marketing t2

8/3/2019 Marketing T2

1/36

Chapter 8

The new product development process

Product developmentThe development of original products, product improvements, productmodification, and new brands through the firms own product developmentefforts.

New product innovation is very expensive and very risky.

70% to 90% of new consumer products fail within 12 months.

Why do new products fail?

- Overestimation of market size

- Design problems- Incorrectly positioned, priced, or advertised- Pushed despite poor marketing research findings- Excessive development costs- Competitive reaction

Idea generation:The systematic search for new-product ideas.Using internal sources (research and development) and external sources(distributors and suppliers).

Idea screening:

Remco v/d Berg


2/36

Screening new products ideas in order to spot good ideas and drop poorones as soon as possible.Executives provide a description of the product along with estimates ofmarket size, productprice, development time and costs, manufacturing costs, and rate of

return.Evaluated against a set of company criteria for new products.

Concept development and testing:The product concept is a detailed version of the new product idea stated inmeaningful consumer terms.Aproduct idea is an idea for a product that the company can see itself offeringto the marketplaceAproduct conceptis a detailed version of the idea stated in meaningfulconsumer termsAproduct image is the way consumers perceive an actual or potential product

The testing concept is testing new products concepts with a group of targetconsumers to find out if the concepts have strong consumer appeal.

- Testing new product concepts with customers, either symbolically orphysically

- Virtual reality, mock-ups

Marketing strategyDesigning an initial marketing strategy for a new product based on the productconcept.

The marketing strategy statement consists of three parts:

1. describes the target market, the planned value proposition and the sales /market share and profit goals for the first few years.

2. outlines the products planned price, distribution, and marketing budget for thefirst year.

3. describes the planned long-run sales, profit goals and marketing mix strategy.

Business AnalysisA review of the sales, costs, and profit projections for a new product to find outwhether these factors satisfy the companys objectives.It has been carried out by sales history of similar products and estimating costsof marketing, production and R&D.

Product developmentDeveloping the product concept into a physical product in order to ensure thatthe product idea can be turned into a workable marketing offering.Designing for (Mass) Manufacturing- Must be suitable for production in large numbers at reasonable cost- Rigorous testing car engines- What do customers think a well designed product will look/behave like?

Remco v/d Berg


3/36

Test marketingThe stage of new product development in which the product and marketingprogram are tested in realistic market settings.

Why Test Market?1. Gives the marketer experience of marketing this category of product2. Provides data as to likely target market, success of promotional strategies3. Testing reduces uncertainty of full product launch

3 types of test marketing:1.Standard Market TestsSmall number of representative test cities (Newcastle)Helps to forecast national salesCompetitors can monitor these trials and sabotage them price cutting,focused promotion etc

2. Controlled Test MarketsPanels of stores nationallyControl of in store placement, below-the-line promotion ,staff trainingRecords purchases by individual consumersDifficult to get a good match between your target market and one retailer3. Simulated Test MarketsSimulated shopping environmentsProducts on shelf next to selected competitors

CommercializationIntroducing a new product into the market.When?When will the timing be right?Buying cycle ice creamWhere?National or international filmsWhat are the most attractive markets?

To Whom?Is the target market understood?How to reach and persuade this audience?Appropriate media?How?How will the marketing budget be divvied up?

Managing New product development

Customer centered new product development:New product development that focuses on finding new ways to solve customerproblems and create more customer satisfying experiences.Team-based new product development:An approach to developing new products in which various company departmentswork closely together, overlapping the steps in the product development processto save time and increase effectiveness.

Remco v/d Berg


4/36

A company can install an innovation management system to collect, review,evaluate, and manage new product ideas.

Product life-cycle strategies

The product life-cycle is the course of a products sales and profits over itslifetime.

Product Development:Begins when the company finds and develops a new product idea. During productdevelopment, sales are zero and the companys investment costs mount.

