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Essentials of marketing


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Essentials of marketing

  1. 1. Think Marketing !www.studyMarketing.orgProduced by 1
  2. 2. Contents 1. Marketing Mix and Key Marketing Activities 2. Developing Market Segmentation 3. Product Planning and Development 4. Promotion Mix : Advertising, Publicity, Personal Selling and Sales Promotion 5. Distribution Planning and Pricing Strategy If you find this presentation useful, please consider telling others about our site ( 2
  3. 3. Marketing Mix and Market 3
  4. 4. Marketing Credo There is only one valid definition of business purpose : to create a customer Peter 4
  5. 5. Marketing Mix Product Price Target Market Place 5
  6. 6. Key Marketing Activities Consumer Analysis Distribution Product Planning Planning Promotion Price Planning 6
  7. 7. Key Marketing Activities Examination and evaluation of consumer Consumer Analysis characteristics, needs, and purchase processes Development and maintenance of products, Product Planning product assortments, product positions, brands, packaging, options, and deletion of old products Outlines price ranges and levels, pricing Price Planning techniques purchase terms, price adjustments, and the use of price as an active or passive 7
  8. 8. Key Marketing Activities Establishment of channel relations, physical Distribution distribution, inventory management, Planning warehousing, transportation, allocation of goods, and wholesaling Promotion Combination of advertising, publicity, Planning personal selling, and sales promotion to drive sales 8
  9. 9. Product/Market Matrix Existing Products New Products Market Market Product Product Existing Markets Penetration Development Penetration Development Market Market Diversification Diversification New Markets Development 9
  10. 10. Product/Market Matrix Market • The firm seeks to achieve growth with Market Penetration existing products in their current market Penetration segments, aiming to increase its market share • Effective when the market is growing or not yet saturated Market Market • The firm seeks growth by targeting its Development Development 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
  11. 11. Product/Market Matrix Product • The firms develops new products Product Development Development targeted to its existing market segments • Effective when the firm has a core of strong brands Diversification • The firm seeks growth by targeting its Diversification existing products to new market segments • Diversification is utilized so that the firm does not become overly depend- ent on one product 11
  12. 12. Market Segmentation Market The division of a market into Segment different homogeneous groups of consumers 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 12
  13. 13. Types of Market Segmentation Based on regional variables such as Geographic region, climate, population density, and population growth rate. Based on variables such as age, gender, Demographic ethnicity, education, occupation, income, and family 13
  14. 14. Types of Market Segmentation Based on variables such as values, Psychographic attitudes, and lifestyle Based on variables such as usage rate Behavioral and patterns, price sensitivity, brand loyalty, and benefits 14
  15. 15. Step in Planning A Segmentation Strategy Determining Analyzing Developing characteristics and consumer consumer needs of consumers similarities and group for the product differences profiles category of the company Selecting Positioning Establishing consumer company’s an segment (s) offering in appropriate relation to marketing competition. 15
  16. 16. Product Planning and 16
  17. 17. Products : Types of Goods Convenience Goods Types of Shopping Goods Goods Specialty 17
  18. 18. Convenience Goods • Those purchased with a minimum of effort, Convenience because the buyer has knowledge of Goods 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 18
  19. 19. Convenience Goods • Staples are low-priced items that are Convenience routinely purchased on a regular basis, Goods 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 19
  20. 20. Shopping Goods • Those for which consumers lack Shopping sufficient information about product Goods alternatives and their attributes, and therefore must acquire further knowledge in order to make a purchase 20
  21. 21. Shopping Goods • For attribute-based shopping goods, Shopping consumers get information about and then Goods 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/ 21
  22. 22. Specialty Goods • Those to which consumers are brand Specialty loyal. Goods • 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 22
  23. 23. Services Rented- goods Service Type of Owned-goods service Services 23
  24. 24. Services Rented- Involves the leasing of a good for a specified period of time. Examples include car, hotel room, goods apartment, and tuxedo rentals Service Involves an alteration or repair of a good owned by Owned-goods the consumer. Examples include repair services service (such as automobile, watch, and plumbing), lawn care, car wash, haircut, and dry cleaning Provides personal service on the pan of the seller; Non-goods it does not involve a goods. Examples include accounting, legal, and consulting 24
  25. 25. Characteristics of Services • The intangible nature of many services makes the consumers choice more diffi-cult 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 25
  26. 26. Product Life Cycle Growth Maturity Introduction 26
  27. 27. Product Life Cycle Characteristics Introduction Growth Marketing objective Attract innovators and Expand distribution and opinion leader to new product line product Industry sales Increasing Rapidly increasing Competition None or small Some Industry profits Negative Increasing Customers Innovators Affluent mass market Product mix One or two basic Expanding line models Distribution Depends on product Rising number of outlets Pricing Depends on product Greater range of prices Promotion Informative 27
