chapter thirteen dimensions of marketing strategy copyright © 2006 by the mcgraw-hill companies,...

Chapter ThirteenChapter ThirteenDimensions ofMarketing Strategy

Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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The Marketing Mix

Maintaining the right marketing mix that satisfies the target market and creates long-term relationships with customers

Did You Know? Domino’s Pizza delivery drivers cover 9 million miles a year delivering 400 million pizzas.2

Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved

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Product Strategy

Product development

Classification

Mix

Life cycle

Identification


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Developing New Products

New Idea Screening

Business Analysis

Product Development

Test Marketing

Commercialization

Source: Rebecca Buckman, “Window into the future,” Wall Street Journal, June 25, 2001, p. R19.

Did You Know? In 2001, Microsoft planned to spend $4 billion on R&D.

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Classifying Products

Consumer ProductsConvenience products

Shopping products

Specialty products

Business ProductsRaw materials

Major equipment

Accessory equipment

Component parts

Processed materials

Industrial services


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Product Line and Product Mix

Product LineClosely related products that are treated as a unit because of similar marketing strategy, production, or end-use considerations

Product MixAll of the products offered by an organization


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Colgate-Palmolive’s Product Mix and Product Lines

Source: “Our Products,” Colgate-Palmolive (n.d.), www.colgate.com/app/Colgate/US/Corp/Products.cvsp (accessed June 5, 2004).

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Product Life Cycle


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Identifying Products

BrandingThe process of naming and identifying products; can use a brand mark or trademark

PackagingThe external container that holds and describes the product

LabelingThe presentation of important information on a package


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The 10 Bottled Water Brands

Source: Advertising Age Fact Pack 2004 Edition, p. 23.

Rank: Brand (Marketer) U.D. Market Share

Ad Spending

($ mil)

1 Aquafina (PepsiCo) 15.1% $33.9

2 Dasani (Coca-cola Co.) 13.8% $20.4

3 Poland Spring (Nestle) 11.5% $4.0

4 Arrowhead (Nestle) 6.8% $7.1

5 Crystal Geyser (Roxanne) 6.0% $1.0

6 Aberfoyle (Nestle) 4.5% $0.0

7 Deer Park (Nestle) 4.1% $3.1

8 Ozarka (Nestle) 3.9% $2.4

9 Ice Mountain (Nestle) 3.9% $3.0

10 Zephyrhillis (Nestle) 2.9% $1.9

For each of the top 10 bottled water brands, discuss potential competitive advantages.

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Categories of Brands

Manufacturer BrandsKellogg’s, Ford, Sony

Private Distributor BrandsKenmore appliances (Sears)

Generic Brandspeanut butter, dog food, kitty litter


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Packaging Functions

Protection

Economy

Convenience

Promotion

Did You Know? While shopping, the average time a consumer looks at a package is 2.5 seconds.


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Labeling

The content of labeling, often required by law, may include:

Ingredients or content

Nutrition facts (calories, fat, etc.)

Care instructions

Suggestions or use (such as recipes)

The manufacturer’s address and toll-free number

Web site

Other useful information


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Product Quality

The degree to which a good, service, or idea meets the demands and requirements of customers


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Pricing Strategy

Four Common Pricing Objectives:Maximize profits and sales

Boost market share

Maintain the status quo

Survival


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Pricing Strategies

New Product PricingPrice skimming Penetration pricing

Psychological Pricing Odd/EvenPrestige pricing

Price DiscountingQuantity discountsSeasonal discountPromotional discounts


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Price vs. Non-Price Competition

For the following products, indicate whether they are sold using price competition or non-price competition and defend your selection:

Toyota Hybrid Prius

Hyundai Sonata

Porsche Cayenne SUV

Estee Lauder Electric Intense Lipcreme

Avon Brilliant Moisture Lip Color

Louis Vuitton’s Murakami Handbags

Olay Complete Moisturizing Lotion

Toshiba Widescreen Televisions


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Distribution Strategy

Marketing ChannelsRetailers (Wal-Mart, Sears)

Wholesalers (food brokers to restaurants)

E-tailers (Amazon.com)


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Supply Chain Management

Long-term partnerships among channel members to reduce costs, waste, and unnecessary movement through the channel to satisfy customers


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Channels for Consumer Products


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Channels for Business Products

More than half of all business products are sold through direct marketing channels

Other business products may be distributed through channels employing wholesaling intermediaries

Industrial distributors

Manufacturer’s agents


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Intensity of Market Coverage

Intensive distributionMakes a product available in as many outlets as possible

Selective distributionUses only a small proportion of all available outlets to expose products

Exclusive distributionExists when a manufacturer gives a middleman the sole right to sell a product in a defined geographic territory


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Physical Distribution

Physical distribution includes all the activities necessary to move products from producers to customers

Inventory control

Transportation

Warehousing

Materials handling


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Importance of Distribution in a Marketing Strategy

