Unit 5 - Marketing Mix & Pricing Methods a. Marketing mix b. Product classification c. Product lifecycle d. New product development lifecycle e. Pricing strategy & steps f. Pricing methods

1. KAUSHIK JAISWAL
7276888855 kaushjaiswal@gmail.com

2. MARKETING MIX
The marketing mix refers to the set of actions, or
tactics, that a company uses to promote its
brand or product in the market.
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4. PRODUCT
❑ General marketing concept describes how to sell more of a product with
an aim to meet the needs of our target market.
❑ In international markets this includes considering various factors like
customer's cultural backgrounds, religion, buying habits and levels of
personal disposable income.
❑ In some circumstances a firm adapts their product and marketing mix
strategy to satisfy the local requirements and demands that cannot be
changed.
❑ For example,
❑ McDonalds is a global player anyways, their burgers are accustomed to
local needs. In India, their burgers include chicken or fish but not beef. In
Mexico, McDonalds burgers is served with chili sauce.
❑ In some parts of the world, Coca-Cola tastes sweeter than in other places.
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5. PRICE
❑ Pricing on an international level is a very difficult task. It takes into account
the traditional price i.e. the cost of the product in the local market
including fixed and variable rates.
❑ It also determines the competition prevailing in the market between a
particular company’s products and similar products of other companies.
❑ Apart from these factors, one should consider additional factors like −
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The cost of
transport
Tariffs or import
duties
Exchange rate
fluctuations
Personal disposal
incomes of the
target market
The currency they want
to be paid in; and
The general economic
situation of the country

6. PLACE
❑ This component of marketing mix is completely about product or service
distribution to the consumer, at the right place and at the right time.
Distribution of goods in a developed market like United States probably
includes goods being shipped in a chain from the producer to
wholesalers and onto retailers for consumers to buy from.
❑ In an international market, number of countries offering same products
with different varieties is more as compared to national market.
❑ For example, in Japan there are probably five different types of
wholesalers engaged in the distribution chain.
❑ Businesses will be required to examine the distribution chains for each
nation they would like to work with. They will also need to analyze and
verify who they would like to sell their products and services to -
businesses, retailers, wholesaler or directly to customers.
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7. PROMOTION
❑ Unlike international product decisions, an enterprise can either
accustom or standardize their promotional strategy and message.
❑ Promotional messages in countries should be accustomed due to
differences in language, political climate, cultural attitudes and religious
practices in different region.
❑ A promotional strategy used in one country could be offensive when
used in another. Every side of promotional brief needs to be analyzed
followed by planning.
❑ For example,
❑ People in China believe red to be a lucky color and this color is also worn
by Indian brides.
❑ Similarly, white is worn by mourners in India whereas, brides in China and
United Kingdom wear white.
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10. PEOPLE
❑ The company’s employees are important in marketing because they
are the ones who deliver the service.
❑ It is important to hire and train the right people to deliver superior service
to the clients, whether they run a support desk, customer service,
copywriters, programmers…etc.
❑ When a business finds people who genuinely believe in the products or
services that the particular business creates, it's is highly likely that the
employees will perform the best they can.
❑ Additionally, they'll be more open to honest feedback about the
business and input their own thoughts and passions which can scale
and grow the business.
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11. PROCESS
❑ The systems and processes of the organization affect the execution of
the service.
❑ So, you have to make sure that you have a well-tailored process in
place to minimize costs.
❑ It could be your entire sales funnel, a pay system, distribution system and
other systematic procedures and steps to ensure a working business that
is running effectively.
❑ Tweaking and enhancements can come later to “tighten up” a business
to minimize costs and maximize profits.
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12. PHYSICAL EVIDENCE
❑ In the service industries, there should be physical evidence that the
service was delivered.
❑ Additionally, physical evidence pertains also to how a business and it's
products are perceived in the marketplace.
❑ It is the physical evidence of a business' presence and establishment. A
concept of this is branding.
❑ For example,
❑ When you think of “fast food”, you think of McDonalds.
❑ When you think of sports, the names Nike and Adidas come to mind.
❑ You immediately know exactly what their presence is in the
marketplace, as they are generally market leaders and have
established a physical evidence as well as psychological evidence in
their marketing.
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13. PRODUCT CLASSIFICATION
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14. Introduction Growth Maturity Saturation Decline
PRODUCT LIFECYCLE

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SATURATION

16. Stage one (Introduction)
A new product
is launched in a
target market
where the
intended
consumers are
not well aware
of its presence.
Stage two (Growth)
An effectively
marketed
product meets
requirements in
its target
market.
The sales
starting
increasing
rapidly and
profits are high.
Stage three (Maturity)
The level of product
demand and sales
volumes increase
slowly.
In order to maintain
market share and
accompany sales,
the original exporter
reduces prices.
There is a decrease
in profit margins, but
the business remains
tempting as sales
volumes soar high.
Stage four (Saturation)
The sales of the
product reach
the peak and
there is no
further possibility
for further
increase.
Stage five (Decline)
In this stage
sales volumes
decrease and
many such
products are
removed or their
usage is
discontinued.
PRODUCT LIFECYCLE

