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Essentials of marketing


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Essentials of marketing

  1. 1. 1www.studyMarketing.orgThink Marketing !Think Marketing !Produced by www.studyMarketing.orgProduced by
  2. 2. 2www.studyMarketing.orgContentsContents1. Marketing Mix and Key Marketing Activities2. Developing Market Segmentation3. Product Planning and Development4. Promotion Mix : Advertising, Publicity, PersonalSelling and Sales Promotion5. Distribution Planning and Pricing StrategyIf you find this presentation useful, please consider tellingothers about our site (
  3. 3. 3www.studyMarketing.orgMarketing Mix andMarketing Mix andMarket SegmentationMarket Segmentation
  4. 4. 4www.studyMarketing.orgMarketing CredoMarketing CredoThere is only one valid definitionThere is only one valid definitionof business purpose :of business purpose : to create ato create acustomercustomerPeter Drucker
  5. 5. 5www.studyMarketing.orgMarketing MixMarketing MixProductProduct PricePricePlacePlace PromotionPromotionTargetMarket
  6. 6. 6www.studyMarketing.orgKey Marketing ActivitiesKey Marketing ActivitiesConsumer AnalysisConsumer AnalysisProduct PlanningProduct PlanningPrice PlanningPrice PlanningDistributionDistributionPlanningPlanningPromotionPromotionPlanningPlanning
  7. 7. 7www.studyMarketing.orgKey Marketing ActivitiesKey Marketing ActivitiesConsumer AnalysisConsumer AnalysisProduct PlanningProduct PlanningExamination and evaluation of consumercharacteristics, needs, and purchaseprocessesDevelopment and maintenance of products,product assortments, product positions,brands, packaging, options, and deletion ofold productsPrice PlanningPrice PlanningOutlines price ranges and levels, pricingtechniques purchase terms, priceadjustments, and the use of price as anactive or passive factor
  8. 8. 8www.studyMarketing.orgKey Marketing ActivitiesKey Marketing ActivitiesDistributionDistributionPlanningPlanningEstablishment of channel relations, physicaldistribution, inventory management,warehousing, transportation, allocation ofgoods, and wholesalingPromotionPromotionPlanningPlanningCombination of advertising, publicity,personal selling, and sales promotion todrive sales revenue
  9. 9. 9www.studyMarketing.orgProduct/Market MatrixProduct/Market MatrixExisting ProductsExisting Products New ProductsNew ProductsExisting MarketsExisting MarketsNew MarketsNew MarketsMarketPenetrationMarketPenetrationMarketDevelopmentMarketDevelopmentProductDevelopmentProductDevelopmentDiversificationDiversification
  10. 10. 10www.studyMarketing.orgProduct/Market MatrixProduct/Market MatrixMarketPenetrationMarketPenetrationMarketDevelopmentMarketDevelopment• The firm seeks to achieve growth withexisting products in their current marketsegments, aiming to increase its marketshare• Effective when the market is growing or notyet saturated• The firm seeks growth by targeting itsexisting products to new market segments• Effective when a local or regional businesslooks to wider its market, new marketsegments are emerging due to changes inconsumer life-style/demographics, andinnovative uses are discovered for a matureproduct
  11. 11. 11www.studyMarketing.orgProduct/Market MatrixProduct/Market MatrixProductDevelopmentProductDevelopmentDiversificationDiversification• The firms develops new productstargeted to its existing market segments• Effective when the firm has a core ofstrong brands• The firm seeks growth by targeting itsexisting products to new marketsegments• Diversification is utilized so that thefirm does not become overly depend-ent on one product line
