essential of marketing

7/30/2019 Essential of Marketing

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Contents

1. Marketing Mix and Key Marketing Activities

2. Developing Market Segmentation

3. Product Planning and Development

4. Promotion Mix : Advertising, Publicity, Personal

Selling and Sales Promotion

5. Distribution Planning and Pricing Strategy

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Marketing Mix andMarket Segmentation


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Marketing Credo

There is only one valid definition

of business purpose : to create acustomer

Peter Drucker


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Marketing Mix

Product Price

Place Promotion

TargetMarket


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Key Marketing Activities

Consumer Analysis

Product Planning

Price Planning

Distribution

Planning

Promotion

Planning


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Consumer Analysis

Product Planning

Examination and evaluation of consumer

characteristics, needs, and purchase

processes

Development and maintenance of products,

product assortments, product positions,

brands, packaging, options, and deletion of

old products

Price PlanningOutlines price ranges and levels, pricing

techniques purchase terms, price

adjustments, and the use of price as an

active or passive factor




Distribution

Planning

Establishment of channel relations, physical

distribution, inventory management,

warehousing, transportation, allocation of

goods, and wholesaling

Promotion

Planning

Combination of advertising, publicity,

personal selling, and sales promotion to

drive sales revenue



Product/Market Matrix

Existing Products New Products

Existing Markets

New Markets

MarketPenetration

MarketDevelopment

ProductDevelopment

Diversification




MarketPenetration

MarketDevelopment

The firm seeks to achieve growth with

existing products in their current market

segments, aiming to increase its market

share

Effective when the market is growing or notyet saturated

The firm seeks growth by targeting its

existing products to new market segments

Effective when a local or regional businesslooks to wider its market, new market

segments are emerging due to changes in

consumer life-style/demographics, and

innovative uses are discovered for a mature

product




ProductDevelopment

Diversification

The firms develops new products

targeted to its existing market segments

Effective when the firm has a core of

strong brands

The firm seeks growth by targeting its

existing products to new market

segments

Diversificationis utilized so that the

firm does not become overly depend-

ent on one product line



Market Segmentation

The division of a market into

different homogeneous groups of

consumers

Market

Segment

Should be:

measurable

accessible by communication and distribution

channels

different in its response to a marketing mix

durable (not changing too quickly)

substantial enough to be profitable



Types of Market Segmentation

Geographic

Demographic

Based on regional variables such as

region, climate, population density, and

population growth rate.

Based on variables such as age, gender,

ethnicity, education, occupation, income,

and family status



Types of Market Segmentation

Psychographic

Behavioral

Based on variables such as values,

attitudes, and lifestyle

Based on variables such as usage rate

and patterns, price sensitivity, brand

loyalty, and benefits sought



Step in Planning A Segmentation Strategy

Determiningcharacteristics and

needs of consumers

for the product

category of thecompany

Analyzing

consumer

similarities and

differences

Developingconsumer

group

profiles

Selecting

consumersegment (s)

Positioning

companysoffering in

relation to

competition.

Establishing

anappropriate

marketing

plan


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Product Planning and

Development


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Products : Types of Goods

Types of

Goods

Convenience

Goods

Shopping

Goods

Specialty

Goods


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Convenience Goods

Convenience

Goods

Those purchased with a minimum of effort,

because the buyer has knowledge of

product characteristics prior to shopping

The consumer does not want to search for

additional information (because the item

has been bought before) and will accept a

substitute rather than have to frequent

more than one store


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Convenience

Goods

Staplesare low-priced items that are

routinely purchased on a regular basis,

such as detergent, milk, and cereal

Impulse goodsare items that the

consumer does not plan to buy on a

specific trip to a store, such as candy, a

magazine, and ice cream

Emergency goodsare items purchased out

of urgent need, such as an umbrella during

a rainstorm, a tire to replace a flat, or

aspirin for a headache

Convenience Goods


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Shopping Goods

Shopping

Goods

Those for which consumers lack

sufficient information about product

alternatives and their attributes, and

therefore must acquire furtherknowledge in order to make a

purchase decision


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Shopping Goods

Shopping

Goods

Forattribute-based shopping goods,

consumers get information about and then

evaluate product features, warranty,

performance, options, and other factors.

