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THARAKA DIASDirector – My Media Network/
Solutions.comMBA(USA), BBA(USA), Dip in Mgt, ACIM(UK), FAEA(Dip in AEA-UK),
FinstSMM(UK), CPM(Asia), MSLIM, PM(Sri-Lanka)
1
Definition of a product As anything that can be offered to a market for attention,
acquisition, use, or consumption that might satisfy a want or need (Philip Kotler)
A product could be any of the following A physical good – Car , Home, Phone, TV Person Place Organization Idea Service Experience
AOT - THARAKA DIAS 3
Product features – the physical attributes that are seen in the product.
Product Benefits – refers to the benefit the consumer would experience in consuming the product.
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This means product assortment, and its consist of all the products or services that a company offers to its customers .
Length of product mix – the length of a companies product mix is the total number of individual products of services in the entire product mix- 3M has over 60,000 products
Width of product mix – the breadth of width of a companies product mix relates to the number of product lines the company process – Unilevers
Depth of product mix – it’s the number of products in each product line – Personal care range consist of , Soaps , toothpaste, colognes etc.
Product mix consistency – this refers to how closely related the various product lines are in terms of use- channels of distribution, promotion AOT - THARAKA DIAS 9
Product Product Line 1Line 1
Product Product Line 2Line 2
Product Product Line 3Line 3
TABLESTABLES•KitchenKitchen•Dining RoomDining Room•EndEnd•CoffeeCoffee•OutdoorOutdoor•ConferenceConference•ComputerComputer
CHAIRSCHAIRS•Dining RoomDining Room•Living RoomLiving Room•BedroomBedroom•OutdoorOutdoor•DeskDesk
LAMPSLAMPS•TableTable•CeilingCeiling•TrackTrack•DeskDesk
• Width of Product Mix
10AOT - THARAKA DIAS
Capital equipment – consist of all the buildings and fixed equipment that have to be in place for production. – plants, machinery, computer installations, generators etc.
Accessory equipment – equipment that does not become a part of the final physical product but is used in production or office activities. – office equipment's, and factory equipment's
Raw materials – are the basic materials that become part of the physical product
Components and parts – are finished goods in their own right, which simply have to be incorporated into the assembly of the final product with no further processing- Intel microchip , Goodyear tyres and head lamp units.
Supplies and services – include office stationery, cleaning materials and services include financial, janitorial, legal, equipment maintenance and printing
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Convenience products- relatively inexpensive and frequently purchased
1. Staple goods- bread, milk, toothpaste2. Impulse goods – chocolates, perfumes, mags3. Emergency products – umbrella, medicine, battery
Shopping products – less frequent purchased products ( Appliances, bicycle, cameras, furniture, clothing, airline
etc) Specialty products - products with unique characteristics or
brand identification ( Cars, watches, designer clothes, medical advisory, legal)
Unsought products – normally does not plan to buy ( catalogues, insurance, encyclopedia, blood donation
etc)
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4.1. What is a Brand – A brand is a name, term, sign, symbol or design or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. ( American Marketing Association)
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The Consumer Easier product identification Communicates features and benefits Helps product evaluation Establishes products position in the market Reduces risk in purchasing Creates interest/ character for product
The Marketers Helps to created loyalty Defends against competition Creates differential advantage Allows premium pricing Helps targeting Increases power over retailers.
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Brand recognition – the first step would be to make the consumer to identify a brand
Brand acceptance – how you should make them accept your brand
Brand Preference – consumers desire for your brand over competitors
Brand loyalty – ultimate dream of marketer. To make consumer loyal to your brand
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Individual product branding – Lux, Anchor Blanket family branding – Damro , Sony,
Phillips Combination brand names – Microsoft
Office, Microsoft Windows
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Packaging is defined as all the activities of designing and producing the containers or wrapper for a product – Kotler
5.1 functions of packaging Protection of contents from damage, deterioration or tempering As a promotional tool- by packaging attractively a marketer can get
the attention and interest of the customer Acts as a silent salesman in self service shops Instant recognition of the brand Innovative packaging creates competitive advantage User convenience –storage and carrying Provides information Compliance with government regulations Must be hygienic and environmental friendly Management information as bar codes can be used to track sales
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The PLC emphasize the fact nothing lasts forever. Warn against the dangers of assuming that growth will
continue forever It is an important tool for forecasting and strategic
planning It shows the trend in sales and profitability PLC emphasizes the need to review marketing
objectives and strategies as the product passes through the various stages.
