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ContentsContents
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
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Marketing Mix andMarketing Mix and
Market SegmentationMarket Segmentation
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Marketing CredoMarketing Credo
There is only one valid definitionThere is only one valid definition
of business purpose :of business purpose : to create ato create a
customercustomer
Peter Drucker
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Marketing MixMarketing Mix
ProductProduct PricePrice
PlacePlace PromotionPromotion
Target
Market
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Key Marketing ActivitiesKey Marketing Activities
Consumer AnalysisConsumer Analysis
Product PlanningProduct Planning
Price PlanningPrice Planning
DistributionDistribution
PlanningPlanning
PromotionPromotion
PlanningPlanning
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Key Marketing ActivitiesKey Marketing Activities
Consumer AnalysisConsumer Analysis
Product PlanningProduct Planning
Examination and evaluation of consumer
characteristics, needs, and purchase
processes
Development and maintenance of products,
product assortments, product positions,
brands, packaging, options, and deletion of
old products
Price PlanningPrice Planning
Outlines price ranges and levels, pricing
techniques purchase terms, price
adjustments, and the use of price as an
active or passive factor
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Key Marketing ActivitiesKey Marketing Activities
DistributionDistribution
PlanningPlanning
Establishment of channel relations, physical
distribution, inventory management,
warehousing, transportation, allocation of
goods, and wholesaling
PromotionPromotion
PlanningPlanning
Combination of advertising, publicity,
personal selling, and sales promotion to
drive sales revenue
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Product/Market MatrixProduct/Market Matrix
Existing ProductsExisting Products New ProductsNew Products
Existing MarketsExisting Markets
New MarketsNew Markets
Market
Penetration
Market
Penetration
Market
Development
Market
Development
Product
Development
Product
Development
DiversificationDiversification
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Product/Market MatrixProduct/Market Matrix
Market
Penetration
Market
Penetration
Market
Development
Market
Development
• The firm seeks to achieve growth with
existing products in their current market
segments, aiming to increase its market
share
• Effective when the market is growing or not
yet saturated
• The firm seeks growth by targeting its
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
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Product/Market MatrixProduct/Market Matrix
Product
Development
Product
Development
DiversificationDiversification
• The firms develops new products
targeted to its existing market segments
• Effective when the firm has a core of
strong brands
• The firm seeks growth by targeting its
existing products to new market
segments
• Diversification is utilized so that the
firm does not become overly depend-
ent on one product line
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Market SegmentationMarket Segmentation
The division of a market into
different homogeneous groups of
consumers
MarketMarket
SegmentSegment
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 profitable
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Types of Market SegmentationTypes of Market Segmentation
GeographicGeographic
DemographicDemographic
Based on regional variables such as
region, climate, population density, and
population growth rate.
Based on variables such as age, gender,
ethnicity, education, occupation, income,
and family status
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Types of Market SegmentationTypes of Market Segmentation
PsychographicPsychographic
BehavioralBehavioral
Based on variables such as values,
attitudes, and lifestyle
Based on variables such as usage rate
and patterns, price sensitivity, brand
loyalty, and benefits sought
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Step in Planning A Segmentation StrategyStep in Planning A Segmentation Strategy
Determining
characteristics and
needs of consumers
for the product
category of the
company
Analyzing
consumer
similarities and
differences
Developing
consumer
group
profiles
Selecting
consumer
segment (s)
Positioning
company’s
offering in
relation to
competition.
Establishing
an
appropriate
marketing
plan
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Product Planning andProduct Planning and
DevelopmentDevelopment
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Products : Types of GoodsProducts : Types of Goods
Types of
Goods
ConvenienceConvenience
GoodsGoods
ShoppingShopping
GoodsGoods
SpecialtySpecialty
GoodsGoods
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Convenience GoodsConvenience Goods
ConvenienceConvenience
GoodsGoods
• Those purchased with a minimum of effort,
because the buyer has knowledge of
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 store
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ConvenienceConvenience
GoodsGoods
• Staples are low-priced items that are
routinely purchased on a regular basis,
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 headache
Convenience GoodsConvenience Goods
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Shopping GoodsShopping Goods
ShoppingShopping
GoodsGoods
• Those for which consumers lack
sufficient information about product
alternatives and their attributes, and
therefore must acquire further
knowledge in order to make a
purchase decision
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Shopping GoodsShopping Goods
ShoppingShopping
GoodsGoods
• For attribute-based shopping goods,
consumers get information about and then
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/store
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Specialty GoodsSpecialty Goods
SpecialtySpecialty
GoodsGoods
• Those to which consumers are brand
loyal.
• 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
acceptable.