The goods with the best combination ofattributes is purchased. Sony electronics

and Calvin Klein clothes are marketed as

attribute-based shopping goods

Forprice-based shopping goods,consumers judge product attributes to be

similar and look around for the least

expensive item/store


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Specialty Goods

Specialty

Goods

Those to which consumers are brandloyal.

They are fully aware of these products

and their attributes prior to making a

purchase decision.

They are willing to make a significant

purchase effort to acquire the brand

desired and will pay a higher price than

competitive products, if necessary.

For specialty goods, consumers will not

make purchases if their brand is not

available. Substitutes are not

acceptable.


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Services

Type of

Services

Rented-

goods

Service

Owned-goods

service

Non-goods


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Services

Rented-

goods

Service

Owned-goods

service

Non-goods

Involves the leasing of a good for a specified

period of time. Examples include car, hotel room,

apartment, and tuxedo rentals

Involves an alteration or repair of a good owned by

the consumer. Examples include repair services

(such as automobile, watch, and plumbing), lawn

care, car wash, haircut, and dry cleaning

Provides personal service on the pan of the seller;

it does not involve a goods. Examples include

accounting, legal, and consulting services


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Characteristics of Services

The intangible nature of many services makes theconsumer's choice more difficult than with goods

The producer and his or her services are often

inseparable

The perishability of services prevents storage and

increases risks

Service quality may be variable


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Product Life Cycle

Introduction

Growth Maturity

Decline


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Product Life Cycle

Characteristics Introduction GrowthMarketing objective Attract innovators and

opinion leader to newproduct

Expand distribution andproduct line

Industry sales Increasing Rapidly increasingCompetition None or small SomeIndustry profits Negative IncreasingCustomers Innovators Affluent mass marketProduct mix One or two basic

models Expanding lineDistribution Depends on product Rising number of

outlets

Pricing Depends on product Greater range of pricesPromotion Informative Persuasive


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Product Life Cycle

Characteristics Maturity DeclineMarketing objective Maintain differential

advantage as long aspossible

(a) cut back,(b) revive,(C) terminate

Industry sales Stable DecreasingCompetition Substantial LimitedIndustry profits Decreasing DecreasingCustomers Mass market LaggardsProduct mix Full product line Best-sellersDistribution Greatest number of

outletsDecreasing number ofoutlets

Pricing Full line of prices Selected pricesPromotion Competitive Informative


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New Product Planning

Idea

Generation

Product

Screening

Concept

Testing

Business

Analysis

Product

Development

Test

Marketing

Commercial-

ization


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Idea

Generation

A continuous, systematic search for new

product opportunities

It involves delineating sources of new

ideas and methods for generating them

Product

Screening

After the firm identifies potential

products, it must screen them

Many companies use a new-product

screening checklist for preliminary

evaluation


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Concept

Testing

Business

Analysis

Concept testingpresents the consumer witha proposed product and measures attitudes

and intentions at this early stage of

development

Concept testing is a quick and inexpensiveway of measuring consumer enthusiasm

Business analysisfor the remaining product

concepts is much more detailed than product

screening

Because the next step is expensive and time-

consuming product development, critical use

of business analysis is essential to eliminate

marginal items


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Business Analysis Variables

Factors ConsiderationsDemand projections Price/sales relationship; short- and long-run sales potential;

speed of sales growth; rate of repurchases; channel intensityCost projections Total and per unit costs; use of existing facilities and

resources; startup vs. continuing costs; estimates of futureraw materials and other costs; economies of scale; channel

needs; break-even point

Competition Short-run and long-run market shares of company andcompetitors; strengths and weaknesses of competitors;potential competitors; likely competitive strategies inresponse to new product by firm

Required investment Product planning (engineering, patent search, productdevelopment, testing); promotion; production; distribution

Profitability Time to recoup initial costs; short- and long-run total and per-unit profits; control over price; return on investment (ROI)


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Product

Development

Test

Marketing

Product developmentconverts a product ideainto a physical form and identifies a basic

marketing strategy

It involves product construction, packaging,

branding, product positioning, and attitude andusage testing.

Test marketinginvolves placing a product for

sale in one or more selected areas and

observing its actual performance under the

proposed marketing plan.

