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Chapter 1 and 2
Marketing
Definition: Organisational function and a set of processes for creating, communicating and
delivering value to customers and for managing customer relationships in ways that benefit
the organisation and its stakeholders.
Marketing Process
1. Understand the Marketplace and customer Needs and Wants
CAPTURING VALUE
FROM CUSTOMERS
Inside out view- Sell what company makes rather than what customer wants
Outside in view- Focus on satisfying customer needs and wants as pathway to profits
Production Concept
Consumers favour products that are available and highly affordable
FOCUS: improve production and distribution efficiency
Product Concept
Consumers favour products that offer most in:
Quality
Performance
Innovative features
Selling Concept
Consumers wont buy enough of the products unless company undertakes large-scale selling
and promotion effort.
FOCUS: Selling and promotion effort. Short term sales. Aggressive selling (Risk: no focus on
building long term cust. r/s)
-Typically practiced with unsought goods (insurance or consultancy services)
Marketing Concept
Achieving org. goals depends on knowing needs and wants of target markets and delivering
satisfaction better than competitors.
Starts with
Chapter 5
Marketing environment- Actors and forces outside marketing that affects marketing
managements ability to develop and maintain successful transactions with its target
customers.
The Microenvironment
- The forces close to the org. that affects ability to serve its customers
The organisation
Take other company groups into account- forms internal environment.
Top management sets goals, company mission, broad strategies and policies.
Marketing managers make decisions within strategies made by top. Must work
closely with other departments.
Marketing intermediaries
Help company promote, sell and distribute finals products to buyers.
Resellers
Distribution channel firms that help company find customers and make sales to
them
Physical Distribution Firms
Stock and move goods from points of origin to destination. Warehouse.
Transportation.
Marketing Services Agencies
-Marketing research firms
-Advertising agencies
-Media firms
-Marketing consulting firms
Help company target and promote products to right market.
Financial intermediaries
-Banks, credit companies, insurance companies
Help finance transactions or insure against the risks associated with buying and
selling of goods.
Customers
Consumer markets
Indiv. & households that buy for personal consumption
Business markets
Buy G&S for further processing or use in their production processes.
Reseller markets
Buy G&S to resell at profit
Government markets
Gov agencies buy G&S to produce public services or transfer to those who need
them.
International markets
These buyers (above) in other countries.
Competitors
Company must provide greater customer value and satisfaction than competitors.
Must gain strategic advantage by positioning offerings strongly against
competitors offerings in mind of consumers. Firm size and industry position
should be considered.
Publics
Any group that has actual or potential interest in or impact on an organisations
ability to achieve its objectives.
Financial publics
Influences companys ability to obtain funds. Banks/Investment
Analysts/Shareholders
Media publics
Carries news, features and editorial opinion. Newspapers/Magazines/Television
Stations/Blogs
Government publics
Must take government developments into account. Marketers must consult lawyer
on issues of product safety, truth in advertising etc.
Citizen-action publics
Marketing decisions may be questioned by consumer organisations, environmental
groups, minority groups etc. PR department can help in stay in touch.
Local public
Includes neighbourhood residents and community organisations.
Large companies normally create departments and programs that deal with local
community issues and provide community support.
General public
Need to be concerned about general public attitude towards product and activities.
Public image will affect buying behaviour.
Internal public
Includes workers, managers, volunteers and BOD. Newsletters etc can be used to
motivate internal publics. Positivity spills over to external publics.
Suppliers
Provide resources needed by company to produce G&S. Must watch supply
availability and costs. Supply shortages/delays, labour strikes etc can cost sales in
short run and damage customer satisfaction in long run.
The Macroenvironment
The larger societal forces that affect the whole MICROenvironment.
Demographic
-The study of human populations (size, age, gender, density, location etc.)
E.g factors:
Economic
-Factors that affect consumer buying power and spending patterns. Total buying
power depends on current income, prices, savings and credit
E.g factors:
Changes in income, changing consumer spending patterns (Engels laws)
Natural
-Involves natural resources that are needed as inputs by marketers or are affected
by marketing activities.
E.g factors:
Shortages of raw materials, increased costs of energy, increased pollution, gov.
intervention in natural resource management.
Technological
-Forces that affect new technologies, creating new product and market
opportunities.
E.g factors:
Fast pace of technological change, high R&D budgets, increased regulation.
Political
-Law, government agencies and pressure groups that influence and limit various
organisations and individuals in a given society.
E.g factors:
Legislation regulating business, increased emphasis on ethics and socially
responsible actions.
Cultural
-Made up of institutions and other forces that affect societys basic values,
perceptions, preferences and behaviours.
E.g factors:
Persistence of cultural values
Subcultures- groups of people with shared value systems based on common life
experiences or situations. Shifts in secondary cultural values
Chapter 6
Marketing Information System (MIS) consists of people, equipment and procedures
used to gather, sort, analyse, evaluate and distribute the needed, timely and accurate
information to marketing decision makers.
Internal data
Electric collections of consumer and market information obtained from data
sources within company network.
Can be accessed more quickly and cheaply.
May be incomplete/In wrong form for making marketing decisions.
Marketing Intelligence
Competitive marketing intelligence: The systematic collection and analysis of
publically available info about competitors and developments in the marketing
environment.
Marketing Research
Marketing research: The systematic gathering, recording and analysing of data
relevant to a particular market.
Marketing Research
Marketing research process:
1. Defining problem and research objectives.
Types of objectives:
Contacts Methods
Mail
Telephone
Personal Interview
Individual/ Group (focus group)
Online
Sampling Plans
Probability Sample
Simple random- Every member has a known and equal chance of selection.
Stratified random- Population divided into mutually exclusive groups, random samples
drawn.
Cluster (area)- Divided into mutually exclusive groups, draws samples of groups to interview.
Non-Probability Sample
Convenience sample- Selects easiest population members
Judgement sample- Use his/her judgement to select population who are good prospects.
