Marketing Concepts Rahul Guhathakurta Indian Institute of Planning & Management Ahmedabad

Brand Equity Brand Equity is a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or substracts from) the value provided by a product or service to a firm and/or that firm’s customers.

Brand Equity is a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or substracts from) the value provided by a product or service to a firm and/or that firm’s customers.

Brand Equity Increases Value Brand Equity Brand Loyalty Brand Awareness Perceived Quality Brand Associations Other Brand Assets Value to Customer Value to Firm

Categories of Assets Brand name awareness Brand loyalty/User ship of brand Perceived Quality Brand Associations Other Proprietary Brand Assets (e.g., channel relationships, patents,…)

Brand name awareness

Brand loyalty/User ship of brand

Perceived Quality

Brand Associations

Other Proprietary Brand Assets (e.g., channel relationships, patents,…)

Brand Equity and Brand Value Brand Equity provides value to customers: Interpretation/processing of information Confidence in the purchase decision Use satisfaction

Brand Equity provides value to customers:

Interpretation/processing of information

Confidence in the purchase decision

Use satisfaction

Brand Equity and Brand Identity Brand Identity Brand Associations Brand Equity

Brand Equity The added value a brand name identity brings to a product or service beyond the functional benefits provided. The accrued value of a brand, developed over a period of time, that creates a positive brand image, drives demand, and modifies client attitudes toward the brand.

The added value a brand name identity brings to a product or service beyond the functional benefits provided.

The accrued value of a brand, developed over a period of time, that creates a positive brand image, drives demand, and modifies client attitudes toward the brand.

Price Price is the sum of all the values that consumers exchange for the benefits of having or using the product or service. “ rent, tuition, fees, premiums, honoraria, salaries, wages, commissions, Why is it so dangerous? (1) Price is the only element in the marketing mix that produces revenues (PxQ); all others represent costs. (2) It’s the easiest element to change.

Price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.

“ rent, tuition, fees, premiums, honoraria, salaries, wages, commissions,

Why is it so dangerous? (1) Price is the only element in the marketing mix that produces revenues (PxQ); all others represent costs.

(2) It’s the easiest element to change.

Price Price is the value placed on what is exchanged. Something of value is exchanged for satisfaction and utility, includes tangible (functional) and intangible (prestige) factors. To a buyer price is a value placed on what is exchanged.

Price is the value placed on what is exchanged. Something of value is exchanged for satisfaction and utility, includes tangible (functional) and intangible (prestige) factors.

To a buyer price is a value placed on what is exchanged.

Importance of Price to the Marketer Relates directly to total revenue TR = Price * Qtty Profits = TR - TC

Relates directly to total revenue TR = Price * Qtty Profits = TR - TC

Types of Pricing Objectives Market share , Pricing objectives used to increase or maintain market share. Profit Survival , accept short term losses necessary for survival Customer satisfaction ROI Status

Market share , Pricing objectives used to increase or maintain market share.

Profit

Survival , accept short term losses necessary for survival

Customer satisfaction

ROI

Status

Types of Cost Factors that Affect Pricing Decisions Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production Variable Costs Costs that do vary directly with sales or production levels. Commissions, Raw materials Fixed Costs (Overhead) Costs that don’t vary with sales or production levels. Executive Salaries, Rent

Mark-up pricing In this the selling price of the product is fixed by adding a margin to its cost price The higher the value of product (unit cost of product),the larger the mark-up and vice-versa

In this the selling price of the product is fixed by adding a margin to its cost price

The higher the value of product (unit cost of product),the larger the mark-up and vice-versa

Cost-Based Versus Value-Based Pricing Product Cost Price Value Customers Customer Value Price Cost Product Cost-Based Pricing Value-Based Pricing

Skimming pricing The practice of ‘price skimming’ involves charging a relatively high price for a short time where a new, innovative, or much-improved product is launched onto a market. The objective with skimming is to “skim” off customers who are willing to pay more to have the product sooner; prices are lowered later when demand from the “early adopters” falls.

