Creating Products and Pricing Strategies to Meet Customers' Needs

1. Creating Products and Pricing Strategies to Meet
Customers‘ Needs

2. The Marketing Concept
• Marketing is finding out the needs and wants of potential buyers and
then providing goods and services that meet or exceed the expectations
of those buyers

3. • The marketing concept is based on the “right” principle
• Marketing is the process of getting the right goods or services or
ideas to the right people at the right place, time, and price, using the
right promotion techniques and utilizing the appropriate people to
provide the customer service associated with those goods, services,
or ideas
The Marketing Concept

4. Marketing Concept
Marketing concept involves the following:
• Focusing on the needs and wants of the customers so the organization
can distinguish its product(s) from competitors’ offerings. Products can be
goods, services, or ideas.
• Integrating all of the organization’s activities, including production and
promotion, to satisfy these wants and needs
• Achieving long-term goals for the organization by satisfying customer
wants and needs legally and responsibly.
e.g. Disney past pass

5. • Disney found that some of its patrons really disliked waiting in lines.
In response, Disney began offering FastPass at a premium price,
which allows patrons to avoid standing in long lines waiting for
attractions.

6. • Customer value is the ratio of benefits for the customer (organization or
consumer) to the sacrifice necessary to obtain those benefits.
Businesses that provide customer value believe that many customers will pay a
premium for superior customer service or accept fewer services for a value
price
• Customer satisfaction is the customer’s feeling that a product has met or
exceeded expectations.
JD Powers surveys car owners two years after they make their purchase. Its
Customer Satisfaction Survey is made up of four measures that each describe
an element of overall ownership satisfaction at two years: vehicle quality/
reliability, vehicle appeal, ownership costs, and service satisfaction from a
dealer. Lexus continues to lead the industry and has been America’s top-
ranked vehicle for five years in a row

7. • Relationship marketing is a strategy that focuses on forging long-term
partnerships with customers. Companies build relationships with
customers by offering value and providing customer satisfaction
• All major airlines have frequentflyer programs. After you fly a certain
number of miles, you become eligible for a free ticket. Now, cruise
lines, hotels, car rental agencies, credit-card companies, and even
mortgage companies give away “airline miles” with purchases.

8. Creating a Marketing Strategy
• Marketing strategy is really five different components of marketing.
These components are called “the Five Ps” of marketing.
• These five tools are also called “the marketing mix.”
Product
Price
Place
Promotion
People

9. 5 P’s
• Product: Something offered in exchange and for which marketing
actions are taken and marketing decisions made. Products can be
goods (physical things such as smartphones) or services (such as the
telecommunications that must be used for a smartphone to work) or
ideas (such as the thought that being constantly connected through
telecommunications is absolutely crucial in today’s society). All
products have both tangible and intangible aspects

10. • Price: Something given in exchange for a product. Price may be
monetary or nonmonetary (such as waiting in long lines for a
restaurant or giving blood at the local blood bank). Price has many
names, such as rent, fees, charges, and others.

11. • Place: Some method of getting the product from the creator of the
product to the customer. Place includes a myriad of important tasks:
transportation, location, supply chain management (managing each
entity that deals with the product in its route to the buyer), online
presence, inventory, and atmospherics (how the office, store, or even
the website looks).

12. • Promotion: Methods for informing and influencing customers to buy
the product. Promotion includes several different components –
traditional advertising, sales promotion, public relations, personal
selling, social media, and e-commerce.

13. • People: Methods of utilizing organization employees to support the
marketing strategies of the company. All products have both tangible
and intangible aspects. People (as a marketing strategy) are crucial to
the development of the product’s intangible aspects.

14. Many organizations assemble a team of specialists to continually collect and
evaluate environmental information, a process called environmental scanning.
The goal in gathering the environmental data is to identify current and future
market opportunities and threats.

15. Defining the Target Market
• The target market is the specific group of customers toward which a firm
directs its marketing efforts
Table 11.1 page 417

16. Creating a competitive advantage
Competitive advantage, also called a differential advantage, is a set of unique
features of a company and its products that are perceived by the target
market(s) as significant and superior to those of the competition.
• A firm that has a cost competitive advantage can produce a product or service
at a lower cost than all its competitors while maintaining satisfactory profit
margins.
• For example, Bell Labs invented fiber-optic cables that reduced the cost of voice
and data transmission by dramatically increasing the number of calls that
could be transmitted simultaneously through a two-inch cable.
• Within five years, however, fiber-optic technology had spread through the
industry, and Bell Labs lost its cost competitive advantage. Firms may also lose
their cost competitive advantage if competing firms match their low costs by
using the same lower-cost suppliers

17. • Product Differentiation Competitive Advantage: e.g. brand names,
product reliability, strong dealer network
Brand names such as Chanel, BMW, and Cartier stand for quality the
world over
• Service Differentiation Competitive Advantage:
• e.g. ??
Creating a competitive advantage

18. • Niche competitive advantage: companies: targets and effectively serves a
single segment of the market.
• For small companies with limited resources that potentially face giant
competitors, utilizing a niche competitive advantage may be the only
viable option
For example, Regions Bank–Music Row Private Bank follows a niche strategy
with its concentration on country music stars and entertainment industry
professionals in Nashville.
Creating a competitive advantage

19. Developing a marketing strategy
• Product strategy involves choosing a brand name, packaging, colors, a
warranty, accessories, and a service program.
• Pricing strategy is based on demand for the product and the cost of
producing that product.
Some firms enter the market with low prices and keep them low, such as
Suzuki cars. Others enter a market with very high prices and then lower
them over time, such as producers of high-definition televisions and personal
computers.