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See : New Product Development Stages

18. THE NEW PRODUCT DEVELOPMENT PROCESS
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1. Idea generation –
The new product development process starts with idea generation.
Idea generation refers to the systematic search for new-product ideas.
Typically, a company generates hundreds of ideas, maybe even thousands,
to find a handful of good ones in the end.
Two sources of new ideas can be identified:
Internal idea sources: the company finds new ideas internally. That means
R&D, but also contributions from employees.
External idea sources: the company finds new ideas externally. This refers to
all kinds of external sources, e.g. distributors and suppliers, but also
competitors. The most important external source are customers, because the
new product development process should focus on creating customer
value.

19. THE NEW PRODUCT DEVELOPMENT PROCESS
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2. Idea screening –
The next step in the new product development process is idea screening.
Idea screening means nothing else than filtering the ideas to pick out
good ones. In other words, all ideas generated are screened to spot
good ones and drop poor ones as soon as possible.
While the purpose of idea generation was to create a large number of
ideas, the purpose of the succeeding stages is to reduce that number.
The reason is that product development costs rise greatly in later stages.
Therefore, the company would like to go ahead only with those product
ideas that will turn into profitable products.
Dropping the poor ideas as soon as possible is, consequently, of crucial
importance.

20. THE NEW PRODUCT DEVELOPMENT PROCESS
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3. Concept development and Testing –
To go on in the new product development process, attractive
ideas must be developed into a product concept.
A product concept is a detailed version of the new-product
idea stated in meaningful consumer terms.
You should distinguish:
• A product idea : an idea for a possible product
• A product concept : a detailed version of the idea stated in
meaningful consumer terms
• A product image : the way consumers perceive an actual or
potential product.

21. THE NEW PRODUCT DEVELOPMENT PROCESS
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4. Marketing strategy development –
When a promising concept has been developed and tested, it is time to
design an initial marketing strategy for the new product based on the
product concept for introducing this new product to the market.
The marketing strategy statement consists of three parts and should be
formulated carefully:
• A description of the target market, the planned value proposition, and
the sales, market share and profit goals for the first few years
• An outline of the product’s planned price, distribution and marketing
budget for the first year
• The planned long-term sales, profit goals and the marketing mix
strategy.

22. THE NEW PRODUCT DEVELOPMENT PROCESS
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5. Business analysis –
The fifth step in the new product development process involves a review
of the sales, costs and profit projections for the new product to find out
whether these factors satisfy the company’s objectives.
If they do, the product can be moved on to the product development
stage.
In order to estimate sales, the company could look at the sales history of
similar products and conduct market surveys. Then, it should be able to
estimate minimum and maximum sales to assess the range of risk.
When the sales forecast is prepared, the firm can estimate the expected
costs and profits for a product, including marketing, R&D, operations etc.
All the sales and costs figures together can eventually be used to analyse
the new product’s financial attractiveness.

23. THE NEW PRODUCT DEVELOPMENT PROCESS
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6. Product development –
The new product development process goes on with the actual product
development.
Up to this point, for many new product concepts, there may exist only a word
description, a drawing or perhaps a rough prototype. But if the product concept
passes the business test, it must be developed into a physical product to ensure
that the product idea can be turned into a workable market offering.
The R&D department will develop and test one or more physical versions of the
product concept. Developing a successful prototype, however, can take days,
weeks, months or even years, depending on the product and prototype
methods.
Also, products often undergo tests to make sure they perform safely and
effectively. This can be done by the firm itself or outsourced.

24. THE NEW PRODUCT DEVELOPMENT PROCESS
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7. Test marketing –
In this stage of the new product development process, the product and
its proposed marketing program are tested in realistic market settings.
Therefore, test marketing gives the marketer experience with marketing
the product before going to the great expense of full introduction.
In fact, it allows the company to test the product and its entire marketing
programme, including targeting and positioning strategy, advertising,
distributions, packaging etc. before the full investment is made.
The amount of test marketing necessary varies with each new product.
Especially when introducing a new product requiring a large investment,
when the risks are high, or when the firm is not sure of the product or its
marketing programme, a lot of test marketing may be carried out.

25. THE NEW PRODUCT DEVELOPMENT PROCESS
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8. Commercialisation –
Commercialisation means nothing else than introducing a new product into the
market.
At this point, the highest costs are incurred: the company may need to build or
rent a manufacturing facility. Large amounts may be spent on advertising, sales
promotion and other marketing efforts in the first year.
Some factors should be considered before the product is commercialized:
Introduction timing: For instance, if the economy is down, it might be wise to wait
until the following year to launch the product. However, if competitors are ready
to introduce their own products, the company should push to introduce the new
product sooner.
Introduction place: Where to launch the new product? Should it be launched in
a single location, a region, the national market, or the international market?