The practice of ‘price skimming’ involves charging a relatively high price for a short time where a new, innovative, or much-improved product is launched onto a market.

The objective with skimming is to “skim” off customers who are willing to pay more to have the product sooner; prices are lowered later when demand from the “early adopters” falls.

Skimming pricing Generate much needed initial cash flow, cover high R&D costs. This type of pricing structure works very well for products that are in demand or where there are few competitors - electronic equipment for example.

Generate much needed initial cash flow, cover high R&D costs.

This type of pricing structure works very well for products that are in demand or where there are few competitors - electronic equipment for example.

Price Level Policies 17-5 “ Skim the cream” pricing involves selling at a high price to those who are willing to pay before aiming at more price-sensitive consumers. Price Quantity Initial skimming price Second price Final price Skimming Pricing Sell at high price before reducing to next price level and repeat

Penetration Pricing Price reduced compared to competitors to penetrate into markets to increase sales. This type of pricing is used for products identified as being in the "introductory" stage of the product life cycle to enable the product to get a foothold in the market. It helps the firm for good coverage of the market

Price reduced compared to competitors to penetrate into markets to increase sales.

This type of pricing is used for products identified as being in the "introductory" stage of the product life cycle to enable the product to get a foothold in the market.

It helps the firm for good coverage of the market

Price Level Policies Price Quantity Penetration Pricing Whole market price Penetration pricing involves selling the whole market at one low price. 17-6

Psychological Pricing

Basic principles of Pricing Prices must at least cover costs The best way to lower the price is to lower the cost Prices must reflect the environment in which they operate Prices must be within the range of what customers are prepared to pay The price that you set should represent a fair return for your time, talent risk and investment

Prices must at least cover costs

The best way to lower the price is to lower the cost

Prices must reflect the environment in which they operate

Prices must be within the range of what customers are prepared to pay

The price that you set should represent a fair return for your time, talent risk and investment

Promotional Pricing Companies offer promotional prices to create buying excitement and urgency.

Promotional Pricing Promotional pricing BOGOF e.g. toothpaste, soups, garments etc

Promotional pricing

BOGOF e.g. toothpaste, soups, garments etc

Assessing and Responding to Competitor Price Changes

Discounts and Allowances Cash Quantity/Volume Functional Seasonal Discounts:

Distribution

Distribution

Marketing Channels The interface between producer and consumer “ An array of exchange relationships that creates customer value in acquisition and consumption of products and services”.

The interface between producer and consumer

“ An array of exchange relationships that creates customer value in acquisition and consumption of products and services”.

Place, distribution, channel, or intermediary. Comprises a set of institutions which perform all of the activities utilized to move a product and its title from production to consumption. It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer.

Comprises a set of institutions which perform all of the activities utilized to move a product and its title from production to consumption.

It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer.

Channel of Distribution The complete sequence of marketing organizations involved in bringing a product from the producer to the customer; -- a system of interdependency within a set of organizations; --a system that facilitates the exchange process.

The complete sequence of marketing organizations involved in bringing a product from the producer to the customer;

-- a system of interdependency within a set of organizations;

--a system that facilitates the exchange process.

Channel Intermediaries’ Functions Facilitate Strategic Aims: Help channel members attain their goals Fulfil Interaction Process: Coordinate ordering systems, delivery timing and merchandising Satisfy Delivery & Handling Needs: Minimize transaction uncertainty Manage Inventory: Meet warehousing, stock-out and product substitutability needs

Facilitate Strategic Aims: Help channel members attain their goals

Fulfil Interaction Process: Coordinate ordering systems, delivery timing and merchandising

Satisfy Delivery & Handling Needs: Minimize transaction uncertainty

Manage Inventory: Meet warehousing, stock-out and product substitutability needs

Distribution channel

Marketing channels create utility It creates three type of utility: Time utility Place utility Possession utility

It creates three type of utility:

Time utility

Place utility

Possession utility

Typical marketing channels for consumer product

Typical marketing channels for industrial, business-to-business products