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ServicesServices
Type of
Services
Rented-Rented-
goodsgoods
ServiceService
Owned-goodsOwned-goods
serviceservice
Non-goodsNon-goods
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ServicesServices
Rented-Rented-
goodsgoods
ServiceService
Owned-goodsOwned-goods
serviceservice
Non-goodsNon-goods
Involves the leasing of a good for a specified
period of time. Examples include car, hotel room,
apartment, and tuxedo rentals
Involves an alteration or repair of a good owned by
the consumer. Examples include repair services
(such as automobile, watch, and plumbing), lawn
care, car wash, haircut, and dry cleaning
Provides personal service on the pan of the seller;
it does not involve a goods. Examples include
accounting, legal, and consulting services
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Characteristics of ServicesCharacteristics of Services
• The intangible nature of many services makes the
consumer's 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 variable
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Product Life CycleProduct Life Cycle
IntroductionIntroduction
GrowthGrowth MaturityMaturity
DeclineDecline
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Product Life CycleProduct Life Cycle
Characteristics Introduction Growth
Marketing objective Attract innovators and
opinion leader to new
product
Expand distribution and
product line
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
models
Expanding line
Distribution Depends on product Rising number of
outlets
Pricing Depends on product Greater range of prices
Promotion Informative Persuasive
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Product Life CycleProduct Life Cycle
Characteristics Maturity Decline
Marketing objective Maintain differential
advantage as long as
possible
(a) cut back,
(b) revive,
(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
outlets
Decreasing number of
outlets
Pricing Full line of prices Selected prices
Promotion Competitive Informative
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New Product PlanningNew Product Planning
IdeaIdea
GenerationGeneration
ProductProduct
ScreeningScreening
ConceptConcept
TestingTesting
BusinessBusiness
AnalysisAnalysis
ProductProduct
DevelopmentDevelopment
TestTest
MarketingMarketing
Commercial-Commercial-
izationization
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New Product PlanningNew Product Planning
IdeaIdea
GenerationGeneration
• A continuous, systematic search for new
product opportunities
• It involves delineating sources of new
ideas and methods for generating them
ProductProduct
ScreeningScreening
• After the firm identifies potential
products, it must screen them
• Many companies use a new-product
screening checklist for preliminary
evaluation
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Screening ChecklistScreening Checklist
GENERAL CHARACTERISTICS OF NEW PRODUCTSGENERAL CHARACTERISTICS OF NEW PRODUCTS
Profit potential
Existing competition
Potential competition
Size of market
Level of investment
Patentability
Level of risk
MARKETING CHARACTERISTICS OF NEW PRODUCTSMARKETING 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 PRODUCTSPRODUCTION 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 prices
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New Product PlanningNew Product Planning
ConceptConcept
TestingTesting
BusinessBusiness
AnalysisAnalysis
• Concept testing presents the consumer with
a proposed product and measures attitudes
and intentions at this early stage of
development
• Concept testing is a quick and inexpensive
way of measuring consumer enthusiasm
• Business analysis for the remaining product
concepts is much more detailed than product
screening
• Because the next step is expensive and time-
consuming product development, critical use
of business analysis is essential to eliminate
marginal items
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Business Analysis VariablesBusiness 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)
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New Product PlanningNew Product Planning
ProductProduct
DevelopmentDevelopment
TestTest
MarketingMarketing
• Product development converts a product idea
into a physical form and identifies a basic
marketing strategy
• It involves product construction, packaging,
branding, product positioning, and attitude and
usage testing.
• Test marketing involves placing a product for
sale in one or more selected areas and
observing its actual performance under the
proposed marketing plan.
• The purpose is to evaluate the product and
pretest marketing efforts in a real setting prior
to a full-scale introduction
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New Product PlanningNew Product Planning
Commercial-Commercial-
izationization
• After testing is completed, the firm is ready
to introduce the product to its full target
market. This is commercialization and
corresponds to the introductory stage of the
product life cycle
• Commercialization involves implementing a
total marketing plan and full production
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Promotion Mix :Promotion Mix :
Advertising, Publicity, PersonalAdvertising, Publicity, Personal
Selling and Sales PromotionSelling and Sales Promotion
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Promotion MixPromotion Mix
AdvertisingAdvertising PublicityPublicity
PersonalPersonal
SellingSelling
SalesSales
PromotionPromotion
Target
Market
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Promotion MixPromotion Mix
Factor AdvertisingAdvertising PublicityPublicity Personal SellingPersonal Selling Sales PromotionSales Promotion
Audience Mass Mass Small (one-to-one) Varies
Message Uniform Uniform Specific Varies
Cost Low per viewer or
reader
None for media space
and time; can be
moderate costs for
press releases and
publicity materials
High per customer Moderate per
customer
Sponsor Company No formal sponsor in
that media are not
paid
Company Company
Flexibility Low Low High Moderate
Control over content
and placement
High None High High
Credibility Moderate High Moderate Moderate
Major goal To appeal to a mass
audience at a
reasonable cost, and
create awareness and
favorable attitudes
To reach a mass
audience with an
independently
reported message
To deal with individual
consumers, to resolve
questions, to close
sales
To stimulate short-run
sales, to increase
impulse purchases
Example Television ad for a
Kodak video camera
Newspaper article
reporting on the
unique features of a
Kodak video camera
Retail sales personnel
explaining how a
Kodak video camera
works
A Kodak video camera
displayed at consumer
photography shows
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Four Key Steps to AdvertiseFour Key Steps to Advertise
DetermineDetermine
message contentmessage content
and devise an adand devise an ad
Specify theSpecify the
location of an adlocation of an ad
(media placement)(media placement)
Outline a promotionOutline a promotion
scheduleschedule
Choose how manyChoose how many
variations of avariations of a
basic message tobasic message to
utilizeutilize
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Things to Consider in AdvertisingThings to Consider in Advertising
WasteWaste
ReachReach
Waste is the portion of an audience that is
not in a firm's target market. Because
media appeal to mass audiences, waste
is a significant factor in advertising.
Reach refers to the number of viewers or
readers in the audience
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Things to Consider in AdvertisingThings to Consider in Advertising
FrequencyFrequency
MessageMessage
permanencepermanence
Frequency is how often a medium can be
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
of exposures one advertisement gener-ates
and how long it remains with the audience
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Things to Consider in AdvertisingThings to Consider in Advertising
PersuasivePersuasive
impactimpact
ClutterClutter
Persuasive impact is the ability of a medium
to stimulate consumers. Television often has
the highest persuasive impact because it is
able to combine audio, video, color, animation,
and other appeals.
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 presented.
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Publicity : Poor and Good ResponsePublicity : Poor and Good Response
SituationSituation Poor ResponsePoor Response Good ResponseGood Response
Fire breaks out in
a company plant
Requests for information by
media are ignored.
Company spokesperson explains the cause
of the fire and company precautions to avoid
it and answers questions.
New product
introduced
Advertising is used without
publicity
Pre-introduction news releases, product
samples, and testimonials are used.
News story about
product defects
Requests for information by media
are ignored, blanket denials are
issued, hostility is exhibited toward
reporter of story.
Company spokesperson states that tests are
being conducted on products, describes
procedure for handling defects, and answers
questions.
Competitor
introduces new
product
The advertising campaign is
stepped up.
Extensive news releases, statistics, and
spokespeople are made available to media to
present company's competitive features.
