About Logistic MANAGEMENT

1. Marketing Planning & Problem Solving
[Dr. Carter; MKTG.4900]
COMBINED SET OF
2nd section
MARKETING PLANNING
TEXT SLIDES

2. Chapter 5: Planning Direction,
Objectives, and Marketing Support
The Marketing Plan Handbook:
3rd ed.
Marian Burk Wood
5-1

3. Determining Marketing Plan Direction
 The ultimate purpose of the marketing
plan is to help the organization achieve its
objectives.
 Goals = Long-term objective targets.
 Objectives= Short-term objective targets
 The direction chosen must be consistent
with the organization’s priorities and
strengths.
5-2

4. Options for Marketing Plan Direction
5-3

5. Growth
Most business plans call for unit or dollar
sale growth.
The four broad strategies for growth are:
 Market penetration
 Market development
 Product development, and
 Diversification
5-4

6. Six Approaches to Growth
Based upon permutations of markets and products.
From Ch.1; 1-12
CURRENT MODIFIED INNOVATED
EXISTING
EXPANDED
(Geographic)
ENTIRELY
NEW
Market Penetration
Market Development
Product Development
Diversification

7. Market Penetration
 Is the growth strategy in which the
company sells more of the existing
products to customers in existing markets
or segments.
 It is especially viable for companies that
can build on established customer
relationships and positive value
perceptions.
5-5

8. Market Development
 Market development involves identifying
and reaching new segments or markets
for existing products.
5-6

9. Product Development
 Product development is a growth strategy
in which the company sells new products
to customers in existing markets or
segments.
5-7

10. Diversification
 Diversification is a growth strategy of
offering new products in new markets to
take advantage of new opportunities:
 Through internal product development
capabilities, or
 By starting or buying a business
5-8

11. Pros and Cons of Diversification
 Advantage:
Diversification can
help avoid over-
reliance on a small
number of products
or markets
 Disadvantage:
Diversification can
dilute available
resources and open
the organization to
competitive attacks
on multiple fronts.
5-9

12. Growth Not Always Possible
 Growth not always desirable or possible
 E.g., tough economic times
 Priorities may be to:
 Maintain current share
 Seek highest possible profits
 Retrench
5-10

13. Nongrowth Strategies
Nongrowth strategies include:
 Filing for bankruptcy
 Withdrawing from certain markets
 Deleting products
 Limiting distribution
 Closing a division
5-11

14. Setting Marketing Plan Objectives
Exact objectives depends upon:
 The current situation.
 Environmental issues and keys to
success.
 Customers in targeted segments.
 The organization’s mission and goals.
 The chosen positioning.
5-12

15. Keys to Effective Objectives
 Specific, time-defined and measurable.
 Realistic, but challenging.
 Consistent with the mission and overall
goals.
 Consistent with internal environmental
analysis.
 Appropriate in light of opportunities and
threats.
5-13

16. Three Types of Objectives in
Marketing Plans
Marketers usually set three types of
objectives in marketing plans:
 Marketing objectives: Targets for
managing certain marketing relationships
and activities,
 Financial objectives: Targets for
managing certain financial results, and
 Societal objectives: Targets for achieving
particular results in social responsibility.
5-14

17. Marketing Objectives
Targets for managing certain marketing
relationships and activities:
 Customer acquisition
 Customer retention
 Customer satisfaction
 Channel relationships
 Unit sales
 Market share
 Product development
 Order fulfillment
5-15

18. Financial Objectives
 To be effective, financial and marketing
objectives should be consistent.
 At times, key financial objectives may
give way to achieve a coveted marketing
objective.
 Financial objectives generally include:
 Sales volume and product targets
 Profitability targets
 Return on Investment (ROI) targets
 Break-even targets
5-16

19. Answering to Stakeholders
 Various stakeholders have an interest in
the activities of the organization:
 Customers
 Suppliers
 Employees
 Civic leaders
 Others
 These stakeholders track company
progress on key issues and often hold
them accountable.
5-17

20. Societal Objectives
Fulfilling societal objectives:
 Polishes company and/or brand image.
 Shows the organization is doing something
constructive about important issues.
 Some of the key issues include:
 “Greener” products
 Charitable donations
 Involvement in community projects
 Energy conservation
 Issue awareness
5-18

21. Cause Related Marketing
 Links the marketing of a brand, good or
service to a charitable cause.
 Although charitable, there is an explicit
marketing connection.
5-19

22. Planning Marketing Support
Before plunging into the details of planning
the marketing mix, marketers need to set
objectives for two aspects of marketing
support:
 Internal Marketing: marketing to
managers and employees inside the
company, and
 This includes upward communication
 Customer Service
5-20

23. Internal Marketing
May take the form of:
 Internal newsletters
 Web pages
 Training meetings
 Marketing or sales meetings
 Other techniques
5-21

24. Internal Marketing Support
Objectives
 Keep employees focused on customers.
 Keep employees involved in marketing.
 Keep employees informed about
marketing.
 Improve employee performance and
satisfaction.
5-22

25. Customer Service
Customers have different customer
service needs at different points in
the buying process:
 Before the sale
 At the moment or point of sale
 After the sale
5-23

26. Customer Service Objectives
 Meet targeted segment’s needs,
expectations.
 Attract, retain, satisfy customers.
 Reinforce the product or brand
positioning.
 Allocate service resources appropriately.
 Service recovery
 Customer service is rarely perfect every time
5-24

