Marketing Mix Decisions 2 Unit

8/9/2019 Marketing Mix Decisions 2 Unit

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UNIT – III MARKETING MIX DECISIONS

Segmentation, Targeting, and Positioning

Segmentation, targeting, and positioning together comprise a three stage process. We first (1)

determine which kinds of customers exist, then (2) select which ones we are best off trying tosere and, finally, (!) implement our segmentation by optimi"ing our products#serices for thatsegment and communicating that we hae made the choice to distinguish ourseles that way.

Segmenting

Segmenting is the process of diiding the market into segments based on customer

characteristics and needs.

$he main actiity segmenting consists of four sub actiities. $hese are%

1. determining who the actual and potential customers are

2. identifying segments

!. analy"ing the intensity of competitors in the market

&. selecting the attractie customer segments.

$he first, second and fourth steps are described as market segmentation. $he third step of

analy"ing the intensity of the competitors is added to the process of segmenting in this process

description. When different segments are identified, it is not necessary that these segments are

attractie to target. ' company is almost neer alone in a market competitors hae a great


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influence on the attractieness of entering a certain market. When there is a high intensity of

competitors, it is hard to obtain a profitable market share and a company may decide not to enter

a certain market. $he third step of segmenting is the first part of the topic of competitor analysis.

$he need for segmenting a market is based on the fact that no market is homogeneous. or one product the market can be diided in different customer groups. $he ariables used for this

segmenting in these groups are usually geographical, psychographical, behaioral and

demographic ariables. $his results in segments which are homogeneous within and

heterogeneous between each other. When these segments are known, it is important to decide on

which market to target. *ot eery market is an attractie market to enter. ' little filtering has

been done in this actiity, but there are more factors to take in account before targeting a certain

market segment. $his process is called targeting.

Targeting

'fter the most attractie segments are selected, a company should not directly start targeting all

these segments other important factors come into play in defining a target market. our sub

actiities form the basis for deciding on which segments will actually be targeted.

$he four sub actiities within targeting are%

1. defining the abilities of the company and resources needed to enter a market

2. analy"ing competitors on their resources and skills

!. considering the company+s abilities compared to the competitors abilities

&. deciding on the actual target markets.

$he first three sub actiities are described as the topic competitor analysis. $he last sub actiity

of deciding on the actual target market is an analysis of the companys abilities to those of its

competitors. $he results of this analysis leads to a list of segments which are most attractie to

target and hae a good chance of leading to a profitable market share.

-biously, targeting can only be done when segments hae been defined, as these segments

allow firms to analy"e the competitors in this market. When the process of targeting is ended, the

markets to target are selected, but the way to use marketing in these markets is not yet defined.

$o decide on the actual marketing strategy, knowledge of the differential adantages of each

segment is needed.

http://en.wikipedia.org/wiki/Competitor_analysishttp://en.wikipedia.org/wiki/Competitor_analysishttp://en.wikipedia.org/wiki/Competitor_analysis


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Positioning

When the list of target markets is made, a company might want to start on deciding on a good

marketing mix directly. ut an important step before deeloping the marketing mix is deciding

on how to create an identity or image of the product in the mind of the customer. /ery segment

is different from the others, so different customers with different ideas of what they expect from

the product. 0n the process of positioning the company%

1. identifies the differential adantages in each segment

2. decides on a different positioning concept for each of these segments. $his process is

described at the topic positioning, here different concepts of positioning are gien.

$he processdata model shows the concepts resulting from the different actiities before and

within positioning. $he model shows how the predefined concepts are the basis for the positioning statement. $he analyses done of the market, competitors and abilities of the company

are necessary to create a good positioning statement. When the positioning statement is created,

one can start on creating the marketing mix.

INTRODUCTION TO PRODUCT MANAGEMENT%

roduct management is an organi"ational lifecycle function within a company dealing

with the planning or forecasting or marketing of a product or products at all stages of the product

lifecycle. roduct management (inbound focused) and product marketing (outbound focused)

are different yet complementary efforts with the obectie of maximi"ing sales reenues, market

share, and profit margins. $he role of product management spans many actiities from strategic

to tactical and aries based on the organi"ational structure of the company.

roduct management can be a function separate on its own and a member of marketing or

engineering. While inoled with the entire product lifecycle, product managements main focus

is on driing new product deelopment. 'ccording to the roduct 3eelopment and

4anagement 'ssociation (34'), superior and differentiated new products 5 ones that delier

uni6ue benefits and superior alue to the customer 5 is the number one drier of success and

product profitability. roduct management may be defined as the entrepreneurial management of

a piece of business (product, product line, serice, brand, segment etc.) as a 7irtual+ company,

with a goal of lingterm customer satisfaction and competitie adantage.

http://en.wikipedia.org/wiki/Positioning_(marketing)http://en.wikipedia.org/wiki/Positioning_(marketing)http://en.wikipedia.org/wiki/Positioning_(marketing)


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OBECTI!ES O" PRODUCT MANAGEMENT%

roducts are the basis of any organi"ation. Sales are reali"ed through sales of the products.

$hus the oerall success of the organi"ation depends upon the planning and deelopment of

products. roduct 4anagement is the holistic ob of product managers, including planning,

forecasting and marketing products or serices. roduct management is an organi"ational

function within a company dealing with the planning marketing of a product or products at all

stages of the product lifecycle. roduct 4anagement is also a collectie term used to describe the

broad sum of dierse actiities performed in the interest of deliering a particular product to

market.

1. $o design product strategies with respect to customer, industry and competition analysis.

2. $o spot marketing opportunities, and to see whether they are exploitable.

!. $o seek growth through new product deelopment.

&. $o plan strategies for each stage of product life cycle.

8. $o generate new product ideas, and deelop them further.

9. $o consolidate existing product profile and to do portfolio analysis.

:. $o improe and modify existing products and to introduce brand extensions and line

extensions.

;. $o identify the brand identity, build a brand image, position a brand, build a brand, to

deelop brand e6uity and measure it.

PRODUCT P#ANNING$

'ccording to W..


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'ccording to .

E%ements o& Prod'(t P%anning%

1. RESEARC) BE"ORE PRODUCTION% before taking a decision to produce a new

item, market research should be carriedout extensiely. $he company should decide the

characteristics of the product that can meet the re6uirement of the people.