High profits
reported
Profits are rationalized and positive
effects on the economy are cited.
Profitability is explained, data (historical and
current) are provided, uses of profits are
detailed: research, community development.
Overall view of
publicity
There is an infrequent need for
publicity; crisis fighting is used
when bad reports are circulated.
There is an ongoing need for publicity, strong
planning, and contingency plans for bad
reports.
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Developing a Publicity PlanDeveloping a Publicity Plan
SettingSetting
objectivesobjectives
OutliningOutlining
types oftypes of
publicitypublicity
SelectingSelecting
mediamedia
CreatingCreating
publicitypublicity
messagesmessages
TimingTiming
publicitypublicity
messagesmessages
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Publicity TypePublicity Type
Publicity Type Example
News publicity Macy's 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, fast-speed microprocessor
Pictorial release Apple distributes photos showing all of its personal computer
products and related software
Background editorial
release
Mc Kinsey presents a biography of its president and his rise
through the company.
Emergency publicity The Red Cross makes a request for aid to tornado victims.
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Specific Personal Selling ObjectivesSpecific 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 practices
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Personal Selling ProcessPersonal Selling Process
ProspectingProspecting
(blind, lead)(blind, lead)
ApproachApproach CustomerCustomer
WantsWants
SalesSales
PresentationPresentation
AnsweringAnswering
QuestionsQuestions
(questions and(questions and
objections)objections)
CloseClose
Follow upFollow up
(satisfaction,(satisfaction,
referrals,referrals,
repurchase)repurchase)
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Types of Sales PromotionTypes of Sales Promotion
TypeType CharacteristicsCharacteristics IllustrationIllustration
Coupons Manufacturers or retailers advertise
special discounts for customers who
redeem coupons.
P&G mails consumers a 25-cents-
off coupon for Sure deodorant,
which can be redeemed at any
supermarket.
Refund or
rebate
A consumer submits proof-of-
purchase (usually to the
manufacturer) and receives an extra
discount.
First Alert home fire alarms
provides $5 rebates to consumers
submitting proof of purchase.
Samples Free merchandise or services are
given consumers, generally for new
items.
When Sunlight dishwashing liquid
was introduced, free samples were
mailed to consumers.
Contests or
sweepstakes
Consumers compete for prizes by
answering questions (contests) or
filling out forms for random drawings
of prices (sweepstakes).
Publishers Clearinghouse sponsors
annual sweepstakes and awards
automobiles, houses, and other
prices.
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TypeType CharacteristicsCharacteristics IllustrationIllustration
Bonus or
multipacks
Consumers receive discounts
for purchasing in quantity
Some stores run I-cent sales,
whereby the consumer buys one
item and gets a second one for a
penny.
Point-of-
purchase
displays
In-store displays remind
customers and generate
impulse purchases.
Chewing gum sales in
supermarkets are high because
displays arc placed at checkout
counters.
Special
events
Manufacturers or retailers
sponsor celebrity appearances,
fashion shows, and other
activities.
Virtually every major league
baseball team has an annual "Old
Timers' Day," which attracts large
crowds.
Gifts Consumers are given gifts for
making a purchase or opening
a new account.
Savings banks offer a range of
gifts for consumers opening new
accounts or expanding existing
ones.
Types of Sales PromotionTypes of Sales Promotion
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Sales Promotion AdvantagesSales Promotion Advantages
• It helps attract customer traffic and maintain brand or store
loyalty
• Quick results can be achieved
• Some forms of sales promotion (calendars, t-shirts. 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 in-store
displays
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Sales Promotion DisadvantagesSales 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 promotion.
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Sales Promotion DisadvantagesSales 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 brand's image and on sales, because a product-
related differential advantage has not been developed.
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Distribution Planning andDistribution Planning and
Pricing StrategyPricing Strategy
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Distribution PlanningDistribution 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 middlemen.
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Intensity of Channel CoverageIntensity of Channel Coverage
CharacteristicsCharacteristics ExclusiveExclusive
DistributionDistribution
SelectiveSelective
DistributionDistribution
IntensiveIntensive
DistributionDistribution
ObjectivesObjectives Prestige image,
channel control and
loyalty, price
stability and high
profit margins
Moderate market
coverage, solid
image, some
channel control and
loyalty, good sales
and profits
Widespread
market coverage,
channel
acceptance, sales
volume and profits
ChannelChannel
membersmembers
Few in number,
well-established
reputable stores
Moderate in number,
well-established,
better stores
Many in number,
all types
of outlets
CustomersCustomers Few in number,
trend setters,
willing to travel to
store, brand loyal
Moderate in number,
brand conscious,
somewhat willing to
travel to store
Many in number,
convenience-
oriented
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Intensity of Channel CoverageIntensity of Channel Coverage
CharacteristicsCharacteristics ExclusiveExclusive
DistributionDistribution
SelectiveSelective
DistributionDistribution
IntensiveIntensive
DistributionDistribution
MarketingMarketing
EmphasisEmphasis
Personal selling,
pleasant
shopping
conditions, good
service
Promotional mix,
pleasant shopping
conditions, good
service
Mass
advertising,
nearby location,
items in stock
MajorMajor
DisadvantagesDisadvantages
Limited sales
potential
May be difficult to
carve out a niche
Limited channel
control
ExamplesExamples Automobiles,
designer clothes,
caviar
Furniture,
clothing, watches
Groceries,
household
products,
magazines
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Methods of Channel CooperationMethods of Channel Cooperation
Factor Manufacturer Action Channel Member Action
