Marketing Management

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Contents
Marketing Mix and Key Marketing Activities
Developing Market Segmentation
Product Planning and Development
Promotion Mix : Advertising, Publicity, Personal Selling and Sales Promotion
Distribution Planning and Pricing Strategy
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Marketing Mix and Market Segmentation

Marketing Credo There is only one valid definition of business purpose : to create a customer Peter Drucker

Marketing Mix Product Price Place Promotion Target Market

Key Marketing Activities Consumer Analysis Product Planning Price Planning Distribution Planning Promotion Planning

Key Marketing Activities Consumer Analysis Product Planning Examination and evaluation of consumer characteristics, needs, and purchase processes Development and maintenance of products, product assortments, product positions, brands, packaging, options, and deletion of old products Price Planning Outlines price ranges and levels, pricing techniques purchase terms, price adjustments, and the use of price as an active or passive factor

Key Marketing Activities Distribution Planning Establishment of channel relations, physical distribution, inventory management, warehousing, transportation, allocation of goods, and wholesaling Promotion Planning Combination of advertising, publicity, personal selling, and sales promotion to drive sales revenue

Product/Market Matrix Existing Products New Products Existing Markets New Markets Market Penetration Market Development Product Development Diversification

Product/Market Matrix Market Penetration Market Development
The firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share
Effective when the market is growing or not yet saturated
The firm seeks growth by targeting its existing products to new market segments
Effective when a local or regional business looks to wider its market, new market segments are emerging due to changes in consumer life-style/demographics, and innovative uses are discovered for a mature product

Product/Market Matrix Product Development Diversification
The firms develops new products targeted to its existing market segments
Effective when the firm has a core of strong brands
The firm seeks growth by targeting its existing products to new market segments
Diversification is utilized so that the firm does not become overly dependent on one product line

Market Segmentation The division of a market into different homogeneous groups of consumers Market Segment
Should be:
measurable
accessible by communication and distribution channels
different in its response to a marketing mix
durable (not changing too quickly)
substantial enough to be profitable

Types of Market Segmentation Geographic Demographic Based on regional variables such as region, climate, population density, and population growth rate. Based on variables such as age, gender, ethnicity, education, occupation, income, and family status

Types of Market Segmentation Psychographic Behavioral Based on variables such as values, attitudes, and lifestyle Based on variables such as usage rate and patterns, price sensitivity, brand loyalty, and benefits sought

Step in Planning A Segmentation Strategy Determining characteristics and needs of consumers for the product category of the company Analyzing consumer similarities and differences Developing consumer group profiles Selecting consumer segment (s) Positioning company’s offering in relation to competition. Establishing an appropriate marketing plan

Product Planning and Development

Products : Types of Goods Types of Goods Convenience Goods Shopping Goods Specialty Goods

Convenience Goods Convenience Goods
Those purchased with a minimum of effort, because the buyer has knowledge of product characteristics prior to shopping
The consumer does not want to search for additional information (because the item has been bought before) and will accept a substitute rather than have to frequent more than one store

Convenience Goods
Staples are low-priced items that are routinely purchased on a regular basis, such as detergent, milk, and cereal
Impulse goods are items that the consumer does not plan to buy on a specific trip to a store, such as candy, a magazine, and ice cream
Emergency goods are items purchased out of urgent need, such as an umbrella during a rainstorm, a tire to replace a flat, or aspirin for a headache
Convenience Goods

Shopping Goods Shopping Goods
Those for which consumers lack sufficient information about product alternatives and their attributes, and therefore must acquire further knowledge in order to make a purchase decision

Shopping Goods Shopping Goods
For attribute-based shopping goods , consumers get information about and then evaluate product features, warranty, performance, options, and other factors. The goods with the best combination of attributes is purchased. Sony electronics and Calvin Klein clothes are marketed as attribute-based shopping goods
For price-based shopping goods , consumers judge product attributes to be similar and look around for the least expensive item/store

Specialty Goods Specialty Goods
Those to which consumers are brand loyal.
They are fully aware of these products and their attributes prior to making a purchase decision.
They are willing to make a significant purchase effort to acquire the brand desired and will pay a higher price than competitive products, if necessary.
For specialty goods, consumers will not make purchases if their brand is not available. Substitutes are not acceptable.