  28. 28. Product Life Cycle Characteristics Maturity Decline Marketing objective Maintain differential (a) cut back, advantage as long as (b) revive, possible (C) terminate Industry sales Stable Decreasing Competition Substantial Limited Industry profits Decreasing Decreasing Customers Mass market Laggards Product mix Full product line Best-sellers Distribution Greatest number of Decreasing number of outlets outlets Pricing Full line of prices Selected prices Promotion Competitive 28
  29. 29. New Product Planning Idea Product Concept Business Generation Screening Testing Analysis Product Test Commercial- Development Marketing 29
  30. 30. New Product Planning • A continuous, systematic search for new Idea product opportunities Generation • It involves delineating sources of new ideas and methods for generating them • After the firm identifies potential Product products, it must screen them Screening • Many companies use a new-product screening checklist for preliminary 30
  31. 31. Screening Checklist GENERAL CHARACTERISTICS OF NEW PRODUCTS Profit potential Existing competition Potential competition Size of market Level of investment Patentability Level of risk 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 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 31
  32. 32. New Product Planning • Concept testing presents the consumer with a proposed product and measures attitudes Concept and intentions at this early stage of Testing development • Concept testing is a quick and inexpensive way of measuring consumer enthusiasm • Business analysis for the remaining product Business concepts is much more detailed than product screening Analysis • Because the next step is expensive and time- consuming product development, critical use of business analysis is essential to marginal items 32
  33. 33. Business Analysis Variables Factors Considerations Demand projections Price/sales relationship; short- and long-run sales potential; speed of sales growth; rate of repurchases; channel intensity Cost projections Total and per unit costs; use of existing facilities and resources; startup vs. continuing costs; estimates of future raw materials and other costs; econo-mies of scale; channel needs; break-even point Competition 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 Required investment Product planning (engineering, patent search, product development, testing); promotion; production; distribution Profitability Time to recoup initial costs; short- and long-run total and per- unit profits; control over price; return on investment (ROI) 33
  34. 34. New Product Planning • Product development converts a product idea Product into a physical form and identifies a basic Development marketing strategy • It involves product construction, packaging, branding, product positioning, and attitude and usage testing. • Test marketing involves placing a product for Test sale in one or more selected areas and Marketing observing its actual performance under the proposed marketing plan. • The purpose is to evaluate the product and pretest marketing efforts in a real setting to a full-scale introduction 34
  35. 35. New Product Planning • After testing is completed, the firm is ready Commercial- to introduce the product to its full target ization market. This is commercialization and corresponds to the introductory stage of the product life cycle • Commercialization involves implementing a total marketing plan and full 35
  36. 36. Promotion Mix : Advertising, Publicity, Personal Selling and Sales 36
  37. 37. Promotion Mix Advertising Publicity Target Market Personal Sales Selling 37
  38. 38. Promotion Mix Factor Advertising Publicity Personal Selling Sales Promotion Audience Mass Mass Small (one-to-one) Varies Message Uniform Uniform Specific Varies Cost Low per viewer or None for media space High per customer Moderate per reader and time; can be customer moderate costs for press releases and publicity materials Sponsor Company No formal sponsor in Company Company that media are not paid Flexibility Low Low High Moderate Control over content High None High High and placement Credibility Moderate High Moderate Moderate Major goal To appeal to a mass To reach a mass To deal with individual To stimulate short-run audience at a audience with an consumers, to resolve sales, to increase reasonable cost, and independently questions, to close impulse purchases create awareness and reported message sales favorable attitudes Example Television ad for a Newspaper article Retail sales personnel A Kodak video camera Kodak video camera reporting on the explaining how a displayed at consumer unique features of a Kodak video camera photography shows Kodak video camera 38
  39. 39. Four Key Steps to Advertise Determine message content and devise an ad Specify the location of an ad (media placement) Choose how many Outline a promotion variations of a schedule basic message to 39
  40. 40. Things to Consider in Advertising Waste is the portion of an audience that is Waste not in a firms target market. Because media appeal to mass audiences, waste is a significant factor in advertising. Reach refers to the number of viewers or Reach readers in the 40
  41. 41. Things to Consider in Advertising Frequency is how often a medium can be Frequency 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 Message of exposures one advertisement gener­ates permanence and how long it remains with the 41