Quota sample- Finds and interviews a prescribed number of people in each of the several
categories.
Research Instruments
-Questionnaire or Survey~ Open-ended (allow to write in own words) or closed questions
(include all possible ans; choose from them).
- Mechanical instruments~ monitor consumer behaviour. Search advertising and search
advertising optimisation.
CULTURAL FACTORS
-Exert broad and deep influence
-Culture: Set of basic values, perceptions, wants and behaviours learned by a member of
society from family and other important institutions.
-Subculture: A group of people with shared value systems based on common life
experiences/situations.
-Social class: Relatively permanent and ordered divisions in a society whose members share
similar values, interests, behaviours.
SOCIAL FACTORS
- Must figure out how to reach opinion leaders (people who, because of their special skills,
knowledge, personality etc, exert influence on others).
- Buzz marketing- Cultivating or even creating opinion leaders, getting them to spread
information about a product or service to others.
-Online social networks: Online social communities like blogs, social networking websites,
where people socialise & exchange information & opinions.
-Family and Household: Roles in buying process
Initiator
Influencer
Decider
Buyer
User
PERSONAL FACTORS
-Age and lifecycle stage
-Occupation
-Economic situation
-Lifestyle
PSYCHOLOGICAL FACTORS
-Motive/Drive: A need that is sufficiently pressing to direct person to seek satisfaction of the
need.
-Need becomes motive when subjects to sufficient level of intensity.
-Perception: Process by which people select, organise, interpret info to form a meaningful
picture of world.
-Marketers have to work hard to get message through.
Selective Attention- Tendency to screen out most information to which they are
exposed.
Selective Distortion- Tendency to adapt info to personal meaning.
Selective Retention- Tendency to likely remember good points about brand they like
and forget good points about competing brands.
Dissonance-reducing
Might experience post-purchase dissonance. After sale communications must be good,
provide support.
Habitual
Use price and sales promo to stimulate interest.
Ad repetitions create brand familiarity rather than brand conviction.
Variety Seeking
Consumers a lot of brand switching. Market leader try to encourage habitual buying
behaviour.
1. Problem/Need Recognition
Buyer recognises problem/need. Buyer senses difference between actual state and
desired state. Can be triggered by internal stimuli or external stimuli.
2. Information Search
Consumer aroused to search for more information (Heightened attention or active
information search). Amount of searching depends on strength of drive, amount of info
started with, ease of obtaining info and value placed on additional info. Information
can be obtained from:
Personal sources: family friends neighbours (most effective)
Commercial sources: advertising salespeople dealers packaging
Public sources: mass media online comparison websites
Experiential sources: Handling examining using product
3. Evaluation of Alternatives
Consumer uses information to evaluate alternative brands in the choice set. How
consumer processes info to arrive at decision. Based on how they evaluate attributes,
ranking of importance of attributes.
4. Purchase Decision
Consumer actually buys the product. TWO factors come in between purchase
intention & purchase decision;
Attitude of others
Unexpected situations (e.g economy, ringgit slide)
5. Post-purchase Behaviour
1. Business/Industrial Market
All organisations that buy G&S to be used in production of other products and
services.
2. Reseller Market
All individual and organisations that acquire G&S to resell or rent to others at a
profit.
3. Government Market
Government units- federal, state and local- that purchase/rent G&S for carrying
out the main functions of government.
-Marketers must locate key decision makers, identify factors that affect buyer
behaviour and understand buyer decision process.
4. Institutional Market
Schools, hospitals, nursing homes, prisons etc. that provide G&S to the people in
their care.
-Low budget and captive patrons
-Marketers can set up special division to meet special characteristics and needs of
institutional buyers.
Characteristics of B2B markets
1. Straight rebuy
An industrial buying decision when a buyer routinely reorders something without
modification
Handled on routine basis by procurement officers. Simply chooses from supplier list
based on past buying satisfaction.
Suppliers often propose automatic reordering systems to save reordering time. Offer
something new to get foot in the door, secure larger share of purchases over time.
2. Modified rebuy
An industrial buying decision when a buyer wants to modify product specifications,
prices, terms or suppliers.
Involves more decision participants than straight rebuy.
In suppliers want to protect account, pressured to present best value proposition.
Out suppliers see as opportunity to make better offer and gain new business.
3. New task
An industrial buying decision in which buyer purchases a product/service for the first
time.
*Many business buyers prefer to buy a packaged solution from a single seller.
Systems buying- buying a packaged solution to a problem, avoids making separate
decisions involved in buying each item separately.
1. Problem Recognition
Consumer recognizes problem/need. External (buyer new ideas at trade show/ad/call
from salesperson) or internal (machine breakdown/launch new product) stimuli.
Chapter 9
Customer Driven Marketing Strategy
SELECT CUSTOMERS TO SERVE
Market segmentation is dividing the market into smaller segments of buyers with distinct
needs, characteristics or behaviours who might require separate products or marketing
mixes.
Market targeting is evaluating each segments attractiveness and selecting one or more
markets to enter.
DECIDE VALUE PROPOSITION
Market Positioning is arranging for a product to occupy a clear, distinctive and desirable
place relative to competing products in the minds of target consumers.
Differentiation is differentiating the market offering to create superior customer value.
Requirement for Effective Segmentation
1. Measurable
The size and purchasing power of segments must be able to be measured. E.g left
handed people
2. Accessible
The segments must be able to be effectively reached and served. E.g heavy users of a
certain brand are single women, stay out, socialise. Difficult to reach, nthn much in
common.
3. Substantial
Segments must be large enough and profitable enough to serve. Should be largest
possible homogeneous group worth going after w/ a tailored marketing program. E.g
developing cars for people over 220cm tall.
4. Differentiable
Segments must be conceptually distinguishable and respond differently to different
marketing mix elements and programs. E.g men and women respond same to soft
drinks so they are not separate segments.
5. Actionable
Effective programs must be able to be designed for attracting and serving the
segments. E.g Small airline develop seven market segments but staff too small to
develop separate marketing programs for each.