Services Type of Services Rented- goods Service Owned-goods service Non-goods

Services Rented- goods Service Owned-goods service Non-goods Involves the leasing of a good for a specified period of time. Examples include car, hotel room, apartment, and tuxedo rentals Involves an alteration or repair of a good owned by the consumer. Examples include repair services (such as automobile, watch, and plumbing), lawn care, car wash, haircut, and dry cleaning Provides personal service on the pan of the seller; it does not involve a goods. Examples include accounting, legal, and consulting services

Characteristics of Services
The intangible nature of many services makes the consumer's choice more difficult than with goods
The producer and his or her services are often inseparable
The perishability of services prevents storage and increases risks
Service quality may be variable

Product Life Cycle Introduction Growth Maturity Decline

Product Life Cycle Persuasive Informative Promotion Greater range of prices Depends on product Pricing Rising number of outlets Depends on product Distribution Expanding line One or two basic models Product mix Affluent mass market Innovators Customers Increasing Negative Industry profits Some None or small Competition Rapidly increasing Increasing Industry sales Expand distribution and product line Attract innovators and opinion leader to new product Marketing objective Growth Introduction Characteristics

Product Life Cycle Informative Competitive Promotion Selected prices Full line of prices Pricing Decreasing number of outlets Greatest number of outlets Distribution Best-sellers Full product line Product mix Laggards Mass market Customers Decreasing Decreasing Industry profits Limited Substantial Competition Decreasing Stable Industry sales (a) cut back, (b) revive, (C) terminate Maintain differential advantage as long as possible Marketing objective Decline Maturity Characteristics

New Product Planning Idea Generation Product Screening Concept Testing Business Analysis Product Development Test Marketing Commercial-ization

New Product Planning Idea Generation
A continuous, systematic search for new product opportunities
It involves delineating sources of new ideas and methods for generating them
Product Screening
After the firm identifies potential products, it must screen them
Many companies use a new-product screening checklist for preliminary evaluation

Screening Checklist PRODUCTION CHARACTERISTICS OF NEW PRODUCTS Fit with production capabilities Length of time to commercialization Ease of product manufacture Availability of labor and material resources Ability to produce at competitive prices MARKETING CHARACTERISTICS OF NEW PRODUCTS Fit with marketing capabilities Effect on existing products (brands) Appeal to current consumer markets Potential length of product life cycle Existence of differential advantage Impact on image Resistance to seasonal factors GENERAL CHARACTERISTICS OF NEW PRODUCTS Profit potential Existing competition Potential competition Size of market Level of investment Patentability Level of risk

New Product Planning Concept Testing Business Analysis
Concept testing presents the consumer with a proposed product and measures attitudes and intentions at this early stage of development
Concept testing is a quick and inexpensive way of measuring consumer enthusiasm
Business analysis for the remaining product concepts is much more detailed than product screening
Because the next step is expensive and time-consuming product development, critical use of business analysis is essential to eliminate marginal items

Business Analysis Variables Time to recoup initial costs; short- and long-run total and per-unit profits; control over price; return on investment (ROI) Profitability Product planning (engineering, patent search, product development, testing); promotion; production; distribution Required investment Short-run and long-run market shares of company and competitors; strengths and weaknesses of competitors; potential competitors; likely competitive strategies in response to new product by firm Competition Total and per unit costs; use of existing facilities and resources; startup vs. continuing costs; estimates of future raw materials and other costs; economies of scale; channel needs; break-even point Cost projections Price/sales relationship; short- and long-run sales potential; speed of sales growth; rate of repurchases; channel intensity Demand projections Considerations Factors

New Product Planning Product Development Test Marketing
Product development converts a product idea into a physical form and identifies a basic marketing strategy
It involves product construction, packaging, branding, product positioning, and attitude and usage testing.
Test marketing involves placing a product for sale in one or more selected areas and observing its actual performance under the proposed marketing plan.
The purpose is to evaluate the product and pretest marketing efforts in a real setting prior to a full-scale introduction

New Product Planning Commercial-ization
After testing is completed, the firm is ready to introduce the product to its full target market. This is commercialization and corresponds to the introductory stage of the product life cycle
Commercialization involves implementing a total marketing plan and full production