The purpose is to evaluate the product and

pretest marketing efforts in a real setting prior to

a full-scale introduction


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Promotion Mix :

Advertising, Publicity, PersonalSelling and Sales Promotion


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Promotion Mix

Advertising Publicity

PersonalSelling

Sales

Promotion

TargetMarket


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Promotion Mix

Factor Advertising Publicity Personal Selling Sales PromotionAudience Mass Mass Small (one-to-one) VariesMessage Uniform Uniform Specific Varies

Cost Low per viewer orreader None for media spaceand time; can be

moderate costs forpress releases andpublicity materials

High per customer Moderate percustomer

Sponsor

Company

No formal sponsor inthat media are notpaid

Company

Company

Flexibility Low Low High ModerateControl over content

and placement High None High HighCredibility Moderate High Moderate ModerateMajor goal To appeal to a massaudience at a

reasonable cost, andcreate awareness andfavorable attitudes

To reach a massaudience with anindependently reportedmessage

To deal with individualconsumers, to resolvequestions, to closesales

To stimulate short-runsales, to increaseimpulse purchases

Example Television ad for aKodak video camera Newspaper articlereporting on the

unique features of a

Kodak video camera

Retail sales personnelexplaining how aKodak video camera

works

A Kodak video cameradisplayed at consumerphotography shows


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Four Key Steps to Advertise

Determine

message content

and devise an ad

Specify thelocation of an ad

(media placement)

Outline a promotionschedule

Choose how many

variations of a

basic message to

utilize


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Things to Consider in Advertising

Waste

Reach

Wasteis the portion of an audience that isnot in a firm's target market. Because

media appeal to mass audiences, waste

is a significant factor in advertising.

Reachrefers to the number of viewers or

readers in the audience


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Frequency

Messagepermanence

Frequencyis how often a medium can beused. It is greatest for newspapers, radio, and

television, where ads may appear daily and

advertising strategy may be easily changed

Message permanencerefers to the number

of exposures one advertisement generates

and how long it remains with the audience


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Persuasiveimpact

Clutter

Persuasive impactis the ability of a mediumto stimulate consumers. Television often has

the highest persuasive impact because it is

able to combine audio, video, color, animation,

and other appeals.

Clutterinvolves the number of ads that are

contained in a single program, issue, etc. of a

medium. Clutter is low when a limited number

of ads is presented and high when many ads

are presented.


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Publicity : Poor and Good Response

Situation Poor Response Good ResponseFire breaks out ina company plant Requests for information bymedia are ignored. Company spokesperson explains the cause ofthe fire and company precautions to avoid it

and answers questions.New product

introduced Advertising is used withoutpublicity Pre-introduction news releases, productsamples, and testimonials are used.News story about

product defects Requests for information by mediaare ignored, blanket denials areissued, hostility is exhibited towardreporter of story.

Company spokesperson states that tests arebeing conducted on products, describesprocedure for handlingdefects, and answersquestions.

Competitorintroduces new

productThe advertising campaign isstepped up. Extensive news releases, statistics, andspokespeople are made available to media to

present company's competitive features.

High profitsreported Profits are rationalized and positiveeffects on the economy are cited. Profitability is explained, data (historical andcurrent) are provided, uses of profits are

detailed: research, community development.

Overall view ofpublicity There is an infrequent need forpublicity; crisis fighting is used

when bad reports are circulated.There is an ongoing need for publicity, strongplanning, and contingency plans for badreports.


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Developing a Publicity Plan

Setting

objectives

Outlining

types of

publicity

Selecting

media

Creatingpublicity

messages

Timingpublicity

messages


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Publicity Type

Publicity Type

Example

News publicity Macy's describes its decision to sell its stores in the Midwest.Business feature article Toyota explains its goals and objectives for the 2020.

Service feature article A trade association offers 10 tips on how to reduce home heatingcosts.

Finance release General Electric distributes quarterly financial data about thecompany.

Product release Intel announces its new, fast-speed microprocessorPictorial release Apple distributes photos showing all of its personal computer

products and related software

Background editorialrelease Mc Kinsey presents a biography of its president and his risethrough the company.

Emergency publicity The Red Cross makes a request for aid to tornado victims.