Identify the key decision points where strategies and tactics must change
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There is no way that any of the decisions points can be predicted with accuracy- it is for each manager to use his best judgment
Not all product follow the classic S shaped curve.
The PLC ignore the application of the marketing mix
Strategic decision can change a PLC by repositioning a product in the market its life can be extended.
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A service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything- Kotler
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37
Marketing
Objectives
SurvivalLow Prices Hoping to Increase Demand.
Current Profit Maximizat ion
Choose the Price that Produces the Maximum Current Profit, Etc.
Market Share LeadershipLow as Possible Prices to Become
the Market Share Leader.
Product Quality LeadershipHigh Prices to Cover Higher
Performance Quality and R&D.
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Four Seasons uses the product quality leadership strategy.
It starts with very high quality service, then charges a price to match.
http://www.fourseasons.com
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Total CostsSum of the Fixed and Variable Costs for Any Given
Level of Production
Total CostsSum of the Fixed and Variable Costs for Any Given
Level of Production
Variable Costs
Costs that do varydirectly with the
level of productionRaw materials
Fixed Costs(Overhead)
Costs that don’tvary with sales or production levels
Executive Salaries, Rent
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Market andDemand
Competitors’ Costs, Prices, and Offers
Other External FactorsEconomic ConditionsReseller Reactions
Government ActionsSocial Concerns
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Pure CompetitionPure CompetitionMany Buyers and Sellers
Who Have Little Effect on the Price
Pure CompetitionPure CompetitionMany Buyers and Sellers
Who Have Little Effect on the Price
Monopolistic Monopolistic CompetitionCompetition
Many Buyers and Sellers Who Trade Over a
Range of Prices
Monopolistic Monopolistic CompetitionCompetition
Many Buyers and Sellers Who Trade Over a
Range of Prices
Pricing in Different Types of Markets
Oligopolistic Oligopolistic CompetitionCompetition
Few Sellers Who AreSensitive to Each Other’s
Pricing/ Marketing Strategies
Oligopolistic Oligopolistic CompetitionCompetition
Few Sellers Who AreSensitive to Each Other’s
Pricing/ Marketing Strategies
Pure MonopolyPure MonopolySingle Seller
Pure MonopolyPure MonopolySingle Seller
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Pric
e
Quantity Demanded per Period
A. Inelastic Demand - Demand Hardly Changes Witha Small Change in Price.
P2
P1
Q1Q2
Pric
e
Quantity Demanded per Period
P’2P’1
Q1Q2
B. Elastic Demand -Demand Changes Greatly Witha Small Change in Price.
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Certainty About
Costs
Pricing is Simplified
Price Competition
Is Minimized
UnexpectedSituational Factors
Attitudes of
Others
Ethical
Ignores Current Demand &
Competition
Cost-Plus Pricing is an Approach That Adds a Standard
Markup to the Cost of the Product
Simplest Pricing Method
Fairer to Buyers
& SellersAOT - THARAKA DIAS
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2468
1012
200 400 600 800 1,000
Total Revenue
Total Cost
Fixed Cost
Target Profit($2 million)
Sales Volume in Units (thousands)Cos
t in
Dol
lars
(milli
ons)
Tries to Determine the Price at Which a Firm Will Break Even or Make a Certain Target Profit.
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Methods for Setting Prices
Going-Rate Company Sets Prices Based on What
Competitors Are Charging
Sealed-BidCompany Sets Prices Based on What They Think Competitors
Will Charge??
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Market-Skimming
Setting a High Price for a New Product to “Skim” Maximum Revenues from the Target Market.
Results in Fewer, But More Profitable Sales.
I.e. Intel
Use Under These Conditions: Product’s Quality and Image
Must Support Its Higher Price. Costs Can’t be so High that
They Cancel the Advantage of Charging More.
Competitors Shouldn’t be Able to Enter Market Easily and Undercut the High Price.
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Market Penetration
Setting a Low Price for a New Product in Order to “Penetrate” the Market Quickly and Deeply.
Attract a Large Number of Buyers and Win a Larger Market Share.
I.e. Dell
Use Under These Conditions: Market Must be Highly Price-
Sensitive so a Low Price Produces More Market Growth.
Production/Distribution Costs Must Fall as Sales Volume Increases.
Must Keep Out Competition & Maintain Its Low Price Position or Benefits May Only be Temporary.