Dividing market into different geographical units like nations, regions, states,
municipalities, cities or neighbourhoods.
Mobile marketing- marketing through mobile electronic device. Location-based
marketing (geomarketing) when target messages are based on ones location.
E.g: Region, city size, density, climate
Demographic
Dividing market into groups based on variables like age, life cycle stage, gender,
family size, income, occupation, education, religion etc.
Psychographic
Behavioural
Dividing market into groups based on different benefits consumers seek from a
product.
E.g: Purchase occasion, benefits sought, usage rate, user status, loyalty status, online
behaviour, attitude towards product.
Niches are less competitive- companies start as nichers, gain foothold over stronger
competitors then grow into broader competitors.
Micromarketing
Positioning Strategies
Product attributes
Like low price, basis of performance, style and engineering.
Benefits offered
Like Sensodyne reduces pain associated with sensitive teeth etc.
Usage occasions
Like Gatorade- Summer, replace athletes body fluids. Winter- Drink to use when
doctor recommends drinking more fluids.
Classes of Users
Like Head and Shoulders shampoo, repositioned as suitable for everyday use rather
than medicated shampoo.
AGAINST a competitor
E.g Avis car rental Were number two so we try harder against larger competitor.
AWAY from competitor
Comparing product with competitors product.
Different product classes
E.g margarine positioned against butter, some against cooking oils. Dove against bath
oils rather than soap.
*Marketers often use a combination of these positioning strategies.
1. Product Differentiation
Can differentiate based on consistency, durability, reliability, performance,
reparability.
2. Services Differentiation
Speedy, reliable or careful delivery.
Installation (Hyundai unlimited km 5 year warranty)
Customer training service- in equipment (General Electric)
Free/Paid consulting services
3. Personnel Differentiation
Hiring and training better people than competitors.
4. Image Differentiation
Work to establish image that differentiates company from competitors.
Need creativity- should be supported by everything the company says or does.
Symbols
Type of events sponsored.
Chapter 10
Product Anything that can be offered to the market for attention, acquisition, use or
consumption that might satisfy a want/need. Includes physical objects, services,
persons, places, organisations and ideas.
Service An activity, benefit or satisfaction offered for sale that is essentially
intangible and does not result in ownership of anything.
Levels of Product & Services
Core Product
The problem solving service or core benefit that consumers are really buying when
they obtain a product.
Actual Product
A products parts, styling, features, brand name, packaging and other attributes that
combine to deliver core product benefits.
From customers perspective, the actual product delivers solution to their problem.
Augmented Product
Additional customer service and benefit built around the core and actual product.
Provide a product that customers value before and after.
The augmentations- important part of total product- contributes to choice of final
product.
Companies use augmentation to create competitive advantage.
1. Convenience Products
Consumer product/service that customer usually buys frequently, immediately
and with minimum of comparison and buying effort.
Low priced, widely available.
Can be further divided into:
- Staples: Products a customer buys on a regular basis (coffee, tea, toothpaste)
2. Shopping Products
Less frequently purchased consumer products/services that customers compare
carefully on suitability, quality, price and style.
Spend more time and effort gathering info and making comparisons.
Can be divided into:
- Uniform: Seen as similar in quality but different enough in price to justify
making comparison. Seller has to talk price to consumer
- Non-uniform: Seller must carry wide assortment to satisfy individual tastes
and must have well trained salespeople to give info. E.g furniture, clothes.
3. Specialty Products
Consumer products/services that have superior, distinctive and unique
characteristics/brand identification for which a significant group of buyers is
willing to make special purchase effort.
Buyers normally dont compare specialty products.
E.g Porsche cars, Mont Blanc pens.
4. Unsought Products
Consumer products/services that the customer either doesnt know
about/knows about but doesnt normally consider buying.
Require a lot of advertising, personal selling & other marketing efforts.
E.g prepaid funeral, life insurance, blood donations.
-Price & Service main factors; Branding & Advertising less important.
-Fall into two classes:
- Raw materials
Include farm products and natural products, each marketed somewhat
differently.
-Farm products supplied by many small producers, then turned over to
marketing intermediaries who process and sell them.
Rarely advertised and promoted.
Can attempt to differentiate by increasing quality and by branding
-Natural products (commodities) often limited in supply. They are usually
bulky, low unit value and require lots of transportation to move from producer
to user.
Producers are fewer and larger- tend to market directly to industrial users
(Long term supply contracts common).
Price and delivery main factors affecting supplier selection- Concentrate on
lowering prices.
-
2. Capital Items
Industrial product/service that contributes to production of finished products.
Includes installations and accessory equipment.
- Installations
Consists of buildings (factories, offices) and fixed equipment (generators, mainframe
computers, lifts)
Major purchases, bought directly from producer after long decision period.
Use technical sales force
Producer willing to design to specs, supply after-sales service.
Rely more on personal representation than advertising.
- Accessory equipment
Includes portable factory equipment and tools (hand tools, lift trucks) and office
equipment (personal computer, desks).
Aid in production process ONLY.
More accessory equipment sellers use resellers, market spread out geographically,
buyer numerous, order small.
Major factors in supplier selection: Price, Quality, Features, Service.
Sales force more important than advertising (but ads can be used effectively)
3. Supplies and Service
Industrial G&S that dont enter finished product at all.
-Supplies
Includes operating supplies (lubricants, fuel, pencils) and maintenance & repair items
(paint, nails, brooms).
~Convenience products of the industrial market: Usually purchased with min. effort
and comparison.
Marketed through resellers due to low unit value of products, large spread of
customers.
Price and Service important purchasing factors.
-Business services
Include maintenance and repair services (window cleaning, computer maintenance
and repair) and business advisory services (legal, management consulting, advertising
agency).
Usually supplied under contract
Normally new task buying situations, choose supplier on basis of supplier reputation
and personnel.
Product & Services Decision
Product Features
Product can be offered with varying features. Used as differentiating tool, first to
introduce valued feature is effective way to compete.