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Specific Personal Selling Objectives

Type of Objective

Illustrations

Demand-OrientedInformation To fully explain all good and service attributes

To answer any questionsTo probe for any further questions

Persuasion To clearly distinguish good or service attributes from those of competitorsTo maximize the number of sales as a per cent of presentationsTo convert undecided consumers into buyersTo sell complementary items, e.g., film with a cameraTo placate dissatisfied customers

Reminding To ensure delivery, installation, etc.To follow up after a good or service has been purchasedTo follow up when a repurchase is nearTo reassure previous customers when making a new purchase

Image-OrientedIndustry and company To maintain a good appearance by all personnel in contact with consumers

To follow acceptable sales practices


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Personal Selling Process

Prospecting(blind, lead)

ApproachCustomer

Wants

Sales

Presentation

Answering

Questions(questions and

objections)

CloseFollow up(satisfaction,referrals,repurchase)


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Types of Sales Promotion

Type Characteristics IllustrationCoupons Manufacturers or retailers advertise

special discounts for customers whoredeem coupons.

P&G mails consumers a 25-cents-off coupon for Sure deodorant,which can be redeemed at anysupermarket.

Refund or

rebateA consumer submits proof-of-

purchase (usually to themanufacturer) and receives an extradiscount.

First Alert home fire alarms

provides $5 rebates to consumerssubmitting proof of purchase.

Samples Free merchandise or services aregiven consumers, generally for new

items.When Sunlight dishwashing liquidwas introduced, free samples were

mailed to consumers.

Contests orsweepstakes Consumers compete for prizes byanswering questions (contests) or

filling out forms for random drawingsof prices (sweepstakes).

Publishers Clearinghouse sponsorsannual sweepstakes and awardsautomobiles, houses, and otherprices.


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Type Characteristics IllustrationBonus or

multipacks Consumers receive discountsfor purchasing in quantity Some stores run I-cent sales,whereby the consumer buys oneitem and gets a second one for apenny.

Point-of-

purchasedisplaysIn-store displays remind

customers andgenerateimpulse purchases.

Chewing gum sales in

supermarkets are high becausedisplays arc placed at checkoutcounters.

Specialevents Manufacturers or retailerssponsor celebrityappearances,

fashion shows, and otheractivities.

Virtually every major leaguebaseball team has an annual "OldTimers' Day," which attracts largecrowds.

Gifts Consumers are given gifts formaking a purchase or openinga new account.

Savings banks offer a range ofgifts for consumers opening newaccounts or expanding existingones.

Types of Sales Promotion


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Sales Promotion Advantages

It helps attract customer traffic and maintain brand or storeloyalty

Quick results can be achieved

Some forms of sales promotion (calendars, t-shirts. Pens,etc) provide value to the consumer and are retained by

them; and these forms can provide a reminder function

Impulse purchases can be increased through in-store

displays


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Sales Promotion Disadvantages

Sometimes sales promotions shift the focus away from theproduct onto secondary factors. Consumers may be attracted by

calendars, coupons, or sweepstakes instead of by product

quality, functions, and durability. In the short run this generates

consumer enthusiasm. In the long run this may have adverseeffects on a brand's image and on sales, because a product-

related differential advantage has not been developed.


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Distribution Planning and

Pricing Strategy


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Distribution Planning

Distribution planningis systematic decision makingregarding the physical movement and transfer of

ownership of a product from producer to consumer.

It includes transportation, storage, and customer

transactions.

Distribution functions are carried out through a channel of

distribution, which is comprised of all the organizations or

people involved in the process. These organizations or people are known as channel

membersormiddlemen.


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Intensity of Channel Coverage

Characteristics ExclusiveDistribution SelectiveDistribution IntensiveDistribution

Objectives Prestige image,channel control andloyalty, pricestability and high

profit margins

Moderate marketcoverage, solidimage, somechannel control and

loyalty, good salesand profits

Widespreadmarket coverage,channelacceptance, sales

volume and profitsChannelmembers Few in number,well-established

reputable storesModerate in number,well-established,better stores

Many in number,all typesof outlets

Customers Few in number,trend setters,willing to travel tostore, brand loyal

Moderate in number,brand conscious,somewhat willing totravel to store

Many in number,convenience-oriented


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Intensity of Channel Coverage

Characteristics ExclusiveDistribution SelectiveDistribution IntensiveDistribution

MarketingEmphasis

Personal selling,pleasantshoppingconditions, goodservice

Promotional mix,pleasant shoppingconditions, goodservice

Massadvertising,nearby location,items in stock

MajorDisadvantages Limited salespotential May be difficult tocarve out a niche Limited channelcontrolExamples Automobiles,

designer clothes,caviar

Furniture,

clothing, watchesGroceries,

householdproducts,magazines


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Methods of Channel Cooperation