New-productNew-product
introductionintroduction
Thorough testing, adequate
promotional
support
Good shelf location and
space, enthusiasm for
product, assistance in test
marketing
DeliveryDelivery Prompt filling of orders, adherence to
scheduled dates
Proper time allowed for
delivery, shipments
immediately checked for
accuracy
PromotionPromotion Sales force training, sales force
incentives, development of national
advertising campaign, cooperative
programs
Attractive in-store displays,
knowledgeable salespeople,
participation in cooperative
programs
ProductProduct
qualityquality
Product guarantees Proper installation and
servicing of products
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Pushing and Pulling StrategyPushing and Pulling Strategy
ManufacturerManufacturer
Channel
members
Channel
members
ConsumersConsumers
ManufacturerManufacturer
Channel
members
Channel
members
ConsumersConsumers
Pushing StrategyPushing Strategy Pulling StrategyPulling Strategy
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Price PlanningPrice Planning
A PriceA PriceA PriceA Price
Represents the value of aRepresents the value of a
good or service for both thegood or service for both the
seller and the buyerseller and the buyer
Represents the value of aRepresents the value of a
good or service for both thegood or service for both the
seller and the buyerseller and the buyer
PricePrice
PlanningPlanning
PricePrice
PlanningPlanning
Systematic decision makingSystematic decision making
by an organization regardingby an organization regarding
all aspects of pricingall aspects of pricing
Systematic decision makingSystematic decision making
by an organization regardingby an organization regarding
all aspects of pricingall aspects of pricing
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Factors Affecting Pricing DecisionsFactors Affecting Pricing Decisions
ConsumersConsumers CompetitorsCompetitors
ChannelChannel
MembersMembers
GovernmentGovernment
CostCost
Total EffectsTotal Effects
on Priceon Price
DecisionsDecisions
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Consumers and Price DecisionsConsumers and Price Decisions
ConsumersConsumers
• The relationship between price and
consumer purchases and perceptions is
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 purchase
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ElasticElastic
DemandDemand
ElasticElastic
DemandDemand
• Elastic demand occurs if relatively small changes in
price result in large changes in quantity demanded
• Numerically, price elasticity is greater than 1
• With elastic demand, total revenue goes up when
prices are decreased and goes down when prices rise
• Inelastic demand takes place if price changes have
little impact on quantity demanded
• Price elasticity is less than 1
• With inelastic demand, total revenue goes up when
prices are raised and goes down when prices decline
In-elasticIn-elastic
DemandDemand
In-elasticIn-elastic
DemandDemand
Consumers and Price DecisionsConsumers and Price Decisions
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UnitaryUnitary
DemandDemand
UnitaryUnitary
DemandDemand
• Unitary demand exists if changes in price are
exactly offset by changes in quantity demanded,
so that total sales revenue remains constant.
• Price elasticity is 1
Consumers and Price DecisionsConsumers and Price Decisions
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Competitors and Price DecisionsCompetitors and Price Decisions
CompetitorsCompetitors
• Another element contributing to the
degree of control a firm has over
prices is the competitive environment
within which it operates
66www.studyMarketing.org
Market-
controlled
price
environment
Market-
controlled
price
environment
• Characterized by a high level of com-
petition, similar goods and services, and
little control over price by individual
companies
• Characterized by moderate competi-tion,
well-differentiated goods and services, and
strong control over price by individual firms
Company-
controlled
priced
environment
Company-
controlled
priced
environment
Competitors and Price DecisionsCompetitors and Price Decisions
67www.studyMarketing.org
Government-
controlled
price
environment
Government-
controlled
price
environment
• Characterized by prices set by the
government. Examples are public utilities,
buses, taxis, and state universities
Competitors and Price DecisionsCompetitors and Price Decisions
68www.studyMarketing.org
Channel Members and Price DecisionsChannel Members and Price Decisions
ChannelChannel
MembersMembers
• A wholesaler or retailer can gain stronger
control over price by stressing its importance as
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 brands
69www.studyMarketing.org
Channel Members and Price DecisionsChannel Members and Price Decisions
ChannelChannel
MembersMembers
• To ensure channel member cooperation with
price decisions, the manufacturer needs to
consider four factors: channel member profit
margins, price guarantees, special deals, and
the impact of price increases
70www.studyMarketing.org
Government and Price DecisionsGovernment and Price Decisions
GovernmentGovernment
Price fixing regulationsPrice fixing regulations
Prohibitions against price
discrimination among
channel members
Prohibitions against price
discrimination among
channel members
Unfair sales acts :
predatory pricing
Unfair sales acts :
predatory pricing
71www.studyMarketing.org
Cost and Price DecisionsCost and Price Decisions
CostCost
Cost of raw
materials and
supplies
Cost of raw
materials and
supplies
Labor costLabor cost
Advertising CostAdvertising Cost
Distribution CostDistribution Cost
PricingPricing
DecisionsDecisions
72www.studyMarketing.org
Price StrategyPrice Strategy
Cost-based PriceCost-based Price
StrategyStrategy
Demand-basedDemand-based
Price StrategyPrice Strategy
Competition-Competition-
based Pricebased Price
StrategyStrategy
PricePrice
StrategyStrategy
73www.studyMarketing.org
Price StrategyPrice Strategy
Cost-based PriceCost-based Price
StrategyStrategy
Demand-basedDemand-based
Price StrategyPrice Strategy
With a cost-based price strategy, the
marketer sets prices by computing
merchandise, service, and overhead
costs, and then adding the desired profit
to these figures
The marketer sets prices after
researching con-sumer desires and
ascertaining the range of prices
acceptable to the target market
74www.studyMarketing.org
Price StrategyPrice Strategy
Competition-Competition-
based Pricebased Price
StrategyStrategy
• The marketer sets prices in
accordance with competitors
• Prices may be below the market, at