2. POSSIBI#IT* O" PRODUCTION MET)OD% $he possibility of production method

which would be followed and is practicable to deelop a product exactly what the

consumer wants should be examined before taking a decision of producing a new

product.

!. MODI"ICATION IN EXISTING #INES% $he existing product lines should also be

examined whether they can be improed and to what extent to meet the new re6uirements

of the consumer or a new product is to be deeloped.

&. E#IMINATION O" T)E PRODUCT% product planning also inoles the decision

regarding the elimination of the unprofitable product lines so that resources may be used

to some other product profitably.

8. IMPRO!EMENT IN T)E PRODUCT% roduct planning includes regarding the

improement of the existing product in terms of 6uality, packaging, etc, taking in iew of

the competitor+s strategies in the market.

PRODUCT%

'nything that can be offered to a market to satisfy a want or need.

"eat'res o& Prod'(t%

1. $angibility.

2. 0ntangible attributes


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!. 'ssociated attributes.

&. /xchange alue.

8. ?onsumer satisfaction%

#e+e%s o& Prod'(t

Core Bene&it $ rest @ sleep

Basi( $ bed, bathroom, towel

E-e(ted $ attributes like clean bed, fresh towel, working fan

A'gmented $ exceeds customer expectation remote control teleision,

Potentia% % benefits not only satisfy but also delight them

Prod'(t )ierar(./

Need "ami%/ A ?ore need that underlies the existence of a product family. /g. Security

Prod'(t "ami%/ A roduct classes that can satisfy a core need with reasonable effectieness.

/g. Saings @ 0ncome

Prod'(t C%ass A ' group of products within a product family recogni"ed as haing a certain

functional coherence. /g. financial instrument


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Prod'(t %ine A Broup of products within a product class that are closely related because they

perform a similar function, are sold to same customer group, are marketed through the same

channel. /g. life insurance

Prod'(t t/-e – group of items within a product line that share one of seeral possible

forms, of the product. /g. term life

Brand – $he name associated with one or more items in the product line that is used to

identify the source or character of the item. /g. rudential

Item – ' distinct unit within a brand or product line distinguishable by si"e, price,

appearance, or some other attribute. /g. rudential renewable term life insurance

Prod'(t C%assi&i(ations 0 Cons'mer Goods

12 Con+enien(e Prod'(ts

uy fre6uently @ immediately

Cow priced

4ass adertising

4any purchase locations

i.e ?andy, newspapers

32 S.o--ing Prod'(ts

uy less fre6uently

Digher price

ewer purchase locations

?omparison shop

i.e ?lothing, appliances

42 S-e(ia%t/ Prod'(ts

Special purchase efforts


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Digh price

Eni6ue characteristics

rand identification

ew purchase locations i.e can be anything

52 Unso'g.t Prod'(ts

*ew innoations

roducts consumers don+t want to think about these products

Fe6uire much adertising @ personal selling

i.e Cife insurance, blood donation

Ind'stria% Goods C%assi&i(ation$

12 Materia%s and -arts

a) farm products

b) natural products

c) 4anufactured material @ parts

d) ?ompound material

e) ?ompound parts

32 Ca-ita% items

a) installations

b) e6uipment

42 S'--%ies 6 7'siness ser+i(es

a) maintenance and repair serice

b) operating supplies

c) maintenance @ repair serices

d) usiness adisory serices

Brand


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rand is a name , term , sign, symbol or design or a combination of them intended to

identify the goods or serices of one seller or group of sellers and to differentiate from those of

competitors. 0n essence the brand identifies the seller or maker. rand is considered to be a

trademark or distinctie name identifying a product or manufacture. $he brand must be a bridge

between the customer and owner of the brand. oth functional and emotional satisfaction is

attainted through branding. ' brand has the power to create interest and command an immediate

second look. $he alue of a business is directly related to the strength of its brand . ' string

brand will eoke a number of images in the mind of the prospects.

' brand is essential a seller+s promise to delier a specific set of features benefits serices

consistently to the buyers. $he best brand coneys warranty of 6uality rands coney een more

meanings up to six leels.

'ttributes

enefits

roducer+s alues

?ulture

ersonality

Eser

enefits of branding

1. randing makes it causes for the seller to process orders and track down problem.

2. $he seller+s brand name and trademark proide legal protection of uni6ue product

features

!. randing gies the seller the opportunity to attract a loyal profitable set of customers.

rand loyalty gies some protection from competition

&. randing helps the seller segment markets

8. Strong brands help build the corporate image, making it easier to launch new brands andgain acceptance by distributers and consumers

Use o& a s'((ess&'% 7rand

With a successful brand, a company will usually hae%

1. 0mproed margins through higher reali"ations leading to higher profits


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2. Benerated better cash flows and improed management and productiity of assets

!. Feduced or een eliminated the need for regular infusion of fresh capital A inestment

needs can be met out of internal accruals and extensions of a successful brand can gie

the benefits of new benefits of new product launch at reduced cost.

&. ?reated an entry barrier for would be rials, who must now spend heaily to counter the

brand and

8. 0nsulated the brand from economic cycles, since a successful brand immediately reduces

the impact of prices alone on demand.

T.ere are (ertain 7asi( (ategories o& 7rand or (or-orate name$

1. 3escriptie name

2. 'ssociatie name

!. reestanding name

&. 'bstract name

8. ?oined name

BRAND STRATEG*

' company has fie choices with regards to brand strategy. $hey are


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12 #ine Etensions$

/xisting brand name extended to new si"es of flaors in the existing product category

like ?inthol =?ologne> , ?inthol 7Cime+. /xtension may lead to brand name losing in

specific meaning. Doweer there is a much higher chance of surial than brand new

products

32 Brand Etensions$

Where a company may use its existing brand name to launch new products in other

categories like the brand 7Fin+ being extended to both detergent powders, detergent cakes.

$he new product may disappoint buyers and damage their report for company+s other

products. $he brand name may be in appropriate to the new product. $he brand name

may also lose its special positioning in consumers+ mind though oer extension. rand

dilution occurs when consumers mind trough oer extension. rand dilution occurs when

consumers no longer associate a brand with a specific product ore highly similar products

42 M'%ti 7rands$

' company will often introduce additional brand in the same product category.

Sometimes the company is trying to establish different features or appeal to different

buying moties. ' multi branding strategy also enables the company to lock up more

distributors shelf space and to protect its maor brand by setting up flanker brand.

