14Developing Pricing Strategies and Programs1

14
Developing Pricing Strategies and Programs
1
*
Copyright © 2012 Pearson Education 14-*
Chapter QuestionsHow do consumers process and evaluate
prices?How should a company set prices initially for products
or services?How should a company adapt prices to meet varying
circumstances and opportunities?When should a company
initiate a price change?How should a company respond to a
competitor’s price challenge?
*
Synonyms for PriceRentTuitionFeeFareRateTollPremiumSpecial
assessmentBribeDuesSalaryCommissionWageTax

*
The Internet Changes the
Pricing Environment –
By Providing Information
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Common Pricing MistakesDetermine costs and take traditional
industry marginsFailure to revise price to capitalize on market
changesSetting price independently of the rest of the marketing
mixFailure to vary price by product item, market segment,
distribution channels, and purchase occasion
*

Consumer Psychology
and PricingReference pricesPrice-quality inferencesPrice
endingsPrice cues
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Table 14.1 Possible Consumer Reference Prices“Fair
price”Typical priceLast price paidUpper-bound priceLower-
bound priceCompetitor pricesExpected future priceUsual
discounted price
*
Tiers in Pricing
*

Steps in Setting PriceSelect the price objectiveDetermine
demandEstimate costsAnalyze competitor price mixSelect
pricing methodSelect final price
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Step 1: Selecting the Pricing ObjectiveSurvivalMaximum
current profitMaximum market shareMaximum market
skimmingProduct-quality leadership
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Step 2: Determining DemandPrice sensitivityEstimate demand
curvesPrice elasticity of demand
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Figure 14.1 Inelastic and

Elastic Demand
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Table 14.3 Factors Leading to Less Price SensitivityThe
product is more distinctiveBuyers are less aware of
substitutesBuyers cannot easily compare the quality of
substitutesExpenditure is a smaller part of buyer’s total
incomeExpenditure is small compared to the total costPart of
the cost is paid by another partyProduct is used with previously
purchased assetsProduct is assumed to have high quality and
prestigeBuyers cannot store the product
*
Step 3: Estimating CostsTypes of costsAccumulated
productionActivity-based cost accountingTarget costing
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Cost Terms and ProductionFixed costsVariable costsTotal
costsAverage costCost at different levels of production
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Target Costing
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Figure 14.4 The Three Cs Model for Price-Setting
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Step 5: Selecting a Pricing MethodMarkup pricingTarget-return

pricingPerceived-value pricingValue pricingGoing-rate
pricingAuction-type pricing
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Figure 14.5 Break-Even Chart for Determining Target-Return
Price and Break-Even Volume
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Auction-Type Pricing
English
Dutch
Sealed-Bid
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Step 6: Selecting the Final PriceImpact of other marketing

activitiesCompany pricing policiesGain-and-risk sharing
pricingImpact of price on other parties
*
Geographical PricingPricing varies by location
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Price Discounts and AllowancesDiscountQuantity
discountFunctional discountSeasonal discountAllowance
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Promotional Pricing TacticsLoss-leader pricingSpecial-event
pricingCash rebatesLow-interest financingLonger payment
termsWarranties and service contractsPsychological discounting

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Traps in Price Cutting StrategiesLow-quality trapFragile-
market-share trap Shallow-pockets trapPrice-war trap
*
Should We Raise Prices?
*
Brand Leader Responses to Competitive Price CutsMaintain
priceMaintain price and add valueReduce priceIncrease price
and improve qualityLaunch a low-price fighter line
*

For ReviewHow do consumers process and evaluate prices?How
should a company set prices initially for products or
services?How should a company adapt prices to meet varying
circumstances and opportunities?When should a company
initiate a price change?How should a company respond to a
competitor’s price challenge?
*
1
Reading-26 Life in the U.S. During the Cold War
The Cold War influenced life in the United States, creating
numerous social and cultural changes.
Technological innovation played a part, particularly in the home
as new labor saving devices
(dishwashers, electric ovens, washers and driers, etc.) came on
the market, and television sets
became standard household items. However, two things
influenced life for Americans in this
period more than anything else: the tremendous prosperity
enjoyed by the nation in the decades
that followed World War II, and the anxieties created by life
during the Cold War, particularly the

constant threat of nuclear war. This combination created a
unique environment that combined
general affluence [prosperity] with widespread conformity to a
narrow range of culturally
accepted behaviors.
The post-war economy grew at a fantastic rate, by more than
fifty percent in the 1940s alone.
Automobile production quadrupled, the housing market boomed,
and corporations expanded. The
invention of air conditioning made living in the sun belt
attractive, and cities in Nevada, Florida,
and everywhere between experienced tremendous population
growth and prosperity. New Deal
style government spending continued after the war and
contributed to the economic boom. In 1956
President Eisenhower approved the Federal Aid Highway Act,
which authorized and funded
construction of 41,000 miles of interstate highways that
connected the nation like never before
because it allowed citizens to travel extensively in their own
automobiles. For the first time,
suburbs sprang up within commuting distance of major cities,
starting with Levittown, New York.
It opened in 1947 and almost immediately rented or sold all
6,000 homes, aided in part by creation
of the Federal Housing Authority, which made it possible for
Americans to get long-term, low-
interest rate housing loans. Televisions became immensely
popular: there were only 17,000 in the
U.S. in 1946, but by 1960 over 75 percent of homes had one.
During the Cold War, more people
entered the middle class, including minorities, and the wealth of
the nation was more evenly
distributed across the population than ever before.