Promotion Mix : Advertising, Publicity, Personal Selling and Sales Promotion

Promotion Mix Advertising Publicity Personal Selling Sales Promotion Target Market

Promotion Mix A Kodak video camera displayed at consumer photography shows Retail sales personnel explaining how a Kodak video camera works Newspaper article reporting on the unique features of a Kodak video camera Television ad for a Kodak video camera Example To stimulate short-run sales, to increase impulse purchases To deal with individual consumers, to resolve questions, to close sales To reach a mass audience with an independently reported message To appeal to a mass audience at a reasonable cost, and create awareness and favorable attitudes Major goal Moderate Moderate High Moderate Credibility High High None High Control over content and placement Moderate High Low Low Flexibility Company Company No formal sponsor in that media are not paid Company Sponsor Moderate per customer High per customer None for media space and time; can be moderate costs for press releases and publicity materials Low per viewer or reader Cost Varies Specific Uniform Uniform Message Varies Small (one-to-one) Mass Mass Audience Sales Promotion Personal Selling Publicity Advertising Factor

Four Key Steps to Advertise Determine message content and devise an ad Specify the location of an ad (media placement) Outline a promotion schedule Choose how many variations of a basic message to utilize

Things to Consider in Advertising Waste Reach Waste is the portion of an audience that is not in a firm's target market. Because media appeal to mass audiences, waste is a significant factor in advertising. Reach refers to the number of viewers or readers in the audience

Things to Consider in Advertising Frequency Message permanence Frequency is how often a medium can be used. It is greatest for newspapers, radio, and television, where ads may appear daily and advertising strategy may be easily changed Message permanence refers to the number of exposures one advertisement generates and how long it remains with the audience

Things to Consider in Advertising Persuasive impact Clutter Persuasive impact is the ability of a medium to stimulate consumers. Television often has the highest persuasive impact because it is able to combine audio, video, color, animation, and other appeals. Clutter involves the number of ads that are contained in a single program, issue, etc. of a medium. Clutter is low when a limited number of ads is presented and high when many ads are presented.

Publicity : Poor and Good Response There is an ongoing need for publicity, strong planning, and contingency plans for bad reports. There is an infrequent need for publicity; crisis fighting is used when bad reports are circulated. Overall view of publicity Profitability is explained, data (historical and current) are provided, uses of profits are detailed: research, community development. Profits are rationalized and positive effects on the economy are cited. High profits reported Extensive news releases, statistics, and spokespeople are made available to media to present company's competitive features. The advertising campaign is stepped up. Competitor introduces new product Company spokesperson states that tests are being conducted on products, describes procedure for handling defects, and answers questions. Requests for information by media are ignored, blanket denials are issued, hostility is exhibited toward reporter of story. News story about product defects Pre-introduction news releases, product samples, and testimonials are used. Advertising is used without publicity New product introduced Company spokesperson explains the cause of the fire and company precautions to avoid it and answers questions. Requests for information by media are ignored. Fire breaks out in a company plant Good Response Poor Response Situation

Developing a Publicity Plan Setting objectives Outlining types of publicity Selecting media Creating publicity messages Timing publicity messages

Publicity Type The Red Cross makes a request for aid to tornado victims. Emergency publicity Mc Kinsey presents a biography of its president and his rise through the company. Background editorial release Apple distributes photos showing all of its personal computer products and related software Pictorial release Intel announces its new, fast-speed microprocessor Product release General Electric distributes quarterly financial data about the company. Finance release A trade association offers 10 tips on how to reduce home heating costs. Service feature article Toyota explains its goals and objectives for the 2020. Business feature article Macy's describes its decision to sell its stores in the Midwest. News publicity Example Publicity Type

Specific Personal Selling Objectives To maintain a good appearance by all personnel in contact with consumers To follow acceptable sales practices Image-Oriented Industry and company To ensure delivery, installation, etc. To follow up after a good or service has been purchased To follow up when a repurchase is near To reassure previous customers when making a new purchase Reminding To clearly distinguish good or service attributes from those of competitors To maximize the number of sales as a per cent of presentations To convert undecided consumers into buyers To sell complementary items, e.g., film with a camera To placate dissatisfied customers Persuasion To fully explain all good and service attributes To answer any questions To probe for any further questions Demand-Oriented Information Illustrations Type of Objective