Dindustan leer limited produces three different brands of detergent powders. ?ompany

inherits different brand name in the process of ac6uiring competitors Smithkline beecham

consumer health care owns the ac6uired brand names like brook bond. Damam Gissan '

maor pitfall introducing multibrand entries is that each might obtain only a small market

share and none may be particularly profitable. $he company will hae dissipated its

resources oer seeral brands instead of building a few highly profitable brands

52 Ne8 Brands$


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*ew brands are created when company launches products in a new category it may find

that none of its current brand names are appropriate. Het the cost of establishing a new

brand name in the market place is costly.

92 Co07rands$

' ?o brand is a combination of two or more well known brands in an offer like the

combination of S0 and B/ ?apital in the issue of S0 credit cards.

Brand Re-ositioning

Doweer well a brand is currently positioned, the company may hae to reposition it

later when facing new competitors or changing customer preferences. ?onsider :Ep,

which was one of seeral soft drinks bought primarily by older people who wanted a

bland, lemonflaored drink. Fesearch indicated that although a maority of softdrink

consumers preferred a cola, they did not prefer it all of the time, and many other consumers were

non cola drinkers.

Brand stret(.ing

rand stretching is applying an existing brand to a completely different business area or a

new product or serice such as ?adbury+s entry into cola market. $he risk attached to brand

stretching is that failure in the new field may affect the core product

Brand e:'it/$

rand e6uity is a set of assets and liabilities linked to a brand+s name and symbol that add

to subtract from the alue proided by a product or serice to ad firm and # or that firm+s

customers.

PACKAGING

Pa(;aging includes the actiities of designing and producing the container for a product.

$he container is called the package, and it might include up to three leels of material. -ld Spice

aftershae lotion is in a bottle (primary package) that is in a cardboard box (secondary package)

that is in a corrugated box (shipping package) containing six do"en boxes of -ld Spice.


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Reasons "or t.e de+e%o-ment o& -a(;aging$

Self-service: $he typical supermarket shopper passes by some !II items per minute.

Bien that 8! percent of all purchases are made on impulse, an effectie package

attracts attention, describes features, creates confidence, and makes a faorable

impression.

Consumer affluence: Fising consumer affluence means consumers are willing to pay a little

more for the conenience, appearance, dependability, and prestige of better

packages.

Company and brand image: ackages contribute to instant recognition of the company or brand.

?ampbell Soup estimates that the aerage shopper sees its red and white can :9 times a year, the

e6uialent of J29 million worth of adertising.

Innovation opportunity: 0nnoatie packaging can bring benefits to consumers and

profits to producers. $oothpaste pump dispensers, for example, hae captured 12

percent of the toothpaste market because they are more conenient and less

messy.

#ABE#ING

/ery physical product must carry a label, which may be a simple tag attached to the

product or an elaborately designed graphic that is part of the package. Cabels perform seeral

functions. irst, the label identifies the product or brand5for instance, the name Sunkist stamped

on oranges. $he label might also grade the product, the way canned peaches are grade labeled ',

, and ?. $he label might describe the product% who made it, where it was made, when it was

made, what it contains, how it is to be used, and how to use it safely. inally, the label might

promote the product through attractie graphics.

PRODUCT #I"E C*C#E

3escribes the stages a product goes through in the marketplace including introduction, growth,

maturity, and decline.

0. Introd'(tor/ Stage%


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3uring the market introductory stage, there may not be ready market for the product.

Sales are lowK the product undergoes teething troubles, profits seem a demand has to be created

and deeloped K customers hae to be prompted to try out the product. $his stage poses seeral

problems for the marketer. $he complexity of the problems and the duration of the stage depend

upon the nature of the product, its price, its technological newness and the consumer+s iew of

the product. the management can pursue one of the four strategies

12 Ra-id s;imming $

Caunching the new product at a high price and a high promotion leel. 0t will take adantage of

early entry and the realitie noelty of the product in the market introduction stage. $hose who

became aware of the product are eager to hae it and can pay the asking price and the firm faces

potential competition and wants to build brand preferences.

32Ra-id Penetration $ Caunching the product at a low price and spending heaily on

promotion. $his strategy make sense when the market is large, the market is unaware of the

product, most buyers are price sensitie, there is strong potential competition, and the unit

manufacturing costs fall with the company+s scale of production and accumulated manufacturing

experience.

4 S%o8 -enetration $ Caunching the product at a low price and low leel of promotion.

$his strategy make sense when the market is large, is highly aware of the product, is price

sensitie, and there is some potential competition. 'nother crucial area demanding attention at

this stage is market deelopment and promotion. 0n this stage, demand has to be created and

deeloped. $he firm has to inest heaily in promotion and isit for the reward

&. S%o8 S;imming % Caunching the new product at a high and low promotion. $his

strategy make sense when the market is limited in si"e. 4ost of the markets are aware of the

product, buyers are willing to pay a high price and potential competition is not imminent

'. C.ara(teristi(s

Cow sales olume


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Digh costs

*o or little direct competition

asic product configuration

. Strategies

3eelop primary demand by building awareness and educating consumers

Stimulate opinion leaders to buy the product

uild channels of distribution (selectie in the beginning)

$wo pricing strategies%

price skimming A introduce at high price

price penetration A introduce at low price

II Gro8t. Stage

3uring this stage, the demand for the product increase and the si"e of the market grows.

$here is a rapid increase in sales. /arly adopters like the product and additional consumers start

buying it. *ow competitors enter attacked by the opportunities. $hey introduce new product

features and expand distribution. rice remain where they are or fall slightly depending on how

fast demand increase. rofits increase during this stage as promotion cost are spread oer a large

olume and unit manufacturing costs fall faster than price decline owing to the producer learning

effect.

3uring this stage the firm uses seeral strategies to sustain rapid market growth as long as

possible.

0t improes product 6uality and adds new features and improed styling

0t adds new models and flanker, products i.e products of different si"e, flaours

0t enters new market segments

0t increases its distribution coerage

0t shifts from product awareness adertising to product preference adertising

0t lowers price to attract the next layer of price sensitie buyers.

'. C.ara(teristi(s

Sales olume increases significantly


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?osts per unit decrease

?ompetition increases

4ore product ariation

B2 Strategies

/ngage in product modification

uild selectie demandK stress differentiation

4oe toward intensie distribution

ractice more aggressie pricing

III Mat'rit/ Stage

0n the maturity stage the demand for the product reach a saturation point rice

competition become intense and pioneer tries to distinguish his brand by subtle company.