the market, or above the mar-ket,
depending on customer loyalty,
services provided, image, real or
perceived differences between
brands or stores, and the
competitive environment
75www.studyMarketing.org
Recommended Further ReadingsRecommended Further Readings
1. Joel Evans and Barry Berman, Marketing, Prentice Hall
2. Phillip Kotler, Marketing Management, Prentice Hall
76www.studyMarketing.org
End of MaterialEnd of Material

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Marketing Management

  • 1. 1www.studyMarketing.org Think Marketing !Think Marketing ! Produced by www.studyMarketing.orgProduced by www.studyMarketing.org
  • 2. 2www.studyMarketing.org ContentsContents 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 (www.studyMarketing.org)(www.studyMarketing.org)
  • 3. 3www.studyMarketing.org www.studyMarketing.orgwww.studyMarketing.org You can download this presentation at: Please visit www.studyMarketing.org for more presentations on strategy, marketing, branding, and innovation
  • 4. 4www.studyMarketing.org Marketing Mix andMarketing Mix and Market SegmentationMarket Segmentation
  • 5. 5www.studyMarketing.org Marketing CredoMarketing Credo There is only one valid definitionThere is only one valid definition of business purpose :of business purpose : to create ato create a customercustomer Peter Drucker
  • 6. 6www.studyMarketing.org Marketing MixMarketing Mix ProductProduct PricePrice PlacePlace PromotionPromotion Target Market
  • 7. 7www.studyMarketing.org Key Marketing ActivitiesKey Marketing Activities Consumer AnalysisConsumer Analysis Product PlanningProduct Planning Price PlanningPrice Planning DistributionDistribution PlanningPlanning PromotionPromotion PlanningPlanning
  • 8. 8www.studyMarketing.org Key Marketing ActivitiesKey Marketing Activities Consumer AnalysisConsumer Analysis Product PlanningProduct Planning Examination and evaluation of consumer characteristics, needs, and purchase processes Development and maintenance of products, product assortments, product positions, brands, packaging, options, and deletion of old products Price PlanningPrice Planning Outlines price ranges and levels, pricing techniques purchase terms, price adjustments, and the use of price as an active or passive factor
  • 9. 9www.studyMarketing.org Key Marketing ActivitiesKey Marketing Activities DistributionDistribution PlanningPlanning Establishment of channel relations, physical distribution, inventory management, warehousing, transportation, allocation of goods, and wholesaling PromotionPromotion PlanningPlanning Combination of advertising, publicity, personal selling, and sales promotion to drive sales revenue
  • 10. 10www.studyMarketing.org Product/Market MatrixProduct/Market Matrix Existing ProductsExisting Products New ProductsNew Products Existing MarketsExisting Markets New MarketsNew Markets Market Penetration Market Penetration Market Development Market Development Product Development Product Development DiversificationDiversification
  • 11. 11www.studyMarketing.org Product/Market MatrixProduct/Market Matrix Market Penetration Market Penetration Market Development Market Development • The firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share • Effective when the market is growing or not yet saturated • The firm seeks growth by targeting its 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
  • 12. 12www.studyMarketing.org Product/Market MatrixProduct/Market Matrix Product Development Product Development DiversificationDiversification • The firms develops new products targeted to its existing market segments • Effective when the firm has a core of strong brands • The firm seeks growth by targeting its existing products to new market segments • Diversification is utilized so that the firm does not become overly depend- ent on one product line
  • 13. 13www.studyMarketing.org Market SegmentationMarket Segmentation The division of a market into different homogeneous groups of consumers MarketMarket SegmentSegment 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 profitable
  • 14. 14www.studyMarketing.org Types of Market SegmentationTypes of Market Segmentation GeographicGeographic DemographicDemographic Based on regional variables such as region, climate, population density, and population growth rate. Based on variables such as age, gender, ethnicity, education, occupation, income, and family status
  • 15. 15www.studyMarketing.org Types of Market SegmentationTypes of Market Segmentation PsychographicPsychographic BehavioralBehavioral Based on variables such as values, attitudes, and lifestyle Based on variables such as usage rate and patterns, price sensitivity, brand loyalty, and benefits sought
  • 16. 16www.studyMarketing.org Step in Planning A Segmentation StrategyStep in Planning A Segmentation Strategy Determining characteristics and needs of consumers for the product category of the company Analyzing consumer similarities and differences Developing consumer group profiles Selecting consumer segment (s) Positioning company’s offering in relation to competition. Establishing an appropriate marketing plan
  • 17. 17www.studyMarketing.org Product Planning andProduct Planning and DevelopmentDevelopment
  • 18. 18www.studyMarketing.org Products : Types of GoodsProducts : Types of Goods Types of Goods ConvenienceConvenience GoodsGoods ShoppingShopping GoodsGoods SpecialtySpecialty GoodsGoods
  • 19. 19www.studyMarketing.org Convenience GoodsConvenience Goods ConvenienceConvenience GoodsGoods • Those purchased with a minimum of effort, because the buyer has knowledge of 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 store
  • 20. 20www.studyMarketing.org ConvenienceConvenience GoodsGoods • Staples are low-priced items that are routinely purchased on a regular basis, 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 headache Convenience GoodsConvenience Goods
  • 21. 21www.studyMarketing.org Shopping GoodsShopping Goods ShoppingShopping GoodsGoods • Those for which consumers lack sufficient information about product alternatives and their attributes, and therefore must acquire further knowledge in order to make a purchase decision
  • 22. 22www.studyMarketing.org Shopping GoodsShopping Goods ShoppingShopping GoodsGoods • For attribute-based shopping goods, consumers get information about and then 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/store
  • 23. 23www.studyMarketing.org Specialty GoodsSpecialty Goods SpecialtySpecialty GoodsGoods • Those to which consumers are brand loyal. • 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 acceptable.