In terms of prosperity, the U.S. had never been in better shape,
but Cold War anxieties provided
an uncomfortable counterbalance. The fears about communism
ingrained into the American public
since 1917 returned after WWII, and magnified as the
ideological struggle with the Soviet Union
became more manifest in people’s daily lives. The vigilance
against potential spies requested by
the federal government during the war shifted its focus from
fascists and Japanese to communist
subversives allegedly skulking around the United States, intent
on its downfall. This propaganda-
fueled paranoia created another series of paradoxes in the
nation’s history, as government officials
and private citizens alike deliberately denied individuals their
Constitutional rights in what looked
a lot like a witch hunt that lasted through most of the Cold War.
Starting in Hollywood, those
accused of having communist sympathies found themselves
black listed. A black list is literally a
list of individuals denied work (blackballed) in a particular
industry, in this case, the film making
industry. But blacklists appeared in other fields too, including
government work and education.
The fear of communist infiltrators reached a fever pitch in 1950
at the hands of Joseph McCarthy,
a Republican Senator from Wisconsin. While campaigning on
behalf of a colleague, McCarthy
2
gave a speech in which he held up a piece of paper and told the

audience that it was a list of 205
names of “known communists” in the U.S. State Department.
The media picked up on his
sensational claim, and it spread across the nation like wildfire.
This event inaugurated the Second
Red Scare, perhaps better known as the McCarthy Era. His
claims made the senator an overnight
media sensation, and he was soon bringing people he accused of
having ties to communism before
public hearings, during which he would bully them and claim
they were traitors to the United
States. But McCarthy’s accusations were often based on little or
no evidence, and in fact he never
did have any list of “known communists” in the State
Department. Instead, McCarthy made up his
accusations because they brought him a lot of media attention,
which made him politically very
powerful. McCarthy’s strategy was the Big Lie: fabricated
stories the consequences of which were
so terrible that many people doubted he would make them up.
Accusing someone of being a
communist during the Cold War often led to that person losing
their job, being blacklisted, and
perhaps even having to leave their community. But McCarthy
did not care about those
consequences. Today, that kind of behavior–telling lies about
others for one’s own political gain–
is referred to as McCarthyism. His power started to wane as
more people started to doubt him
publicly, and everything collapsed around him late in 1954 after
he accused the U.S. military of
harboring communists. McCarthy died a few years later of
alcoholic complications, and to his
dying did not understand why people were so upset with him; he
said he had just been playing the
game of American politics like everyone else.

McCarthy wasn’t the only one accusing citizens of being
communist. Such things continued to
occur at the national level, under the leadership of the House
Committee on Un-American
Activities (HUAC), and locally at the hands of fiercely
nationalistic groups like the John Birch
Society and the American Legion. But such accusations seemed
too far-fetched to a growing
number of citizens, who began to see accusers like McCarthy as
guilty of fanatical behavior. As a
result, one of the unforeseen consequences of McCarthyism was
that people began to doubt that
there were many communist spies and infiltrators in the U.S.
This was unfortunate, because it turns
out that the Soviet Union did have agents living in the United
States, just not on the scale that the
anti-communist fanatics claimed. Another unforeseen
consequence was that more citizens began
to harbor doubts about their government, and whether it was
being honest. But mostly, the
McCarthy Era worried many people in the U.S. because merely
the accusation of being communist
was enough to ruin one’s life. As a result, the nation’s citizens
conformed to national norms in
dress, religion, behavior, diet, and otherwise, so as to not stand
out from the pack and potentially
be labeled a “commie.”
The Cold War also changed American family life. Families
started moving out of cities and into
the suburbs, and instead of renting they purchased their own
homes. The marriage rate increased
while the divorce rate went down, and couples started marrying
much earlier, as young adults or
even just out of high school. Contraception started to play a

much larger role in family planning,
and couples tended to have all their children very early in the
marriage instead of spacing out births
over time. This was the era of the Nuclear Family, a term that
has nothing to do with the Cold War,
but instead refers to the new focus on the nucleus of a family:
mother, father, and children, instead
3
of the extended family. With all these changes, the birth rate
increased dramatically, giving rise to
the Baby Boomer generation.
Separate Spheres played a major part in Cold War conformity,
as gender roles were further
reinforced by government propaganda and the American media
in general. The ideal woman was
the homemaker, who received just enough education to be the
best wife and mother possible. The
message that women were inferior to men physically and
mentally was reinforced constantly. On
the other hand, men were to be the sole breadwinners, doi ng
whatever they could to maximize
their income and their family’s quality of life. In reality, that
was impossible for many families,
and more women then ever before joined the workforce,
providing a second income so their
families could afford their new middle class lifestyles.
Resistance to this gendered worldview
started to galvanize in the 1960s, as more women came to resent
the role forced upon them by
American Cold War culture.