4aturity diides into ! phases%

0. Browth hase

00. Stable hase

000. 3ecaying 4aturity

Mar;et Modi&i(ation

$he company might try to expand the market for its mature brand by working with the two

factors that makeup sales olume.

Lolume M *umber of brand users N usage rate per user

$he company can try to expand the number of brand users in three ways

0. ?onert non users

00. /nter new market segments

000. Win competitors customers

'. C.ara(teristi(s

Sales growth slows then leels off

rofits decline for the industry

4arginal competitors leae marketplace

. Strategies

Feuenate product A change packaging, new


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models, line extensions

Stimulate usage rate

4aintain brand loyalty through reminder promotions

?ontinue aggressie pricing

?ontinue intensie distribution

I! De(%ine Stage $

0n this stage, sales begin to fall. $he demand for the product shrinks probably due to new and

functionally adanced products becoming aailable in the market# market being more saturated

to the product. 0n any case, price and margins get depressed% total sales and profits diminish .

irms do perceie the impounding total decline and prepare for the gradual phasing out of the

product. Successful firms 6uite often keep new products ready in the 6ueue to fill the acuum

created by the decline of existing products

A2 C.ara(teristi(s

Strong downward shift in sales

rofits stay low and continue to decline

-nly a few strong competitors remain

ack to basic product configurations

B2 Strategies

3istribution reduced to fewer outlets

romotional support reduced

rices lowered

Ese haresting strategy

roduct life cycles ary in length

roduct life cycles are getting shorter


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#i&e C/(%e #engt.

ecause of

technology and

globali"ation

the introduction stage is getting ery short

some cycles more 6uickly to maturity, then hae many product modifications so the

decline stage drags on and on

ashions currently popular products that tend to follow recurring life cycles

ads(' fashion that is taken up with great enthusiasm for a brief period of timeK a cra"e )

ashions with abbreiated life cycles only popular with certain groups

4usic

ast food

?hildren+s toys

=adult toys

Prod'(t #i&e C/(%e Considerations in Mar;eting Strateg/

Enderstand that profits hae a predictable pattern

in the early stages, focus is on product information

in the later stages, focus is on brand promotion

use market segmentation in maturity stage to maintain strong core customer basis

NE< PRODUCT DE!E#OPMENT AND MANAGEMENT%

*ew product deelopment (*3) is the term used to describe the complete process of

bringing a new product or serice to market. $here are two parallel paths inoled in the *3

process% one inoles the idea generation, product design and detail engineeringK the other

inoles market research and marketing analysis. ?ompanies typically see new product


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deelopment as the first stage in generating and commerciali"ing new products within the oerall

strategic process of product life cycle management used to maintain or grow their market share.

$he process# Steps %

Stage 1 Idea Generation is often called the Ofu""y front endO of the *3 process

0deas for new products can be obtained from basic research using a SW-$ analysis

(Strengths, Weaknesses, -pportunities @ $hreats), 4arket and consumer trends,

companys F@3 department, competitors, focus groups, employees, salespeople,

corporate spies, trade shows, or /thnographic discoery methods (searching for user

patterns and habits) may also be used to get an insight into new product lines or product

features.

Cots of ideas are being generated about the new product. -ut of these ideas many ideas

are being implemented. $he ideas use to generate in many forms and their generating

places are also arious. 4any reasons are responsible for generation of an idea.

0dea Beneration or rainstorming of new product, serice, or store concepts idea

generation techni6ues can begin when you hae done your --F$E*0$H '*'CHS0S

to support your ideas in the 0dea Screening hase (shown in the next deelopment step).

Stage 32 Idea S(reening

$his process inoles shifting through the ideas generated aboe and selecting ones which are

feasible and workable to deelop. ursing non feasible ideas can clearly be costly for the

company. $he obect is to eliminate unsound concepts prior to deoting resources to them. $he

screeners should ask seeral 6uestions%

Will the customer in the target market benefit from the productP

What is the si"e and growth forecasts of the market segment#target marketP


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What is the current or expected competitie pressure for the product ideaP

What are the industry sales and market trends the product idea is based onP

0s it technically feasible to manufacture the productP

Will the product be profitable when manufactured and deliered to the customer at the target

priceP

Stage 42 Con(e-t De+e%o-ment and Testing

$he organi"ation may hae come across what they beliee to be a feasible idea, howeer, the

idea needs to be taken to the target audience. What do they think about the ideaP Will it be

practical and feasibleP Will it offer the benefit that the organi"ation hopes it willP or hae they

oerlooked certain issuesP *ote the idea and concept is taken to the target audience not a

working prototype at this stage. 3eelop the marketing and engineering details like

0nestigate intellectual property issues and search patent data bases

Who is the target market and who is the decision maker in the purchasing processP

What product features must the product incorporateP

What benefits will the product proideP

Dow will consumers react to the productP

Dow will the product be produced most cost effectielyP

roe feasibility through irtual computer aided rendering, and rapid prototyping

What will it cost to produce itP


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$esting the ?oncept by asking a sample of prospectie customers what they think of the idea.

Esually ia ?hoice 4odeling.

Stage 52 B'siness Ana%/sis

$he company has a great idea, the marketing strategy seems feasible, but will the product be

financially worth while in the long runP $he business analysis stage looks more deeply into the

cashflow the product could generate, what the cost will be, how much market shares the product

may achiee and the expected life of the product.

o /stimate likely selling price based upon competition and customer feedback

o /stimate profitability and breakeen point

Stage 9 2 Mar;eting Strateg/

' proposed marketing strategy will be written laying out the marketing mix strategy of the

product, the segmentation, targeting and positioning strategy sales and profits that are expected.

Stage =$ Prod'(t De+e%o-ment

inally it is at this stage that a prototype is finally produced. $he prototype will clearly run

through all the desired tests, and be presented to the target audience to see if changes need to be

made.

Stage >$ Test Mar;eting

$est marketing means testing the product within a specific area. $he product will be launched

within a particular region so the marketing mix strategy can be monitored and if needed, be

modified before national launch.