27. Shaping the Marketing Mix
 Managers look to the key priorities of the
organization as they determine action
steps and allocate resources.
 All tactics and programs developed :
 Must be consistent with mission, direction,
goals and objectives, and
 Support the mission, direction, goals and
objectives.
5-25

28. The Strategy Pyramid
5-26

29. Chapter 6: Developing
Product and Brand Strategy
The Marketing Plan Handbook:
3rd ed.
Marian Burk Wood
6-1

30. Introduction
 Product strategy is critical to the success
of the overall marketing strategy.
 Value is captured in two key areas:
 Product Strategy
 Existing and proposed products.
 Branding
 Value enhancement through awareness and
image.
6-2

31. Product Strategy
 Product value is derived from
 Features, and
 Benefits received
 Products can be tangible goods, services,
places, ideas, organizations, or people.
6-3

32. Designing a Service
Tangible
Activities
People
Processing
Item Processing
Health care
Hotels
Mass transit
Delivery service
Janitorial service
Parking garage
Intangible
Activities
Mental
Processing
Information
Processing
Entertainment
Management
consulting
Local phone service
Banking
Legal services
Accounting services
6-4

33. Features and Benefits
 Features: Specific attributes that enable a
product or service to perform its function.
 Benefits: Need-satisfaction outcomes.
6-5

34. Mass Customization
 Mass Customization: Creating products,
on a large scale, with features tailored to
the needs of individual customers.
Offerings should be analyzed, feature by
feature, to help understand the benefits
and value derived by the target
customers. Try to avoid “feature bloat”.
6-6

35. Sample Needs, Features and Benefits
Product
Targeted
Segment Need Feature Benefit
Cordless drill Do it
yourselfers
Drill holes
without
electricity
Extra battery
pack
included
Drill can be
used for long
periods of
time
Mortgage
loan
First-time
home buyers
Obtain
money to
buy a home
Low down
payment
Less money
needed up
front to buy a
home
Laser printer Small
business
owners
Print
documents
economically
Draft-quality
printing
mode uses
less toner
Toner
cartridge
lasts longer,
saving
money
6-7

36. Quality
Quality: Put simply, how well the product
satisfies customers.
 Basic functionality is only the price of entry.
 Superior quality attracts business.
 Poor quality can lead to negative word-of-mouth.
6-8

37. Design
Design: Quality comes from design,
components/ingredients and processes.
 At the forefront of many categories.
 Includes “emotional quality” – the impact
of design on how it makes the customer
feel.
6-9

38. Packaging
 Keeps products safe.
 Helps companies burnish their brand
imagery and highlight points of
differentiation.
6-10

39. Labeling
 Communicates product contents, uses and
warnings.
 Conforms to national, regional and local laws and
requirements mandating warnings, allowable use of
certain phrases, and even the size and type of words
used.
 Helps attract attention, stand out from retail clutter.
6-11

40. Product Development
Steps in the Product Development Process:
 Idea generation.
 Screening of new ideas.
 Initial concept testing.
 Business analysis.
 Prototype design.
 Market testing.
 Commercialization.
 Monitoring customer reaction.
Let’s look at product strategy from the perspective of this development process…
6-12

41. Product Strategy and
The Product Development Process
Idea
Generation
and
Screening
Initial
Concept
Testing
Business
Analysis
Design
Prototype
Market
Testing
Commercialization
Based on
customer
needs and
wants
Screen out
unprofitable
or unsuitable
ideas
Research
customer
value of
product
concepts
Refine
concept
based on
research
Estimate
development,
production
and marketing
mix costs
Compare
costs with
potential
share, sales,
profitability to
identify good
candidates
Design and
produce
working
prototypes
Test
prototype
functionality,
customer
appeal
Limited
market
trials or
simulate
d testing
Test
different
marketin
g mix
combinat
ions for
support
Plan targeting and
timing of launch
Plan production and
marketing mix support
for launch
6-13

42. The Product Life Cycle
Marketers must carefully monitor the
environment to determine where their
industry or product may be among the
following stages of the PLC:
 Introduction
 Growth
 Maturity
 Decline
Let’s look at product strategy from the perspective of the Product Life Cycle…
6-14

43. Product Strategy and
the Product Life Cycle
Introduction Growth Maturity Decline
Launch the new
product.
Support launch
with marketing mix
programs to build
customer
awareness, make
product available,
and encourage trial.
Enhance product (new
features, improved
quality, added
services, new
packaging).
Support rising sales
with expanded channel
coverage, pricing for
market penetration,
and communications
to start and reinforce
customer
relationships.
Add brand or
line extensions.
Defend market
share through
competitive
pricing, channel
expansion,
communicating
differentiation,
and promotion
to reinforce
customer
loyalty.
Reposition,
reformulate, or
cut struggling
products.
Manage
profitability
through careful
pricing, pruning
channel outlets,
and minimal or
highly targeted
communications.
6-15

44. Product Mix and Product Lines
 Product Mix: The overall assortment of all product or services
offered.
 Product Lines: A group of products that are all similar in some
way.
 Product Mix Width: Number of lines offered.
 Product line Depth: Number of products in a line.
6-16