Personal Selling Process Prospecting (blind, lead) Approach Customer Wants Sales Presentation Answering Questions (questions and objections) Close Follow up (satisfaction, referrals, repurchase)

Types of Sales Promotion Publishers Clearinghouse sponsors annual sweepstakes and awards automobiles, houses, and other prices. Consumers compete for prizes by answering questions (contests) or filling out forms for random drawings of prices (sweepstakes). Contests or sweepstakes When Sunlight dishwashing liquid was introduced, free samples were mailed to consumers. Free merchandise or services are given consumers, generally for new items. Samples First Alert home fire alarms provides $5 rebates to consumers submitting proof of purchase. A consumer submits proof-of-purchase (usually to the manufacturer) and receives an extra discount. Refund or rebate P&G mails consumers a 25-cents-off coupon for Sure deodorant, which can be redeemed at any supermarket. Manufacturers or retailers advertise special discounts for customers who redeem coupons. Coupons Illustration Characteristics Type

Types of Sales Promotion Savings banks offer a range of gifts for consumers opening new accounts or expanding existing ones. Consumers are given gifts for making a purchase or opening a new account. Gifts Virtually every major league baseball team has an annual "Old Timers' Day," which attracts large crowds. Manufacturers or retailers sponsor celebrity appearances, fashion shows, and other activities. Special events Chewing gum sales in supermarkets are high because displays arc placed at checkout counters. In-store displays remind customers and generate impulse purchases. Point-of-purchase displays Some stores run I-cent sales, whereby the consumer buys one item and gets a second one for a penny. Consumers receive discounts for purchasing in quantity Bonus or multipacks Illustration Characteristics Type

Sales Promotion Advantages
It helps attract customer traffic and maintain brand or store loyalty
Quick results can be achieved
Some forms of sales promotion (calendars, t-shirts. Pens, etc) provide value to the consumer and are retained by them; and these forms can provide a reminder function
Impulse purchases can be increased through in-store displays

Sales Promotion Disadvantages
The image of the firm may be lessened if it continuously runs promotions. Consumers may view discounts as representing a decline in product quality and believe the firm could not sell its offerings without them.
When coupons, rebates, or other special deals are used frequently, consumers may not make purchases if the items are sold at regular prices. Instead, they will stock up each time there is a promotion.

Sales Promotion Disadvantages
Sometimes sales promotions shift the focus away from the product onto secondary factors. Consumers may be attracted by calendars, coupons, or sweepstakes instead of by product quality, functions, and durability. In the short run this generates consumer enthusiasm. In the long run this may have adverse effects on a brand's image and on sales, because a product-related differential advantage has not been developed.

Distribution Planning and Pricing Strategy

Distribution Planning
Distribution planning is systematic decision making regarding the physical movement and transfer of ownership of a product from producer to consumer.
It includes transportation, storage, and customer transactions.
Distribution functions are carried out through a channel of distribution, which is comprised of all the organizations or people involved in the process.
These organizations or people are known as channel members or middlemen.

Intensity of Channel Coverage Many in number, convenience-oriented Moderate in number, brand conscious, somewhat willing to travel to store Few in number, trend setters, willing to travel to store, brand loyal Customers Many in number, all types of outlets Moderate in number, well-established, better stores Few in number, well-established reputable stores Channel members Widespread market coverage, channel acceptance, sales volume and profits Moderate market coverage, solid image, some channel control and loyalty, good sales and profits Prestige image, channel control and loyalty, price stability and high profit margins Objectives Intensive Distribution Selective Distribution Exclusive Distribution Characteristics

Intensity of Channel Coverage Groceries, household products, magazines Furniture, clothing, watches Automobiles, designer clothes, caviar Examples Limited channel control May be difficult to carve out a niche Limited sales potential Major Disadvantages Mass advertising, nearby location, items in stock Promotional mix, pleasant shopping conditions, good service Personal selling, pleasant shopping conditions, good service Marketing Emphasis Intensive Distribution Selective Distribution Exclusive Distribution Characteristics