  12. 12. 12www.studyMarketing.orgMarket SegmentationMarket SegmentationThe division of a market intodifferent homogeneous groups ofconsumersMarketMarketSegmentSegmentShould be:• measurable• accessible by communication and distributionchannels• different in its response to a marketing mix• durable (not changing too quickly)• substantial enough to be profitable
  13. 13. 13www.studyMarketing.orgTypes of Market SegmentationTypes of Market SegmentationGeographicGeographicDemographicDemographicBased on regional variables such asregion, climate, population density, andpopulation growth rate.Based on variables such as age, gender,ethnicity, education, occupation, income,and family status
  14. 14. 14www.studyMarketing.orgTypes of Market SegmentationTypes of Market SegmentationPsychographicPsychographicBehavioralBehavioralBased on variables such as values,attitudes, and lifestyleBased on variables such as usage rateand patterns, price sensitivity, brandloyalty, and benefits sought
  15. 15. 15www.studyMarketing.orgStep in Planning A Segmentation StrategyStep in Planning A Segmentation StrategyDeterminingcharacteristics andneeds of consumersfor the productcategory of thecompanyAnalyzingconsumersimilarities anddifferencesDevelopingconsumergroupprofilesSelectingconsumersegment (s)Positioningcompany’soffering inrelation tocompetition.Establishinganappropriatemarketingplan
  16. 16. 16www.studyMarketing.orgProduct Planning andProduct Planning andDevelopmentDevelopment
  17. 17. 17www.studyMarketing.orgProducts : Types of GoodsProducts : Types of GoodsTypes ofGoodsConvenienceConvenienceGoodsGoodsShoppingShoppingGoodsGoodsSpecialtySpecialtyGoodsGoods
  18. 18. 18www.studyMarketing.orgConvenience GoodsConvenience GoodsConvenienceConvenienceGoodsGoods• Those purchased with a minimum of effort,because the buyer has knowledge ofproduct characteristics prior to shopping• The consumer does not want to search foradditional information (because the itemhas been bought before) and will accept asubstitute rather than have to frequentmore than one store
  19. 19. 19www.studyMarketing.orgConvenienceConvenienceGoodsGoods• Staples are low-priced items that areroutinely purchased on a regular basis,such as detergent, milk, and cereal• Impulse goods are items that theconsumer does not plan to buy on aspecific trip to a store, such as candy, amagazine, and ice cream• Emergency goods are items purchasedout of urgent need, such as an umbrelladuring a rainstorm, a tire to replace a flat,or aspirin for a headacheConvenience GoodsConvenience Goods
  20. 20. 20www.studyMarketing.orgShopping GoodsShopping GoodsShoppingShoppingGoodsGoods• Those for which consumers lacksufficient information about productalternatives and their attributes, andtherefore must acquire furtherknowledge in order to make apurchase decision
  21. 21. 21www.studyMarketing.orgShopping GoodsShopping GoodsShoppingShoppingGoodsGoods• For attribute-based shopping goods,consumers get information about and thenevaluate product features, warranty,performance, options, and other factors.The goods with the best combination ofattributes is purchased. Sony electronicsand Calvin Klein clothes are marketed asattribute-based shopping goods• For price-based shopping goods,consumers judge product attributes to besimilar and look around for the leastexpensive item/store
  22. 22. 22www.studyMarketing.orgSpecialty GoodsSpecialty GoodsSpecialtySpecialtyGoodsGoods• Those to which consumers are brandloyal.• They are fully aware of these productsand their attributes prior to making apurchase decision.• They are willing to make a significantpurchase effort to acquire the branddesired and will pay a higher price thancompetitive products, if necessary.• For specialty goods, consumers will notmake purchases if their brand is notavailable. Substitutes are notacceptable.