45. Line Extensions & Brand Extensions
 Line Extension: Putting an established brand on a new product
and adding it to an existing product line.
 A low fat version of Lay’s potato chips.
 Brand Extension: Putting an established brand on a new
product in a different category for a new customer segment.
 E.g., Snicker’s brand ice cream.
6-17

46. Product Line and Mix Decisions
DECISION RESULT
New product Lengthens product line
Line extension Lengthens product line
New line Widens product mix
Brand extension Widens product mix
Product deletion Shortens product mix
Line deletion Narrows product mix
6-18

47. Planning Branding
 Branding gives a product a distinct identity and differentiates it
from competitive products using: words, designs, and
symbols.
 In terms of branding, a product may carry:
 Company name and individual brand.
 Courtyard by Marriott
 Individual name.
 Gap, Old Navy
 Private-label brand.
 Wal-Mart
 Multiple Brands (co-branding, ingredient
branding).
 Dell PC with Intel computer chips
6-19

48. Brands Should Be….
 Meaningful.
 Recognizable and memorable.
 Capable of being legally
protected.
 Suitable for international
markets.

49. Branding and Positioning
 Branding not only identifies a particular
product, but it sets it apart from the
competition (both direct and indirect).
 Positioning: What the target group
perceives about your brand relative to
how they perceive the competition.
6-20

50. The Power of Brand Equity
 Brand Equity: the extra value customers
perceive that enhances their long-term loyalty to
a brand.
 Can insulate a company against competitive threats.
 Can help new products achieve acceptance.
 The Value of Strong Brands:
 Encourages brand loyalty.
 Boosts customer lifetime value.
 The total amount that a customer spends on a brand or
with a company during the life of their relationship.
6-21

51. Pyramid of Brand Equity
Salience
Performance Imagery
Judgments Feelings
Resonance
6-22

52. Chapter 8: Developing Channel
and Logistics Strategy
The Marketing Plan Handbook:
3rd ed.
Marian Burk Wood
8-1

53. Channel Strategy
8-2
 How, when and where to make goods and
services available to customers.
 Decisions must be based upon:
 Other elements of the marketing mix strategy.
 A thorough understanding of the targeted
segment.
 An understanding of the environment.
 The product’s characteristics and its stage in
the product life cycle.

54. The Value Chain
 A series of interrelated, value-added
functions plus the structure of
organizations performing them.
 On the inbound side: To obtain the inputs
needed for creating the goods and
services.
 On the outbound side: To meet demand
by making the product or service
available.
8-3

55. Major Links in the Value Chain
During the planning process, marketers analyze
how value is added at each connection in the
value chain.
8-4

56. Three Flows in the Value Chain
Channel and logistics involves managing the three
value-chain flows:
 Products: Refers to physical items such as raw
materials and product packaging on the inbound
side and finished products on the outbound
side.
 Data: Refers to information such as the number
of items ordered, customer requirements and
feedback, and other information that adds value.
 Money: Refers to payments for supplies, reseller
or customer payments for finished goods, and
other money movements between participants.
8-5

57. Adding Value Through the Chain
 Each participant adds value to satisfy the
needs of the next link.
 The price paid by each successive
participant reflects the value added by the
previous link.
 Customers at the end of the chain
ultimately pay for the combined value
added by all participants.
8-6

58. Services and the Value Chain
 Marketers planning for service business
face the same supply chain challenges as
those who manage tangible goods.
 However, because services are generally
produced and consumed simultaneously,
marketers must plan flows to more
accurately match supply and demand.
8-7

59. Planning Channel Strategy
Each organization must make decisions
regarding:
 Which channel functions must be covered
by someone other than the organization?
 Who will handle each function?
 How many channel levels to use?, and
 How many and what type of channel
members to choose?
The answers to these questions will vary from product to
product and market to market.
8-8

60. Types of Channel Functions
 Matching volume, amount, or offer to
customer needs.
 Providing intermediaries and customers
with product and market information.
 Contacting and negotiating with
customers to maintain relationships and
complete sales.
 Transporting and storing products prior
to purchase.
8-9

61. Decisions Regarding Channel
Functions
The configuration of functions must be
tailored to products and markets.
 Determine which functions are best
handled by the firm and which are best
handled by an intermediary.
 Determine who the channel intermediary
should be.
 Determine the compensation for the
intermediary.
8-10

62. Channel Levels
Each channel level adds value in some way.
Basic channel level configurations:
 Zero-level: direct linking of the seller to the
buyer.
 One-level: The seller works with a single type of
intermediary.
 Typically a manufacturer – retailer configuration.
 Multiple-level: The seller works with tow or three
levels of distribution partners.
 Typically a manufacturer – wholesaler – retailer
configuration.
8-11

63. Channel Levels Illustrated
8-12

64. Reverse Channels
 To return products for exchange, repair or
recycling.
 Can be used to build relationships with
customers and the community.
 Must take into consideration the laws and
regulations that may govern their reverse
channel strategy.
 Can also represent profit opportunities for
enterprising companies.
8-13

65. Channel Members
Key considerations include:
 Customer needs and habits
 Financial considerations
 Product’s life cycle
 Product’s positioning
 The target segment
 Relations with channel members should
be reexamined periodically.
8-14

66. Distribution Intensity
 Intensive Distribution: In many outlets for
maximum market coverage.
 Selective Distribution: In a number of
selected outlets.
 Exclusive Distribution: In few outlets for
exclusivity within each market.
8-15

