Transcript
Chapter 15
managing the marketing mix: product, price, place, and promotion
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Managing product decisions
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Product development
Product development, is a key activity in any modern business, anywhere in the world.
There’s a lot more to new-product development than merely introducing goods and services
It is to design and promote better products, meaning products that are perceived to have the best value—good quality at a fair price.
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Product development
Value: good quality at a fair price.
When consumers calculate the value of a product, they look at the benefits they are getting and then subtract the cost to see if the benefits exceed their costs.
A total product offer (also called a value package) consists of everything that consumers evaluate when deciding whether to buy something.
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Product lines and the product mix
A product line is a group of products that are physically similar or are intended for a similar market. They usually face similar competition.
Product Mix is the group of product lines offered by a company.
Product differentiation is the creation of real or perceived product difference in the minds of consumers of the superiority of one product over others.
The products can be equal; the differentiated product may be better than the others, but it is often inferior.
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Packaging changes the product
Companies have used packaging to change and improve their basic product.
Packaging can also help make a product more attractive to retailers.
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Characteristics of A good brand name…
Reflects benefits
Easy to say, recognize, and remember
Distinctive
Translates well (no bloopers)
Can be protected legally
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branding
Brand Equity
The combination of factors— such as awareness, loyalty, perceived quality, images, and emotions—that people associate with a given brand name.
Brand Loyalty
The degree to which customers are satisfied, enjoy the brand, and are committed to further purchase.
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branding
Brand Awareness
How quickly or easily a given brand name comes to mind when a product category is mentioned.
Brand Manager
A manager who has direct responsibility for one brand or one product line; called a product manager in some firms.
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branding
National Brand:
A known brand distributed and advertised nationally; for example, Kraft Foods
Private Brand:
The goods do not carry the manufacturer’s name, they carry the distributor’s name; for example, Kenmore for Sears.
Generic name:
The name for a product category which is not advertised, is cheaply packaged, and is sold at a discount; for example, acetylsalicylic acid.
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Product life cycle (PLC)
Once a product has been developed and tested, it goes to market.
There it may pass through a product life cycle of four stages:
Introduction – product is new to market, low sales.
Growth – market is growing, product is accepted and in demand.
Maturity – sales level off, many people have one.
Decline – sales drop off, producers leave market.
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Product life cycle (PLC)
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Product Life cycle (PLC)
Not all individual products follow the life cycle, and particular brands may act differently.
A product class may go through the entire cycle, one brand may never get beyond the introduction stage.
Some product classes stay in the introductory stage for years while other products become classics and never experience decline.
Different stages in the product life cycle call for different marketing strategies, the product may reach the top in sales growth at the maturity stage while profit is decreasing. Then a marketing manager may create a new image for the product to start a new growth cycle.
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Managing pricing decisions
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Pricing objectives
The ultimate goal of all marketing activity is to increase sales and profits.
Each product requires its own pricing strategy. Some strategies are:
Achieving a target profit
Achieving a market share
Creating an image
Building traffic
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Pricing determination
Cost-based pricing: producers often set the price based on the profit margin desired.
Value pricing: brand-name goods and services at fair prices
Competition-based pricing: a strategy based on what all the other competitors are doing.
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Pricing using breakeven analysis
Break-even analysis: the point where net income = zero; any profit will come on sales above this point.
Total fixed costs:
All expenses that remain the same no matter how many products are made or sold.
Variable costs:
Costs that change according to the level of production.
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Retailer pricing strategies
Everyday low pricing (EDLP), consistently lower prices, without sales.
This is the pricing strategy used by Home Depot and Walmart.
Department stores and other retailers most often use a high–low pricing strategy.
The idea is to have regular prices that are higher than those at stores using EDLP but also to have many special sales in which the prices are lower than those of competitors.
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How market forces affect pricing
Different consumers may be willing to pay different prices; marketers sometimes price on the basis of consumer demand rather than cost or some other calculation.
This is called demand-oriented pricing.
This practice leads to costs being driven down to fit the consumer’s price desire, not the other way around.
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Non-price competition
Marketers often compete on product attributes other than price.
Instead, marketers tend to stress product image and consumer benefits such as comfort, style, convenience, and durability.
Marketers must determine where the highest value placed by the customer is, and if a higher price can be overcome with other attributes.