  23. 23. 23www.studyMarketing.orgServicesServicesType ofServicesRented-Rented-goodsgoodsServiceServiceOwned-goodsOwned-goodsserviceserviceNon-goodsNon-goods
  24. 24. 24www.studyMarketing.orgServicesServicesRented-Rented-goodsgoodsServiceServiceOwned-goodsOwned-goodsserviceserviceNon-goodsNon-goodsInvolves the leasing of a good for a specifiedperiod of time. Examples include car, hotel room,apartment, and tuxedo rentalsInvolves an alteration or repair of a good owned bythe consumer. Examples include repair services(such as automobile, watch, and plumbing), lawncare, car wash, haircut, and dry cleaningProvides personal service on the pan of the seller;it does not involve a goods. Examples includeaccounting, legal, and consulting services
  25. 25. 25www.studyMarketing.orgCharacteristics of ServicesCharacteristics of Services• The intangible nature of many services makes theconsumers choice more diffi-cult than with goods• The producer and his or her services are ofteninseparable• The perishability of services prevents storage andincreases risks• Service quality may be variable
  26. 26. 26www.studyMarketing.orgProduct Life CycleProduct Life CycleIntroductionIntroductionGrowthGrowth MaturityMaturityDeclineDecline
  27. 27. 27www.studyMarketing.orgProduct Life CycleProduct Life CycleCharacteristics Introduction GrowthMarketing objective Attract innovators andopinion leader to newproductExpand distribution andproduct lineIndustry sales Increasing Rapidly increasingCompetition None or small SomeIndustry profits Negative IncreasingCustomers Innovators Affluent mass marketProduct mix One or two basicmodelsExpanding lineDistribution Depends on product Rising number ofoutletsPricing Depends on product Greater range of pricesPromotion Informative Persuasive
  28. 28. 28www.studyMarketing.orgProduct Life CycleProduct Life CycleCharacteristics Maturity DeclineMarketing objective Maintain differentialadvantage as long aspossible(a) cut back,(b) revive,(C) terminateIndustry sales Stable DecreasingCompetition Substantial LimitedIndustry profits Decreasing DecreasingCustomers Mass market LaggardsProduct mix Full product line Best-sellersDistribution Greatest number ofoutletsDecreasing number ofoutletsPricing Full line of prices Selected pricesPromotion Competitive Informative
  29. 29. 29www.studyMarketing.orgNew Product PlanningNew Product PlanningIdeaIdeaGenerationGenerationProductProductScreeningScreeningConceptConceptTestingTestingBusinessBusinessAnalysisAnalysisProductProductDevelopmentDevelopmentTestTestMarketingMarketingCommercial-Commercial-izationization
  30. 30. 30www.studyMarketing.orgNew Product PlanningNew Product PlanningIdeaIdeaGenerationGeneration• A continuous, systematic search for newproduct opportunities• It involves delineating sources of newideas and methods for generating themProductProductScreeningScreening• After the firm identifies potentialproducts, it must screen them• Many companies use a new-productscreening checklist for preliminaryevaluation
  31. 31. 31www.studyMarketing.orgScreening ChecklistScreening ChecklistGENERAL CHARACTERISTICS OF NEW PRODUCTSGENERAL CHARACTERISTICS OF NEW PRODUCTSProfit potentialExisting competitionPotential competitionSize of marketLevel of investmentPatentabilityLevel of riskMARKETING CHARACTERISTICS OF NEW PRODUCTSMARKETING CHARACTERISTICS OF NEW PRODUCTSFit with marketing capabilitiesEffect on existing products (brands)Appeal to current consumer marketsPotential length of product life cycleExistence of differential advantageImpact on imageResistance to seasonal factorsPRODUCTION CHARACTERISTICS OF NEW PRODUCTSPRODUCTION CHARACTERISTICS OF NEW PRODUCTSFit with production capabilitiesLength of time to commercializationEase of product manufactureAvailability of labor and material resourcesAbility to produce at competitive prices
  32. 32. 32www.studyMarketing.orgNew Product PlanningNew Product PlanningConceptConceptTestingTestingBusinessBusinessAnalysisAnalysis• Concept testing presents the consumer witha proposed product and measures attitudesand intentions at this early stage ofdevelopment• Concept testing is a quick and inexpensiveway of measuring consumer enthusiasm• Business analysis for the remaining productconcepts is much more detailed than productscreening• Because the next step is expensive and time-consuming product development, critical useof business analysis is essential to eliminatemarginal items