67. Distribution Intensity (cont’d)
Distribution
Intensity Value to Marketer Value to Customer
Intensive Increase unit sales.
Market impulse items.
Cover more of each market.
Convenient.
Lower prices due to
competition.
Selective Reduce dependence on a few
outlets.
Control costs.
See product.
Receives sales help.
Obtain some services
as needed.
Exclusive Support product or brand
positioning.
Better supervise service, etc.
Receive personalized
attention.
Access to delivery,
alterations,
customizations, etc.
8-16

68. Influences on Channel Strategy
8-17

69. Planning for Logistics
Marketer’s Balancing Act: Being responsive
to customers needs while still meeting
internal financial targets.
8-18

70. Logistics Decisions
8-19

71. Influences on Logistics Decisions
 The organization’s approach to social
responsibility.
 Cost constraints and the marketer's
logistics budget.
8-20

72. The Logistics Strategy
The marketing plan need not contain very
detail of the logistics strategy. But it
should contain:
 A general outline,
 An explanation of the balance of total
costs versus responsiveness, and
 An indication of how logistics functions
will support other marketing decisions.
8-21

73. Chapter 9: Developing Integrated
Marketing Communication
The Marketing Plan Handbook:
3rd ed.
Marian Burk Wood
9-1

74. Integrated Marketing
Communications
 Every marketing plan anticipates the use
of marketing messages.
 For maximum effect, marketers should
coordinate the content and delivery of all
marketing communications to ensure
consistency and support the positioning
and direction.
 This approach is known as integrated
marketing communications.
9-2

75. Five Basic Promotion Tools
Integrated Marketing Communications
consists of five basic tools:
1. Advertising
2. Sales Promotion
3. Public Relations
4. Direct Marketing
5. Personal Selling
9-3

76. IMC Strategy
The IMC strategy involves:
1. Defining target audiences,
2. Establishing objectives and a budget,
3. Analyzing pertinent issues,
4. Selecting appropriate IMC tools, and
5. Planning appropriate pre- and post-
implementation research to evaluate
effectiveness.
9-4

77. Choosing the Target Audience
 Target market can vary from end
customers to employees to distribution
partners.
 Target markets need to be understood in
as much detail as possible:
 To help shape the message.
 To help choose the appropriate tool.
9-5

78. “Push” and “Pull” Strategies
 Push strategy: the company targets intermediaries,
encouraging them to carry and promote the product.
 Pull strategy: The company encourages end
consumers to ask intermediaries for the product.
9-6

79. Understanding Target Market
Consumer Behavior
 IMC can be used to move the audience through a
series of responses corresponding to beliefs,
behavior and feelings about the product or
brand.
 The order that the consumer moves through
these responses is dependent upon whether the
good or service is “low involvement” , “high
involvement”, or “experiential”.
 The marketer should understand the response
model for a given product or category when
setting objectives.
9-7

80. Low Involvement, High Involvement &
Experiential Models of Behavior
 Under high involvement, beliefs precede all subsequent
steps.
 Under low involvement, behavior precedes feelings.
 Under experiential, feelings, precede both behavior and
beliefs.
9-8

81. Setting Objectives
 Objectives can be related to influencing beliefs,
influencing feelings, or influencing behaviors.
Objective Sample
Influencing Beliefs “Achieve 25% awareness of Product A
among the target audience within 4
months.”
Influencing Feelings “Achieve 18% preference for Product E
among the target audience within 3
months.”
Influencing
Behavior
“Achieve 9% trial of Product C among
the target audience within 6 months.”
9-9

82. Setting the Budget
Factors to be considered when setting the
IMC budget:
 Overall marketing budget.
 Objectives to be achieved.
 Competitive circumstances.
 Potential ROI (Return on Investment).
9-10

83. Examining Issues
Types of issues that can impact IMC
strategy:
 Legal
 Regulatory
 Technological
 Ethical
 Cultural
 Competitive
9-11

84. Choosing IMC Tools
9-12

85. Word of Mouth and Buzz Marketing
 When possible, marketers want to spark positive
word-of-mouth (WOM) communication:
 Information spread by WOM has more credibility
because it comes from a personal source.
 However, the outcome of WOM is unpredictable, and
cannot often be accurately measured.
 Buzz marketing: When the company seeks to
generate more intense WOM, it may provide
communicators with samples or coupons.
9-13

86. Planning Research
 The marketing plan should allow for pre-testing
and post-implementation research to evaluate
the IMC activities.
 Pre-testing: To find out if the target audience
understands the message and retains
information.
 Post-implementation: To determine whether or
not the IMC program has achieved its objectives
and which elements of the plan were particularly
effective.
9-14

87. Using IMC Tools
 Marketers typically use multiple tools in
any one campaign.
 Marketers should consider the overall
effect when planning the IMC program.
 Careful coordination of content and delivery
across messages and media is essential for
consistency.
9-15

88. Advertising
Two basic decisions:
 Message
 Media
9-16

89. Message Appeal
Message Appeal: determined by the ad’s
wording, format and design, graphics,
sound, and other elements. Types of
appeals include:
 Rational: Using facts and logic to
stimulate a response.
 Emotional: Evoking feelings to stimulate a
response.
9-17