Introduction:Is a period of slow sales growth (early adopters) as the product is introduced inthe market. Profits are nonexistent in this stage because of the heavy expensesof the product introduction.Marketing objective: Create product awareness and trialProduct: Offer a basic productPrice: Use cost-plus formulaDistribution: Build selective distributionPromotion: Heavy to entice product trial

Growth:Is a period of rapid market acceptance and increasing profits.At this stage competitors come with rival products.Marketing objective: Maximize market shareProduct: Offer extension, service, warrantyPrice: Penetration strategyDistribution: Build intensive distribution

Promotion: Reduce to take advantage of demand

Remco v/d Berg


5/36

Remco v/d Berg


6/36

Maturity:Is a period of slowdown in sales growth because the product has achievedacceptance by most potential buyers. Profits level off or decline because ofincrease marketing outlays to defend the product against competition.Marketing objective: Maximize profits while defending market shareProduct: Diversify brand and modelsPrice :Match or best competitorsDistribution: Build more intensive distributionPromotion: Increase to encourage brand switching

Strategies used to manage the PLC during maturity include:

1 - Modifying the marketIncrease the consumption of the current product.- Look for new users and market segments.- Reposition the brand to appeal to larger or faster-growing segment.-

Look for ways to increase usage among present customers.2 - Modifying the productChanging characteristics such as quality, features, or style to attract new users andto inspire more usage.- Improve durability, reliability, speed, taste- Improve styling and attractiveness- Add new features- Expand usefulness, safety, convenience

3 - Modifying the marketing mix:Improving sales by changing one or more marketing mix elements.- Cut prices- Launch a better ad campaign- Move into larger market channels

Decline:Is the period when sales fall off and profit drops.Marketing objective: Reduce expenditures and milk the brandProduct: Phase out weak items.Price: Cut priceDistribution: selectivephase out unprofitable outletsPromotion: Reduce to minimal level

Remco v/d Berg


7/36

Types of PLC

Style:A basic and distinctive mode of expression.

Fashion:A currently accepted or popular style in a given field.

Fad:A temporary period of unusually high sales driven by consumers enthusiasm andimmediate product or brand popularity.

What does the PLC tell us:A predictive device; forecasting the futureA comparative device; comparison with competitors and other products withinthe same range.A Formative device; Assisting the design of future products and supportingstrategies.A manipulative device; guiding responses and management of the marketingmix.

Practical Problems of PLCMost of the times it is too difficult to:

Identify which stage of the PLC the product is in. Pinpoint when the product moves to the next stage. Identify factors that affect products movement through stages. Forecast sales level, length of each stage, and shape of PLC. Develop marketing strategy because strategy is both a cause and result of

the PLC.

Remco v/d Berg


8/36

Chapter 9

What is a pricePrice:

The amount of money charged for a product or service, or the sum of all thevalues that customers give up in order to gain he benefits of having or using aproduct or service.

Valued based pricing:

Setting price based on buyers perceptions of value rather than on sellers cost.

Good-valued pricing:

Remco v/d Berg


9/36

Offering just the right combination of quality and good service at a fair price.

Value added pricing:Attaching value added pricing features and services to differentiate a marketoffering and support higher prices, rather than cutting prices to matchcompetitors.

Costs based pricing:Setting prices based on the costs for producing, distributing, and selling theproduct plus a fair rate of return for its effort and risk.

3 types of costs:Fixed costs:Costs that do not vary with production or sales level.

Variable costs:Costs that vary directly with the level of production.

Total costs:The sum of the fixed costs for any given level of production.

3 types of costs based pricing:Cost-plus pricing:Adding a standard markup to the costs of the product.

Break even pricing:Setting price to break even on the costs of making and marketing a product.

Target profit pricing:Setting price to make a target profit.

Remco v/d Berg


10/36

Other Considerations Affecting Price Decisions

Overall Marketing Strategy- Pricing decisions must be compatible with other elements of the marketing

mix- Luxury or value brand?- Target costing : pricing that starts with an ideal selling price, then target

costs that will ensure that the price is met-

Organizational ConsiderationsWho sets prices inside the organization?

- Management- Product line managers

Competitors Strategies and Prices- Your prices in the context of theirs- Pricing affects the nature, type and intensity of competition

External Factors- Economic conditions- Taxes and quotas

The market on demandCosts set the lower limit of prices while the market and demand sets the upperlimit.Pricing in different types of markets:

- Pure competition (uniform commodity: the going price)

- Monopolistic competition (differentiation: range of prices)- Oligopolistic competition (few sellers, highly sensitive to each otherspricing, buyers switch easily)

- Pure monopoly (one seller)

Analyzing the pricedemand relationship:- Different prices result in different levels of demand, as illustrated by the

demand curve.