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Managing placement decisions
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Channels of distribution
Marketing intermediaries
Organizations that assist in moving goods and services from producers to business and consumer users.
Called intermediaries because they’re in the middle of a whole series of organizations that join together to help distribute goods from producers to consumers.
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Why marketing needs intermediaries: creating exchange efficiency
Manufacturers don’t always need marketing intermediaries to sell their goods to consumer and business buyers; some manufacturers sell directly to buyers.
Intermediaries survive and thrive because they perform certain marketing tasks—such as transporting, storing, selling, advertising, and relationship building—faster and cheaper than most manufacturers could.
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Channels of distribution
A channel of distribution consists of a set of marketing intermediaries, such as agents, brokers, wholesalers, and retailers, that join together to transport and store goods in their path (or channel) from producers to consumers.
Agents and brokers are marketing intermediaries that bring buyers and sellers together and assist in negotiating an exchange but don’t take title to the goods—that is, at no point do they own the goods.
The most useful marketing intermediaries are retailers; retailers sell to ultimate consumers.
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Retail distribution strategy
Intensive distribution puts products into as many retail outlets as possible, including vending machines.
Selective distribution is the use of only a preferred group of the available retailers in an area. Such selection helps assure producers of quality sales and service.
Exclusive distribution is the use of only one retail outlet in a given geographic area. The retailer has exclusive rights to sell the product and is therefore likely to carry a large inventory, give exceptional service, and pay more attention to this brand.
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Non-store retailing
Non-store retailing categories include:
Vending machines
Kiosks and carts
Direct selling.
Electronic retailing consists of selling products to ultimate consumers over the internet.
Telemarketing is the sale of goods and services by telephone.
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Managing promotional decisions
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The traditional promotion mix
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Promotional tool: advertising
Advertising is paid, non-personal communication through various media by organizations and individuals who are in some way identified in the advertising message.
There are various categories of advertising, including product advertising, online advertising, and comparison advertising, which is advertising that compares competitive products.
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Promotion tool: personal selling
Personal selling is the face-to-face presentation and promotion of goods and services.
It also involves the search for new prospects and follow-up service after the sale.
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Promotional tool: Public relations
Public relations (PR) is the management function that evaluates public attitudes, changes policies and procedures in response to the public’s requests, and executes a program of action and information to earn public understanding and acceptance.
Publicity is the talking arm of public relations.
Publicity is any information about an individual, product, or organization that is distributed to the public through the media.
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Promotional Tool: Sales promotion
Sales promotion is a promotional tool that stimulates consumer purchasing and dealer interest by means of short-term activities.
Sales promotion programs are designed to supplement personal selling, advertising, and public relations efforts by creating enthusiasm for the overall promotional program.
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How new technologies are affecting promotion
As people purchase products and services on the Internet, companies keep track of those purchases and gather other facts and figures about those consumers.
Over time, companies learn who buys what, when, and how often.
They can then use that information to design catalogues and brochures specifically tailored to meet the wants and needs of individual consumers.
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Promotional tool: Direct marketing
Direct marketing includes any activity that directly links manufacturers or intermediaries with the ultimate consumer.
It uses direct communication with consumers.
While direct marketing has been one of the fastest-growing forms of promotion, it has several disadvantages.
First, most forms of direct marketing require a comprehensive and up-to-date database with information about the target market.
Second, growing concern about privacy has led to a decline in response rates among some customer groups.
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Word of mouth (W.O.M.)
Although word of mouth was not traditionally listed as one of the major promotional efforts (it was not considered to be manageable), it is now one of the most effective, especially on the Internet.
In word-of-mouth promotion, people tell other people about products they’ve purchased.
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Push and pull strategies
In a push strategy, the producer uses advertising, personal selling, sales promotion, and all other promotional tools to convince wholesalers and retailers to stock and sell merchandise, pushing it through the distribution system to the stores.
If the push strategy works, consumers will walk into a store, see the product, and buy it.
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Push and pull strategies
A pull strategy directs heavy advertising and sales promotion efforts toward consumers. If the pull strategy works, consumers will go to the store and ask for the products.
The store owner will order them from the wholesaler, who in turn will order them from the producer.
Products are thus pulled through the distribution system.
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