90. Choosing Media
 Each medium has characteristics that
convey the message in a different way.
 Two key decisions in planning media:
 Reach
 Frequency
9-18

91. Media Choices
 Television
 Radio
 Outdoor
 Newspaper
 Magazine
 Internet
 Direct Mail
 Other
9-19

92. Sales Promotion
 Influences customer behavior by reducing
perceived price or enhancing perceived
value for a limited time.
 Sale promotion techniques vary
depending on the target audience;
 Consumer promotions: Targeting end
consumers.
 Trade promotions: targeting channel members
and salespeople.
9-20

93. Consumer Promotions
Consumer Promotions
 Sampling
 Coupons
 Rebates
 Refunds
 Premiums
 Sweepstakes and
contests
 Bonus packs
 Loyalty programs
Objectives
 Building awareness
 Encouraging product trial
or usage
 Encouraging speedy
response
 Reinforcing loyalty
 Supporting advertising or
other IMC activities
 Defending against
competitors
9-21

94. Trade Promotions
Trade Promotions
 Allowances and
incentives
 Sales contests
 Training and support
 Point-of-purchase
materials
Objectives
 Enhancing product
knowledge
 Building commitment
 Reinforcing focus and
loyalty
 Supporting
advertising or other
IMC activities
 Defending against
competitors
9-22

95. Public Relations
Purpose: To open the lines of communication and
develop positive relationships with the company’s
stakeholder groups:
 Customers and prospects
 Employees and job applicants
 Channel members
 Suppliers
 Government officials
 Local community groups
 Special interest groups
 Financial community
9-23

96. Objectives for PR Activities
 Understanding stakeholders’ perceptions
and attitudes.
 Managing the company’s image.
 Communicating views and information.
 Building brand and product awareness.
9-24

97. Direct Marketing
 Through mail, broadcast and print media,
the Internet, and other media.
 Direct marketing is cost-effective for:
 Precise targeting, and
 The use of customized messages.
 Marketers can easily measure results.
 To be effective, the direct marketing
message must be relevant to the target
audience and not be perceived as junk mail
or spam.
9-25

98. Personal Selling
More appropriate if the target audience:
 Requires customized goods and services.
 Needs assistance assessing needs.
 Makes large purchases.
 Requires individual attention for other reasons.
The one-to-one nature of personal selling supports
strong customer relationships.
 For an immediate sale, or for a sale in the future.
9-26

99. Personal Selling Decisions
 Whether to hire salespeople or work with
an outside sales agency.
 How many salespeople are needed, and
how they will be organized.
 Related to sales staff, how to:
 Recruit
 Train
 Manage
 Motivate
 Compensate
9-27

100. The Personal Selling Process
1. Identifying and qualifying prospects.
2. Planning the presales approach.
3. Making sales contact.
4. Addressing objections.
5. Closing the sale.
6. Following up after the sale.
9-28

101. Chapter 7: Developing
Pricing Strategy
The Marketing Plan Handbook:
3rd ed.
Marian Burk Wood
7-1

102. Unique Aspects of Pricing
 Pricing directly produces revenues,
whereas other marketing functions
require investments of money, time and
effort.
 Most pricing decisions can be
implemented relatively quickly, while
other elements of the marketing mix
usually take longer to implement.
7-2

103. Fixed vs. Dynamic Pricing
 Fixed Pricing: customers in the targeted
segment pay the price set (fixed) by the
marketer.
 Dynamic Pricing: Prices vary from
customer to customer or situation to
situation.
7-3

104. Value
 Marketers must research and analyze
value from the customers perspective
 Marketers must also consider how the
product’s value will be communicated to
customers.
 Customers’ perceptions of value and
price sensitivity can be used to deal with
imbalances in supply and demand.
7-4

105. Weighing Benefits vs. Total Price
7-5

106. Price Elasticity
 Price elasticity is the level of demand for a product
at different price points.
 Price elasticity is calculated by dividing the
percentage change in unit sales demanded by the
percentage change in price.
 Demand is said to be “elastic” when a small price
change significantly increases or decreases
demand.
 Demand is said to be “inelastic” when a price
change does not significantly change the number
of units demanded.
7-6

107. Price Elasticity (cont’d)
Change in Price Inelastic
Demand
Elastic
Demand
Small Increase Demand drops
slightly
Demand drops
significantly
Small
Reduction
Demand rises
slightly
Demand rises
Significantly
7-7

108. Factors Impacting Elasticity
In general, customers tend to be less sensitive to a product’s
price when they:
 Are considering a relatively small amount.
 Are unaware of or can’t easily compare substitutes and
prices.
 Would incur costs or difficulties in switching products.
 Perceive that the product’s quality, status, or another
benefit justifies the price.
 Are spending a relatively small amount or are sharing the
cost.
 Perceive the price as fair.
 Are buying products bundled rather than separately.
7-8

109. Cost-Based Pricing / Value-Based Pricing
 Cost-based pricing:
 Start with the product and its cost.
 Set a price that covers the cost.
 Communicate value to customers.
 Value-based pricing:
 Research customers perceptions of value and
the price they are willing to pay.
 Find a way to make the product at a
reasonable cost (target costing) to return a
reasonable profit or achieve other objectives.
7-9