The threat of nuclear war was a major concern for everyone and,
as understanding of the threat
developed, the federal government started a program to try and
convince citizens to build fallout
shelters. Typically built underground, the intent of these
structures was to provide a relatively safe
place for people to live for several weeks in case of a nuclear
attack. It would not protect against
a nuclear explosion, but it would shelter people from fallout,
the radioactive ash that drifts down
from the sky for several weeks afterward. The government
funded construction of public shelters,
most often located in major cities in the basements of
government buildings. But for the suburban
and rural citizens, the only option was to build their own,
personal fallout shelters. Government
propaganda tried to convince citizens to do so, but the program
turned out to be a tremendous flop.
Some 200,000 fallout shelters were built in the U.S. during the
Cold War, but that was only one
shelter for every 1,000 citizens. Considering that the average
fallout shelter could accommodate
around a half-dozen people, 200,000 shelters were grossly
inadequate. (The Soviet Union, on the
other hand, successfully managed an extensive fallout shelter
program, one that it maintains and
today.)
While the prosperity of the Cold War was enjoyed by a majority
of Americans, regardless of skin
color, some of the benefits of that prosperity were not shared
equally. As white middle-class
families moved out of cities and into suburbs, blacks found
themselves deliberately excluded from
suburban living. For example, a clause in the standard lease

agreement for a Levittown home stated
that it could only be occupied by whites, a discriminatory policy
acceptable to the Federal
Housing Authority at the time. This kind of discrimination,
combined with Jim Crow racism in
the South and a rise in the number of educated middle-class
blacks, were important contributing
factors to the rise of the modern civil rights movement in the
mid-1950s.
8
Identifying Market Segments and Targets
1
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Chapter QuestionsWhat are the different levels of market
segmentation?How can a company divide a market into
segments?What are the requirements for effective
segmentation?How should business markets be segmented?How
should a company choose the most attractive target markets?
*

Effective Targeting Requires…Identify and profile distinct
groups of buyers who differ in their needs and preferencesSelect
one or more market segments to enterEstablish and
communicate the distinctive benefits of the market offering
*
What is a Market Segment?
A market segment consists of a group of customers who share a
similar set of
needs and wants.
Two broad groups of variables can be used to segment consumer
markets:
Descriptive characteristicsBehavioral characteristics
*
Segmenting Consumer Markets
Geographic

Demographic
Psychographic
Behavioral
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Geographic Segmentation
*
Demographic SegmentationAge and life cycleLife
stageGenderIncomeGenerationSocial classRace and Culture
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Geodemographic Segmentation -Claritas’ PRIZMEducation and
affluenceFamily life cycleUrbanizationRace and
ethnicityMobility

*
Age and Lifecycle Stage
*
Gender and Income
*
Generational Influences
*

Race and Culture
https://www.youtube.com/watch?v=TeBimZRpR2E
*
Psychographic Segmentation
and The VALS Framework
*
Behavioral Segmentation: Decision Roles
Initiator
Influencer
Decider
Buyer
User
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Behavioral Segmentation: Behavioral
VariablesOccasionsBenefitsUser StatusNonusersEx-
usersPotential usersFirst-time usersRegular usersUsage RateE.g.
heavy Coca Cola drinkers only account for a small percentage
of the overall market, but account for a large chunk of
consumption.Buyer-ReadinessLoyalty StatusHard-core
loyalsConsumers who only buy one brandSplit loyalsConsumers
who are loyal to 2 or 3 brandsShifting loyalsConsumers who
shift loyalty from one brand to anotherSwitchersConsumers who
show no loyalty to any brandAttitude
*
Figure 8.2 Example of a Brand Funnel
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Loyalty StatusHard-coreSplit loyalsShifting loyalsSwitchers

*
Figure 8.3 Behavioral Segmentation Breakdown
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Steps in Segmentation ProcessNeed-based segmentationSegment
identificationSegment attractivenessSegment
profitabilitySegment positioningSegment acid testMarket mix
strategy
*
Effective Segmentation
CriteriaMeasurableSubstantialAccessibleDifferentiableActionab

le
*
Porter’s 5 Forces Model
Threat of Rivalry
Threat of Supplier
Bargaining Power
Threat of Buyer Bargaining Power
Threat of
New Entrants
Threat of Substitutes
*
Figure 8.4 Possible Levels
of Segmentation
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For ReviewWhat are the different levels of market
segmentation?How can a company divide a market into
segments?What are the requirements for effective
segmentation?How should business markets be segmented?How
should a company choose the most attractive target markets?
*
3
Collecting Information and
Forecasting Demand
1
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Chapter QuestionsWhat are the components of a modern
marketing information system?What are useful internal
records?What makes up a marketing intelligence system?What
are some influential macro environment developments?How can

companies accurately measure and forecast demand?
https://timesofoman.com/article/1432468/Oman/Expatriate-
numbers-in-Oman-drop-below-two-million
*
What is a
Marketing Information System?
A marketing information system consists of people, equipment,
and procedures to gather, sort, analyze, evaluate, and distribute
needed, timely, and accurate information to marketing
decision makers.
*
Marketing Information and Customer Insights
Ch 4 -*
Copyright © 2011 Pearson Education
Table 3.2 Information Needs ProbesWhat decisions do you
regularly make?What information do you need to make these

decisions?What information do you regularly get?What studies
do you periodically request?What information would you want
that you are not getting now?What are the four most helpful
improvements that could be made in the present marketing
information system?
*
Internal Records and
Marketing IntelligenceOrder-to-payment cycleSales information
systemDatabases, warehousing, data miningMarketing
intelligence system
*
How do you gather information from customers?