The price elasticity of demand refers to how responsive demand will be to achange in price.Demand may be characterized as:

- Inelastic (demand changes hardly with small price changes)- Elastic (demands changes greatly)

The demand curve:A curve that shows the number of units the market willbuy in a given time period, at different prices that mightbe charged.

Remco v/d Berg


11/36

New product pricing strategy

Market skimming pricing:Setting a high price for a new product to skim maximum revenues layer by layerfrom the segments willing to pay the high price.

Price skimming:The company makes fewer but more profitable sales.

Marketing penetration pricing:Setting a low price for a new product in order to attract a large number of buyersand a large market share.

Product mix pricing strategy

Product line pricing:Setting the price steps between products in a product line based on costdifferences and customer perceptions of the value.

Optional product pricing:The pricing of optional or accessory products along with a main product.

Captive product pricing:Setting a price for products that must be used along with a main product.

By product pricing:

Remco v/d Berg


12/36

Setting a price for by-products in order to make the main products price morecompetitive.

Product bundle pricing:Combining several products and offering the bundle at a reduced price.

Price adjustment strategies

Discount and allowance pricing:Reducing prices to reward customer responses such as paying early or promotingthe product.

Discount:A straight reduction in price on purchases under stated conditions or during astated period of time.

- Cash- Functional- Quantity- Seasonal

Allowance:Promotional money paid by manufactures to retailers in return for an agreementto feature the manufacturers products in some way.

- Trade-in-allowance- Promotional allowance

Segmented pricing:Adjusting prices to allow for differences in customers, products, time or location.

Selling a product or service at two or more prices, where the difference in pricesin not based on differences in costs.

Types are:- Customer pricing (different customers, pay different prices)- Product-form pricing (different versions of the product are priced

differently)- Location pricing (different price for different locations)- Time pricing (price by season, week or hour)

Psychological pricing:Adjusting prices for psychological effect.

A pricing approach that considers the psychology of prices and not simply theeconomics. The price is used to say something about the product.

Consumers usually perceive higherpriced products as having higher quality.Consumers use price less when they can judge the quality of a product byexamining it or recalling experiences.

Reference pricesPrices that buyers carry in their minds and refer to when they look at a givenproduct.

Remco v/d Berg


13/36

Promotional pricingTemporarily pricing products below the list price, and sometimes even belowcosts, to increase short-run sales.It takes place in several forms:

- Loss leaders (supermarkets, customers come to buy the disposableproducts but also buy other products that are more expensive).

- Special event pricing (Christmas articles in January)- Cash rebates (directly from manufacture to customer)- Low-interest financing- Longer warranties- Free maintenance- Discounts

Geographical pricing

Setting price based on the buyers Geographic location.

There are five geographical pricing strategies:1. FOB-pricing (free on board)2. Uniform-delivered pricing (opposite of FOB pricing)3. Zone pricing (falls between FOB and uniform-delivered)4. basing-point pricing (sellers selects a city and charges freight costs from thatcity)5. Freight-absorption pricing

Dynamic pricing:Adjusting prices continually to meet the characteristics and needs of individual

customers and situations.

International pricing:Adjusting prices for international markets requires consideration of many factors.

Price changes

Initiating price cuts:Cutting prices are lowering the prices to give an extra boost to sales and share.

(price war at supermarkets)

Initiating price increase:A successful price increase can greatly improve profits. (oil and gas)

Buyers reaction to price changes:Price cuts could mean that your business is not doing well and you need to sellmore.

Competitors reactions to price changes:Look out if the competitors is not trying to take a bigger market share or that thecompetitor has more products and more markets so they get their profit fromanother market and try to destroy you.

Remco v/d Berg


14/36

Public policy and pricing

Pricing Within Channel Levels- Pricefixing (seller must set prices without talking to competitors)- Predatory pricing (selling below costs with the intention of punishing a

competitor or gaining higher long run profits by putting competitors out ofbusiness)

Pricing Across Channel Levels- Price discrimination (sellers must offer the products for the same price as

competitors)- Retail price maintenance- Deceptive pricing (price that misleads customers)

- Price confusion (make it difficult for customers what price they need topay)

Remco v/d Berg


15/36

Chapter 10

Supply chains and the value delivery network

Producing and making products available to buyers requires buildingrelationships with upstream and downstream supply chain partners.Upstream: Firms that supply the raw materials, components, parts, and otherelements necessary to create a good.Downstream: Marketing channel partners that link the firm to the customer.