  • 25. 25www.studyMarketing.org ServicesServices Rented-Rented- goodsgoods ServiceService Owned-goodsOwned-goods serviceservice Non-goodsNon-goods Involves the leasing of a good for a specified period of time. Examples include car, hotel room, apartment, and tuxedo rentals Involves an alteration or repair of a good owned by the consumer. Examples include repair services (such as automobile, watch, and plumbing), lawn care, car wash, haircut, and dry cleaning Provides personal service on the pan of the seller; it does not involve a goods. Examples include accounting, legal, and consulting services
  • 26. 26www.studyMarketing.org Characteristics of ServicesCharacteristics of Services • The intangible nature of many services makes the consumer's 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 variable
  • 27. 27www.studyMarketing.org Product Life CycleProduct Life Cycle IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline
  • 28. 28www.studyMarketing.org Product Life CycleProduct Life Cycle Characteristics Introduction Growth Marketing objective Attract innovators and opinion leader to new product Expand distribution and product line 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 models Expanding line Distribution Depends on product Rising number of outlets Pricing Depends on product Greater range of prices Promotion Informative Persuasive
  • 29. 29www.studyMarketing.org Product Life CycleProduct Life Cycle Characteristics Maturity Decline Marketing objective Maintain differential advantage as long as possible (a) cut back, (b) revive, (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 outlets Decreasing number of outlets Pricing Full line of prices Selected prices Promotion Competitive Informative
  • 30. 30www.studyMarketing.org New Product PlanningNew Product Planning IdeaIdea GenerationGeneration ProductProduct ScreeningScreening ConceptConcept TestingTesting BusinessBusiness AnalysisAnalysis ProductProduct DevelopmentDevelopment TestTest MarketingMarketing Commercial-Commercial- izationization
  • 31. 31www.studyMarketing.org New Product PlanningNew Product Planning IdeaIdea GenerationGeneration • A continuous, systematic search for new product opportunities • It involves delineating sources of new ideas and methods for generating them ProductProduct ScreeningScreening • After the firm identifies potential products, it must screen them • Many companies use a new-product screening checklist for preliminary evaluation
  • 32. 32www.studyMarketing.org Screening ChecklistScreening Checklist GENERAL CHARACTERISTICS OF NEW PRODUCTSGENERAL CHARACTERISTICS OF NEW PRODUCTS Profit potential Existing competition Potential competition Size of market Level of investment Patentability Level of risk MARKETING CHARACTERISTICS OF NEW PRODUCTSMARKETING 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 PRODUCTSPRODUCTION 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 prices
  • 33. 33www.studyMarketing.org New Product PlanningNew Product Planning ConceptConcept TestingTesting BusinessBusiness AnalysisAnalysis • Concept testing presents the consumer with a proposed product and measures attitudes and intentions at this early stage of development • Concept testing is a quick and inexpensive way of measuring consumer enthusiasm • Business analysis for the remaining product concepts is much more detailed than product screening • Because the next step is expensive and time- consuming product development, critical use of business analysis is essential to eliminate marginal items
  • 34. 34www.studyMarketing.org Business Analysis VariablesBusiness 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)
  • 35. 35www.studyMarketing.org New Product PlanningNew Product Planning ProductProduct DevelopmentDevelopment TestTest MarketingMarketing • Product development converts a product idea into a physical form and identifies a basic marketing strategy • It involves product construction, packaging, branding, product positioning, and attitude and usage testing. • Test marketing involves placing a product for sale in one or more selected areas and observing its actual performance under the proposed marketing plan. • The purpose is to evaluate the product and pretest marketing efforts in a real setting prior to a full-scale introduction
  • 36. 36www.studyMarketing.org New Product PlanningNew Product Planning Commercial-Commercial- izationization • After testing is completed, the firm is ready to introduce the product to its full target market. This is commercialization and corresponds to the introductory stage of the product life cycle • Commercialization involves implementing a total marketing plan and full production
  • 37. 37www.studyMarketing.org Promotion Mix :Promotion Mix : Advertising, Publicity, PersonalAdvertising, Publicity, Personal Selling and Sales PromotionSelling and Sales Promotion
  • 38. 38www.studyMarketing.org Promotion MixPromotion Mix AdvertisingAdvertising PublicityPublicity PersonalPersonal SellingSelling SalesSales PromotionPromotion Target Market
  • 39. 39www.studyMarketing.org Promotion MixPromotion Mix Factor AdvertisingAdvertising PublicityPublicity Personal SellingPersonal Selling Sales PromotionSales Promotion Audience Mass Mass Small (one-to-one) Varies Message Uniform Uniform Specific Varies Cost Low per viewer or reader None for media space and time; can be moderate costs for press releases and publicity materials High per customer Moderate per customer Sponsor Company No formal sponsor in that media are not paid Company Company Flexibility Low Low High Moderate Control over content and placement High None High High Credibility Moderate High Moderate Moderate Major goal To appeal to a mass audience at a reasonable cost, and create awareness and favorable attitudes To reach a mass audience with an independently reported message To deal with individual consumers, to resolve questions, to close sales To stimulate short-run sales, to increase impulse purchases Example Television ad for a Kodak video camera Newspaper article reporting on the unique features of a Kodak video camera Retail sales personnel explaining how a Kodak video camera works A Kodak video camera displayed at consumer photography shows
  • 40. 40www.studyMarketing.org Four Key Steps to AdvertiseFour Key Steps to Advertise DetermineDetermine message contentmessage content and devise an adand devise an ad Specify theSpecify the location of an adlocation of an ad (media placement)(media placement) Outline a promotionOutline a promotion scheduleschedule Choose how manyChoose how many variations of avariations of a basic message tobasic message to utilizeutilize
  • 41. 41www.studyMarketing.org Things to Consider in AdvertisingThings to Consider in Advertising WasteWaste ReachReach Waste is the portion of an audience that is not in a firm's target market. Because media appeal to mass audiences, waste is a significant factor in advertising. Reach refers to the number of viewers or readers in the audience
  • 42. 42www.studyMarketing.org Things to Consider in AdvertisingThings to Consider in Advertising FrequencyFrequency MessageMessage permanencepermanence Frequency is how often a medium can be 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 of exposures one advertisement gener-ates and how long it remains with the audience
  • 43. 43www.studyMarketing.org Things to Consider in AdvertisingThings to Consider in Advertising PersuasivePersuasive impactimpact ClutterClutter Persuasive impact is the ability of a medium to stimulate consumers. Television often has the highest persuasive impact because it is able to combine audio, video, color, animation, and other appeals. 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 presented.