A stripped down (base) model without any extras normally starting point.
Company can create higher-level models by adding more features.
Selling features- tool to differentiate customer who dont want to pay more and
those who will.
To identify new features, decide on which to add
Survey buyers who have used product- provide rich list of future ideas.
Can assess customer value against company cost.
Product Design
Can add product distinctiveness through this
E.g Apple, Bang & Olufsen etc.
2. Branding
Brand is a name, term, sign, symbol/design, or a combination of these, intended to
identify the G&S of one/group of sellers and to differentiate them from those of
competitors.
Identifies maker of product or service. Can command strong consumer loyalty.
Branding helps consumers by:
- Identifying products that may benefit them
- Saying something about product quality and consistency.
Gives seller several advantages:
-
3. Packaging
Packaging involves the activities of designing and producing the container or
wrapper for product. Creates instant consumer recognition of the company/brand.
Highly competitive- Packaging may be last thing to influence consumer decision.
Now it must perform many functions like
- Attracting attention
- Describing the product
- Meeting legal requirements concerning contents
- Making the sale
Developing a good packaging requires many decisions- Establish packaging
concept (what it should be/do)- Elements must work together to support
products positioning and marketing strategy, products advertising, pricing and
distribution.
Must also heed growing environmental concerns- sustainability strategy.
4. Labelling
Labels may range from a simple tag attached to product or complex graphics that
are part of packaging.
Must contain all info required in countries in which products are sold.
Upward Stretching
Companies at lower end of market- stretch lines upward
Attracted by faster growth rate, higher margins, or to position as full-time
manufacturers. Add prestige to current products.
Risks
1. High end competitors may strike back by entering lower end of market
2. Prospective customers may not believe a newcomer can produce quality
goods.
3. Company salespeople and distributer may lack training and talent to serve
more complex and sophisticated high end market.
Two-way Stretching
Middle range companies- stretch in both directions
Eg: Apple ipod nano (middle), shuffle (low) and touch (high).
Branding
Brand Equity & Value
Brand Equity- The differential effect that knowing the name has on customer response to
product and its marketing. It is a measure of the brands ability to capture customer
preference and loyalty.
Brand Valuation- The process of estimating the total financial value of a brand.
High brand equity- many competitive advantages
-
*Fundamental asset for brand equity = customer equity (value of customer r/s that brand
creates). Profitable set of loyal customers.
Desirable benefit
Go beyond brands ingredients and attributes.
Should establish mission for the brand when positioning and vision of what it must be or do.
A brand is a companys promise to consumers. A brand contract with customers- simple &
honest.
2. Brand Name Selection
Begins with review of product & benefits, target market and proposed marketing
strategies.
Suggest something about products benefits & qualities
Easy to pronounce, recognise, remember.
Distinctive
Easily translated into foreign languages.
Capable of registration and legal protection.
3. Brand Sponsor Decision
FOUR sponsorship options:
i.
National brand/ Manufacturers brand (e.g Heinz)
ii.
Store brand- sold to marketing intermediaries (private label-e.g
$mart Buy)
iii.
Licencing- Pay licence fees to use brands of others.
iv.
Co-brand Two well-known brands in one product.
Licensing
For a fee, can provide instant, proven brand name. E.g Nickelodeon.
Co-Branding
The practice of using an established brand names of two different companies on the same
product. Must trust each other to take good care of brand.
Advantages:
-
Limitations:
-
4. Brand Development
i.
Line extensions
Using a successful brand name to introduce additional items in given product
category under the same brand name such as new flavours, forms, colours, added
ingredients or package sizes.
Reasons: To command more shelf space, excess manufacturing capacity, consumer
desire for variety, match competitors successful line extension.
Risks: Might lose specific meaning, Wont sell enough to cover development and
promo costs, cannibalise other company items.
ii.
Brand extensions
A new/modified product launched under an already successful brand name in new
category.
Advantages: Capture greater market share, realise greater advertising efficiency
than individual brands, enter new product categories easily with faster acceptance
and brand recognition.
Risks: Harm consumers attitude towards other products carrying same brand
name, may lose special position in consumers mind through overuse. Brand
dilution (when consumers no longer associate a brand with a certain product or
even similar products) might occur.
iii.
Multibranding
Seller develops two or more brands in same product category.
A way to establish different features and appeal to different buying motives,
introducing additional brands in same category.
*Product category- grouping of products, often at retail level, which may be
substituted for each other/ supplement each other in some way.
Advantage: command more shelf space, project its major brand by setting up
flanker or fighter brands.
Drawback: Each brand obtain small market share, none may be very profitable,
could end up spreading resources over many brands than build a few to highly
profitable level.
iv.
New brands
New brand name when entering new product category for which none of current
brand names are appropriate.
Or may believe power of current brand name is waning, want to create new one.
Brand Repositioning
- Altering the product and image to better meet customers expectations with its brand(s) due
to competitive action or strategy change. (can choose to alter either one as well )
- Must be careful not to lose/ confuse current loyal users.
Services Marketing
Nature and Characteristics of Service
Intangibility- Looks for signals of service quality. From place, people, price, equipment &
communications they can see. To manage, send right message = evidence management.
Inseparability- cant separate production of service from consumption of service. Providercustomer interaction = both affects outcome of service.
Variability- Unforeseen circumstances like staff having bad day, sick, may affect service.
Technology increasingly used- reduce service variability & costs.
Perishability- No problem when demand steady. When demand fluctuates, service firms
design strategies to produce better match between demand and supply.
Chapter 11
New product- A good, service or an idea that is perceived by some potential customers as
new.
Categories of new products
- New to the world
- New category entries
-Additions to product lines
- Product improvements
- Repositioning
1. IDEA GENERATION
The systematic search for new product ideas.
Internal Idea Sources
- Through formal R&D
-Encourage employees provide ideas
2. IDEA SCREENING
Screening new product ideas to spot good ideas and drop poor ones a.s.a.p.