Value delivery networkThe network made up of the company, suppliers, distributers, and ultimatelycustomers who partner with each other to improve the performance of theentire system in delivering customer value.

Marketing or distribution channels represent the downstream side of the valuedelivery network.

What is a marketing or distribution channel?

Channel level:A layer of intermediaries that performs somework in bringing the product and its ownershipcloser to the final buyer.

Direct marketing:A marketing channel that has no intermediarylevels.

Indirect marketing channel:

Remco v/d Berg


16/36

A channel containing one or more intermediary levels.

Channel conflict:Disagreement among marketing channel members on goals and roles, who

should do what and for what rewards.Horizontal Conflict: Occurs among firms at same level of the channel (retailerto retailer)Vertical Conflict: Conflict between different levels of the same channel

Vertical marketing systems

Conventional distribution channelA channel consisting of one or more independent producers, wholesalers andretailers, each a separate business seeking to maximize its own profits for thesystem as a whole.

vertical

Vertical marketing system(VMS):A distribution channel structure in which producers, wholesalers and retailers actas a unified system. One channel members owns the others, has contracts withthem, or has so much power that they all cooperate.

Corporate VMS

Remco v/d Berg


17/36

A vertical marketing systems that combines successive stages of production anddistribution under single ownership, channel leadership. Is established throughcommon ownerships.

Contractual VMSA vertical marketing system in which independent firms at different levels ofproduction and distribution join together through contracts to obtain moreeconomies or sales impact than they could achieve alone.

Franchise organizationA contractual vertical marketing system in which a channel member, called afranchiser, link several stages in the production-distribution process.

Administered VMSA vertical marketing system that coordinates successive stages of production anddistribution, not through common ownership or contractual ties, but through thesize and power of one of the parties.

Horizontal marketing systems

A channel arrangement in which two or more companies at one level jointogether to follow a new marketing opportunity.

Multichannel distribution system

A distribution system in which a single firm sets up two or more marketingchannels to reach one or more customer segments. (also called: Hybridmarketing channels)

Trends inmarketing channels

are:Shift from Push to Pull

- Demand driven supply chain

The Customer is Gaining More Power in the Marketing Channel- Retailer consolidation

Remco v/d Berg


18/36

The Elimination of Unnecessary Inventory- JIT, smart supply chains

Focus on Core Capabilities- Outsourcing noncore activities to specialists

Ethical issues in distribution:The Dominance of the Retailer

- Slotting fee for shelf spaceGrey Markets

- Unauthorized channels Levis/Nike and TescoExclusive Dealing

- Manufacturer bans intermediaries from working with competitorsRestrictions in Supply

- Artificially limiting supply to maintain pricesFairTrading

- Small commodity producers bullied/blackmailed by large firms Nestle andcoffee producers

Disintermediation:The cutting out of marketing channel intermediaries by product or serviceproducers, or the displacement of traditional resellers by radical new types ofintermediaries.

Customers buying directly removal of- Wholesalers- Warehouses- Retailers!

Caused by: Improved Quality of Information and Communication- Databases

- Narrowcasting communications channels- Number of niches to target- One2one relationships possible?

Remco v/d Berg


19/36

Channel design decisions

Marketing channel design:Design effective marketing channels by analyzing consumer needs, settingchannel objectives, identifying major channel alternatives and evaluating them.

Setting channel objectives:

Objectives are stated in terms of targeted levels of customer service.Channel objectives are influenced by:

Cost

Nature of the company

The firms products

Marketing intermediaries

Competitors Environment

Types of intermediaries:Company sales forceManufacturers agentsIndustrial distributors

Number of marketing intermediaries:Intensive distribution: Stocking he product in as many outlets as possible.Exclusive distribution: Giving a limited number of dealers the exclusive rightto distribute the companys products in their territories.Selective distribution:The use of more than one, but fewer than all, of theintermediaries who are willing to carry the companys product.

Responsibilities of channel membersThe producer and intermediaries need to agree on the terms and responsibilitiesof each channel member.

Evaluating the major Alternatives:Economic criteriaControl issuesAdaptive criteria

Remco v/d Berg


20/36

Channel management decisions

Marketing channel management:Selecting, managing and motivating individual channel members and evaluatingtheir performance over time.