Stage ?$ Commer(ia%i@ation


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0f the test marketing stage has been successful then the product will go for national launch. $here

are certain factors that need to be taken into consideration before a product is launched

nationally. $hese are timing, how the product will be launched, where the product will be

launched, will there be a national roll out or will it be region by regionP

Ne8 Prod'(t Pri(ing

o 0mpact of new product on the entire product portfolio

o Lalue 'nalysis (internal @ external)

o ?ompetition and alternatie competitie technologies

o 3iffering alue segments (price, alue, and need)

o roduct ?osts (fixed @ ariable)

o orecast of unit olumes, reenue, and profit

Integrated Mar;eting (omm'ni(ation$

0ntegrated 4arketing ?ommunications (04?) is the coordination and integration of all

marketing communication tools, aenues, functions and sources within a company into a

seamless program that maximi"es the impact on consumers and other end users at a minimal cost

Mar;eting Comm'ni(ation O7e(ti+es$

Q ehaiour 4odificationQ 4odify behaiour @ $houghts

Q Feinforce existing behaiour $o strengthen by adding extra support or

material.

Q $o 0nform

Q $o persuade $o influence or gain oer by argument, adice.


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Q $o remind

Q Specific -becties

Q Shift the demand

Q $o change the pattern of demand

"a(tors determining mar;eting Comm'ni(ation Mi$

Q $ype of product

Q *ature of market

Q Stage in roduct Cife cycle

Q udget aailability

Q ?ompany policies

Q $ype of roduct 4arket

Q uyer Feadiness

C)ANNE# MANAGEMENT

'ccording to hilip Gotler, = /ery producer seeks to link together the set of marketing

intermediaries that best fulfill the firm+s obecties. $his set of marketing intermediaries is called

the marketing channel (also called as trade channel or channel of distribution.)

' system of marketing institutions that promotes the physical flow of goods and serices, along

with ownership title, from producers to consumer or business userK also called a distribution

channel

or marketers the distribution decision is primarily concerned with the supply chain+s frontend

or channels of distribution that are designed to moe the product (goods or serices) from the

hands of the company to the hands of the customers

C.ara(teristi(s o& Distri7'tion (.anne%$

1) Foute or pathway%

2) low%

!) ?omposition%

&) unctions%


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8) Femuneration%

9) $ime Etility%

:) ?onenience Lalue%

;) ossession Lalue%

R) 4arketing tools%

1I) Supplydemand Cinkage%

C.anne% "'n(tions%

1) 0nformation roider

2) rice stability.

!) romotion

&) inancing

8) $itle

9) Delp in roduction unction

:) 4atching demand and supply.

?ontractual% inding out buyers and sellers.

4erchandising% roducing goods that will satisfy market re6uirements.

ricing% rocess of attaching alue to the product in monetary terms.

ropaganda% Sales promotion actiities.

hysical 3istribution% 3istribution actiities.

$ermination% Settlement of contract, i.e., paying the alue and receiing the goods.

;) ricing

R) Standardi"ing $ransactions.

1I) 4atching uyers and Sellers.

Con(e-ts o& C.anne% Management%


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Distribution Channel Strategy:

i) Channel objective

ii) Activity Finalization.

iii) Organizing the activities.

iv) Developing policy guidelines.

Designing channel structure

Establishing the channel

otivating channel !e!bers

"esolving con#icts a!ong channel !e!bers

E$%paste phase

E$%ante phase

1. $he /x 'nte phase% $he ex ante phase inoles all the actiities that are associated with the

design and establishment of the distribution channel actually starts functioning.

i) 3esigning channel structure.

ii) /stablishing the channel.

a) 'ppointing processing /ntities.

b) 0nfrastructure 3eelopment.

c ) 4iscellaneous unctions.

2. $he /xpaste hase%

While these actiities are ust preparatory actiities, the main task of a channel manager

starts only after the channel is set up and starts functioning. 0t comprises following two set of

actiities%

i) 4otiating ?hannel 4embers%

ii) Fesoling ?onflicts among ?hannel 4embers.

T.e Ro%e o& Mar;eting C.anne%s in Mar;eting Strateg/

?hannels proide the means by which the firm moes the goods and serices it produces to

ultimate users

acilitate the exchange process by cutting the number of contacts necessary


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'dust for discrepancies in the market+s assortment of goods and serices ia

sorting

Standardi"e exchange transactions

acilitate searches by both buyers and sellers

"a(tors In&%'en(ing C.anne% De(isions

12 Re%ating to Prod'(t C.ara(teristi(s

• erishability

• 0ndustrial # consumer products

• Enit alues

• Style obsolescence

• Weight @ technicality

• Standardi"ed roducts

• urchase re6uency

• *ewness @ 4arket 'cceptance

• Seasonally

• roduct readth

II Re%ating to Com-an/ C.ara(teristi(s

• inancial Strength

• 4arketing olicies

• Si"e of the company

• ast ?hannel /xperience

• roduct 4ix

• Feputation

III "a(tors re%ating to Mar;et or (ons'mer C.ara(teristi(s

• ?onsumer uying habits

• Cocation of the market

• *umber of customer

• Si"e of orders


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I! "a(tors re%ating to midd%eman (onsideration

• Sales olume potential

• 'ailability of middleman

• 4iddlemen+s 'ttitude

• Serice proided by middlemen

• ?ost of channel

! "a(tors re%ating to en+ironmenta% (.ara(teristi(s

• /conomic conditions

• Cegal restriction

• ?ompetitors channel

• iscal structure

C.anne%s Using Mar;eting Intermediaries

Wholesaler # Stockiest# 3istributor

Fetailer

Sole Selling 'gent

? @ 'gents

Semi Wholesaler

Lalue added resellers


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T/-es o& Mar;eting C.anne%s

)/7ridM'%tiD'a% Distri7'tion$ *etwork that moes products to a firm+s target market

through more than one marketing channel

Re+erse C.anne%s$ ?hannels designed to return goods to their producers


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Determining Distri7'tion Intensit/

*umber of intermediaries through which a manufacturer distributes its goods

Intensi+e distri7'tion$ channel policy in which a manufacturer of a conenience product

attempts to saturate the market

Se%e(ti+e distri7'tion$ channel policy in which a firm chooses only a limited number of

retailers to handle its product line

E(%'si+e distri7'tion$ channel policy in which a firm grants exclusie rights to a single

wholesaler or retailer to sell its products in a particular geographic area

C.anne% Management

$he administration of existing channels to secure the cooperation of channel members in

achieing the firm+s distribution obecties. /mergence of distribution channel could be

attributed to the need for facilitating exchanges by speeding up the time consuming matching

process between buyers and sellers.