*
Database Management
*
What is a
Marketing Intelligence System?
A marketing intelligence system is a set of procedures and
sources that managers use to obtain everyday information about
developments in the marketing environment.
*
Steps to Quality Marketing IntelligenceTrain sales force to scan
for new developmentsMotivate channel members to share
intelligenceHire external experts to collect intelligenceNetwork
externallyUtilize a customer advisory panelUtilize government
data sourcesPurchase information

*
Sources of Competitive Information OnlineIndependent
customer goods and service review forumsDistributor or sales
agent feedback sitesCombination sites offering customer
reviews and expert opinionsCustomer complaint sitesPublic
blogs
http://www.hissingkitty.com/
*
Needs and Trends
Fad
Trend
Megatrend
*

Major Forces in the Environment
Demographic
Economic
Socio-cultural
Natural
Technological
Political-legal
*
Population and DemographicsPopulation growthPopulation age
mixEthnic marketsEducational groupsHousehold patterns
*
Perspective on the Global Demographic Environment
*

Economic Environment
Consumer Psychology
Income Distribution
Income, Savings, Debt, Credit
*
Economic Environment and Consumer Psychology
*
Income DistributionSubsistence economiesRaw-material-
exporting economiesIndustrializing economiesIndustrial
economies
*

Social-Cultural EnvironmentViews of themselvesViews of
othersViews of organizationsViews of societyViews of
natureViews of the universe
*
Table 3.4 Most Popular
American Leisure ActivitiesReadingTV WatchingSpending time
with familyGoing to moviesFishing
What big activity are we missing from this list?Computer
activitiesGardeningRenting moviesWalkingExercise
https://www.ft.com/content/87a8ecb6-e4c2-11e7-8b99-
0191e45377ec
*
Socio-Cultural Influences
*

Guns in America – A core belief
*
Natural EnvironmentShortage of raw materialsIncreased energy
costsAnti-pollution pressuresGovernmental protections
*
Keys to Avoiding
Green Marketing MyopiaConsumer Value
PositioningCalibration of Consumer KnowledgeCredibility of
Product Claims
*

Consumer Environmental SegmentsGenuine GreensNot Me
GreensGo-with-the-Flow GreensDream GreensBusi ness First
GreensMean Greens
*
Technological EnvironmentPace of changeOpportunities for
innovationVarying R&D budgetsIncreased regulation of change
*
The Political-Legal Environment
Business Legislation
Growth of Special Interest Groups
*

Forecasting and
Demand MeasurementHow can we measure market
demand?Potential marketAvailable marketTarget
marketPenetrated market
*
A Vocabulary for
Demand Measurement
Market Demand
Market Forecast
Market Potential
Company Demand
Company Sales Forecast
Company Sales Potential
*
Market Demand Functions

*
Estimating Current Demand:
Total Market PotentialCalculationsMultiple potential number of
buyers by average quantity each purchases times priceChain-
ratio method
*
Area Market Potential
Market-Buildup
*

Area Market Potential
Multiple-Factor Index
*
Estimating Future DemandSurvey of Buyers’
IntentionsComposite of Sales Force OpinionsExpert
OpinionPast-Sales AnalysisMarket-Test Method
*
For ReviewWhat are the components of a modern marketing
information system?What are useful internal records?What
makes up a marketing intelligence system?What are some
influential macroenvironment developments?How can
companies accurately measure and forecast demand?
*

2
Developing Marketing
Strategies and Plans
1
*
Chapter QuestionsHow does marketing affect customer
value?How is strategic planning carried out at different levels
of the organization?What does a marketing plan include?
*
Phases of Value Creation and Delivery
Choosing the value
Providing the value
Communicating the value

*
What is the Value Chain?
The value chain is a tool for identifying was to create more
customer value because every firm is a synthesis of primary and
support activities performed to design, produce, market, deliver,
and support its product.
https://www.youtube.com/watch?v=cpYhgqPRivw
*
Core Business ProcessesMarket-sensing processNew-offering
realization processCustomer acquisition processCustomer
relationship management processFulfillment management
process
*
Characteristics of
Core CompetenciesA source of competitive

advantageApplications in a wide variety of marketsDifficult to
imitate
Who can name me one competitive advantage of the iPhone?
*
Maximizing Core Competencies(Re)define the business
concept(Re)shaping the business scope(Re)positioning the
company’s brand identity
*
What is Holistic Marketing?
Holistic marketing sees itself as integrating the value
exploration, value creation, and value delivery activities with
the purpose of building long-term, mutually satisfying
relationships and co-prosperity among key stakeholders.
*