  42. 42. Things to Consider in Advertising Persuasive impact is the ability of a medium Persuasive to stimulate consumers. Television often has impact the highest persuasive impact because it is able to combine audio, video, color, animation, and other appeals. Clutter 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 42
  43. 43. Publicity : Poor and Good Response Situation Poor Response Good Response Fire breaks out in Requests for information by Company spokesperson explains the cause a company plant media are ignored. of the fire and company precautions to avoid it and answers questions. New product Advertising is used without Pre­introduction news releases, product introduced publicity samples, and testimonials are used. News story about Requests for information by media Company spokesperson states that tests are product defects are ignored, blanket denials are being conducted on products, describes issued, hostility is exhibited toward procedure for handling defects, and answers reporter of story. questions. Competitor The advertising campaign is Extensive news releases, statistics, and introduces new stepped up. spokespeople are made available to media to product present companys competitive features. High profits Profits are rationalized and positive Profitability is explained, data (historical and reported effects on the economy are cited. current) are provided, uses of profits are detailed: research, community development. Overall view of There is an infrequent need for There is an ongoing need for publicity, strong publicity publicity; crisis fighting is used planning, and contingency plans for bad when bad reports are circulated. 43
  44. 44. Developing a Publicity Plan Setting Outlining objectives types of publicity Creating Selecting publicity media messages Timing publicity 44
  45. 45. Publicity Type Publicity Type Example News publicity Macys describes its decision to sell its stores in the Midwest. Business feature article Toyota explains its goals and objectives for the 2020. Service feature article A trade association offers 10 tips on how to reduce home heating costs. Finance release General Electric distributes quarterly financial data about the company. Product release Intel announces its new, fast­speed microprocessor Pictorial release Apple distributes photos showing all of its personal computer products and related software Background editorial Mc Kinsey presents a biography of its president and his rise release through the company. Emergency publicity The Red Cross makes a request for aid to tornado 45
  46. 46. Specific Personal Selling Objectives Type of Objective Illustrations Demand-Oriented Information To fully explain all good and service attributes To answer any questions To probe for any further questions Persuasion 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 Reminding 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 Image-Oriented Industry and company To maintain a good appearance by all personnel in contact with consumers To follow acceptable sales 46
  47. 47. Personal Selling Process Prospecting Approach Customer (blind, lead) Wants Sales Answering Presentation Questions (questions and objections) Follow up Close (satisfaction, referrals, repurchase) 47
  48. 48. Types of Sales Promotion Type Characteristics Illustration Coupons Manufacturers or retailers advertise P&G mails consumers a 25­cents­ special discounts for customers who off coupon for Sure deodorant, redeem coupons. which can be redeemed at any supermarket. Refund or A consumer submits proof­of­ First Alert home fire alarms rebate purchase (usually to the provides $5 rebates to consumers manufacturer) and receives an extra submitting proof of purchase. discount. Samples Free merchandise or services are When Sunlight dishwashing liquid given consumers, generally for new was introduced, free samples were items. mailed to consumers. Contests or Consumers compete for prizes by Publishers Clearinghouse sponsors sweepstakes answering questions (contests) or annual sweepstakes and awards filling out forms for random drawings automobiles, houses, and other of prices (sweepstakes). 48
  49. 49. Types of Sales Promotion Type Characteristics Illustration Bonus or Consumers receive discounts Some stores run I­cent sales, multipacks for purchasing in quantity whereby the consumer buys one item and gets a second one for a penny. Point-of- In­store displays remind Chewing gum sales in purchase customers and generate supermarkets are high because displays impulse purchases. displays arc placed at checkout counters. Special Manufacturers or retailers Virtually every major league events sponsor celebrity appearances, baseball team has an annual "Old fashion shows, and other Timers Day," which attracts large activities. crowds. Gifts Consumers are given gifts for Savings banks offer a range of making a purchase or opening gifts for consumers opening new a new account. accounts or expanding existing 49
  50. 50. 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, t­shirts. 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 in­store 50
  51. 51. 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 51
  52. 52. 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 brands image and on sales, because a product­ related differential advantage has not been 52
  53. 53. Distribution Planning and Pricing 53
  54. 54. 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 54
  55. 55. Intensity of Channel Coverage Characteristics Exclusive Selective Intensive Distribution Distribution Distribution Objectives Prestige image, Moderate market Widespread channel control and coverage, solid market coverage, loyalty, price image, some channel stability and high channel control and acceptance, sales profit margins loyalty, good sales volume and profits and profits Channel Few in number, Moderate in number, Many in number, members well­established well­established, all types reputable stores better stores of outlets Customers Few in number, Moderate in number, Many in number, trend setters, brand conscious, convenience­ willing to travel to somewhat willing to oriented store, brand loyal travel to 55