C.anne% Management De(isions

12 Se%e(ting C.anne% Mem7ers

3uring the selection process, producers should determine what characteristics distinguish the

better intermediaries. $hey will want to ealuate number of years in business, other lines carried,

growth and profit record, solency, cooperatieness, and reputation. 0f the intermediaries are

sales agents, producers will want to ealuate the

number and character of other lines carried and the si"e and 6uality of the sales force.

32 Training C.anne% Mem7ers

?ompanies need to plan and implement careful training programs for their distributors

and dealers because the intermediaries will be iewed as the company by end


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users. 4icrosoft, for example, re6uires thirdparty serice engineers who work with its software

applications to complete a number of courses and take certification exams. $hose who pass are

formally recogni"ed as 4icrosoft ?ertified rofessionals, and they can use this designation to

promote business.

42 Moti+ating C.anne% Mem7ers

$he most successful firms iew their channel members in the same way they iew their end

users. $his means determining their intermediaries+ needs and then tailoring the channel

positioning to proide superior alue to these intermediaries. $o improe

intermediaries+ performance, the company should proide training, market research,

and other capabilitybuilding programs. 'nd the company must constantly reinforce

that its intermediaries are partners in the oint effort to satisfy customers.

52 E+a%'ating C.anne% Mem7ers

roducers must periodically ealuate intermediaries+ performance against such standards as

sales6uota attainment, aerage inentory leels, customer deliery time,

treatment of damaged and lost goods, and cooperation in promotional and training

programs. ' producer will occasionally discoer that it is paying too much to particular

intermediaries for what they are actually doing

92 Modi&/ing C.anne% Arrangements

?hannel arrangements must be reiewed periodically and modified when distribution

is not working as planned, consumer buying patterns change, the market expands,

new competition arises, innoatie distribution channels emerge, or the product

moes into later stages in the product life cycle.

C)ANNE# CON"#ICT

)ori@onta% Con&%i(t

4ost often, hori"ontal conflict causes sparks between different types of marketing intermediaries

that handle similar products. Sometimes results from disagreements among channel members at

the same leel.


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!erti(a% Con&%i(t

?hannel members at different leels find many reasons for disputes

/xample% when retailers deelop priate brands to compete with producers+ brands or when

producers establish their own retail outlets or WWW Sites.

M'%ti(.anne% (on&%i(t

/xists when the manufacture has established two or more channels that sell to the same market

Ca'ses o& (.anne% (on&%i(t

• Boals incompatibility

• Enclear roles @ rights

Managing C.anne% (on&%i(t

• Super ordinate goals

• /xchange persons

•

?ooptation• 4ediation

• 3iplomacy

!erti(a% Mar;eting S/stems

Lertical marketing system (L4S)% planned channel system designed to improe distribution

efficiency and cost effectieness by integrating arious functions throughout the distribution

chain

T/-es o& !MS

Administered mar;eting s/stem$ L4S that achiees channel coordination when a dominant

channel member exercises its power


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Cor-orate mar;eting s/stem$ a L4S in which a single owner operates at each stage in its

marketing channel

Contra(t'a% mar;eting s/stem$ L4S that coordinates channel actiities through formal

agreements among channel members like%

WholesalerSponsored Loluntary ?hains

Fetail ?ooperaties

ranchises

)ori@onta% Mar;eting S/stems

$wo or more unrelated companies put together resources or programs to exploit an emerging

marketing opportunity

M'%ti(.anne% Mar;eting S/stem

-ccurs when a single firm uses two or more marketing channels to reach one or more customer

segmentations.

Integrated Mar;eting (omm'ni(ation

0s the coordination and integration of all marketing communication tools, aenues, functions and

sources within a company into a seamless program that maximi"es the impact on consumers and

other end users at a minimal cost

Mar;eting Comm'ni(ation O7e(ti+es

ehaiour 4odification

• 4odify behaiour @ $houghts

• Feinforce existing behaiour

$o 0nform

$o persuade

$o remind

Specific -becties

• Shift the demand


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• $o change the pattern of demand

"a(tors determining mar;eting Comm'ni(ation Mi

• $ype of product

• *ature of market

• Stage in roduct Cife cycle

• udget aailability

• ?ompany policies

• $ype of roduct 4arket

• uyer Feadiness

PROMOTION$

= 0t compasses all the tools in the marketing mix whose maor role is persuasie

communications> hilip Gotler.

E%ements o& Mar;eting Comm'ni(ation Mi

'dertisement

ublicity

ersonal Selling

Sales romotion

ublic Felations

Promotion Met.ods

*onpersonal communication paid for by a clearly identified sponsor promoting ideas,

organi"ations, or products

4ost familiar outlets are broadcast ($L, radio) and print (newspapers, maga"ines) media Doweer, there are many other adertising ehicles, from billboards to $Shirts and, more

recently, the 0nternet

AD!ERTISING$


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'ccording to 'merican 4arketing 'ssociation, ='dertising is any paid form of non

personal presentation of ideas, goods or serices by an identified sponsor>.

"eat'res o& Ad+ertising$

(i) 0t is 4ass?ommunication rocess.

(ii) 0t is 0nformatie in 'ction.

(iii) 0t is a ersuasie 'ct.

(i) 0t is a ?ompetitie 'ct.

() 0t is a aidor.

(i) 0t has an 0dentified Sponsor.

(ii) 0t is *onpersonal resentation.

P'r-ose O7e(ti+es o& Ad+ertising$

(i) $o increase 3emand.

(ii) $o sell a new product and to build

(iii) $o educate the masses.

(i) $o build rand reference.

() $o build Boodwill.

(i) $o attract and to help 4iddlemen.

(ii) $o support Salesmen.

(iii) $o remind the customers of the roduct and company.

(ix) $o inform about changes in marketing 4ix.

(x) $o *eutrali"e.

(xi) $o enter in *ew Beographical 'rea.