27. PRICING STEPS
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1.
• Selecting the pricing objective
2.
• Determining demand
3.
• Estimating costs
4.
• Analysing competitors’ cost, prices and offers
5.
• Selecting a price method
6.
• Selecting the final price

28. PRICING STRATEGY
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Keep the prices as low as possible to make entry
into a new market.
Penetration
Pricing
Once you have gained a fair share in the
market, keep the prices so that it gives you profit
and at the same time does not push away the
customers.
Economy
Pricing
Since you have advantages over other brands,
you can even charge the customer higher!
Price
Skimming

29. PRICING METHODS
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See : Pricing Methods

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A company adds a markup percentage to the overall production costs and thus forms the
price. The markup is the profit percentage calculated on total cost.
For instance, if the cost of the product is $10 and the company expects a 20 percent profit,
then the selling price will be $12.
Cost-plus pricing
Similar to cost-plus pricing, the markup is calculated as a percentage of the selling price and
not the cost price.
If the cost of the product is $10 and the company wants to earn the markup of 20 percent on
sales, the price is calculated with the following equation:
• Price = product cost / 1 – markup
• which in our case is: Price = 10 / 1 – 0.20 = 12.5
• Hence, the company will set the price at $12.5 and earn a profit of $2.5 per product.
Mark-up pricing
This pricing method focuses on the required ROI rate from the sales of goods.
Let’s say that a business invested a $100,000 and expects a 20 percent ROI ($20,000). The
target-return price is calculated like this:
• Target-return price = product cost + (desired return x capital invested) / unit sales
• Based on the previous example and calculating 10000 unit sales, that would translate to:
• Target-return price = 10 + (0.20 x 100000) / 10000 = 12
Target-return pricing

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• In this case, a business, more than anything, sets the price based on the
customer’s perception of its offering.
• This pricing method accounts all the other elements of marketing
mix (product, place, promotion) to influence the customers.
• As an example, a customer buys a more expensive product such as
Apple’s iPhone despite having lower-priced smartphones available in the
market.
• The reason for such decision lies in Apple alignment with perceived value
pricing where the customer has no problem paying extra for better
quality and durability or perhaps for the status symbol.
Perceived value pricing
• The basic principle here is providing low priced products with high-
quality levels.
• Even though the price is low, it is set accordingly to minimize the cost of
production while preserving quality at the same time.
• A good example would be Tata Motors, whose Tata Nano was designed
with only the necessary features at a low price while retaining quality.
Value pricing

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A business takes into account the prices of its direct competition and uses
them as a basis for its own prices.
Going-rate pricing can be divided into three subgroups:
• Parity pricing – the price is the same price as that of the biggest
competitor;
• Premium pricing – the price is a little higher, usually accounting the fact
the product has additional features unlike competitor’s product;
• Discount pricing – the price is a little lower if the product lacks features
that competitor’s product has.
Going-rate pricing
• Differential pricing is used in cases where companies charge different
prices to a different group of customers for the same product or service.
• This pricing method depends on factors such as place, time and product
form, thus varying in offering.
• An example would be a 0.33 can of Coca-Cola which has different
prices in grocery stores, public stations, and especially hotel rooms with
their super-pricy minibars.
Differential pricing

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The most popular modern example of auction type pricing is eBay
who provides a platform for its customers to both buy and sell.
Usually, there are three types of auctions (interestingly enough,
country-related in name):
• English auctions – there is only one seller with many buyers who
bid on the item until the best price is reached;
• Dutch auctions – either one seller and many buyers or one buyer
and many sellers, with the process backwards to English auctions
in the first case as the top price is first announced and then slowly
lowering in bidding or the buyer announcing the product he
wishes to buy and then the sellers bidding their best offers to him;
• Sealed-bid auctions – common for large orders or contracts,
particularly in the industrial and government departments, where
companies submit their bids in sealed envelopes in response to a
tender, not disclosing the bid to anyone.
Auction type pricing

34. ALLOWANCE
Allowance is a type of pricing strategy employed for the
promotion a product. Companies typically reward customers
for desirable behavior such as bulk purchase, offseason
purchase etc. by allowing discounts and allowances on list
price.
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35. ALLOWANCE
❑ Allowances can take many forms:
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• Price reductions given for turning in old products in
exchange for new products.
• This is prevalent in many industries such as automobile,
electronics etc.
• This allowance makes the customers loyal to a particular
product.
1. Trade-in allowances:
• Payments or price reductions given to dealers for
participating in sales and support programmes.
2. Promotional allowances:

36. MOST COMMON TYPES OF DISCOUNTS
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1. Quantity Discounts
2. Trade (or Functional) Discounts
3. Promotional Discounts
4. Seasonal Discounts
5. Cash Discounts
6. Geographical Discounts
See : Types of Discounts

37. THANK YOU..!
KAUSHIK JAISWAL
7276888855 kaushjaiswal@gmail.com
See : New Product Development Stages
See : Pricing Methods
See : Types of Discounts