  • 44. 44www.studyMarketing.org Publicity : Poor and Good ResponsePublicity : Poor and Good Response SituationSituation Poor ResponsePoor Response Good ResponseGood Response Fire breaks out in a company plant Requests for information by media are ignored. Company spokesperson explains the cause of the fire and company precautions to avoid it and answers questions. New product introduced Advertising is used without publicity Pre-introduction news releases, product samples, and testimonials are used. News story about product defects Requests for information by media are ignored, blanket denials are issued, hostility is exhibited toward reporter of story. Company spokesperson states that tests are being conducted on products, describes procedure for handling defects, and answers questions. Competitor introduces new product The advertising campaign is stepped up. Extensive news releases, statistics, and spokespeople are made available to media to present company's competitive features. High profits reported Profits are rationalized and positive effects on the economy are cited. Profitability is explained, data (historical and current) are provided, uses of profits are detailed: research, community development. Overall view of publicity There is an infrequent need for publicity; crisis fighting is used when bad reports are circulated. There is an ongoing need for publicity, strong planning, and contingency plans for bad reports.
  • 45. 45www.studyMarketing.org Developing a Publicity PlanDeveloping a Publicity Plan SettingSetting objectivesobjectives OutliningOutlining types oftypes of publicitypublicity SelectingSelecting mediamedia CreatingCreating publicitypublicity messagesmessages TimingTiming publicitypublicity messagesmessages
  • 46. 46www.studyMarketing.org Publicity TypePublicity Type Publicity Type Example News publicity Macy's 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, fast-speed microprocessor Pictorial release Apple distributes photos showing all of its personal computer products and related software Background editorial release Mc Kinsey presents a biography of its president and his rise through the company. Emergency publicity The Red Cross makes a request for aid to tornado victims.
  • 47. 47www.studyMarketing.org Specific Personal Selling ObjectivesSpecific 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 practices
  • 48. 48www.studyMarketing.org Personal Selling ProcessPersonal Selling Process ProspectingProspecting (blind, lead)(blind, lead) ApproachApproach CustomerCustomer WantsWants SalesSales PresentationPresentation AnsweringAnswering QuestionsQuestions (questions and(questions and objections)objections) CloseClose Follow upFollow up (satisfaction,(satisfaction, referrals,referrals, repurchase)repurchase)
  • 49. 49www.studyMarketing.org Types of Sales PromotionTypes of Sales Promotion TypeType CharacteristicsCharacteristics IllustrationIllustration Coupons Manufacturers or retailers advertise special discounts for customers who redeem coupons. P&G mails consumers a 25-cents- off coupon for Sure deodorant, which can be redeemed at any supermarket. Refund or rebate A consumer submits proof-of- purchase (usually to the manufacturer) and receives an extra discount. First Alert home fire alarms provides $5 rebates to consumers submitting proof of purchase. Samples Free merchandise or services are given consumers, generally for new items. When Sunlight dishwashing liquid was introduced, free samples were mailed to consumers. Contests or sweepstakes Consumers compete for prizes by answering questions (contests) or filling out forms for random drawings of prices (sweepstakes). Publishers Clearinghouse sponsors annual sweepstakes and awards automobiles, houses, and other prices.
  • 50. 50www.studyMarketing.org TypeType CharacteristicsCharacteristics IllustrationIllustration Bonus or multipacks Consumers receive discounts for purchasing in quantity Some stores run I-cent sales, whereby the consumer buys one item and gets a second one for a penny. Point-of- purchase displays In-store displays remind customers and generate impulse purchases. Chewing gum sales in supermarkets are high because displays arc placed at checkout counters. Special events Manufacturers or retailers sponsor celebrity appearances, fashion shows, and other activities. Virtually every major league baseball team has an annual "Old Timers' Day," which attracts large crowds. Gifts Consumers are given gifts for making a purchase or opening a new account. Savings banks offer a range of gifts for consumers opening new accounts or expanding existing ones. Types of Sales PromotionTypes of Sales Promotion
  • 51. 51www.studyMarketing.org Sales Promotion AdvantagesSales Promotion Advantages • It helps attract customer traffic and maintain brand or store loyalty • Quick results can be achieved • Some forms of sales promotion (calendars, t-shirts. 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 in-store displays
  • 52. 52www.studyMarketing.org Sales Promotion DisadvantagesSales 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 promotion.
  • 53. 53www.studyMarketing.org Sales Promotion DisadvantagesSales 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 brand's image and on sales, because a product- related differential advantage has not been developed.
  • 54. 54www.studyMarketing.org Distribution Planning andDistribution Planning and Pricing StrategyPricing Strategy
  • 55. 55www.studyMarketing.org Distribution PlanningDistribution 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 middlemen.