Questions to Address in
Holistic Marketing
What value opportunities are available?
How can we create new value offerings efficiently?
How can we deliver the new offerings efficiently?
*
Figure 2.1 The Strategic Planning, Implementation, and
Control Processes
*
Table 2.1 Master Marketers
*

What is a Marketing Plan?
A marketing plan is the
central instrument for
directing and coordinating
the marketing effort.
It operates at a strategic and tactical level.
*
Levels of a Marketing PlanStrategicTarget marketing
decisionsValue propositionAnalysis of marketing
opportunitiesTacticalProduct
featuresPromotionMerchandisingPricingSales channelsService
*
Corporate Headquarters’
Planning ActivitiesDefine the corporate missionEstablish
strategic business units (SBUs)Assign resources to each
SBUAssess growth opportunities

*
Good Mission StatementsFocus on a limited number of
goalsStress major policies and valuesDefine major competitive
spheresTake a long-term viewShort, memorable, meaningful
“make transportation as reliable as running water, everywhere,
for everyone.”
*
Google
*
Table 2.2
Major Competitive SpheresIndustryProductsCompetenceMarket

segmentVertical channelsGeographic
*
Product Orientation vs.
Market Orientation
Copyright © 2012 Pearson Education 2-
*CompanyProductMarketMissouri-Pacific RailroadWe run a
railroadWe are a people-and-goods moverXeroxWe make
copying equipmentWe improve office productivityStandard
OilWe sell gasolineWe supply energyColumbia PicturesWe
make moviesWe entertain people
*

Dimensions Define a Business
Customer Groups
Customer Needs
Technology
*
Characteristics of SBUsIt is a single business or collection of
related businessesIt has its own set of competitorsIt has a leader
responsible for strategic planning and profitability
*
*

www.presentationgo.com
© presentationgo.com
BCG Matrix
STARS
CASH COWS
QUESTION MARKS
DOGS
RELATIVE MARKET SHARE
MARKET GROWTH RATE
Products with high growth and high market share. Require
significant investment to maintain market leadership. e.g.
Apple AirPods
Not known yet whether the product will become a star or a dog.
May require a lot of investment to become a star. e.g.
Apple HomePod
Mature, well-established products. Not much new investment is
required. Just keep milking the product! e.g. Apple iPad
Products that don’t generate much ROI and just waste money.
Best to remove the product. e.g. Apple iPod Shuffle
High
Low
Low
High
*
Figure 2.2 The Strategic Planning Gap

*
What is Corporate Culture?
Corporate culture is the
shared experiences, stories, beliefs,
and norms that
characterize an organization.
*
Figure 2.3 The Business Unit Strategic Planning Process
*
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats

*
Market Opportunity Analysis (MOA)Can the benefits involved
in the opportunity be articulated convincingly to a defined
target market?Can the target market be located and reached with
cost-effective media and trade channels?Does the company
possess or have access to the critical capabilities and resources
needed to deliver the customer benefits?
*
Market Opportunity Analysis (MOA)Can the company deliver
the benefits better than any actual or potential competitors?Will
the financial rate of return meet or exceed the company’s
required threshold for investment?
*
Figure 2.4

Opportunity and Threat Matrices
*
Goal Formulation and MBO (Management by Objectives)Unit’s
objectives must be hierarchicalObjectives should be
quantitativeGoals should be realisticObjectives must be
consistent
*
Porter’s Generic Strategies
Overall cost leadership
Differentiation
Focus
https://www.androidcentral.com/vertu-constellation
*

Categories of Marketing AlliancesProduct or service
alliancePromotional allianceLogistics alliancesPricing
collaborations
*
McKinsey’s Elements of Success
Strategy
Structure
Systems
Style
Shared values
Staff
Skills
*
Marketing Plan Contents
Executive summary Table of contents Situation analysis
Marketing strategy Financial projections Implementation
controls

*
Evaluating a Marketing Plan Is the plan simple? Is the plan
specific? Is the plan realistic? Is the plan complete?
*
For ReviewHow does marketing affect customer value?How is
strategic planning carried out at different levels of the
organization?What does a marketing plan include?
*
1
Defining Marketing

for the 21st Century
1
*
Chapter QuestionsWhy is marketing important?What is the
scope of marketing?What are some funda mental marketing
concepts?How has marketing management changed?What are
the tasks necessary for successful marketing management?
*
What is Marketing?
Marketing is an organizational function
and a set of processes for creating,
communicating, and delivering value
to customers and for managing
customer relationships in ways that
benefit the organization and its
stakeholders.
*

What is Marketing Management?
Marketing management is the
art and science
of choosing target markets
and getting, keeping, and growing
customers through
creating, delivering, and communicating
superior customer value.
*
What is Marketed?
Goods Services Events Experiences Persons
*
What is Marketed?
Places Properties Organizations Information Ideas

*
Demand StatesNegativehttp://www.bbc.com/news/uk-
21335872NonexistentFor example, older iPhonesLatentBeats by
DreDecliningCD Players, DVDsIrregularHoliday
packagesUnwholesomePirated movies, cigarettesFullCoca
ColaOverfullhttp://autoweek.com/article/green-cars/tesla-
model-3-production-delays-start-take-toll-company
*
Figure 1.1 Structure of Flows in Modern Exchange Economy
*
Figure 1.2
A Simple Marketing System

