right media at the right time.

Evaluating advertising effectivenessThe results provide important input from the target consumersthemselves rather relying solely on advertising agency views.

Organizing for campaign development

Sales promotionKey reasons for the growth in sales promotion:

1. Increased impulse purchasing2. The rising cost of advertising and advertising clutter3. Shortening time horizons4. Competitor activities5. Measurability

Sales promotion strategy Selecting the type of sales promotion to use

Consumer promotion techniquesCoupons; Premiums; Money off; Bonus packs; Free samples; Prizepromotions; Loyalty cards

Trade promotion techniquesPrice discounts; Competitions; Allowances; Free goodsPre-testing techniques: group discussions; hall tests; experimentation

Public relations and publicity9.5 P2349.3 P236

Sponsorship Gaining publicity



Creating entertainment opportunities Fostering favourable brand and company associations Improving community relations Creating promotional opportunities New developments in sponsorship

Other promotional tools: Exhibitions Product placement

Marketing Chapter Summaries

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