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Optional-Product Pricing optional or
accessory products sold with the main product. i.e camera bag.
Captive-Product Pricing products that
must be used with the main product. i.e. film.
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C a s h D i s c o u n t S e a s o n a l D i s c o u n t
Q u a n t i t y D i s c o u n t T r a d e - I n A l l o w a n c e
F u n c t i o n a l D i s c o u n t P r o m o t i o n a l A l l o w a n c e
A d j u s t i n g B a s i c P r i c e t o R e w a r d C u s t o m e r sF o r C e r t a i n R e s p o n s e s
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Considers the psychology of prices and not simply the economics.
Customers use price less when they can judge quality of a product.
Price becomes an important quality signal when customers can’t judge quality; price is used to say something about a product.
Retail $100.00Cost $3.00
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Temporarily Pricing Products Below List Price
Through:Special-Event PricingSpecial-Event Pricing
Cash RebatesCash Rebates
Low-Interest FinancingLow-Interest Financing
Longer WarrantiesLonger Warranties
Free MaintenanceFree Maintenance
DiscountsDiscounts
Loss LeadersLoss Leaders
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•Pricing products for customers located in different parts of the country or world.• i.e. FOB-Origin, Uniform- Delivered, Zone, Basing- Point, & Freight-Absorption.
• Adjusting prices for customers in different counties.• Price Depends on Costs, Consumers, Economic Conditions, Competitive Situations, & Other Factors.
Geographical Pricing
International Pricing
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Why?
Excess Capacity
Falling Market Share
Dominate Market Through Lower Costs
Why?
Cost Inflation
Overdemand: Company Can’t Supply All Customers’ Needs
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Distribution involves all the activities that a marketer does in order for the consumer to buy the product
at the right time at the right place in the right condition It includes: selecting channels, transporting,
storage, loading, breaking bulk packs, display etc.
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Provision of information Storage Physical possession Promotion Order taking Credit After sales service
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Distributors –handle all the activities of the distribution and not deal with competitive products
Stockists- Usually order goods with consultation of the manufacturer and sales reps of the manufacturer will sell products collection of money is done by the stokists
Wholesale – sell it to small retailers Retail- sell it to end user Modern trade ( Super markets)- sell it to end users Authorised dealers- supply the retailers with company
prices and replenish stocks Franchises – use the name and technology of the principle Department stores ( garments to personal care- usually not
handle groceries) eg. ODEL
•Company own sales team
•Distributors, dealers, stockists, value-added re-sellers
•Agents and brokers
•Franchisees
•Electronic channels
•Wholesalers
•Retailers AOT - THARAKA DIAS 61
•Intensive: distribution through every reasonable outlet available
•Selective: multiple, but not all outlets in the market – pharma, frozen food
•Exclusive: may be only one outlet in a market - car dealers
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The distribution strategy also needs the support and encouragement of top management to succeed
Some of the CSFs could be: Clear, transparent and unambiguous policy and procedure Serious commitment of the channel partners Fairness in dealings Clearly defined customer service policy High level of integrity Equitable distribution at times of shortage Timely compensation of channel partners
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Consumer ( let consumer buy at convenience- wider geographical area)
Industrial/business( generally in a concentrated area)
Service markets ( no intermediaries much but their could be agents )
Physical Supply goods moving from supplier to manufacturer “inbound”
Physical Distribution goods moving from manufacturer to
customers “outbound”
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1. Total Cost Concept2. Customer Service Concept
a. Timeb. Dependabilityc. Communicationd. Conveniencee. Accuracy
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3. Distribution Cost-Service trade offsa. Achieve right balance between them b. Flexibility is important in balancing the cost
and service
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Have a proper order processing system Have a good inventory control system – have
realistic lead times, Minimum order levels, Overstock levels, Optimum levels
Plan and schedule movement of goods Use shorter distribution channels Use technology such as online stock ordering
and control systems Consolidate small lots in one lorry Out source when profitable
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a. Verifying Customers’ Credibilityb. Checking for any outstanding paymentc. Monitoring stock leveld. Preparing invoicee. Arranging transporterf. Sending the consignment and information
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i. Suitability or nature of productii. Affordabilityiii. Availabilityiv. Customers’ specificationsv. Competitor’s transportation model
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Developed in 1980s. SCM is the process of planning,
implementing, and controlling the operation of the supply chain as possible
The primary objective of supply chain management is to fulfill customer demand through the most efficient use of resources
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