*
Key Customer MarketsConsumer marketsBusiness
marketsGlobal marketsNonprofit/Government markets
*
Core ConceptsNeeds, wants, and demandsTarget markets,
positioning, segmentationOfferi ngs and brandsValue and
satisfactionMarketing channelsSupply
chainCompetitionMarketing environmentMarketing planning
*
Types of Needs
Stated

Real
Unstated
Delight
Secret
*
Target Markets,
Positioning & Segmentation
*
Offerings and Brands
*
Value and Satisfaction

*
Marketing Channels
Communication
Distribution
Service
*
Marketing Environment
Demographic
Economic
Socio-cultural
Natural
Technological
Political-legal
*

Major Societal ForcesNetwork information technologyMore
targeted communicationsMore accurate levels of
productionGlobalizationCompanies such as Amazon are able to
reach a global market.DeregulationEg. US stock
marketPrivatizationCompanies that were once government
controlled are now more efficientHeightened competitionMore
domestic competitionChinese substitutes entering the
marketMegabrands – i.e. UnileverIndustry
convergenceCompanies identify new areas of opportunity and
merge two or more markets together.Retail
transformationTraditional retail faces competition from e-
tailers, and have to create a more complete buying
experienceDisintermediationRemoval of intermediaries from the
supply chain
*
Major societal forces cont.Consumer buying powerWe are able
to compare prices online, find the best possible dealsConsumer
informationWe are more informed thanks to the
Internet.Consumer participationhttps://cdn.artaic.com/wp-
content/uploads/2015/11/Apple-Store-Mosaic-Workshop-2010-
Left-Block-of-Stations.jpgConsumer resistanceMore customers
tend to show less brand loyalty and become more price – and
quality - sensitive
Copyright © 2011 Pearson Education, Inc. Publishing as
Prentice Hall 1-*
Copyright © 2011 Pearson Education, Inc. Publishing as
Prentice Hall 1-*

*
Company Orientations
Production
Product
Selling
Marketing
*
Holistic Marketing
*
Relationship Marketing
Customers
Employees
Marketing Partners

Financial Community
*
Integrated Marketing
*
Internal Marketing
Internal marketing is the task of
hiring, training, and motivating able employees
who want to serve customers well.
*
Performance Marketing
Financial
Accountability

Social Responsibility Marketing
*
Types of
Corporate Social InitiativesCorporate social marketingCause
marketingCause-related marketingCorporate
philanthropyCorporate community involvementSocially
responsible business practices
https://pbs.twimg.com/media/CE_B81-WgAAjnjN.jpg:large
*
The Marketing Mix
*
Marketing Management TasksDevelop market strategies and

plansCapture marketing insightsConnect with customersBuild
strong brandsShape market offeringsDeliver valueCommunicate
valueCreate long-term growth
*
For ReviewWhy is marketing important?What is the scope of
marketing?What are some fundamental marketing concepts?How
has marketing management changed?What are the tasks
necessary for successful marketing management?
*
12
Setting Product Strategy
1
*

Chapter QuestionsWhat are the characteristics of products and
how do marketers classify products? How can companies
differentiate products?Why is product design important and
what factors affect a good design?
*
Chapter QuestionsHow can a company build and manage its
product mix and product lines?How can companies combine
products to create strong co-brands or ingredient brands?How
can companies use packaging, labeling, warranties, and
guarantees as marketing tools?
*
What is a Product?
A product is anything that can be offered to a market to satisfy
a want or need, including physical goods, services, experiences,
events, persons, places, properties, organizations, information,
and ideas.

*
Figure 12.1 Components of the
Market Offering
*
Figure 12.2 Five Product Levels
*
Product Classification Schemes
Durability
Tangibility
Use

*
Durability and Tangibility
Nondurable goods
Durable goods
Services
*
Consumer Goods Classification
Convenience
Shopping
Specialty
Unsought
*
Industrial Goods ClassificationMaterials and partsRaw
materialsFarm productsNatural productsManufactured materials

and parts.Component materialsComponent partsCapital
itemsInstallationsBuildings and heavy
equipmentEquipmentPortable factory equipment, tools, office
equipmentSupplies/business services
*
Product DifferentiationProduct
formFeaturesCustomizationPerformanceConformanceDurability
ReliabilityRepairabilityStyle
*
Service DifferentiationOrdering
easeDeliveryInstallationCustomer trainingCustomer
consultingMaintenance and repairReturns
*

Design
*
The Product Hierarchy
*
Product Systems and Mixes
*
Figure 12.3 Product-Item Contributions to a Product Line’s
Total Sales and Profits

*
www.presentationgo.com
© presentationgo.com
BCG Matrix
STARS
CASH COWS
QUESTION MARKS
DOGS
RELATIVE MARKET SHARE
MARKET GROWTH RATE
Products with high growth and high market share. Require
significant investment to maintain market leadership. e.g.
Apple AirPods
Not known yet whether the product will become a star or a dog.
May require a lot of investment to become a star. e.g.
Apple HomePod
Mature, well-established products. Not much new investment is
required. Just keep milking the product! e.g. Apple iPad
Products that don’t generate much ROI and just waste money.
Best to remove the product. e.g. Apple iPod Shuffle
High
Low
Low
High
*