Distribution decisions are the least flexible marketing decisions

Use committed resources

Establish contractual relationships

Are bound by time


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The Promotion Mix

A strong promotion program results from the careful selection and blending of:

AdvertisingPersonal sellingPublicitySales promotion

Integrated marketing communicationsThe process of coordinating the promotion mix elements and synchronizing promotion as a unified effort


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Advertising

A paid form of non-personal communication transmitted through a mass medium

Advertising campaign


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Advertising Media

Print media Newspapers

Magazines

Direct mail

Outdoor (billboards)

Electronic mediaTelevision

Radio

Cyber ads


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U.S. Advertising Expenditures in Millions of Dollars

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Internet Advertising

Total revenues from advertising, paid content, and e-commerce on mobile devices in the U.S. is projected to grow from $100 million today to $3.3 billion in 2005

Source: “E-MONEY,” American Demographics, June, 2001, p. 32.

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Top 10 Product Categories for Advertising Spending in the United States for the year 2003

Product Category Advertising Spending ($mil)

Automotive – Factory $8,938

Auto Dealerships – Local $4,953

Autos – Dealer Association $4,320

Department Stores $4,070

Motion Pictures $3,468

Restaurant – Quick Service $3,442

Prescription Drugs – Human $3,226

Telephone Services – Wireless $2,307

Direct Response Products $1,757

Furniture Stores $1,402

Source: “U.S. Advertising Spending Rose More than 5% in 2003, Nielson Media Research press release, February 19, 2004, available at http://www.nielsenmedia.com

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Ten Leading National Advertisers

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Personal Selling

Direct, two-way communication with buyers and potential buyers A six-step process:

ProspectingApproachingPresentingHandling objectionsClosing – asking for the orderFollowing up

Did You Know? A typical sales call on an industrial customer can cost between $200 and $300 per call


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Publicity

Non-personal communication transmitted through mass media but not paid for directly by the firm

Presented in news story form

Describes what a firm is doing, what products it is launching, or other newsworthy information


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Sales Promotion

Direct inducements offering added value or some other incentive for buyers to enter into an exchange

Store displays

Premiums

Sampling and demonstrations

Coupons

Consumer contests and sweepstakes

Refunds

Trade shows

Did You Know? Annually, 248 billion cents-off coupons are distributed, but less than 2% are redeemed


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Push and Pull Strategies


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Objectives of Promotions

Stimulate demand

Stabilize sales

Inform, remind, and reinforce customers


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Promotional Positioning

The use of promotion to create and maintain an image of a product in the buyer’s mind

A natural result of market segmentation

Assists in product differentiation


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Average Salary for Sales and Marketing Executives, 2003

Total Compensation

Base Salary

Bonus Plus Commissions

Executive $144,653 $95,170 $49,483

Top Performer $153,417 $87,342 $66,075

Mid-level Performer $92,337 $58,546 $33,791

Low-level Performer $63,775 $44,289 $19,486

Average of all Positions $111,135 $70,588 $40,547

Source: Galea, Christine. “the 2004 compensation Survey,” Sales & Marketing Management, May 2004, table p.29.

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Solve the Dilemma

1. Design a marketing strategy for the new product line.

2. Critique your marketing strategy in terms of its strengths and weaknesses.

3. What are your suggestions for implementation of the marketing strategy?


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Explore Your Career Options

Do you think the role of marketing will continue to be important in the face of increasing technological advances?

Should professionals such as doctors, lawyers, and dentists utilize marketing in the same way that manufacturing and retail firms do?


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Additional Discussion Questions and Exercises

1. Research and development is the process of identifying new ideas and technologies that can be developed into new products.

Where do these new ideas come from?

2. Assume you have the opportunity to buy a company that markets a product.

Which stage of the life cycle of that product would offer you the greatest opportunity for profits? Why?


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Additional Discussion Questions and Exercises

3. What is the difference between a “brand mark” and a “trademark”?

4. What are the advantages of businesses using coupons and/or contests and sweepstakes for sales promotion purposes?


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Chapter 13 Quiz

1. In the introductory stage of a product’s life, buyers may be charged the highest possible price for the product. This pricing approach is calleda. penetrating pricing

b. psychological pricing

c. price skimming.

d. break-even point.

2. Branding may includea. the brand name.

b. the brand mark

c. the trade mark

d. all of the above.


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Chapter 13 Quiz

3. Products that are purchased after the consumer has compared competitive products area. convenience products.

b. shopping products.

c. specialty products.

d. a product line.

4. Intermediaries who sell products to ultimate consumers for home and household use rather than for resale or for use in producing other products area. wholesalers.

b. retailers.

c. merchant middlemen

d. agent middlemen.


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Multiple Choice Questions about the Video

1. One way that Hotel Monaco sets itself apart is by offering guests a(n) ______ as a temporary pet companion during their stay.a. dogb. catc. goldfishd. bird

2. According to Business Week readers, after price and location, _______ is very important in a hotel service. a. room qualityb. food qualityc. bed qualityd. Web site quality


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