Methods of Channel Cooperation Proper installation and servicing of products Product guarantees Product quality Attractive in-store displays, knowledgeable salespeople, participation in cooperative programs Sales force training, sales force incentives, development of national advertising campaign, cooperative programs Promotion Proper time allowed for delivery, shipments immediately checked for accuracy Prompt filling of orders, adherence to scheduled dates Delivery Good shelf location and space, enthusiasm for product, assistance in test marketing Thorough testing, adequate promotional support New-product introduction Channel Member Action Manufacturer Action Factor

Pushing and Pulling Strategy Manufacturer Channel members Consumers Manufacturer Channel members Consumers Pushing Strategy Pulling Strategy

Price Planning A Price Represents the value of a good or service for both the seller and the buyer Price Planning Systematic decision making by an organization regarding all aspects of pricing

Factors Affecting Pricing Decisions Consumers Competitors Channel Members Government Cost Total Effects on Price Decisions

Consumers and Price Decisions Consumers
The relationship between price and consumer purchases and perceptions is explained by two economic principles — the law of demand and price elasticity of demand
The law of demand states that consumers usually purchase more units at a low price than at a high price
The price elasticity of demand defines the sensitivity of buyers to price changes in terms of the quantities they will purchase

Elastic Demand
Elastic demand occurs if relatively small changes in price result in large changes in quantity demanded
Numerically, price elasticity is greater than 1
With elastic demand, total revenue goes up when prices are decreased and goes down when prices rise
Inelastic demand takes place if price changes have little impact on quantity demanded
Price elasticity is less than 1
With inelastic demand, total revenue goes up when prices are raised and goes down when prices decline
In-elastic Demand Consumers and Price Decisions

Unitary Demand
Unitary demand exists if changes in price are exactly offset by changes in quantity demanded, so that total sales revenue remains constant.
Price elasticity is 1
Consumers and Price Decisions

Competitors and Price Decisions Competitors
Another element contributing to the degree of control a firm has over prices is the competitive environment within which it operates

Market-controlled price environment
Characterized by a high level of competition, similar goods and services, and little control over price by individual companies
Characterized by moderate competition, well-differentiated goods and services, and strong control over price by individual firms
Company-controlled priced environment Competitors and Price Decisions

Government-controlled price environment
Characterized by prices set by the government. Examples are public utilities, buses, taxis, and state universities
Competitors and Price Decisions

Channel Members and Price Decisions Channel Members
A wholesaler or retailer can gain stronger control over price by stressing its importance as a customer to the manufacturer, refusing to carry unprofitable product, stocking competitive items, and developing strong dealer brands so that consumers are loyal to the seller and not the manufacturer
Sometimes retailers engage in selling against the brand, whereby they stock merchandise, place high prices on it, and then sell other brands for lower prices. This is often done to increase the sales of their own brands

Channel Members and Price Decisions Channel Members
To ensure channel member cooperation with price decisions, the manufacturer needs to consider four factors: channel member profit margins, price guarantees, special deals, and the impact of price increases

Government and Price Decisions Government Price fixing regulations Prohibitions against price discrimination among channel members Unfair sales acts : predatory pricing

Cost and Price Decisions Cost Cost of raw materials and supplies Labor cost Advertising Cost Distribution Cost Pricing Decisions

Price Strategy Cost-based Price Strategy Demand-based Price Strategy Competition-based Price Strategy Price Strategy

Price Strategy Cost-based Price Strategy Demand-based Price Strategy With a cost-based price strategy, the marketer sets prices by computing merchandise, service, and overhead costs, and then adding the desired profit to these figures The marketer sets prices after researching consumer desires and ascertaining the range of prices acceptable to the target market

Price Strategy Competition-based Price Strategy
The marketer sets prices in accordance with competitors
Prices may be below the market, at the market, or above the market, depending on customer loyalty, services provided, image, real or perceived differences between brands or stores, and the competitive environment

Recommended Further Readings
Joel Evans and Barry Berman, Marketing , Prentice Hall
Phillip Kotler, Marketing Management , Prentice Hall

End of Material

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Marketing Management

by Yodhia Antariksa on May 19, 2007

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Marketing Management — Presentation Transcript