Purpose: To reduce ideas cause product and development costs rise greatly in later
stage.
-Reviewed by new product committee. Evaluates idea against general criteria
- R-W-W (real, win, worth doing) framework.
3. CONCEPT DEVELOPMENT & TESTING
Product idea An idea for possible product that company can see itself offering to
market.
Product concept- A detailed version of new product idea stated in meaningful
consumer terms.
Concept Development
Develop products into alternative product concepts, find out how attractive
each is to consumers, choose best one.
Concept Testing
Testing new product concepts with groups of target consumers. Find out if
have strong consumer appeal or not.
Identifying Optimal Product Concepts
Choosing features that will be included in new product.
Compare different product concepts using conjoint analysis.
5. BUSINESS ANALYSIS
A strategic and/or financial evaluation of the expected return on investment (ROI) in
new product.
-Evaluation of new product proposals
-Long term financial analysis/ Comprehensive analysis of whole situation
- Early in development process/ Late in product development cycle during
commercialisation.
-Followed by marketing plan
- Business analysis- whether to launch ; Marketing plan how to launch.
6. PRODUCT DEVELOPMENT
Developing the product concept into a physical product to ensure product idea can be
turned into workable market offering.
-R&D tests more than one physical versions
-involve actual customers most times
-New product must have required functional features and convey the intended
psychological characteristics.
7. TEST MARKETING
Stage of new product development in which product and marketing program are
introduced into more realistic market settings.
-Lets marketer experience marketing the product, find pot. probs, learn where more
info is needed before going to expense of full introduction.
-Provides info on how consumers will react, company can test entire marketing
program.
-Amount of testing varies with product, cost is huge, and it takes time (competitors
can gain advantage).
-can test using simulated test markets
Test marketing business products
-May conduct product-use tests. Select small group of customers to use for lim.
time. Watch and observe. Asks about purchase intent & other reactions.
8. COMMERCIALISATION
Introducing new product into the market.
Must make 4 decisions:
When to launch
Where to launch
Whom to target
How to launch- action plan for intro. Detailed marketing plan.
Adoption process- Mental process through which an individual passes from first
learning about an innovation to final adoption.
1. Awareness
Consumer becomes aware of the product, but lacks info about it.
2. Interest
Consumer seeks info about new product
3. Evaluation
Consumer considers whether trying new product makes sense.
4. Trial
Consumer tries new product on small scale to improve estimate of value.
5. Adoption
Consumer decides to make full & regular use of new product.
Marketer aims to move consumer swiftly through these stages. Marketing strategy that
results in faster adoption and faster diffusion of innovation- faster spread within
market group over time & various categories of adopters.
Diffusion process- Process by which the use of the innovation is spread within a
market group, over time and various categories of adopters.
The product life cycle is the course of a products sales and profits during its lifetime.
It involves 5 distinct stages; Product development, introduction, growth, maturity and
decline.
1. Product development: When company finds and develops a new product idea.
Sales zero, investment costs add up.
2. Introduction: Period of slow sales growth as it is still being introduced to market.
No profits- heavy expenses of product introduction.
3. Growth: Rapid market acceptance, increasing profits.
4. Maturity: Period of slowdown in sales growth- acceptance achieved by most pot.
buyers. Profits level off/decline because of increasing marketing outlays to defend
product against competition.
5. Decline: Period when sales fall off and profits drop.
Marketing Strategies through PLC
Introduction
- Product first distributed, made available.
- Set high or low level for each marketing variable (price, promotion, product,
place). E.g high price with low promo.
- Low price, high promo- faster market penetration and largest market share.
-If choose to max. short term profits, sacrifice long term.
Growth
-Products sales start climbing quickly
- Promo costs spread over larger number profits increase.
-Add product features, improve quality. Enter new segments & distribution
channels.
- Advertising from building product awareness to building product conviction.
-Lowers prices to attract buyers
-Tradeoff : High market share vs high current profit
Maturity
-Sales growth levels off or slows.
-Normally lasts longer- most prod. in this stage now.
-Three strategies:
i) Market Modification
Try to increase consumption of current product. Looks for new users & new
market segments.
Reposition brand to appeal to larger/faster-growing segments
Decline
Product sales decline. Weak product costly to firm.
Identify product in this stage by regularly reviewing sales, market share, cost
& profit trends, decide to harvest, maintain or drop.
Can sometimes be reinvigorated with effective marketing.
Can still provide profits and introduce new customers to brand.
Harvest: Reduce various costs, hope sales holds up.
Drop: Sell it, liquidate to salvage value. *Wont run down value by harvesting.
Chapter 12
4 Internal Factors Affecting Pricing Decisions
1. Marketing Objectives
Before set price- strategy must be set.
Target market & positioning set- price fairly straightforward.
Company may seek additional objectives e.g : survival, profit max., market share
leadership & product-quality leadership.
The clearer the objective, the easier to set price.
Survival
Facing eco. Downturn, too much capacity or face heavy competition, or
changing consumer wants.
Profits less important than survival. As long it covers AVC & AFC.
Product-Quality Leadership
Want highest quality product on market.
Charge high price to cover high quality & R&D cost.
Other Objectives
Set prices low- Prevent competition
At competitors level- Stabilise market
Keep loyalty and support of resellers or avoid gov. intervention
Temp. reduced Create excitement. Draw more customers.
3. Costs
Companies with low cost, can set low prices = sales and profits
Costs also fall as result of cumulative experience over time from learning and better
processes.
Experience curve= Drop in average per unit production cost that comes with
experience.
Downward sloping curve- Good for company. Unit prod. cost will fall faster if sells
more during given period. Market needs to be ready for higher output*.
Should set price low, sales increase, costs decrease through more experience, can
lower prices more.
Information based products costing
IT products with large sunk costs- priced for volume so rapid penetration of market in
shortest time.
4. Organisational Considerations
WHO within org. sets prices.