  56. 56. Intensity of Channel Coverage Characteristics Exclusive Selective Intensive Distribution Distribution Distribution Marketing Personal selling, Promotional mix, Mass Emphasis pleasant pleasant shopping advertising, shopping conditions, good nearby location, conditions, good service items in stock service Major Limited sales May be difficult to Limited channel Disadvantages potential carve out a niche control Examples Automobiles, Furniture, Groceries, designer clothes, clothing, watches household caviar products, 56
  57. 57. Methods of Channel Cooperation Factor Manufacturer Action Channel Member Action New-product Thorough testing, adequate Good shelf location and introduction promotional space, enthusiasm for support product, assistance in test marketing Delivery Prompt filling of orders, adherence to Proper time allowed for scheduled dates delivery, shipments immediately checked for accuracy Promotion Sales force training, sales force Attractive in­store displays, incentives, development of national knowledgeable salespeople, advertising campaign, cooperative participation in cooperative programs programs Product Product guarantees Proper installation and quality servicing of 57
  58. 58. Pushing and Pulling Strategy Pushing Strategy Pulling Strategy Manufacturer Manufacturer Manufacturer Manufacturer Channel Channel Channel Channel members members members members Consumers Consumers Consumers 58
  59. 59. Price Planning Represents the value of a Represents the value of a good or service for both the good or service for both the A Price A Price seller and the buyer seller and the buyer Systematic decision making Systematic decision making Price Price by an organization regarding by an organization regarding Planning Planning all aspects of pricing all aspects of 59
  60. 60. Factors Affecting Pricing Decisions Consumers Competitors Cost Channel Government Members Total Effects on Price 60
  61. 61. Consumers and Price Decisions • The relationship between price and consumer purchases and perceptions is Consumers 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 61
  62. 62. Consumers and Price Decisions Elastic • Elastic demand occurs if relatively small changes in Elastic price result in large changes in quantity demanded Demand Demand • Numerically, price elasticity is greater than 1 • With elastic demand, total revenue goes up when prices are decreased and goes down when prices rise In-elastic • Inelastic demand takes place if price changes have In-elastic little impact on quantity demanded Demand Demand • Price elasticity is less than 1 • With inelastic demand, total revenue goes up when prices are raised and goes down when prices 62
  63. 63. Consumers and Price Decisions Unitary Unitary • Unitary demand exists if changes in price are Demand exactly offset by changes in quantity demanded, Demand so that total sales revenue remains constant. • Price elasticity is 63
  64. 64. Competitors and Price Decisions • Another element contributing to the Competitors degree of control a firm has over prices is the competitive environment within which it 64
  65. 65. Competitors and Price Decisions Market- Market- • Characterized by a high level of com­ controlled controlled petition, similar goods and services, and price price little control over price by individual environment environment companies Company- Company- • Characterized by moderate competi­tion, controlled controlled well­differentiated goods and services, and priced priced strong control over price by individual firms environment 65
  66. 66. Competitors and Price Decisions Government- Government- • Characterized by prices set by the controlled controlled government. Examples are public utilities, price price buses, taxis, and state universities environment 66
  67. 67. Channel Members and Price Decisions • A wholesaler or retailer can gain stronger Channel control over price by stressing its importance as Members 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 67
  68. 68. Channel Members and Price Decisions • To ensure channel member cooperation with Channel price decisions, the manufacturer needs to Members consider four factors: channel member profit margins, price guarantees, special deals, and the impact of price 68
  69. 69. Government and Price Decisions Price fixing regulations Price fixing regulations Prohibitions against price Prohibitions against price discrimination among discrimination among Government channel members channel members Unfair sales acts :: Unfair sales acts predatory pricing predatory 69
  70. 70. Cost and Price Decisions Cost of raw Cost of raw Cost materials and materials and supplies supplies Labor cost Labor cost Pricing Decisions Advertising Cost Advertising Cost Distribution Cost Distribution 70
  71. 71. Price Strategy Cost-based Price Strategy Price Demand-based Strategy Price Strategy Competition- based Price 71
  72. 72. Price Strategy With a cost-based price strategy, the Cost-based Price marketer sets prices by computing Strategy merchandise, service, and overhead costs, and then adding the desired profit to these figures The marketer sets prices after Demand-based researching con­sumer desires and Price Strategy ascertaining the range of prices acceptable to the target 72
  73. 73. Price Strategy • The marketer sets prices in Competition- accordance with competitors based Price Strategy • 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 73
  74. 74. Recommended Further Readings 1. Joel Evans and Barry Berman, Marketing, Prentice Hall 2. Phillip Kotler, Marketing Management, Prentice 74
  75. 75. End of 75