  33. 33. 33www.studyMarketing.orgBusiness Analysis VariablesBusiness Analysis VariablesFactors ConsiderationsDemand projections Price/sales relationship; short- and long-run sales potential;speed of sales growth; rate of repurchases; channel intensityCost projections Total and per unit costs; use of existing facilities andresources; startup vs. continuing costs; estimates of futureraw materials and other costs; econo-mies of scale; channelneeds; break-even pointCompetition Short-run and long-run market shares of company andcompetitors; strengths and weaknesses of competitors;potential competitors; likely competitive strategies inresponse to new product by firmRequired investment Product planning (engineering, patent search, productdevelopment, testing); promotion; production; distributionProfitability Time to recoup initial costs; short- and long-run total and per-unit profits; control over price; return on investment (ROI)
  34. 34. 34www.studyMarketing.orgNew Product PlanningNew Product PlanningProductProductDevelopmentDevelopmentTestTestMarketingMarketing• Product development converts a product ideainto a physical form and identifies a basicmarketing strategy• It involves product construction, packaging,branding, product positioning, and attitude andusage testing.• Test marketing involves placing a product forsale in one or more selected areas andobserving its actual performance under theproposed marketing plan.• The purpose is to evaluate the product andpretest marketing efforts in a real setting priorto a full-scale introduction
  35. 35. 35www.studyMarketing.orgNew Product PlanningNew Product PlanningCommercial-Commercial-izationization• After testing is completed, the firm is readyto introduce the product to its full targetmarket. This is commercialization andcorresponds to the introductory stage of theproduct life cycle• Commercialization involves implementing atotal marketing plan and full production
  36. 36. 36www.studyMarketing.orgPromotion Mix :Promotion Mix :Advertising, Publicity, PersonalAdvertising, Publicity, PersonalSelling and Sales PromotionSelling and Sales Promotion
  37. 37. 37www.studyMarketing.orgPromotion MixPromotion MixAdvertisingAdvertising PublicityPublicityPersonalPersonalSellingSellingSalesSalesPromotionPromotionTargetMarket
  38. 38. 38www.studyMarketing.orgPromotion MixPromotion MixFactor AdvertisingAdvertising PublicityPublicity Personal SellingPersonal Selling Sales PromotionSales PromotionAudience Mass Mass Small (one-to-one) VariesMessage Uniform Uniform Specific VariesCost Low per viewer orreaderNone for media spaceand time; can bemoderate costs forpress releases andpublicity materialsHigh per customer Moderate percustomerSponsor Company No formal sponsor inthat media are notpaidCompany CompanyFlexibility Low Low High ModerateControl over contentand placementHigh None High HighCredibility Moderate High Moderate ModerateMajor goal To appeal to a massaudience at areasonable cost, andcreate awareness andfavorable attitudesTo reach a massaudience with anindependentlyreported messageTo deal with individualconsumers, to resolvequestions, to closesalesTo stimulate short-runsales, to increaseimpulse purchasesExample Television ad for aKodak video cameraNewspaper articlereporting on theunique features of aKodak video cameraRetail sales personnelexplaining how aKodak video cameraworksA Kodak video cameradisplayed at consumerphotography shows
  39. 39. 39www.studyMarketing.orgFour Key Steps to AdvertiseFour Key Steps to AdvertiseDetermineDeterminemessage contentmessage contentand devise an adand devise an adSpecify theSpecify thelocation of an adlocation of an ad(media placement)(media placement)Outline a promotionOutline a promotionschedulescheduleChoose how manyChoose how manyvariations of avariations of abasic message tobasic message toutilizeutilize
  40. 40. 40www.studyMarketing.orgThings to Consider in AdvertisingThings to Consider in AdvertisingWasteWasteReachReachWaste is the portion of an audience that isnot in a firms target market. Becausemedia appeal to mass audiences, wasteis a significant factor in advertising.Reach refers to the number of viewers orreaders in the audience
  41. 41. 41www.studyMarketing.orgThings to Consider in AdvertisingThings to Consider in AdvertisingFrequencyFrequencyMessageMessagepermanencepermanenceFrequency is how often a medium can beused. It is greatest for newspapers, radio, andtelevision, where ads may appear daily andadvertising strategy may be easily changedMessage permanence refers to the numberof exposures one advertisement gener­atesand how long it remains with the audience
  42. 42. 42www.studyMarketing.orgThings to Consider in AdvertisingThings to Consider in AdvertisingPersuasivePersuasiveimpactimpactClutterClutterPersuasive impact is the ability of a mediumto stimulate consumers. Television often hasthe highest persuasive impact because it isable to combine audio, video, color, animation,and other appeals.Clutter involves the number of ads that arecontained in a single program, issue, etc. of amedium. Clutter is low when a limited numberof ads is presented and high when many adsare presented.