(xii) $o do /ntire Selling


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Blobal adertising

Basis o& Target Gro'-s

?onsumer 'dertising

0ndustrial 'dertising

$rade 'dertising

rofessional 'dertising

Basis o& demand in&%'en(e %e+e%

rimary 3emand

Selectie 3emand

Instit'tiona% or Prod'(t Ad+ertising

roduct 'dertising

0nformatie roduct 'dertising

persuasie roduct 'dertising

Femainderoriented 'dertising

0nstitutional 'dertising

Criteria "or se%e(ting ad+ertising Media

• ?ommunication /ffectieness

• Beographic Selectiity

• 'udience Selectiity

• lexibility

• 0mpact

• restige

• 4essage life

• ?oerage

• ?ost

• re6uency

• Cead times


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Ad+antages o& ad+ertising

12 To Man'&a(t'rers

• 0ncreased sales

• Steady demand

• Cower ?osts

• Breater dealer interest

• uick $urnoer and smaller inentories

• Supplementing salesmanship

• /ncouragement to better performance

• ?reation of goodwill

32 Ad+antages to Cons'mers

• acility of urchasing

• 0mproement in uality

• /limination of unnecessary intermediaries

• ?onsumer+s surplus

• /ducation of consumers

42 Ad+antages to Midd%eman$

• Buarantees uick sales

•'cts as a salesman

• 0t makes possible retail price maintenance

52Ad+antages to t.e so(iet/

• /ncouragement to Fesearch

• Sustaining the press

& ?hange in motiation

Disad+antages

• 4ultiplication of needs

• 4isrepresentation of acts

• ?onsumer+s deficit

• 0ncreased cost

• Wastage of national resources


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• arriers to entry

• roduct proliferation

• 3eferred reenue expenditure

• 4anagerial difficulties

SA#ES PROMOTION

' sponsorfunded, demandstimulating actiity designed to supplement adertising and

facilitate personal selling

re6uently consists of a temporary incentie to encourage a sale or purchase

0ncluded are a wide spectrum of actiities, such as eent sponsorships, fre6uency

programs, contests, trade shows, instore displays, rebates, samples, premiums, discounts,

and coupons

4arketing actiities , other than personal selling , adertising and publicity that stimulate

consumer purchasing and dealer effectieness such as display shows and exhibitions,

demonstration and arious nonrecurrent selling efforts not in the ordinary routine>

C.ara(teristi(s o& sa%es Promotion

• Sales romotion does not include personal selling , adertising and publicity

•

'ctiities are not regular • 4akes adertisement @ ersonal Selling more effectie

• 0t encourages dealers, distributors and consumers.

Met.ods too%s o& Sa%es Promotion

12 Cons'mer Promotion

• ree Samples

• ?oupons

• 4oney Fefund offer

• $emporary price Feduction# price -ff

• ?ontests#sweepstakes

• onus offer

• 3raw

• 'fter Sales serice


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• - material

• /xchange -ffer

• roduct placements#tieins

32 Midd%eman Promotion

• uying allowance 3iscount

• uyback allowance

• 3isplay @ 'dertising allowances

• 3ealer A listed romotions

• ush 4oney

• Sales ?ontest

• ree Bifts

• 'dertising materials

• ?redit acility

42 Sa%es "or(e Promotions

• onus to Sales orce

• Sales force ?ontest

•Sales 4eetings

Ad+antages o& Sa%es Promotion$

• 0ntroduction of new brands

• 3uring inflationary stage, to increase sales

• or stimulating demand

Disad+antages

• ?reates feeling that it is intended to sell substandard product

• 3iscounts are artificial as price is inflated

• 'ctiities are shortlied and so the result is also shortlies

• rand image may be affected

• /ffectie actiities easily copied by competitors


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PERSONA# SE##ING

ersonal selling inoles the twoway flow of communication between a buyer and seller, often

in a facetoface encounter, designed to influence a person+s or group+s purchase decision.

Ad+antages o& Persona% Se%%ing

• roides a detailed explanation or demonstration

• of product

• 4essage can be aried to fit the needs of each

• prospectie customer

• ?an be directed to specific 6ualified prospects

• 0nstant feedback

• ersonal persuasion can be used

• =' good salesman can get you to buy ice in winter>

C.ara(teristi(s o& Persona% Se%%ing

Pro

1. Flexibility

'dapt to situations

/ngage in dialog

2. Builds Relationsips

Cong term

'ssure buyers receie appropriate serices

Soles customer+s problems

Con ?an not reach mass audience

/xpensie per contact

*umerous calls needed to generate sale

Cabor intensie


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PUB#IC RE#ATIONS

ublic Felations inoles a ariety of programs designed to promote or protect a company+s

image or its indiidual products. F can take many forms, including newspapers, annual reports,

lobbying, and support of charitable or ciic eents

"'n(tions o& PR

• romoting goodwill

• romoting product, serice, corporate image

• ?orporate communications

• Cobbying

• ?ounteracting negatie publicity

Maor De(isions in PR

• /stablishing the marketing -becties

uild 'wareness

uild ?redibility

Stimulate sales force and dealers

uild a core consumer base

Dold down promotion ?ost

uild oneone relationship with customers

0nfluence the influential

• ?hoosing 4essages and ehicles

• 0mplementing the plan

• /aluating Fesults

Ad+antages o& PR

Lery credible and inexpensie


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F can hold down promotion costs

Disad+antages o& PR

3ifficult to 6uantify F benefits

Cack of control

73eft+ management re6uired

P'7%i( Re%ations

publications (annual reports, brochures, *ews latterT)

/ents (?onference, exhibitions, 'nniersariesT)

news (press releases)

Speeches

Serice actiities

On%ine P'7%i( Re%ation

Lideoconferencing

Satellite 4edia tour

Lideo new release

Streaming ideo of lie eents

Website

email

P'7%i(it/

o is a special form of F that inoles news stories about an organi"ation or its

products

o Cike adertising, it consists of an impersonal message that reaches a mass audience

o ut% lacement is not paid for, the organi"ation that is the subect of the publicity has

little or no control oer it, it appears as news and therefore has greater credibility than

adertising

o -rgani"ations should try to proide the material for good publicity


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PRICE

$he sum or amount of money at which a thing is alued, or the alue which a seller sets on his

goods in marketK that for which something is bought or sold, or offered for sale

O7e(ti+es o& Pri(ing

$o maximi"e the profits

?ompetitie Situation

?apturing the 4arket

Congrun Welfare of the irm

rice Stability

'chieing a $argetFeturn

'bility to ay

4argin of profit to 4iddlemen.