20. • Place (distribution) strategy is creating the means (the channel) by
which a product flows from the producer to the consumer.
• It includes the physical location and physical attributes of the business,
as well as inventory and control systems, transportation, supply chain
management, and even presence on the web
• One aspect of distribution strategy is deciding how many stores and
which specific wholesalers and retailers will handle the product in a
geographic area.
• Redken ( Cosmetics) products sell through hair salons.
Developing a marketing strategy

21. • Promotion strategy covers personal selling, traditional advertising, public
relations, sales promotion, social media, and e-commerce (promotional
mix)
• Social media is a major element of the promotion mix in today’s world.
Most businesses have a corporate website, as well as pages on different
social media sites such as Facebook, Pinterest, and Twitter.
• It can include actual “order online” capabilities, create online
communities, and be used to collect data from both existing and potential
customers. Some e-commerce websites offer free games and other
interactive options for their customers.
Developing a marketing strategy

22. Buyer behavior

23. Influences on Consumer Decision-Making
• Social Factors
• Culture
• Individual Influences (e.g. gender differences)
• Personality is a broad concept that can be thought of as a way of organizing
and grouping how an individual typically reacts to situations. Thus,
personality combines psychological makeup and environmental forces. It
includes people’s underlying dispositions (a person's inherent qualities of
mind and character), especially their most dominant characteristics.

24. Characteristics of the B2B Market
• Purchase volume
• Number of customers
• Location of buyers
Business customers tend to be much more geographically concentrated than
consumers. The computer industry is concentrated in Silicon Valley and a few
other areas. Aircraft manufacturing is found in Seattle, Washington; St.
Louis, Missouri; and Dallas/Fort Worth, Texas.
• Direct distribution: Business sales tend to be made directly to the buyer
Consumer goods are more likely to be sold through intermediaries such as
wholesalers and retailers

25. Market segmentation
Market segmentation is the process of separating, identifying, and
evaluating the layers of a market to identify a target market
• The five basic forms of consumer market segmentation are
demographic, geographic, psychographic, benefit, and volume

26. • Demographic segmentation uses categories such as age, education, gender,
income, and household size to differentiate among markets.
• Geographic segmentation means segmenting markets by region of the
country, city or county size, market density, or climate (Rural, Urban, Sindhi,
Punjabi)

27. • Psychographic segmentation is market segmentation by personality or
lifestyle.
• For example, Harley-Davidson divides its customers into seven lifestyle
segments, from “cocky misfits” who are most likely to be arrogant
troublemakers, to “laid-back camper types” committed to cycling and
nature, to “classy capitalists” who have wealth and privilege
• Benefit segmentation is based on what a product will do rather than on
consumer characteristics.
e.g. Sensodyne toothpaste is aimed at people with highly sensitive teeth.

28. • volume segmentation, which is based on the amount of the product
purchased
For example, in the fast-food industry, the heavy user (a young, single
male) accounts for only one in five fast-food patrons. Yet this heavy
user makes over 60 percent of all visits to fast food restaurants.

29. Marketing research
Marketing research is the process of planning, collecting, and analyzing data
relevant to a marketing decision.
• Survey research, data is gathered from respondents
• Observation research is research that monitors respondents’ actions
without direct interaction. e.g. scanners that read tags
• Experiment, the investigator changes one or more variables—price,
package, design, shelf space, advertising theme, or advertising
expenditures—while observing the effects of those changes on another
variable (usually sales).

30. Classifying Consumer Products
• Convenience products are relatively inexpensive items that require little
shopping effort. Soft drinks, candy bars, milk, bread, and small hardware
items are examples.
• shopping products are bought only after a brand-to-brand and store-to-store
comparison of price, suitability, and style. e.g. furniture, automobiles
• Specialty products are products for which consumers search long and hard
and for which they refuse to accept substitutes. E.g. Expensive jewelry,
designer clothing, limited-production automobiles.
• Unsought products are products unplanned by the potential buyer or known
products that the buyer does not actively seek e.g. life insurance, burial plots

31. Business Products
Products bought by businesses or institutions for use in making other
products are business products.
• Business products are classified as:
• Capital products are usually large, expensive items with a long life
span. Examples are buildings, large machines, and airplanes
• Expense items are typically smaller, less expensive items that usually
have a life span of less than a year. Examples are printer cartridges
and paper

32. Product Life Cycle
• Product life cycle is a pattern of sales and profits over time for a
product (Ivory dishwashing liquid) or a product category (liquid
detergents)
• As the product moves through the stages of the life cycle, the firm
must keep revising the marketing mix to stay competitive and meet
the needs of target customers.

33. Stages of the Life Cycle
• Introduction
• Growth
• Maturity
• Decline

34. Strategies for Success at Each Stage of the Product Life Cycle
Class Task Page 443

35. Price skimming
The practice of introducing a new product on the market with a high
price and then lowering the price over time
• High introductory price can create an image of quality and prestige
• When the price is lowered later, consumers may think they are getting
a bargain.
Product Pricing

36. Product Pricing
Penetration Pricing With this strategy, the company offers new
products at low prices in the hope of achieving a large sales volume.
• The low initial price may induce consumers to switch brands or
companies.
• penetration pricing may discourage competitors from entering the
market.

37. Product Pricing
Product Pricing: Pricing the products below the normal markup or even
below cost to attract customers to a store where they wouldn’t
otherwise shop
A product priced below cost is referred to as a loss leader

38. Pricing of Services
• Pricing of services tends to be more complex than pricing of products
that are goods.
• Pricing may be based on tailored services designed for a specific
buyer

39. • Bundling means grouping two or more related products together and
pricing them as a single product.
e.g. Conditioner with shampoo
• Prestige Pricing The strategy of raising the price of a product so
consumers will perceive it as being of higher quality, status, or value
• This type of pricing is common where high prices indicate high status