•

In our last lecture # 16 – we covered:32. The Marketing Mix: Product and PriceLecture 17:33. The Marketing Mix: Promotion34. The Marketing Mix: Distribution

In our last lecture # 16 – we covered:32. The Marketing Mix: Product and PriceLecture 17:33. The Marketing Mix: Promotion34. The Marketing Mix: Distribution

Promotional MixPromotional Mix

Promotion LAP 1Promotion LAP 1

ObjectivesObjectives

A.A. Describe the elements of the Describe the elements of the promotional mix.promotional mix.

B.B. Explain factors affecting the selection Explain factors affecting the selection of a promotional mix.of a promotional mix.

Objective AObjective A

Describe the elements of the Describe the elements of the promotional mix.promotional mix.

Purposes of PromotionPurposes of PromotionTo tell consumers about a company’s …To tell consumers about a company’s …

GoodsGoods ServicesServices ImagesImages

IdeasIdeas

Purposes of PromotionPurposes of Promotion

To persuade consumers to buyTo persuade consumers to buy

Promotion’s Recipe for Success:

Mix various communication

activities together and serve to potential

customers until desired outcome is achieved.

The Top 5 The Top 5 Airlines!Airlines!

Traveler Magazine

FlynnFlynnThe bikesThe bikesthe prosthe prosuse.use.

25% OffCoupon

• AdvertisingAdvertising

• Personal sellingPersonal selling

• PublicityPublicity

• Sales promotionSales promotion

Communication Techniques

The Combination, or Blend, of Marketing The Combination, or Blend, of Marketing Communication Channels Is Called the...Communication Channels Is Called the...

AdvertisingAdvertisingAny paid form of nonpersonal presentation of ideas, Any paid form of nonpersonal presentation of ideas,

images, goods, or servicesimages, goods, or services

The most visible element of the promotional mixThe most visible element of the promotional mix

The New BarchettaThe New Barchetta

• Actual cost of Actual cost of advertisement is quite advertisement is quite high.high.

• Since many people receive Since many people receive the message, the per the message, the per contact cost is very low.contact cost is very low.

GoodsGoodsServicesServicesImagesImagesIdeasIdeas

The Vet for Your Pet

At Techco, we’re

friendly to our

customers and the

environment.

At Techco, we’re

friendly to our

customers and the

environment.

Say No to Drugs.Diamonds from Desmond’s Jewelers are a girl’s best friend.

Diamonds from Desmond’s Jewelers are a girl’s best friend.

AdvertisingAdvertising

Messages can be delivered by:Messages can be delivered by:

• TelevisionTelevision• RadioRadio• NewspapersNewspapers• MagazinesMagazines• Direct mailDirect mail• Outdoor advertisementsOutdoor advertisements• DirectoriesDirectories• The InternetThe Internet

Personal SellingPersonal Selling

Determines client needs/wants and responds through Determines client needs/wants and responds through planned, personalized communication that influences planned, personalized communication that influences purchase decisions and enhances future business purchase decisions and enhances future business opportunitiesopportunities

Are you planningon replacing all

of your computersat once?

My budget won’tallow me to replace

them all at once,but I want them to

be compatible.

You might wantto consider leasing

computers. You canget free service

and upgrade to anewer model whenever

you want!

Selling Advantages

• Immediate feedbackImmediate feedback

• FlexibilityFlexibility

I like the soundof this stereo,

but I think it’s alittle large for

my dorm room.

We do carry abookshelf model

with similarsound quality.

Selling Disadvantage

On a per contact basis, On a per contact basis, selling is the most expensive selling is the most expensive

form of promotion.form of promotion.

PublicityPublicity

• Any nonpersonal presentation of ideas, goods, or Any nonpersonal presentation of ideas, goods, or services that is not paid for by the company or services that is not paid for by the company or individual which benefits from or is harmed by itindividual which benefits from or is harmed by it

• Many consumers pay close attention to publicity.Many consumers pay close attention to publicity.

– Feel publicity has more credibility because it is not a Feel publicity has more credibility because it is not a commercial messagecommercial message

– View publicity as newsView publicity as news

Example: Mention of a company’s charitable activities Example: Mention of a company’s charitable activities in print or broadcast mediain print or broadcast media

Ways the Internet Can Be Used Ways the Internet Can Be Used as a Source of Publicityas a Source of Publicity

A company web site can be used to obtain and display A company web site can be used to obtain and display positive feedback.positive feedback.

“Tae-Bo has really changed my life. I’ve lost weight, toned-up, and feel better than ever.”

-Susie Wells, CA

Ways the Internet Can Be Used Ways the Internet Can Be Used as a Source of Publicityas a Source of Publicity

A business’s goods, services, or web site might be mentioned in an A business’s goods, services, or web site might be mentioned in an Internet newsgroup.Internet newsgroup.

OnlineNews.comOnlineNews.com

Car shopping on the web

Buying a car on the web just got easier! Autobytel.com will help you get the financing, pick out the model, color and extras. Then they provide a quote from a local dealer. All at the touch of a keypad.