Selecting channel membersManaging and motivating channel membersEvaluating channel members

Supply chain management

Marketing logistics:Planning, implementing, and controlling the physical flow of materials, finalgoods, and related information from points to meet customer requirements at aprofit.

Nature and Importance of Marketing Logistics- The right product to the right customer in the right place at the right time

Goals of the Logistics SystemCost Vs customer service

Major Logistics Functions

WarehousingInventory management

TransportationLogistics information management

Integrated Logistics Management (teamwork)Crossfunctional teamworkLogistics partnerships

Thirdparty logistics

Remco v/d Berg


21/36

Chapter 12

The promotion mix

Promotion mix (Marketing communication mix)The specific blend of advertising, public relations, personal selling, salespromotion and direct-marketing tools that the company uses to persuasivelycommunicate customer value and build customer relationships.

Advertising:Any paid form of non personal presentation and promotion of ideas, good,services by any identified sponsor.

Sales promotion:Short-term incentives to encourage the purchase or sale of a product or service.

Personal selling:Personal presentation by the firms sales force for the purpose of making salesand building customers relationships.

Public relations:Building good relations with the companys various public by obtaining favorablepublicity, building up a good corporate image, and handling or heading offunfavorable rumors, stories and events.

Direct marketing:Direct connections with carefully targeted individual to both obtain an immediateresponse and cultivate lasting customer relationships.

Integrated marketing communications (IMC)Carefully integrating and coordinating the companys many communicationschannels to deliver a clear, consistent, and compelling message about theorganization and its products.

Remco v/d Berg


22/36

Advertising

Advertising objective:A specific communication task to be accomplished with a specific target audienceduring a specific period of time.

Informative Advertising Telling the market about a new product Describing availableservices

Suggesting new uses for a product Correcting falseimpressionsInforming the market of a price change Reducing consumers'fearsExplaining how the product works Building a companyimage

Persuasive AdvertisingBuilding brand preference Persuading customer topurchase nowEncouraging switching to your brand Persuading customer toreceive a sales callChanging customer's perception of product

attributes

Reminder AdvertisingBuilding and maintaining the customer relationship Reminding consumer

where to buy the productReminding consumer that the product keeping it in thecustomers may be needed in the near future mindduring off-season

Affordable method:Setting the promotion budget at the level management thinks the company canafford.

Remco v/d Berg


23/36

Percentage of sales method:Setting the promotion budget at a certain percentage of current or forecastedsales or as a percentage of the unit sales price.

Competitive-parity method:Setting the promotion budget to match competitors outlays.

Objective and task method:Developing the promotion budget by:1. Defining specific objectives.2. Determining the tasks that must be performed to achieve these objectives3. Estimating the costs of performing these tasks

The sum of these costs is the proposed promotion budget.

Advertising strategy:The strategy by which the company accomplishes its advertising objectives. It

consist of two major elements: creating advertising messages and selectingadvertising media.

Madison & Vine:A term that has come to represent the merging of advertising and entertainmentin an effort to break through the clutter and create new avenues for reachingconsumers with more engaging messages.

Creative concept:The compelling big idea that will bring he advertising message strategy to lifein a distinctive and memorable way.

Execution style:The approach, style, tone, words, and format used for executing an advertisingmessage.

Advertising media:The vehicles through which advertising messages are delivered to their intendedaudiences.

Remco v/d Berg


24/36

Evaluating advertising effectiveness.

Measuring/TestingGauging the success of the adverts

PreTestingTakes place before the campaign is runMay involve mock adverts with focus groupsLimiting access to the advert cinemas

PostTestingStatistical analysis of sales dataBrand recognition/recall

Advertising ROI the Holy GrailHalf the money I spend on advertising is wasted; the trouble is, I don't knowwhich half John Wanamaker, 1908

Return on advertising investment:The net return on advertising investment divided by the costs of advertisinginvestment.

Advertising agency:A marketing services firm that assists companies in planning, preparing,implementing, and evaluating all or portions of their advertising programs.

Remco v/d Berg


25/36

Public relations

Building good relations with the firms various publics by obtaining favorablepublicity, building up a good corporate image, and handling or heading offunfavorable rumors, stories and events.