3 External Factors Affecting Pricing Decisions
1. Market & Demand
Pricing in Different Types of Markets
Pure competition
- Market in which many buyers and sellers trade in uniform commodityno single buyer or seller has much effect on going market price.
- Marketing research, pricing, ads, promotions little to no role
- Not much time on marketing strategies
Monopolistic competition
-
Oligopolistic Competition
-
Few sellers who are highly sensitive to each others pricing and
marketing strategies.
Product can be uniform or non-uniformed.
Alert to competitors strategies & moves.
Never sure it will gain anything permanent through price cut.
If price raised, competitors might not follow.
Pure Monopoly
-
Going-Rate Pricing
- Setting prices largely based on following competitors price, rather than
company costs & demand.
- Like in oligopolistic competition, smaller firms follow leader.
Sealed-Bid/ Tenders
- Based on how firm thinks competitors will price, rather than its own costs
or demand- used when bidding for jobs!
- Cannot price below cost without harming position, if higher than costs,
lower chance of getting contract.
- Net effect of two opposite pulls- expected profit for particular bid
- Company profit x probability of winning = expected profit.
-Price diff small, will buy advanced model, if big, less advanced.
2. Optional Product/Service Pricing
The pricing of optional or accessory products along with main product.
E.g car with GPS & Bluetooth- have to pay extra
3. Captive Product/Service Pricing
The pricing of products that must be used along with main product
E.g razor blades, inkjet printers.
Services: Two-part pricing
Price of service= Fixed fee + Variable Usage Rate (profit made here)
e.g hotel and service like food.
4. By Product Pricing
Setting a price for by-products in order to make main products price more
competitive.
e.g feathers are by products of chicken processing.
Accept any price that covers more than the cost of storing and delivering them.
5. Product/Service-Bundle Pricing
Combining several products and offering bundle at reduced price
e.g burger, fries, drink in a set.
Segmented Pricing
Selling a product/ service at two or more prices where difference in prices is not based
on diff in costs. Market should be segmentable and show diff degrees of demand.
Members paying lower price should not be able to sell to segment paying higher price.
Competitor should not be able to undersell firm in segment paying higher price.
Differentiated practice should be legal.
Customer segmented pricing
Diff customers pay diff prices for same product/service.
Product form pricing
Diff versions of product are prices diff, NOT according to difference in costs.
(e.g evian water cheap but the aerosol spray exp eventhough diff in packaging
only small)
Location pricing
Diff locations are priced differently even though cost of offering is same
(e.g in cinema, diff seat diff price)
Time pricing
Prices varied seasonally, monthly, by month, day, or hour.
Psychological Pricing
A pricing approach that considers the psychology of prices not simply the economics.
The price is used to say something good about the product.
Perceived higher price as higher quality
Reference prices are prices buyers carry in their minds and refer to when looking at
given product. E.g: can display products next to more expensive ones so it seems
higher quality.
Promotional Pricing
Temporarily price products below price list, sometimes even below cost to increase
short run sales.
Loss leaders- supermarkets price some products as this, hoping to attract customers in
and buy other items at markup.
Special event pricing
Cash rebates
Low-interest financing longer warranties or free maintenance to reduce
consumers price.
Discounts- to increase sales and reduce inventories.
Value Pricing
Adjusting pricing to the right combination of quality & good service at fair price.
Geographical Pricing
FOB-Origin Pricing
Good are placed free on board carrier and customer pays freight from factory
to destination.
7. International Markets
Companies must decide what prices to charge different countries. Most adjust to match local
market conditions and cost considerations.
Chapter 13
Upstream partners are firms that supply raw materials, components, parts, information,
finances, and expertise needed to create a product or service.
Downstream partners include the marketing channels or distribution channels that look
toward the customer, including retailers and wholesalers.
Value delivery network is composed of the company, suppliers, distributors, and, ultimately,
customers who partner with each other to improve the performance of the entire system.
Nature and Importance of Marketing Channels
Marketing channel (distribution channel) is a set of interdependent organizations that help
make a product or service available for use or consumption by the consumer or business user.
How they add value?
Information- Gather, distribute marketing research and intell info about players &
external forces in environment- for company to plan and facilitate exchange.
Promotion- Develop & communicate info about a product/service.
Contact- Finding & communicating with prospective buyers
4)
5)
6)
7)
8)
2)
3)
4)
5)
Warehousing Decisions
- Decide on best number of stocking locations. More= quicker delivery. But costs
increase. Must balance desired level of cust. service against distribution costs.
Inventory Decisions
-3 kinds of inventory: Raw materials/ input supplies to a conversion process, work-inprocess and finished goods.
- Finished goods most exp inclu all costs.
- Decisions involve knowing when to order and how much to order.
-When: Balance risks of running out of stock vs cost of too much
-How much: Balance order processing costs vs inventory carrying costs.
7)
Transport Decisions
-Affects pricing, delivery performance, condition of goods when arrive.
- Can choose from : Rail transport, road, water, air, pipeline.
- intermodal transportation methods: Two or more used.
8)
Horizontal Conflict
Conflict between firms at same level of the channel- insurance agent w
insurance agent, franchise w franchise.
Vertical Conflict
Conflicts between different levels of same channel
3 Types of VMNs
1.
Corporate VMN
Combine successive stages of production and distribution under single
ownership.
Channel leadership established through common ownership.
2.
Contractual VMN
Consist of independent firms at different levels of production and distribution
who join together through contracts.
Three types:
Wholesaler sponsored voluntary chains
Wholesalers organise voluntary chains of independent retailers to help compete
with large corporate chain organisations.
Retailer cooperatives
Retailers organise new, jointly owned wholesale business.
Franchise Organisations
A channel member called a franchiser links several stages in the productiondistribution process.
3.
Administered VMN
Coordinates successive stages of production and distribution through the size
and power of one of the parties.
A channel arrangement in which two or more companies at one level join together to follow a
new marketing opportunity.