  • 56. 56www.studyMarketing.org Intensity of Channel CoverageIntensity of Channel Coverage CharacteristicsCharacteristics ExclusiveExclusive DistributionDistribution SelectiveSelective DistributionDistribution IntensiveIntensive DistributionDistribution ObjectivesObjectives Prestige image, channel control and loyalty, price stability and high profit margins Moderate market coverage, solid image, some channel control and loyalty, good sales and profits Widespread market coverage, channel acceptance, sales volume and profits ChannelChannel membersmembers Few in number, well-established reputable stores Moderate in number, well-established, better stores Many in number, all types of outlets CustomersCustomers Few in number, trend setters, willing to travel to store, brand loyal Moderate in number, brand conscious, somewhat willing to travel to store Many in number, convenience- oriented
  • 57. 57www.studyMarketing.org Intensity of Channel CoverageIntensity of Channel Coverage CharacteristicsCharacteristics ExclusiveExclusive DistributionDistribution SelectiveSelective DistributionDistribution IntensiveIntensive DistributionDistribution MarketingMarketing EmphasisEmphasis Personal selling, pleasant shopping conditions, good service Promotional mix, pleasant shopping conditions, good service Mass advertising, nearby location, items in stock MajorMajor DisadvantagesDisadvantages Limited sales potential May be difficult to carve out a niche Limited channel control ExamplesExamples Automobiles, designer clothes, caviar Furniture, clothing, watches Groceries, household products, magazines
  • 58. 58www.studyMarketing.org Methods of Channel CooperationMethods of Channel Cooperation Factor Manufacturer Action Channel Member Action New-productNew-product introductionintroduction Thorough testing, adequate promotional support Good shelf location and space, enthusiasm for product, assistance in test marketing DeliveryDelivery Prompt filling of orders, adherence to scheduled dates Proper time allowed for delivery, shipments immediately checked for accuracy PromotionPromotion Sales force training, sales force incentives, development of national advertising campaign, cooperative programs Attractive in-store displays, knowledgeable salespeople, participation in cooperative programs ProductProduct qualityquality Product guarantees Proper installation and servicing of products
  • 59. 59www.studyMarketing.org Pushing and Pulling StrategyPushing and Pulling Strategy ManufacturerManufacturer Channel members Channel members ConsumersConsumers ManufacturerManufacturer Channel members Channel members ConsumersConsumers Pushing StrategyPushing Strategy Pulling StrategyPulling Strategy
  • 60. 60www.studyMarketing.org Price PlanningPrice Planning A PriceA PriceA PriceA Price Represents the value of aRepresents the value of a good or service for both thegood or service for both the seller and the buyerseller and the buyer Represents the value of aRepresents the value of a good or service for both thegood or service for both the seller and the buyerseller and the buyer PricePrice PlanningPlanning PricePrice PlanningPlanning Systematic decision makingSystematic decision making by an organization regardingby an organization regarding all aspects of pricingall aspects of pricing Systematic decision makingSystematic decision making by an organization regardingby an organization regarding all aspects of pricingall aspects of pricing
  • 61. 61www.studyMarketing.org Factors Affecting Pricing DecisionsFactors Affecting Pricing Decisions ConsumersConsumers CompetitorsCompetitors ChannelChannel MembersMembers GovernmentGovernment CostCost Total EffectsTotal Effects on Priceon Price DecisionsDecisions
  • 62. 62www.studyMarketing.org Consumers and Price DecisionsConsumers and Price Decisions ConsumersConsumers • The relationship between price and consumer purchases and perceptions is 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 purchase
  • 63. 63www.studyMarketing.org ElasticElastic DemandDemand ElasticElastic DemandDemand • Elastic demand occurs if relatively small changes in price result in large changes in quantity demanded • Numerically, price elasticity is greater than 1 • With elastic demand, total revenue goes up when prices are decreased and goes down when prices rise • Inelastic demand takes place if price changes have little impact on quantity demanded • Price elasticity is less than 1 • With inelastic demand, total revenue goes up when prices are raised and goes down when prices decline In-elasticIn-elastic DemandDemand In-elasticIn-elastic DemandDemand Consumers and Price DecisionsConsumers and Price Decisions
  • 64. 64www.studyMarketing.org UnitaryUnitary DemandDemand UnitaryUnitary DemandDemand • Unitary demand exists if changes in price are exactly offset by changes in quantity demanded, so that total sales revenue remains constant. • Price elasticity is 1 Consumers and Price DecisionsConsumers and Price Decisions
  • 65. 65www.studyMarketing.org Competitors and Price DecisionsCompetitors and Price Decisions CompetitorsCompetitors • Another element contributing to the degree of control a firm has over prices is the competitive environment within which it operates
  • 66. 66www.studyMarketing.org Market- controlled price environment Market- controlled price environment • Characterized by a high level of com- petition, similar goods and services, and little control over price by individual companies • Characterized by moderate competi-tion, well-differentiated goods and services, and strong control over price by individual firms Company- controlled priced environment Company- controlled priced environment Competitors and Price DecisionsCompetitors and Price Decisions
  • 67. 67www.studyMarketing.org Government- controlled price environment Government- controlled price environment • Characterized by prices set by the government. Examples are public utilities, buses, taxis, and state universities Competitors and Price DecisionsCompetitors and Price Decisions
  • 68. 68www.studyMarketing.org Channel Members and Price DecisionsChannel Members and Price Decisions ChannelChannel MembersMembers • A wholesaler or retailer can gain stronger control over price by stressing its importance as 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 brands
  • 69. 69www.studyMarketing.org Channel Members and Price DecisionsChannel Members and Price Decisions ChannelChannel MembersMembers • To ensure channel member cooperation with price decisions, the manufacturer needs to consider four factors: channel member profit margins, price guarantees, special deals, and the impact of price increases
  • 70. 70www.studyMarketing.org Government and Price DecisionsGovernment and Price Decisions GovernmentGovernment Price fixing regulationsPrice fixing regulations Prohibitions against price discrimination among channel members Prohibitions against price discrimination among channel members Unfair sales acts : predatory pricing Unfair sales acts : predatory pricing
  • 71. 71www.studyMarketing.org Cost and Price DecisionsCost and Price Decisions CostCost Cost of raw materials and supplies Cost of raw materials and supplies Labor costLabor cost Advertising CostAdvertising Cost Distribution CostDistribution Cost PricingPricing DecisionsDecisions
  • 72. 72www.studyMarketing.org Price StrategyPrice Strategy Cost-based PriceCost-based Price StrategyStrategy Demand-basedDemand-based Price StrategyPrice Strategy Competition-Competition- based Pricebased Price StrategyStrategy PricePrice StrategyStrategy
  • 73. 73www.studyMarketing.org Price StrategyPrice Strategy Cost-based PriceCost-based Price StrategyStrategy Demand-basedDemand-based Price StrategyPrice Strategy With a cost-based price strategy, the marketer sets prices by computing merchandise, service, and overhead costs, and then adding the desired profit to these figures The marketer sets prices after researching con-sumer desires and ascertaining the range of prices acceptable to the target market
  • 74. 74www.studyMarketing.org Price StrategyPrice Strategy Competition-Competition- based Pricebased Price StrategyStrategy • The marketer sets prices in accordance with competitors • Prices may be below the market, at the market, or above the mar-ket, depending on customer loyalty, services provided, image, real or perceived differences between brands or stores, and the competitive environment
  • 75. 75www.studyMarketing.org Recommended Further ReadingsRecommended Further Readings 1. Joel Evans and Barry Berman, Marketing, Prentice Hall 2. Phillip Kotler, Marketing Management, Prentice Hall