110. Cost-Based Pricing / Value-Based Pricing
Of the two methods, cost-based is more common.
7-10

111. Planning Pricing Decisions
 Pricing decisions must be:
 Value-based
 Profit-driven
 Proactive
 When planning pricing, marketers must
examine:
 Objectives
 External influences
 Tend to suggest the price “ceiling”.
 Internal influences
 Tend to suggest the price “floor”.
7-11

112. Pricing to Meet the Firm’s
Objectives
 The pricing strategy must be consistent
with the firm’s overall goals and
objectives
 Due to market realities, organizations may
have to trade off market share growth with
profitability.
7-12

113. Samples of Pricing Objectives
Type of Objective Sample Pricing Objective
Financial For profitability: Set prices to achieve gross
margin of 40%.
For ROI: Set prices to achieve full-year ROI of
18%.
Marketing For higher market share: Set prices to achieve
a market share increase of 5% within 6 months.
For customer acquisition: Set prices to attract
1500 new customers from January to June.
Societal For philanthropy: Set prices to raise $10,000 for
charity during the second quarter of the year.
For energy conservation: Set prices to sell 500
alternative fuel vehicles nationwide during
August.
7-13

114. External Pricing Influences
Key external influences on pricing strategy
include:
 Customers
 Competitors
 Channel Members
 Legal, Regulatory and Ethical Concerns
7-14

115. Customers
 Consumer Customers
 Perceptions of value, behavior, and attitudes all affect
consumers reaction to pricing.
 Research shows consumers allow some latitude in the
range of prices deemed acceptable.
 Business Customers
 Globalization has increased range of choices.
 Customers frequently search for the lowest price.
 Willing to switch suppliers frequently.
 Emphasis on building relationships, thereby increasing
switching costs.
Customers tend to set the price “ceiling”.
7-15

116. Competitors
 By analyzing prices, special deals and
probable costs of competing products, a
company can get a better sense of:
 The alternatives available to customers, and
 Competitors’ pricing objectives and strategies.
 Pricing is highly visible in many
industries, often exerting downward
pressure on profits and limiting pricing
options.
7-16

117. Reacting to Competitors’ Changes
in Pricing Strategy
7-17

118. Channel Members
 Companies must consider the pricing
expectations and marketing objectives of their
distribution partners: wholesalers and retailers.
 The marketer must also consider that the
Internet is bringing wholesale and retail prices
down in many categories, due to:
 More efficient transaction capabilities,
 Convenient price comparisons, and
 Higher competition – sometimes from unexpected
sources.
7-18

119. Sample of Consumer Pricing in the
Retail Channel
Note the % increase in price required by each channel intermediary.
7-19

120. Legal and Regulatory Concerns
Companies need to comply with a variety of
pricing laws and regulations. Some of
these include:
 No price collusion.
 No minimum retail price.
 No price discrimination.
 No predatory pricing.
 Price limits.
7-20

121. Ethical Concerns
Some examples of ethical decisions in
pricing:
 Is it ethical to raise prices during an
emergency, when products may be scarce or
particularly valuable?
 Should a company set a high price for an
indispensable product, knowing that some
customers will be unable to pay?
 How far in advance should customers be
notified of planned price increases?
7-21

122. Internal Pricing Influences
Key external influences on pricing strategy
include:
 Costs and break-even objectives.
 Targeting and positioning strategy.
 Product strategy.
 Other marketing decisions.
7-22

123. Costs and Break-even Objectives
 Costs typically establish the theoretical
“floor” of the pricing range.
 Break-even point: the sales level at which
revenues cover costs.
 Costs and break-even are more easily
calculated for existing products in
existing markets.
 For new products, marketers must rely on
forecasts and/or expert estimates of costs
and expected sales volumes.
7-23

124. Total, Fixed and Variable Costs
 The total cost consists of both fixed and
variable cost.
 Fixed costs: Overhead expenses such as
rent and payroll, which do not vary with
volume.
 Variable costs: Expenses such as raw
materials, which do vary with volume.
7-24

125. Average Cost/Unit
 Once the marketer knows the total costs, they
can divide the total by the number of units
produced to compute the average cost per unit.
 The marketer can then compute this average
cost at various output levels, corresponding to
different assumptions about demand.
 This provides important insight to the marketer
at how the price could be set at each level of
demand to recover total costs, or earn a targeted
level of profit.
7-25

126. Break-even Example
The break-even formula is:
 Break-even volume = fixed cost/price-
variable cost.
 Example:
 Fixed cost = $40,550
 Variable cost = $45 per unit
 Price = $995 per unit
 Therefore:
 Breakeven = $40,550/$995 - $45
 Breakeven = $40,550/$950
 Breakeven = 42.6 units (roundup to 43 units)
7-26

127. Targeting and Positioning Strategy
The price must be appropriate to support the
targeting and positioning strategy.
 Target Market:
 A target of price–sensitive customers would likely
require lower price points.
 A target of affluent customers would likely tolerate
higher price points.
 Positioning
 A product positioned as being a “good value” will
likely require a lower price point,
 A product positioned as a luxury good, or as a status
symbol would best be supported by a higher price
point.
7-27

128. Product Strategy
Pricing can be used to manage the product’s
movement through the life cycle:
 Introduction: Decision between skim and
penetration pricing.
 Growth: Pricing used to stimulate demand, drive
toward break-even point.
 Maturity: Pricing used to defend market share,
retain customers, pursue profitability and expand
into additional channels.
 Decline: Pricing can be used to stimulate demand
and “clear out” old products, or to “milk” existing
products for profitability at end of life.
7-28