  43. 43. 43www.studyMarketing.orgPublicity : Poor and Good ResponsePublicity : Poor and Good ResponseSituationSituation Poor ResponsePoor Response Good ResponseGood ResponseFire breaks out ina company plantRequests for information bymedia are ignored.Company spokesperson explains the causeof the fire and company precautions to avoidit and answers questions.New productintroducedAdvertising is used withoutpublicityPre­introduction news releases, productsamples, and testimonials are used.News story aboutproduct defectsRequests for information by mediaare ignored, blanket denials areissued, hostility is exhibited towardreporter of story.Company spokesperson states that tests arebeing conducted on products, describesprocedure for handling defects, and answersquestions.Competitorintroduces newproductThe advertising campaign isstepped up.Extensive news releases, statistics, andspokespeople are made available to media topresent companys competitive features.High profitsreportedProfits are rationalized and positiveeffects on the economy are cited.Profitability is explained, data (historical andcurrent) are provided, uses of profits aredetailed: research, community development.Overall view ofpublicityThere is an infrequent need forpublicity; crisis fighting is usedwhen bad reports are circulated.There is an ongoing need for publicity, strongplanning, and contingency plans for badreports.
  44. 44. 44www.studyMarketing.orgDeveloping a Publicity PlanDeveloping a Publicity PlanSettingSettingobjectivesobjectivesOutliningOutliningtypes oftypes ofpublicitypublicitySelectingSelectingmediamediaCreatingCreatingpublicitypublicitymessagesmessagesTimingTimingpublicitypublicitymessagesmessages
  45. 45. 45www.studyMarketing.orgPublicity TypePublicity TypePublicity Type ExampleNews 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 heatingcosts.Finance release General Electric distributes quarterly financial data about thecompany.Product release Intel announces its new, fast­speed microprocessorPictorial release Apple distributes photos showing all of its personal computerproducts and related softwareBackground editorialreleaseMc Kinsey presents a biography of its president and his risethrough the company.Emergency publicity The Red Cross makes a request for aid to tornado victims.
  46. 46. 46www.studyMarketing.orgSpecific Personal Selling ObjectivesSpecific Personal Selling ObjectivesType of Objective IllustrationsDemand-OrientedInformation To fully explain all good and service attributesTo answer any questionsTo probe for any further questionsPersuasion To clearly distinguish good or service attributes from those of competitorsTo maximize the number of sales as a per cent of presentationsTo convert undecided consumers into buyersTo sell complementary items, e.g., film with a cameraTo placate dissatisfied customersReminding To ensure delivery, installation, etc.To follow up after a good or service has been purchasedTo follow up when a repurchase is nearTo reassure previous customers when making a new purchaseImage-OrientedIndustry and company To maintain a good appearance by all personnel in contact with consumersTo follow acceptable sales practices
  47. 47. 47www.studyMarketing.orgPersonal Selling ProcessPersonal Selling ProcessProspectingProspecting(blind, lead)(blind, lead)ApproachApproach CustomerCustomerWantsWantsSalesSalesPresentationPresentationAnsweringAnsweringQuestionsQuestions(questions and(questions andobjections)objections)CloseCloseFollow upFollow up(satisfaction,(satisfaction,referrals,referrals,repurchase)repurchase)
  48. 48. 48www.studyMarketing.orgTypes of Sales PromotionTypes of Sales PromotionTypeType CharacteristicsCharacteristics IllustrationIllustrationCoupons Manufacturers or retailers advertisespecial discounts for customers whoredeem coupons.P&G mails consumers a 25­cents­off coupon for Sure deodorant,which can be redeemed at anysupermarket.Refund orrebateA consumer submits proof­of­purchase (usually to themanufacturer) and receives an extradiscount.First Alert home fire alarmsprovides $5 rebates to consumerssubmitting proof of purchase.Samples Free merchandise or services aregiven consumers, generally for newitems.When Sunlight dishwashing liquidwas introduced, free samples weremailed to consumers.Contests orsweepstakesConsumers compete for prizes byanswering questions (contests) orfilling out forms for random drawingsof prices (sweepstakes).Publishers Clearinghouse sponsorsannual sweepstakes and awardsautomobiles, houses, and otherprices.