Multichannel Network
Multimarketing channel networks- A single firm sets up 2 or more marketing channels to
reach one or more segments.
3 Strategies to Determine Number of Marketing Intermediaries
1.
Intensive Distribution
Stocking the product in as many outlets as possible
2.
Exclusive Distribution
Giving a limited number of dealers the right to distribute the companys
products in their territories.
3.
Selective Distribution
The use of more than one BUT fewer than all of the intermediaries
who are willing to carry the product.
Chapter 14
The main types of retailers:
Amount of Service
-
Limited-service Retailer
Provides only a limited number of services to shoppers.
Like hardware chains
Full-service Retailers
Provide full range of services to shoppers.
Like specialty stores and first class department stores.
Department Stores
Carries a wide variety of product lines, typically- clothing, home furnishing
and household.
Each line operated as separate department which may be managed by
specialist buyers or merchandisers, or may be performed centrally.
Supermarkets
Large, low cost, low margin, high volume, self service store, that carries wide
variety of food, laundry and household products.
Convenience Stores
A small store, located near residential area, open long hours seven days a
week, carrying a limited line of high turnover convenience goods.
Hypermarkets
Huge store that combines supermarket, discount & warehouse
retailing. Other than food, also carries- furniture, appliances, clothing
etc.
Category Killer
Giant specialty store, carries a very deep assortment of particular line,
staffed by knowledgeable employees.
Control of Outlets
- Corporate Chains
A group of retail outlets with common ownership and control, using
central buying and merchandising, and selling similar lines of
merchandise, usually with national (and sometimes international)
coverage.
-
Voluntary Chain
Wholesaler sponsored group of independent retailers that engages in
group buying and common merchandising.
Retailer Cooperative
A contractual association of independent retailers who engage in group
buying and merchandising
-Franchising
A contractual association between manufacturer, wholesaler or
service organisation (franchiser) and independent business people
(franchisees) who buy the right to own/operate one or more units in the
franchise system
2.
3.
Bulk Breaking
Wholesalers can save customers money by buying in carload lots & breaking
bulk (breaking large lots into small quantities).
4.
Warehousing
Wholesalers hold inventories, reducing inventory costs and risks of suppliers
and customers.
5.
Transportation
Can provide quicker delivery to buyers, cause closer than producers.
6.
Financing
Finance customers by giving credit. And to suppliers- by ordering early and
paying promptly.
7.
Risk bearing
Absorb risk by taking title & bearing cost of theft, damage, spoilage and
obsolescence.
8.
Market Information
Give info to suppliers & customers about competitors, new products and price
development.
9.
3 Types of Wholesalers
1)
Merchant Wholesalers
Independently owned business that takes title to merchandise it handles.
- Full service Wholesalers
Provide set of full services- carrying stock, using sales force, offering credit,
making deliveries, management assistance.
Either wholesale merchants or industrial distributor:
Wholesale merchants- Sell mostly to retailers, provide full range services.
Vary in breadth of product line.
Industrial distributors- Sell to producers. Provide inventory, credit, delivery
etc. B2B may concentrate on lines like maintenance and operating supplies,
original equipment goods or equipment.
-
2)
Agents
Represents buyer and sellers on more permanent basis
Several types:
Manufacturers agents- Represent two or more manufacturers of related lines.
Have formal agreement w manufacturer, know each product line, use contacts
to sell. Hired by small producers who cant afford to maintain field sales force
or by large producers who want to open new territories/sell in areas that cant
support full time sales person.
Selling agents- Contract to sell producers entire output. Serves as sales
department, much influence over prices and T&C of sale. No territory limits.
Purchasing agents- Make purchases for buyers, receive, inspect, warehouse &
ship goods to buyers. Know a lot about product line, helpful info and can
obtain best goods and prices.
Commission merchants- Take physical possession of products, negotiate
sales. Not on long term basis. Typically agriculture.
3)
Definition: The concept of a company carefully integrating and coordinating its online and
offline communication channels to deliver a clear, consistent and compelling message about
the organisation & its products.
3.
4.
5.
6.
7.
8.
9.
Sender
The party is sending the message to another party (McDonalds)
Encoding
The process of putting thought into symbolic form (Mcd ad agency assembles
words and illustrations into ad to convey intended message)
Message
The set of symbols the sender transmits (Mcds advertisement)
Media
The communication channels through which the message moves from sender
to receiver (TV channels chosen by Mcds agency)
Decoding
The process of which the receiver assigns meaning to symbols encoded by
sender (consumer notices ad, interprets the words & illustrations)
Receiver
The party receiving the message sent by another party (the consumer who
watched the ad)
Response
The reaction of consumer after being exposed to the message (any hundreds of
possible responses)
Feedback
Part of the receivers response communicated back to sender (Mcd research
that shows customers like the ad)
Noise
The unplanned static/distortion (competing stimuli) during communication
process that results receiver getting diff message than intended one.
2.
3.
Knowledge
Need to know what knowledge they have.
Might then decide to select product knowledge as first comm. objective.
Liking
Can be measured- market research.
If dislike- learn why, develop marketing comm. campaign create favourable
feeling.
Preference
Measure- Ask sample to rate.
Try build customer preference
Promote quality, value, performance- Measure again to check.
Conviction
Build conviction that it will be valuable so they buy
Purchase
Have conviction but not enough to buy- Promote, offer at lower price, offer
premium, let them try on daily basis.
Effective marketing comm. needs good design.
Design a Message
Get attention, hold interest, arouse desire, obtain action (AIDA method)
- Message Content
Rational Appeal- Relate to audiences self interest, show product will produce
desired benefits; quality, economy, value, performance.
Emotional Appeal- Stir up negative/positive emotions that motivate
purchase ; fear, guilt, shame, love, humour.
Moral Appeal- Sense of right & wrong, Urge to support social causes.
-
Message Structure
4.
Message Format
Need strong format
Illustration, Headline & Copy(main block of text)- must work well tgt.