129. Skim Pricing
More appropriate when the firm is more focused on
profitability, rather than unit volume.
Most likely to occur at early stages and late stages of
the PLC.
Favorable conditions:
 Considerable differentiation.
 Quality-sensitive customers.
 Sustainable advantage.
 Few competitors.
 Few substitutes.
 Difficult competitor entry.
7-29

130. Penetration Pricing
More appropriate when business is focused on
building unit volume.
Most likely to occur at the early stages of the PLC.
Favorable conditions:
 No/Limited differentiation.
 Price-sensitive customers.
 No sustainable advantage.
 Many competitors.
 Many substitutes.
 Easy competitor entry.
7-30

131. Skim and Penetration Pricing
Note: Under skim pricing, prices start higher
and are maintained higher over time.
7-31

132. Pricing for Special Situations
Special situations:
 For survival: Price to cover costs at very
least.
 For bankruptcy: Price to liquidate stock
and raise money quickly.
 For aggressive growth: Set prices to
return slim or no profit margins in the
short run.
7-32

133. Impact of Other Marketing Mix
Variables
 Channel members, suppliers and logistics
 Each independent business partner has its own
business objectives which must be balanced with the
objectives of the organization.
 Promotion strategy
 Higher-priced products often promoted differently and
through different media than lower-priced products.
 Pricing is a challenge for companies that market
through personal selling, when customers expect to
negotiate prices with salespeople.
7-33

134. Adapting Prices
 Involves the activity of modifying and
fine-tuning prices within an acceptable
range.
 Sometimes prompted by changes in
customer behavior.
 The chosen adaptation depends on the
company’s:
 Resources and capabilities
 Goals and strategic direction, and
 Marketing plan objectives
7-34

135. Pricing Adaptations
Some typical pricing adaptations include:
 Discounts
 Allowances
 Bundling or Unbundling
 Product Enhancement
 Segment Pricing
7-35

136. Pricing Adaptations (cont’d)
Pricing
Adaptation
In Consideration
of ,,, Examples
Discounts Buying in volume
Buying out of season
Quantity discounts
Cash discounts
Functional discounts
Allowances Participating in special
promotions
Bringing in old products and
trading up to new products
Discounts
Extra payments
Extra product allocations
Trade-in allowances
Bundling or
unbundling
Buying multiple products
together
Buying parts of a product
separately
Increasing discounts as one purchases
more items together.
Lower overall prices as one purchases
parts of an offering
Product Enhancement Maintaining the current price
point
Raising the price point
Adding more for same price
Adding complementary products or
services
Segment Pricing Special requirements of
specific segments
Child’s menu
Senior citizen discount
7-36

137. Chapter 10: Planning
Performance Measurement and
Implementation Control
The Marketing Plan Handbook:
3rd ed.
Marian Burk Wood
10-1

138. Measurement and Control
Measurement
 Forecasts of future sales and costs,
 Budgets allocating financial resources,
 Schedules identifying the timing of marketing
tasks, and
 Metrics to gauge progress toward achieving
objectives.
Control
 Identify
 Analyze
 Correct
10-2

139. Overview of Measurement Tools
10-3

140. Forecasts
 Are future projections of what sales and costs
are likely to be in the months and years covered
in the plan.
 Can never be more than good estimates.
 However, still should be as accurate as possible.
 Need to be reviewed often.
 Must account for the effect that marketing
activities will have on the direction and velocity
of sales.
10-4

141. Forecasts of Sales and Costs
 External factors to consider:
 Demand
 Threats
 Opportunities
 Internal factors to consider:
 Goals
 Capabilities
 Constraints
10-5

142. Types of Forecasts
 Market and segment sales
 Company product sales
 Cost of sales
 Sales and costs by channel
Creating the forecasts is only part of the task. Next,
month-to-month and year-to-year changes must be
estimated in order to examine trends and rates of
change.
10-6

143. Sources of Information
For Forecasting
 Value-chain partners
 Primary research:
 Studies of buying patterns and buying
intentions.
 Secondary research:
 Trade associations.
 Government statistics.
 Industry analyst reports.
 Judgment is typically used to fine-tune
the estimates.
10-7

144. Judgment-based Forecasting
10-8

145. Forecasting New Products
 Forecasting for new products is even more
challenging than for existing products.
 Bass model appropriate when:
 The company has been able to collect sales data
for even a brief period , and
 The product is similar to an existing product or
technology with a known sales history.
 When the product is so innovative that it
establishes a new product category, companies
will:
 Use simulated test markets.
 Look at sales patterns of products with similar
market behavior.
10-9

146. Budgets
 Budgets are time-defined allocations of
financial outlays for specific functions,
programs, customer segments or
geographic regions.
 Enable marketing managers to:
 Allocate expenses, and
 Compare estimates with actual expenses.
10-10

147. Examples of Budgeting Policies
 Insist that budget preparation follow internal
financial calendars.
 Specify profit hurdles.
 Specify particular assumptions about expenses
and allocations.
 Mandate particular formats or supporting
documentation.
 Based upon best-case, worst-case and most-
likely scenarios.
 Adjusting budgets monthly instead of annually.
10-11