Press relations or press agencyProduct publicityPublic affairsLobbyingInvestor relationsDevelopment

How does PR Work?- Low level persistence- News stories and events seem more real than adverts- Can work with those who avoid adverts and sales people- Can use media otherwise prohibited- Borrows credibility of third party

Remco v/d Berg


26/36

Chapter 13

Personal selling

Personal selling:Personal presentation by the firms sales force for the purpose of making salesand building customer relationships.

Sales person:An individual representing a company to customers by performing one or more ofthe following activities:

- Prospecting- Communicating- Selling- Servicing- Information gathering- Relationship building

Order taker: Department store clerk.Order getter: Demands creative selling and relationship building.

Sales force management

Sales force management:The analysis, planning, implementation and control of sales force activities. Itincludes designing sales force strategy and structure and recruiting, selecting,training, supervising, compensating and evaluating the firms salespeople.

Territorial sales force structure:A sales force organization that assigns each salesperson to an exclusivegeographic territory in which that salesperson sells the companys full line.

The selling process is transaction oriented.

Remco v/d Berg


27/36

The purpose of the selling process is to help salespeople to close a specific salewith a customer.

Building profitable relationships is a key goal for most firms.Large customers favor suppliers who can:

Deliver a coordinated set of products and services.Work closely with customer teams to improve products and processes.

Building relationships requires listening to customers, understanding their needs,and carefully coordinating the whole firms efforts to create value.

Product sales force structure:A sales force organization under which salespeople specialize in selling only aportion of the companys products or lines.

Customer sales force structure:A sales force organization under which salespeople specialize in selling only to

certain customers or industries.

Outside sales force (field sales force)Outside salespeople who travel to call on customers in the field.

Inside sales forceInside salespeople who conduct business from their offices by telephone, theinternet or visits from prospective buyers.

Remco v/d Berg


28/36

The personal selling process

Selling process:The steps that the salesperson follows when selling (which include prospectingand qualifying), pre- approach, approach, presentation and demonstration,handling objections, closing and follow-up.

Sales promotion

Sales promotion:Short-term incentives to encourage the purchase or sale of a product or service.

Can be targeted toward:- Final buyers (consumer promotions)- Retailers and wholesalers (trade promotions)- Business customers (business promotions)- Members of the sales force (sales force promotions)

Several factors have contributed to the rapid growth of sales promotion:- Product managers are facing more pressure to increase their current

sales.- Companies face more competition from less differentiated brands.- Advertising efficiency has declined.- Consumers have become more deal oriented.

Consumer promotion:

Remco v/d Berg


29/36

Sales promotion tools used to boost short-term customer buying and involvementor to enhance long-term customer relationships.

Event marketing:Creating a brand-marketing event or serving as a sole or participating sponsor ofevents created by others.

Trade promotions:Sales promotion tools used to persuade resellers to carry a brand, give it shelfspace, promote it in advertising and push it to consumers.

- Discounts- Allowance- Free goods- Push money- Specialty advertising items

Business promotions:

Sales promotions tools used to generate business leads, stimulate purchases,reward customers, and motivate salespeople.Conventions, trade shows, sales contests, and many of the same tools used forconsumer or tradepromotions.

Developing the sales promotion program:- Decide on the size of the incentive- Set conditions for participation- Decide how to promote and distribute the promotion program- Decide the length of the program- Evaluate the program

Remco v/d Berg


30/36

Chapter 14

Direct marketing:Direct connections with carefully targeted individual consumers to both obtain animmediate response and cultivate lasting customer relationships.

- Features oneonone communication in which offers are tailored to needsof narrowly defined segments.

- Usually seeks a direct, immediate, and measurable consumer response.

The new directmarketing model:- Direct marketing has undergone a dramatic transformation.- Most firms use direct marketing as a supplemental medium.- For many companies, direct marketing constitutes a new and complete

model for doing business.- Some firms employ the direct model as their only approach.

Growth of direct marketing:10% of U. S. economy ($ 1.94 trillion) is generated by direct marketing sales.Direct marketing sales are expected to grow at 6.3% annually through 2011.Direct marketing continues to become more Web oriented.Internet marketing accounts for 18% of direct marketing sales and is expected togrow by almost 16% in the next 5 years.

Benefits to buyers of direct marketing:- Convenient

- Easy to use- Private- Ready access to products- Ready access to comparative information- Immediate and interactive

Benefits to sellers of direct marketing:- Powerful tool for building customer relationships.

