Marketing Concepts


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Brand, Brand Equity, Price, Pricing Technique, Distribution and its Channels

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  • Marketing Concepts

    1. 1. Marketing Concepts Rahul Guhathakurta Indian Institute of Planning & Management Ahmedabad
    2. 2. Brand Equity <ul><li>Brand Equity is a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or substracts from) the value provided by a product or service to a firm and/or that firm’s customers. </li></ul>
    3. 3. Brand Equity Increases Value Brand Equity Brand Loyalty Brand Awareness Perceived Quality Brand Associations Other Brand Assets Value to Customer Value to Firm
    4. 4. Categories of Assets <ul><li>Brand name awareness </li></ul><ul><li>Brand loyalty/User ship of brand </li></ul><ul><li>Perceived Quality </li></ul><ul><li>Brand Associations </li></ul><ul><li>Other Proprietary Brand Assets (e.g., channel relationships, patents,…) </li></ul>
    5. 5. Brand Equity and Brand Value <ul><li>Brand Equity provides value to customers: </li></ul><ul><ul><li>Interpretation/processing of information </li></ul></ul><ul><ul><li>Confidence in the purchase decision </li></ul></ul><ul><ul><li>Use satisfaction </li></ul></ul>
    6. 6. Brand Equity and Brand Identity Brand Identity Brand Associations Brand Equity
    7. 7. Brand Equity <ul><li>The added value a brand name identity brings to a product or service beyond the functional benefits provided. </li></ul><ul><li>The accrued value of a brand, developed over a period of time, that creates a positive brand image, drives demand, and modifies client attitudes toward the brand. </li></ul>
    8. 8. Price <ul><li>Price is the sum of all the values that consumers exchange for the benefits of having or using the product or service. </li></ul><ul><li>“ rent, tuition, fees, premiums, honoraria, salaries, wages, commissions, </li></ul><ul><li>Why is it so dangerous? (1) Price is the only element in the marketing mix that produces revenues (PxQ); all others represent costs. </li></ul><ul><li>(2) It’s the easiest element to change. </li></ul>
    9. 9. Price <ul><li>Price is the value placed on what is exchanged. Something of value is exchanged for satisfaction and utility, includes tangible (functional) and intangible (prestige) factors. </li></ul><ul><li>To a buyer price is a value placed on what is exchanged. </li></ul>
    10. 10. Importance of Price to the Marketer <ul><li>Relates directly to total revenue TR = Price * Qtty Profits = TR - TC </li></ul>
    11. 11. Types of Pricing Objectives <ul><li>Market share , Pricing objectives used to increase or maintain market share. </li></ul><ul><li>Profit </li></ul><ul><li>Survival , accept short term losses necessary for survival </li></ul><ul><li>Customer satisfaction </li></ul><ul><li>ROI </li></ul><ul><li>Status </li></ul>
    12. 12. Types of Cost Factors that Affect Pricing Decisions Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production Variable Costs Costs that do vary directly with sales or production levels. Commissions, Raw materials Fixed Costs (Overhead) Costs that don’t vary with sales or production levels. Executive Salaries, Rent
    13. 13. Mark-up pricing <ul><li>In this the selling price of the product is fixed by adding a margin to its cost price </li></ul><ul><li>The higher the value of product (unit cost of product),the larger the mark-up and vice-versa </li></ul>
    14. 14. Cost-Based Versus Value-Based Pricing Product Cost Price Value Customers Customer Value Price Cost Product Cost-Based Pricing Value-Based Pricing
    15. 15. Skimming pricing <ul><li>The practice of ‘price skimming’ involves charging a relatively high price for a short time where a new, innovative, or much-improved product is launched onto a market. </li></ul><ul><li>The objective with skimming is to “skim” off customers who are willing to pay more to have the product sooner; prices are lowered later when demand from the “early adopters” falls. </li></ul>
    16. 16. Skimming pricing <ul><li>Generate much needed initial cash flow, cover high R&D costs. </li></ul><ul><li>This type of pricing structure works very well for products that are in demand or where there are few competitors - electronic equipment for example. </li></ul>
    17. 17. Price Level Policies 17-5 “ Skim the cream” pricing involves selling at a high price to those who are willing to pay before aiming at more price-sensitive consumers. Price Quantity Initial skimming price Second price Final price Skimming Pricing Sell at high price before reducing to next price level and repeat
    18. 18. Penetration Pricing <ul><li>Price reduced compared to competitors to penetrate into markets to increase sales. </li></ul><ul><li>This type of pricing is used for products identified as being in the &quot;introductory&quot; stage of the product life cycle to enable the product to get a foothold in the market. </li></ul><ul><li>It helps the firm for good coverage of the market </li></ul>
    19. 19. Price Level Policies Price Quantity Penetration Pricing Whole market price Penetration pricing involves selling the whole market at one low price. 17-6
    20. 20. Psychological Pricing
    21. 21. Basic principles of Pricing <ul><li>Prices must at least cover costs </li></ul><ul><li>The best way to lower the price is to lower the cost </li></ul><ul><li>Prices must reflect the environment in which they operate </li></ul><ul><li>Prices must be within the range of what customers are prepared to pay </li></ul><ul><li>The price that you set should represent a fair return for your time, talent risk and investment </li></ul>
    22. 22. Promotional Pricing Companies offer promotional prices to create buying excitement and urgency.
    23. 23. Promotional Pricing <ul><li>Promotional pricing </li></ul><ul><ul><ul><li>BOGOF e.g. toothpaste, soups, garments etc </li></ul></ul></ul>
    24. 24. Assessing and Responding to Competitor Price Changes
    25. 25. Discounts and Allowances Cash Quantity/Volume Functional Seasonal Discounts:
    26. 26. <ul><li>Distribution </li></ul>
    27. 27. Marketing Channels <ul><li>The interface between producer and consumer </li></ul><ul><li>“ An array of exchange relationships that creates customer value in acquisition and consumption of products and services”. </li></ul>
    28. 28. Place, distribution, channel, or intermediary. <ul><li>Comprises a set of institutions which perform all of the activities utilized to move a product and its title from production to consumption. </li></ul><ul><li>It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer. </li></ul>
    29. 29. Channel of Distribution <ul><li>The complete sequence of marketing organizations involved in bringing a product from the producer to the customer; </li></ul><ul><li>-- a system of interdependency within a set of organizations; </li></ul><ul><li>--a system that facilitates the exchange process. </li></ul>
    30. 30. Channel Intermediaries’ Functions <ul><li>Facilitate Strategic Aims: Help channel members attain their goals </li></ul><ul><li>Fulfil Interaction Process: Coordinate ordering systems, delivery timing and merchandising </li></ul><ul><li>Satisfy Delivery & Handling Needs: Minimize transaction uncertainty </li></ul><ul><li>Manage Inventory: Meet warehousing, stock-out and product substitutability needs </li></ul>
    31. 31. Distribution channel
    32. 32. Marketing channels create utility <ul><li>It creates three type of utility: </li></ul><ul><li>Time utility </li></ul><ul><li>Place utility </li></ul><ul><li>Possession utility </li></ul>
    33. 33. Typical marketing channels for consumer product
    34. 34. Typical marketing channels for industrial, business-to-business products