  49. 49. 49www.studyMarketing.orgTypeType CharacteristicsCharacteristics IllustrationIllustrationBonus ormultipacksConsumers receive discountsfor purchasing in quantitySome stores run I­cent sales,whereby the consumer buys oneitem and gets a second one for apenny.Point-of-purchasedisplaysIn­store displays remindcustomers and generateimpulse purchases.Chewing gum sales insupermarkets are high becausedisplays arc placed at checkoutcounters.SpecialeventsManufacturers or retailerssponsor celebrity appearances,fashion shows, and otheractivities.Virtually every major leaguebaseball team has an annual "OldTimers Day," which attracts largecrowds.Gifts Consumers are given gifts formaking a purchase or openinga new account.Savings banks offer a range ofgifts for consumers opening newaccounts or expanding existingones.Types of Sales PromotionTypes of Sales Promotion
  50. 50. 50www.studyMarketing.orgSales Promotion AdvantagesSales Promotion Advantages• It helps attract customer traffic and maintain brand or storeloyalty• Quick results can be achieved• Some forms of sales promotion (calendars, t­shirts. Pens,etc) provide value to the consumer and are retained bythem; and these forms can provide a reminder function• Impulse purchases can be increased through in­storedisplays
  51. 51. 51www.studyMarketing.orgSales Promotion DisadvantagesSales Promotion Disadvantages• The image of the firm may be lessened if it continuously runspromotions. Consumers may view discounts as representing adecline in product quality and believe the firm could not sell itsofferings without them.• When coupons, rebates, or other special deals are usedfrequently, consumers may not make purchases if the items aresold at regular prices. Instead, they will stock up each time thereis a promotion.
  52. 52. 52www.studyMarketing.orgSales Promotion DisadvantagesSales Promotion Disadvantages• Sometimes sales promotions shift the focus away from theproduct onto secondary factors. Consumers may be attracted bycalendars, coupons, or sweepstakes instead of by productquality, functions, and durability. In the short run this generatesconsumer enthusiasm. In the long run this may have adverseeffects on a brands image and on sales, because a product­related differential advantage has not been developed.
  53. 53. 53www.studyMarketing.orgDistribution Planning andDistribution Planning andPricing StrategyPricing Strategy
  54. 54. 54www.studyMarketing.orgDistribution PlanningDistribution Planning• Distribution planning is systematic decision makingregarding the physical movement and transfer ofownership of a product from producer to consumer.• It includes transportation, storage, and customertransactions.• Distribution functions are carried out through a channel ofdistribution, which is comprised of all the organizations orpeople involved in the process.• These organizations or people are known as channelmembers or middlemen.