Figure 12.4 Product Map for a Paper-Product Line
*
Line Stretching
Down-Market Stretch
Up-Market Stretch
Two-Way Stretch
*
Product-Mix PricingProduct-line pricingOptional-feature
pricingCaptive-product pricingTwo-part pricingBy-product
pricingProduct-bundling pricing
*
Ingredient Branding

*
What is the Fifth P?
Packaging, sometimes called the 5th P, is all the activities of
designing and producing the container for a product.
*
Factors Contributing to the
Emphasis on PackagingSelf-serviceConsumer
affluenceCompany/brand imageInnovation opportunity
*
Packaging ObjectivesIdentify the brandConvey descriptive and

persuasive informationFacilitate product transportation and
protectionAssist at-home storageAid product consumption
*
Functions of Labels
*
For ReviewWhat are the characteristics of products and how do
marketers classify products? How can companies differentiate
products?Why is product design important and what factors
affect a good design?
*
Also For ReviewHow can a company build and manage its
product mix and product lines?How can companies combine
products to create strong co-brands or ingredient brands?How

can companies use packaging, labeling, warranties, and
guarantees as marketing tools?
20
Introducing New Market Offerings
1
*
Chapter QuestionsWhat challenges does a company face in
developing new products and services?What organizational
structures and processes do managers use to oversee new -
product development?What are the main stages in developing
new products and services?
*
Chapter QuestionsWhat is the best way to manage the new -

product development process?What factors affect the rate of
diffusion and consumer adoption of newly launched products
and services?
*
Categories of New Products
New to the World
Additions
Improvements
Repositionings
Cost reductions
*
Factors That Limit
New Product DevelopmentShortage of ideasFragmented
marketsSocial and governmental constraintsCost of
developmentCapital shortagesFaster required development
timeShorter product life cycles

*
Table 201. Finding One Successful Product
*
What is a Venture Team?A venture team is a cross-functional
group charged with developing a specific product or business.
*
Criteria for Staffing Venture TeamsDesired team leadership
styleDesired level of leader expertiseTeam member skills and
expertiseLevel of interest in conceptPotential for personal
rewardDiversity of team members
*

Figure 20.1 New-Product Development Decision Process
*
Ways to Find Great New Ideas Run informal sessions with
customersAllow time off for technical people to putter on pet
projectshttps://metro.co.uk/2018/03/16/took-tour-googles-
magic-happens-dreamy-imagine-7337482/Make customer
brainstorming a part of plant toursSurvey your
customersUndertake “fly on the wall” research to customers
*
More Ways to Find Great IdeasUse iterative rounds with
customersSet up a keyword search to scan trade
publicationsTreat trade shows as intelligence missionsHave
employees visit supplier labsSet up an idea vault

*
Drawing Ideas from CustomersObserve customers using
productAsk customers about problems with productsAsk
customers about their dream productsUse a customer advisory
board or a brand community of enthusiasts to discuss product
*
Idea Generation:
Creativity TechniquesAttribute listing: list the attributes of an
object then try to modifyForced relationships: list several ideas
and consider how each relates to the othersMorphological
analysis: involves starting with a problem, and then identifying
the dimensions, the medium, and the power sourceReverse
assumption analysis: list all the normal assumptions about an
entity and then reverse themNew contexts: instead of adopting
the logical, normal manner of looking at a challenge, you
reverse it and think about opposite ideas.Mind mapping: is
intended for generating as many ideas as possible in relation to
a specific topic
*

Lateral MarketingGas stations + foodCafeteria + InternetCereal
+ snackingCandy + toyAudio + portable
*
Figure 20.2 Forces Fighting
New Ideas
*
Figure 20.3 Product and
Brand Positioning
*

Concept TestingCommunicability and believabilityNeed
levelGap levelPerceived valuePurchase intentionUser targets,
purchase occasions, purchasing frequency
*
Figure 20.6 Product Life-Cycle Sales for Three Types of
Products
*
Prototype TestingAlpha testingBeta testingRank-order
methodPaired-comparison methodMonadic-rating methodMarket
testing
*

Consumer Goods Market TestingSales-Wave ResearchSimulated
Test MarketingControlled Test MarketingTest Markets
*
Test Market DecisionsHow many test cities?Which
cities?Length of test?What information to collect?What action
to take?
*
Timing of Market EntryFirst entryParallel entryLate entry
*

What is Adoption?
Adoption is an individual’s decision to become a regular user of
a product.
*
Stages in the Adoption Process
Awareness
Interest
Evaluation
Trial
Adoption
*
Figure 20.7 Adopter Categorization on the Basis of Relative
time of Adoption
*

Characteristics of an InnovationRelative
advantageCompatibilityComplexityDivisibilityCommunicability
*
For ReviewWhat challenges does a company face in developing
new products and services?What organizational structures and
processes do managers use to oversee new-product
development?What are the main stages in developing new
products and services?
*
For ReviewWhat is the best way to manage the new-product
development process?What factors affect the rate of diffusion
and consumer adoption of newly launched products and
services?