Choose Media
Must choose a channel of communication
Two types:
Personal
- Two or more people communicate directly with each other (inclu. face to face,
person to audience, telephone, mail or elec media)
- Effective: Allow for interaction.
- Word of mouth- Most effective- personal influence
- Target opinion leaders, engage in buzz marketing
Non-Personal
1.
5.
6.
2.
3.
4.
5.
Advantages
Advertising
1.
2.
3.
4.
Sales Promotion
1.
2.
3.
Limitations
1.
2.
3.
4.
Personal Selling
1.
2.
3.
4.
Public Relations
1.
2.
3.
4.
Direct Marketing
1.
2.
3.
4.
1.
2.
3.
Believability
Reach prospects who
avoid salespeople & ads.
Can dramatise a
company/product.
Effective, economical- tgt
with other promo mix.
Non-public- directed at
specific person
Immediate & customisedprepared quickly, tailored
to appeal to specific
consumers.
Interactive- allows
dialogue between
marketing team &
consumer.
Highly targeted marketing
1.
Limitations on how
customer data can be used.
5.
efforts
Build customer
relationships.
3. Buyer-Readiness Stage
Marketing comm. tools vary effect at diff stages of buyer readiness.
1.
ADVERTISING
Definition: Any paid form of non-personal presentation & promotion of ideas, G&S by
identified sponsor.
Decisions developing Advertising program
Newspapers
Internet
Direct Mail
Magazines
Advantages
Good mass marketing
coverage
Low cost per exposure
Combines sight, sound &
motion
Appealing to senses
High attention & reach
Flexibility
Timeliness
Good local coverage
Broad acceptance
High believability
High selectivity
Immediacy
Interactive capabilities
Easy to measure number
of exposures
Limitation
High absolute cost
High clutter
Fleeting exposure
Less audience selectivity
Radio
Outdoor/cinema
Short life
Poor reproduction quality
Small pass along audience
2.
3.
4.
5.
Press Relations Place newsworthy info into news media to attract attention to
a person, product/service.
Product Publicity- Publicising specific products.
Corporate Communication- Create internal & external comm. to promote
understanding of company/institution to shareholders/financial institutions.
Lobbying- Dealing with legislators & gov. officials to promote/defeat legislation
& regulation.
Counselling- Advise management about public issues, company position &
image.
Development: Working with donors/members of non profit org to gain
financial/volunteer support.
Tools of PR
News
Find/create favourable news about company/products/people
Special Events
News conference, press tours, grand openings with spectaculars that interest
public.
Written Materials
To reach and influence target markets like annual reports, brochures, articles,
newsletters and magazines.
3.
Audiovisual tools
Films, slide-and-sound programs also used. Like Will it Blend
Community Services
Improve public goodwill by contributing time and money.
SALES PROMOTION
Definition: Short term incentives to encourage purchase/sale of a product/service.
Sales Promotion Objectives
Consumer promotions objectives:
Urge short term customer buying
Enhance customer brand involvement.
Trade promotions objectives:
Getting retailers to carry new items & more inventory
Buy ahead promote companys products
More shelf space.
Setting Sales Promotion Objectives
Rather than create short term sales only or temp. brand switching, it should
reinforce product position and build long term customer r/s.
Redeemable Coupons
Coupons carried on-pack or other media, when forwarded to marketer
or appointed agent, can be redeemed for a product/service, or discount
on next purchase.
Premium Offers
Goods offered FOC/ at reduced price as incentive to buy a product.
Advertising Specialties
Useful articles imprinted with advertisers name, given as gifts to
consumers.
2.
3.
4.
Size of incentive
Set conditions for participants
How to promote, distribute the promotion program itself.
Length of promotion
Evaluation
PERSONAL SELLING
Definition: Involves personal presentations by the firms sales force for the purpose of
making sales and building customer relationship
Types of Personal Selling
1.
5.
2.
Pre-Approach
Salesperson learns as much as possible about prospect before making call.
Set call objectives and decide best approach.
3.
Approach
Salesperson meets and greets buyers to get r/s off to good start.
4.
5.
Handling Objections
Seeks out, clarifies & overcomes customer objections to buying.
6.
Closing
The salesperson asks customer for an order.
Know how to recognise closing signals. Start of relationship.
7.
Follow-Up
Last step in selling process, follow up after sale to ensure satisfaction & repeat
business.
Must say thank you.
DIRECT MARKETING
Definition: Connecting directly with targeted segments/individual customers, often on
one-to-one, interactive basis, to effect trackable & measurable responses/transactions.
Benefit to buyers:
- Convenient, easy, private
- Give access to a wealth of comparative info about competitors, companies &
products.
- Immediate & interactive.
Benefit to seller:
-
1.
2.
3.
4.
Personal Selling
A companys sales force creates and communicates customer value through
personal interactions with customers and build customer relationship.
A form of selling associated with more B2B transactions. It is personal in
nature and may be on a one-to-one or one to many basis.
Direct Mail Marketing
Printed materials sent by mail and conveying offers to customers, whether
targeted to the recipient by name, or to the business or householder by a
broader targeting method.
High target market selectivity, one-to-one comm. Junk
Direct Print & Reproduction Marketing
The use of printed materials such as mail and catalogues to convey offers to
existing and high value prospective customers.
Not junk,
Catalogue Marketing
Printed listing of products, often featuring high-quality reproduction of the
items on sale.
More going digital. Best way to drive online sales.
Perception that must be held by consumers for this to be successful:
- Unique product offers
5.
6.
7.
Telesales
Routine order taking by operator.
8.
9.
Direct Selling
Selling directly to customers by impersonal means, such as online, by mail
order, and so on.
10.
11.
Online Marketing
Marketing via the Internet using company Web sites, online ads and
promotions, e-mail, online video, and blogs to achieve marketing objectives.
Blogs
Online journals where people and companies post their thoughts and
other content, usually related to narrowly defined topics.
Social Media
Independent and commercial online communities where people
congregate, socialize, and exchange views and information.