Fesource mobili"ation.

"a(tors A&&e(ting t.e Pri(ing De(isions%

12 Interna% &a(tors$

(a) -rgani"ational actors% pricing decisions occur on two leels in the organi"ation. -erall

rice strategy is with the top executies. $hey determine the basic ranges that the product falls

into in terms of market segments.

$he actual mechanics of pricing are dealt with at lower leels in the firm and focus on

indiidual product strategies.

(b) 4arketing 4ix% 4arketing experts iew prices as only one of the many important elements

of the marketing mix. ' shift in any one of the elements has an immediate effect on the other

three production, romotion and distribution.

(c) roduct 3ifferentiation% $he price of the product also depends upon the characteristics of the

product. 0n order to attract the customers, differentiation

Pri(ing Pro(ess


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1. Set ricing -becties

2. 'naly"e demand

!. /stimating ?ost

&. 'naly"ing ?ompetitor+s ?osts, rices and -ffers

8. Select pricing 4ethod

9. Selecting the final price

I Pri(ing O7e(ti+es

Q rofit obecties e.g.

A $argeted profit return

Q Lolume obecties e.g.

A 3ollar or unit sales growth

A 4arket share growth

Q -ther obecties e.g.

A 4atch competitors+ price

A *onprice competition

II Demand Ana%/sis

• 4easure the impact of price change on total reenue

• redicts unit sales olume and total reenue for arious price leels

• 3ifferent customers hae different price sensitiities and needs

Pri(e Sensiti+it/

Q Eni6ueLalue /ffect

Q Substitute Aawareness effect

Q 3ifficult?omparison /ffect

Q $otal/xpenditure /ffect

Q /ndenefit /ffect

Q Shared?ost /ffect

Q Sunk0nestment /ffect

Q rice6uality /ffect

Q 0nentory /ffect


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Estimating Demand C'r+e

• Statistical analy"ing past prices, 6uantities sold etc.

• ?onduct price experiments

• 'sk buyer to state how many units they would buy at different proposed prices.

Pri(e E%asti(it/ o& Demand

4arketers need to know how responsie or elastic, demand would be to a change in price.

III Estimating Cost

• 3emand sets a ceiling on the price the company can charge for its product.

• ?ost set the floor.

• $he company wants to change a price that coers its costs of producing, distribution and

selling the product, including a fair return for its effort and risk.

T/-es o& (osts and %e+e%s o& -rod'(tion

ixed ?ost

Lariable ?ost

$otal cost3ecline in the aerage cost with accumulated production experience is called the experience

cure or learning cure.

'ccumulated roduction

Di&&erentiated Mar;eting O&&ers

• $oday+s companies try to adapt their offers and terms to different buyers.

• $hus, a manufacturer will negotiate different terms with different retail chains, meaning

the costs and profits will differ with each chain.

• $o estimate the real profitability of dealing with

• different retailers, the manufacturer needs to use actiitybased cost ('?) accounting

• instead of standard cost accounting


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Target Costing

• ?ost can also change as a result of a concentrated effort by the company+s designers,

engineers, and purchasing agents to reduce them.

• 4any


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• Per(ei+ed0 +a%'e Pri(ing% is an open line pricing techni6ue where respondents

estimate the price of a new product compared to those who are already in the

market.

• !a%'e Pri(ing% -ccurs when prices are set on the basis of fair alue for both the

serice proider and the consumer.

• Going0Rate Pri(ing$ /stablishing the price for a product or serice based on

prealent market prices. (steel or meat ).

• Sea%ed – Bid Pri(ing% rice 6uotes solicited by goernmental and other public

agencies to ensure obectie consideration of competitie bids.

Se%e(ting t.e &ina% -ri(e

Q sychological ricing

Q $he influence of other 4arketingmix /lements

Q ?ompany pricing policies

Q 0mpact of rice on other parties

Q 'dapting the price

Q Beographical ricing (arter, ?ompensation deal, uyback arrangement, -ffset).

Q rice discounts @ allowances

Q ?ash 3iscounts

Q uantity 3iscounts

Q unctional 3iscounts# trade discounts.

Q Seasonal 3iscounts price reduction to buyers who buy merchandise.

Q 'llowances # $radein allowances. (turning in an old item when buying a

new one

Q romotional ricing

Q CossCeader ricing

Q Specialeent ricing

Q ?ash Febates

Q Cowinterest financing

Q Conger ayment terms


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Q Warranties @ Serice ?ontracts

Q 3iscriminatory ricing

Q ?ustomersegment pricing 4useums often charge a lower admission fee

to students and senior students.

Q roduct A form pricing % 3ifferent ersions of the product are priced

differently but not proportionately to their respectie costs.

Q 0mage pricing% Some companies price the same product at two different

leels based on image differences.

Q Cocation pricing

Q $ime ricing% aried by season, day, or hour.

roduct4ix ricing

Q roductCine ricing ?ompanies normally deelop product lines rather than single

products and introduce price steps. Fs.2II, &II, and 9II.

Q -ptionalfeature ricing A 4any companies optional products ,features.

Q ?aptieproduct ricing Some products re6uire the use of ancillary or captie products.

4anufacturers of ra"ors, digital phones and cameras often price them low and set high

markups on ra"or blades and film, respectiely.

Q $wopart ricing Serice firms often engage in twopart pricing, consisting of fixed fee

plus a ariable usage fee. 'musement parks charge an admission fee plus fees for rides

oer a certain minimum.

Q yproduct ricing 'ny income earned on the byproducts will make it easier for the

company to charge a lower price on its main product if competition forces it to do so.

Q roduct undling ricing is a marketing strategy that inoles offering seeral products

for sale as one combined product. $his strategy is ery common in the software business

(for example% bundle a word processor, a spreadsheet, and a database into a single office

suite )

0nitiating @ Fesponding to rice ?hanges%

Q 0nitiating rice ?uts

/xcess plant capacity

3eclining market Share


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3ominating the market

Fesults in arious traps like low6uality,

ragile market%

' low price buys market share but not market loyalty. and shallowpocket traps

Q 0nitiating price increases

A ?ost inflation

A -er demand

Q Feactions to price ?hanges

Q ?ustomers+ reactions

Q ?ompetitors

3istribution # 4arketing ?hannels%

Marketing Mix Decisions 2 Unit

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Transcript of Marketing Mix Decisions 2 Unit