*
Marketing Management 3631,
Spring 2020
Marketing Plan
Group Written Report Marking Criteria
Due Date:
Week 15
Weighting:
40% Group Report
Type:
Group Report
Length:
Written report - maximum 10 pages, 1.5 line spacing (not
including references)
Submission:
Week 15 in class
Requirements:
This assessment entails to submit a written marketing plan
(40%). Your analyses and discussion in the marketing plan
report must show how your new / improved offering fills a
marketing gap in the Oman market snack category.
Marketing Plan (Group)
Using the ideas from your opportunity analysis and other
secondary data research, you are required to write a marketing
plan for your new / improved product offering in the snack
category for the Oman market.
As in the opportunity analysis assessment, you are required to
develop your new improved product offering and support your
idea with relevant secondary research and demonstrate that your
new product offering is taking an advantage of a gap in the

Oman market snack category.
To demonstrate analysis, you must not only present relevant
data, but also explain clearly what it means. However, you must
not contact sales & marketing personnel in any company in your
chosen industry either directly or via contacts on a website. All
information must be obtained from secondary research.
After you have selected and analysed your product and
thoroughly understand its growth pattern, you need then to make
a decision about how the industry can be expanded or
developed. To do this you either take the perspective of a new
entrant to the industry, or one of the established players. You
must consider appropriate objectives, develop a marketing
strategy and the marketing mix strategies you will need to
achieve the objectives and strategy.
Maybe you could consider a new product line, a new variety,
new distribution methods, and/or new advertising initiatives.
For example, If you wish to reach a new consumer group, then
you need to show that they exist. If you believe that a lower
(higher) price is a key then you need to show that there is a
trend to low prices, or evidence of economic pressures, that
make the strategy sensible
A marketing plan is a structured way of presenting ideas to
develop a product or service within its market space. We
strongly suggest that you follow the marking criteria set out
below to structure your marketing plan. There are many
outlines, pro-formas and checklists available; a good example
can be found in your text book.

The marking criteria for the individual opportunity analysis and
the group marketing plan are found at the end of this brief.
Please note that you must reference all your sources carefully.
The following headings and sub-headings may assist you in
identifying relevant issues for your secondary research,
application of relevant marketing concepts for both your written
marketing plan the oral presentation parts of the marketing plan
assessment.
Introduction –
· Literature review
· Clear product description.
· Briefly outline your key differential unique selling point(s) or
value proposition(s) for selected target market (to sign-post to
your reader)
Market Analysis
Micro & macro factor analysis
· selecting the relevant factors and assessing why and how these
factors contribute to the development of the opportunity
Customer analysis / segments /target markets –
· What segmentation variable(s) are useful for profiling your
customer segments?
· Which segments are being targeted for the marketing plan?
· Competitor analysis – who are the three main competitors for
the new / improved offering
· Why do these three companies pose such a threat? What are
their strengths?
Industry or category definition
· Does the new/improved offering align with the snack food
category/industry?
· If not discuss set out an explanation why this new offering fits
into this category.
· A clear identification of your product category (industry)
enables the business to identify your closest competitors and
how best to position the new (or improved) offering in the

market
Identifying a gap in the market for your product offering
(positioning your new offering in the market
· How does the new offering create value for your customer
groups? What is the differential value for the new improved
product?
· What are the attributes that differentiate your offering from
the competitors?
· These points highlight the value proposition and demonstrate
the difference(s) for your new / improved offering.
Marketing Strategy
· Objectives of marketing plan
· Strategies to achieve marketing objectives, for example are
there plans to adopt market penetration, market development
strategies to grow your market
· SWOT analysis may be useful in thinking about strategy
development
Action Plan - Marketing- Mix tactics
· Discussion of your marketing-mix tactics to achieve your
business objective and strategy for the new / improved offering.
(For example product, price, place, promotional activities to
operationalise positioning / marketing strategy
· A hypothetical timeline for the marketing plan
Marketing Management 3631,
Spring Semester 2020
Marketing Plan Marking Criteria
MARKING CRITERIA
A
B
C
D
comments
CONTENT

Market Analysis
Clear product description

Market analysis 1 - Macro environmental analysis to discover
opportunity
Market analysis 2 - Customer analysis
Market analysis 3 - Competitor analysis

Market Analysis – other relevant micro factor if relevant
Market analysis 4 - Marketing strategy

Market analysis 5 –
· Action Plan – Marketing Mix tactics
· Integrated marketing-mix strategies discussion
Market Analysis 6 - Marketing gap established and supported in
market analysis and discussion
PROCESS

Range and quality of secondary research in market analysis
Application of relevant marketing concepts in market analysis

Depth in discussion in market analysis
Peer evaluation completed
A

B
C
D
WRITTEN PRESENTATION
Report written in your own words
Discussion presents a logical flow of ideas and coherent flow of
ideas

Grammar and spelling
Professional standard in formatting and presentation of report

APA Referencing
· In-text citation
· Correct reference list

14Developing Pricing Strategies and Programs1

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