148. Budgeting Methods
 Affordability budgeting
 Percentage-of-sales budgeting
 Comparative-parity budgeting
 Objective-and-task budgeting
10-12

149. Affordability Budgeting
 Budgeting what you believe you can
afford.
 May work for start-ups.
 Generally, not a good way to budget.
 Doesn’t allow for the kinds of significant,
ongoing investments often needed to launch
major new products or enter intensely
competitive markets.
 Ignores profit payback calculation.
10-13

150. Percentage-of-sales Budgeting
 Management sets aside a certain percentage of
dollar sales to fund marketing programs.
 Based on internal budgeting guidelines or
previous marketing experience.
 Advantage: Simple to implement.
 Disadvantages:
 Sales are seen as the source of marketing funding,
rather than as the result of budget investments.
 Difficult to justify the % set aside for marketing.
 Self-defeating: lower sales may lead to a lower
marketing budget.
10-14

151. Comparative-parity Budgeting
 Funding marketing by matching what
competitors spend.
 Advantage: Simple to implement.
 Disadvantages:
 Ignores differences between companies.
 Doesn’t allow for adjustments to meet specific
marketing objectives.
10-15

152. Objective-and-task Budgeting
 Adding up the cost of completing all of
the marketing tasks needed to achieve
marketing plan objectives.
 Advantage: A reasonable build-up
method.
 Disadvantage: May add up to more than
the firm can afford. Priorities may have to
be established.
10-16

153. Budgets Within the Marketing Budget
 Budgets for each marketing mix program.
 Budgets for each brand, segment or
market.
 Budgets for each region or geographic
division.
 Budgets for each division or product
manager.
 Budget summarizing all marketing
expenses.
10-17

154. Schedules
 Schedules are time-defined plans for
completing a series of tasks or activities
related to a specific program or objective.
 Timing should be as concrete as possible.
 Help avoid conflicts.
 Help measure progress toward
completion.
10-18

155. The Scheduling Process
 List the main tasks and activities.
 Assign each a projected start and end date.
 Through research or experience.
 Determine who is responsible for each task.
 Develop an overall summary schedule.
 Develop detailed schedules for each sub-
program.
 Gantt charts.
 Critical path schedules.
10-19

156. Metrics
Metrics:
 Focus employees on activities that make
a difference.
 Set up performance expectations that can
be objectively measured.
 Lay a foundation for internal
accountability and pride in
accomplishments.
10-20

157. Main Categories of Metrics
10-21

158. Marketing Dashboard
 A marketing dashboard is a computerized,
graphical presentation that helps
management track important metrics over
time and spot patterns that signal
deviations from the marketing plan.
 Helps managers see the situation at a
glance, based upon a limited number of
data inputs.
 Varying levels of dashboards: Corporate,
divisional or functional.
10-22

159. Identifying Metrics
Methods of identifying appropriate metrics
include:
 Working backward from mission, goals and
objectives.
 Looking for key components or activities related
to customer buying behavior.
 This would include metrics for each of the three
key areas:
 Marketing objectives,
 Financial objectives, and
 Societal objectives
10-23

160. Sample Marketing Metrics
Objective Metric
To acquire new
customers.
Measure number or percentage
of new customers acquired by
month, quarter, year.
To retain current
customers.
Measure number or percentage
of customers who continue
purchasing during a set period.
To increase market
share.
Measure dollar or unit sales
divided by total industry sales
during a set period.
To accelerate product
development
Measure the time needed to
bring a new product to market.
10-24

161. Sample Financial Metrics
Objective Metric
To increase sales
revenue by product.
Measure product sales in
dollars per week, month,
quarter, or year.
To improve profitability. Measure gross or net margin for
a set period byproduct, line,
channel, marketing program or
customer.
To reach break-even. Measure the number of weeks
or months until a product’s
revenue equals and begins to
exceed costs.
10-25

162. Sample Societal Metrics
Objective Metric
To make products more
environmentally friendly.
Measure the proportion of each
product’s parts that are
recyclable or have been
recycled during a set period.
To build awareness of a
social issue.
Measure awareness among the
target audience after the
program or a set period.
To conserve electricity
or fuel.
Measure amount used by
month, quarter, year.
10-26

163. Metrics Based on Customer Behavior
10-27

164. Using Metrics
Metrics are most valuable to the marketer
when viewed in the context of:
 Expected outcomes.
 Historical results.
 Competitive or industry outcomes.
 Environmental influences.
10-28

165. Keys to Success in Implementing
a Marketing Plan
10-29

166. Controlling Marketing Plan
Implementation
Four types of marketing control help
marketers gauge the effectiveness of the
plan implementation:
 Annual Plan,
 Profitability,
 Productivity, and
 Strategic Control
10-30

167. Four Forms of Control
10-31

168. Applying Control
1. Set objectives.
2. Determine metrics.
3. Determine measurement intervals.
4. Measure.
5. Take corrective action, if necessary.
 Or modify standards and/or objectives.
10-32

169. Contingency Plans
Contingency plans are plans that organizations
have ready to implement if one (or more) of their
original strategies or programs is disrupted by
significant, unexpected changes.
Often prepared to show how the organization will
respond in the case of emergencies such as:
 Computer system outages
 Power outages
 Natural disasters
 Etc.
Should be creative in terms of considering
options, priorities and resources.
10-33