Factor Manufacturer Action Channel Member ActionNew-productintroduction Thorough testing, adequatepromotional

supportGood shelf location andspace, enthusiasm forproduct, assistance in testmarketing

Delivery Prompt filling of orders, adherence toscheduled dates

Proper time allowed for

delivery, shipmentsimmediately checked foraccuracy

Promotion Sales force training, sales forceincentives, development of national

advertising campaign, cooperativeprograms

Attractive in-store displays,knowledgeable salespeople,

participation in cooperativeprogramsProductquality Product guarantees Proper installation andservicing of products


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Pushing and Pulling Strategy

Manufacturer

Channelmembers

Consumers

Manufacturer

Channelmembers

Consumers

Pushing Strategy Pulling Strategy


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Factors Affecting Pricing Decisions

Consumers Competitors

ChannelMembers

Government

Cost

Total Effectson Price

Decisions


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Consumers and Price Decisions

Consumers

The relationship between price andconsumer purchases and perceptions is

explained by two economic principles

the law of demand and price elasticity of

demand

The law of demandstates that consumers

usually purchase more units at a low price

than at a high price

The price elasticity of demanddefines thesensitivity of buyers to price changes in

terms of the quantities they will purchase


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ElasticDemand

Elastic demandoccurs if relatively small changes inprice result in large changes in quantity demanded

Numerically, price elasticity is greater than 1

With elastic demand, total revenue goes up when

prices are decreased and goes down when prices

rise

Inelastic demandtakes place if price changes have

little impact on quantity demanded Price elasticity is less than 1

With inelastic demand, total revenue goes up when

prices are raised and goes down when prices decline

In-elastic

Demand



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UnitaryDemand

Unitary demandexists if changes in price areexactly offset by changes in quantity demanded,

so that total sales revenue remains constant.

Price elasticity is 1



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Competitors and Price Decisions

Competitors

Another element contributing to thedegree of control a firm has over

prices is the competitive environment

within which it operates


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Market-controlled

price

environment

Characterized by a high level of com-petition, similar goods and services, and

little control over price by individual

companies

Characterized by moderate competition,

well-differentiated goods and services, andstrong control over price by individual firms

Company-

controlledpriced

environment



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Government-controlled

price

environment

Characterized by prices set by thegovernment. Examples are public utilities,

buses, taxis, and state universities



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Channel Members and Price Decisions

ChannelMembers

A wholesaler or retailer can gain strongercontrol over price by stressing its importance as

a customer to the manufacturer, refusing to

carry unprofitable product, stocking competitive

items, and developing strong dealer brands sothat consumers are loyal to the seller and not

the manufacturer

Sometimes retailers engage in selling against

the brand, whereby they stock merchandise,

place high prices on it, and then sell other

brands for lower prices. This is often done to

increase the sales of their own brands


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Channel Members and Price Decisions

ChannelMembers

To ensure channel member cooperation withprice decisions, the manufacturer needs to

consider four factors: channel member profit

margins, price guarantees, special deals, and

the impact of price increases


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Government and Price Decisions

Government

Price fixing regulations

Prohibitions against pricediscrimination among

channel members

Unfair sales acts :predatory pricing


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Cost and Price Decisions

Cost

Cost of rawmaterials and

supplies

Labor cost

Advertising Cost

Distribution Cost

PricingDecisions


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Price Strategy

Cost-based PriceStrategy

Demand-basedPrice Strategy

Competition-based Price

Strategy

PriceStrategy


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Price Strategy

Cost-based PriceStrategy

Demand-based

Price Strategy

With a cost-based price strategy, themarketer sets prices by computing

merchandise, service, and overhead

costs, and then adding the desired profit

to these figures

The marketer sets prices after

researching consumer desires and

ascertaining the range of prices

acceptable to the target market

S


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Price Strategy

Competition-based Price

Strategy

The marketer sets prices inaccordance with competitors

Prices may be below the market, at

the market, or above the market,

depending on customer loyalty,services provided, image, real or

perceived differences between

brands or stores, and the competitive

environment


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Recommended Further Readings

1. Joel Evans and Barry Berman, Marketing, Prentice Hall

2. Phillip Kotler, Marketing Management, Prentice Hall


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essential of marketing

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