Can target small groups or individualsCan tailor offers to individual needs

- Offers a lowcost, speedy way to reach markets.- Offers greater flexibility.

- Gives access to buyers they could not reach through other channels.

Customer database:An organized collection of comprehensive data about individual customers orprospects, including geographic, demographic, psychographic, and behavioraldata.

Remco v/d Berg


31/36

Forms of Direct Marketing

Directmail marketing: Involves sending an offer, announcement, reminder, orother item to a person at a particular address.Largest direct marketing medium.Wellsuited to onetoone communication:

- Permits high targetmarket selectivity- Can be personalized, and is flexible- Easy to measure results- Although CPM is higher than mass media, direct mail yields better

prospectsConstantly developing new methods and approaches.

Catalog marketing: Direct marketing through print, video, or digital catalogsthat are mailed to select customers, made available in stores, or presentedonline.

Catalog marketing trends:

More and more catalogs are going digital:- Minimizes costs and space is unlimited- Allows realtime merchandising

Print catalogs are still the primary medium.- Can create an emotional connection to the consumer

Expected catalog sales in 2011 = $185 billion.

Remco v/d Berg


32/36

Telephone marketing: Used in both consumer and B2B markets.Marketers use outbound and inbound calls.Outbound: Sell directly to consumer

Inbound: Toll free ordering or order faxing

Donotcall legislation has impacted the telemarketing industry.Many outbound solicitations have shifted to other forms of direct marketing.

Directresponse TV marketing:Directresponse television advertising (DRTV):

- TV spots that are 60 or 120 seconds long.Infomercials:

- A 30 minute or longer advertising program for a single product.Home shopping channels:

- Entire cable channels dedicated to selling multiple brands, items, and

services.

Kiosk marketing:Information and ordering machines generally found in stores, airports, and otherlocations.

E.g., instore Kodak kiosks allow customers to transfer pictures from digitalstorage devices, edit them, and produce highquality color prints.

New digital direct marketing technologies:- Mobile phone marketing-

Podcasts and vodcasts- Interactive TV (ITV)

Online marketing

Online marketing:Company efforts to market products and services and build customerrelationships over the internet.

Internet:

A vast public web of computer networks that connects users of all types allaround the world to each other and to an amazingly large informationrepository.

Click-only companies:The so-called dot-coms, which operate only online without any brick-and-mortarmarket presence.

Click and mortar companies:Traditional brick-and-mortar companies that have added online marketing totheir operations.

Trends:

Remco v/d Berg


33/36

Almost all traditional companies have set up their own online sales andcommunication presence.Many clickandmortar firms are having more online success than their clickonlycompetitors.

Remco v/d Berg


34/36

Online marketing domains:Business to consumer (B2C) (bol.com)Business to business (B2B) (makro / vikking direct)Consumer to consumer (C2C) (Marktplaats, Ebay)Consumer to business (C2B) (suggestions and questions)

Conducting online marketing:

- Creating a Web site- Placing ads and promotions online- Creating or participating in online social networks- Using email

Remco v/d Berg


35/36

Forms of online advertising:- Banner ads

- Interstitials (Meaning in between, an advertisement that appears in aseparate browser window while you wait for a Web page to load)- Pop up or pop under ads- Rich media ads (incorporate animation, video, sound, and interactivity)- Searchrelated ads (contextual advertising)

Forms of online promotion:- Content sponsorships (sponsoring special content)- Alliances and affiliate programs (work with firms to promote each other)- Viral marketing (Internet version of wordof mouth)

Creating or participating in online social networks (also called web communities).

E.g., MySpace, Facebook, YouTube, Hyves.

Marketers can participate in existing online communities or setup their own.- Results are hard to measure- Forum is user controlled; marketers must be careful not to intrude

Using email:Permissionbased email marketing is key.

Irritation, unfairness, deception, and fraud:- Direct marketing excesses may offend consumers.

Remco v/d Berg


36/36

- Direct marketing has been accused of taking unfair advantage of impulsiveor less sophisticated buyers.

- Internet fraud and phishing are growing concerns.- Internet shoppers have security concerns, and are afraid of contracting

computer malware.

Invasion of privacy: Do marketers know TOO much about consumers?

marketing t2

Documents