  55. 55. 55www.studyMarketing.orgIntensity of Channel CoverageIntensity of Channel CoverageCharacteristicsCharacteristics ExclusiveExclusiveDistributionDistributionSelectiveSelectiveDistributionDistributionIntensiveIntensiveDistributionDistributionObjectivesObjectives Prestige image,channel control andloyalty, pricestability and highprofit marginsModerate marketcoverage, solidimage, somechannel control andloyalty, good salesand profitsWidespreadmarket coverage,channelacceptance, salesvolume and profitsChannelChannelmembersmembersFew in number,well­establishedreputable storesModerate in number,well­established,better storesMany in number,all typesof outletsCustomersCustomers Few in number,trend setters,willing to travel tostore, brand loyalModerate in number,brand conscious,somewhat willing totravel to storeMany in number,convenience­oriented
  56. 56. 56www.studyMarketing.orgIntensity of Channel CoverageIntensity of Channel CoverageCharacteristicsCharacteristics ExclusiveExclusiveDistributionDistributionSelectiveSelectiveDistributionDistributionIntensiveIntensiveDistributionDistributionMarketingMarketingEmphasisEmphasisPersonal selling,pleasantshoppingconditions, goodservicePromotional mix,pleasant shoppingconditions, goodserviceMassadvertising,nearby location,items in stockMajorMajorDisadvantagesDisadvantagesLimited salespotentialMay be difficult tocarve out a nicheLimited channelcontrolExamplesExamples Automobiles,designer clothes,caviarFurniture,clothing, watchesGroceries,householdproducts,magazines
  57. 57. 57www.studyMarketing.orgMethods of Channel CooperationMethods of Channel CooperationFactor Manufacturer Action Channel Member ActionNew-productNew-productintroductionintroductionThorough testing, adequatepromotionalsupportGood shelf location andspace, enthusiasm forproduct, assistance in testmarketingDeliveryDelivery Prompt filling of orders, adherence toscheduled datesProper time allowed fordelivery, shipmentsimmediately checked foraccuracyPromotionPromotion Sales force training, sales forceincentives, development of nationaladvertising campaign, cooperativeprogramsAttractive in­store displays,knowledgeable salespeople,participation in cooperativeprogramsProductProductqualityqualityProduct guarantees Proper installation andservicing of products
  58. 58. 58www.studyMarketing.orgPushing and Pulling StrategyPushing and Pulling StrategyManufacturerManufacturerChannelmembersChannelmembersConsumersConsumersManufacturerManufacturerChannelmembersChannelmembersConsumersConsumersPushing StrategyPushing Strategy Pulling StrategyPulling Strategy
  59. 59. 59www.studyMarketing.orgPrice PlanningPrice PlanningA PriceA PriceA PriceA PriceRepresents the value of aRepresents the value of agood or service for both thegood or service for both theseller and the buyerseller and the buyerRepresents the value of aRepresents the value of agood or service for both thegood or service for both theseller and the buyerseller and the buyerPricePricePlanningPlanningPricePricePlanningPlanningSystematic decision makingSystematic decision makingby an organization regardingby an organization regardingall aspects of pricingall aspects of pricingSystematic decision makingSystematic decision makingby an organization regardingby an organization regardingall aspects of pricingall aspects of pricing
  60. 60. 60www.studyMarketing.orgFactors Affecting Pricing DecisionsFactors Affecting Pricing DecisionsConsumersConsumers CompetitorsCompetitorsChannelChannelMembersMembersGovernmentGovernmentCostCostTotal EffectsTotal Effectson Priceon PriceDecisionsDecisions
  61. 61. 61www.studyMarketing.orgConsumers and Price DecisionsConsumers and Price DecisionsConsumersConsumers• The relationship between price andconsumer purchases and perceptions isexplained by two economic principles —the law of demand and price elasticity ofdemand• The law of demand states that consumersusually purchase more units at a low pricethan at a high price• The price elasticity of demand defines thesensitivity of buyers to price changes interms of the quantities they will purchase
  62. 62. 62www.studyMarketing.orgElasticElasticDemandDemandElasticElasticDemandDemand• Elastic demand occurs if relatively small changes inprice result in large changes in quantity demanded• Numerically, price elasticity is greater than 1• With elastic demand, total revenue goes up whenprices are decreased and goes down when prices rise• Inelastic demand takes place if price changes havelittle impact on quantity demanded• Price elasticity is less than 1• With inelastic demand, total revenue goes up whenprices are raised and goes down when prices declineIn-elasticIn-elasticDemandDemandIn-elasticIn-elasticDemandDemandConsumers and Price DecisionsConsumers and Price Decisions
  63. 63. 63www.studyMarketing.orgUnitaryUnitaryDemandDemandUnitaryUnitaryDemandDemand• Unitary demand exists if changes in price areexactly offset by changes in quantity demanded,so that total sales revenue remains constant.• Price elasticity is 1Consumers and Price DecisionsConsumers and Price Decisions
  64. 64. 64www.studyMarketing.orgCompetitors and Price DecisionsCompetitors and Price DecisionsCompetitorsCompetitors• Another element contributing to thedegree of control a firm has overprices is the competitive environmentwithin which it operates
  65. 65. 65www.studyMarketing.orgMarket-controlledpriceenvironmentMarket-controlledpriceenvironment• Characterized by a high level of com­petition, similar goods and services, andlittle control over price by individualcompanies• Characterized by moderate competi­tion,well­differentiated goods and services, andstrong control over price by individual firmsCompany-controlledpricedenvironmentCompany-controlledpricedenvironmentCompetitors and Price DecisionsCompetitors and Price Decisions
  66. 66. 66www.studyMarketing.orgGovernment-controlledpriceenvironmentGovernment-controlledpriceenvironment• Characterized by prices set by thegovernment. Examples are public utilities,buses, taxis, and state universitiesCompetitors and Price DecisionsCompetitors and Price Decisions
  67. 67. 67www.studyMarketing.orgChannel Members and Price DecisionsChannel Members and Price DecisionsChannelChannelMembersMembers• A wholesaler or retailer can gain strongercontrol over price by stressing its importance asa customer to the manufacturer, refusing tocarry unprofitable product, stocking competitiveitems, and developing strong dealer brands sothat consumers are loyal to the seller and notthe manufacturer• Sometimes retailers engage in selling againstthe brand, whereby they stock merchandise,place high prices on it, and then sell otherbrands for lower prices. This is often done toincrease the sales of their own brands
  68. 68. 68www.studyMarketing.orgChannel Members and Price DecisionsChannel Members and Price DecisionsChannelChannelMembersMembers• To ensure channel member cooperation withprice decisions, the manufacturer needs toconsider four factors: channel member profitmargins, price guarantees, special deals, andthe impact of price increases
  69. 69. 69www.studyMarketing.orgGovernment and Price DecisionsGovernment and Price DecisionsGovernmentGovernmentPrice fixing regulationsPrice fixing regulationsProhibitions against pricediscrimination amongchannel membersProhibitions against pricediscrimination amongchannel membersUnfair sales acts :predatory pricingUnfair sales acts :predatory pricing
  70. 70. 70www.studyMarketing.orgCost and Price DecisionsCost and Price DecisionsCostCostCost of rawmaterials andsuppliesCost of rawmaterials andsuppliesLabor costLabor costAdvertising CostAdvertising CostDistribution CostDistribution CostPricingPricingDecisionsDecisions
  71. 71. 71www.studyMarketing.orgPrice StrategyPrice StrategyCost-based PriceCost-based PriceStrategyStrategyDemand-basedDemand-basedPrice StrategyPrice StrategyCompetition-Competition-based Pricebased PriceStrategyStrategyPricePriceStrategyStrategy
  72. 72. 72www.studyMarketing.orgPrice StrategyPrice StrategyCost-based PriceCost-based PriceStrategyStrategyDemand-basedDemand-basedPrice StrategyPrice StrategyWith a cost-based price strategy, themarketer sets prices by computingmerchandise, service, and overheadcosts, and then adding the desired profitto these figuresThe marketer sets prices afterresearching con­sumer desires andascertaining the range of pricesacceptable to the target market
  73. 73. 73www.studyMarketing.orgPrice StrategyPrice StrategyCompetition-Competition-based Pricebased PriceStrategyStrategy• The marketer sets prices inaccordance with competitors• Prices may be below the market, atthe market, or above the mar­ket,depending on customer loyalty,services provided, image, real orperceived differences betweenbrands or stores, and thecompetitive environment
  74. 74. 74www.studyMarketing.orgRecommended Further ReadingsRecommended Further Readings1. Joel Evans and Barry Berman, Marketing, Prentice Hall2. Phillip Kotler, Marketing Management, Prentice Hall
  75. 75. 75www.studyMarketing.orgEnd of MaterialEnd of Material