Ways the Internet Can Be Used Ways the Internet Can Be Used as a Source of Publicityas a Source of Publicity

A company might agree to provide a link to another business’s web A company might agree to provide a link to another business’s web site in exchange for the same consideration.site in exchange for the same consideration.

LINK TO ACME.COMLINK TO ACME.COMLINK TO ACME.COMLINK TO ACME.COM

Sales PromotionSales Promotion • Promotional activities other than advertising, personal Promotional activities other than advertising, personal

selling, and publicity which stimulate purchasesselling, and publicity which stimulate purchases

• Sales promotion activities include:Sales promotion activities include:

Visual merchandising or displaysVisual merchandising or displaysCouponsCouponsProduct demonstrationsProduct demonstrationsInstant rebatesInstant rebatesFree samplesFree samplesFashion showsFashion showsContestsContestsNovelty itemsNovelty itemsTrade showsTrade showsExhibitsExhibits

Importance Importance of the of the

Promotional Promotional MixMix

• Plays a key role in Plays a key role in obtaining and keeping obtaining and keeping customerscustomers

• Enables businesses to Enables businesses to communicate effectively communicate effectively with customerswith customers

• Informs consumers about Informs consumers about goods/services and goods/services and persuades them to buypersuades them to buy

Objective BObjective B

Explain factors affecting the Explain factors affecting the selection of a promotional mix.selection of a promotional mix.

Marketers Try To Create theMarketers Try To Create theIdeal Blend of Promotional Ideal Blend of Promotional

Activities for Their Businesses.Activities for Their Businesses.

Must decide which methods willMust decide which methods willbest reach potential customers and best reach potential customers and

communicate desired messagecommunicate desired message

AdvertisingAdvertising

PersonalPersonalsellingselling

PublicityPublicity

Sales Sales promotionpromotion

Hard to determine effectiveness of the Hard to determine effectiveness of the different promotional methodsdifferent promotional methods

No magic formula that No magic formula that marketers use to help marketers use to help

design promotional mixdesign promotional mix

Factors Affecting the Selection of a Factors Affecting the Selection of a Promotional MixPromotional Mix

Product’s target Product’s target marketmarket

Good, service, Good, service, image, or ideaimage, or ideaDistribution Distribution

channelschannelsProduct’s Product’s companycompany

Must be carefully Must be carefully analyzed before analyzed before marketers decide when marketers decide when and where to invest and where to invest promotional fundspromotional funds

Good, Service, Image, or IdeaGood, Service, Image, or Idea

Convenience goodsConvenience goods Shopping goodsShopping goods

Specialty goodsSpecialty goods

• Type of product

Good, Service, Image, or IdeaGood, Service, Image, or Idea

Product natureProduct nature

Products which are Products which are high-tech, require high-tech, require demonstration, are demonstration, are expensive, or require expensive, or require installation should be installation should be promoted through promoted through personal selling.personal selling.This computer is

perfect for you. Ithas all the softwarepre-installed and a left-handed mouse!

Inexpensive and Inexpensive and self-service products self-service products can rely on advertising can rely on advertising and sales promotion.and sales promotion.

SALE!SALE! 10% OFF

on all small appliances

HARRY’SHARDWAR

E

IntroductoryIntroductory

GrowthGrowth

MaturityMaturity

DecliningDeclining

Good, Service, Image, or IdeaGood, Service, Image, or Idea

Stage of life cycleStage of life cycle

When you are When you are on-the-go…on-the-go…

…it’s Breakfast-To-Go

Each pocket provides you a delicious breakfast in just two minutes!

New and New and Improved!Improved!

Product’s Target MarketProduct’s Target Market

vs.ConsumerConsumerMarketMarket

IndustrialIndustrialMarketMarket

Type of ConsumerType of Consumer

AdvertisingAdvertising

Sales PromotionSales Promotion

PublicityPublicity

Personal SellingPersonal Selling

Number of ConsumersNumber of Consumers

Few Few

ConsumersConsumers

ManyManyConsumersConsumers

Geographical LocationGeographical Location

Close Close TogetherTogether

Spread Over Spread Over a a

Wide AreaWide Area

Distribution ChannelDistribution Channel

The promotional mix selection is affected by the

path that a product takes.

INTERMEDIARY BLVD. DIRECT AVE.

Requires personal Requires personal sellingselling

Requires personal Requires personal selling and selling and advertisingadvertising

Businesses often rely on previoususe of promotional methods.

Product’s Company

1960 20001980

Historical Perspective

1970 1990

Think small. Less flower. More power.

Product’s CompanyProduct’s Company

Available FundsAvailable Funds

Wal-Mart started as one small Wal-Mart started as one small store in Arkansas. In Wal-Mart’s store in Arkansas. In Wal-Mart’s early years, local newspaper early years, local newspaper advertising and personal selling advertising and personal selling were all that the small company were all that the small company could afford.could afford.

Today, the Wal-Mart corporation Today, the Wal-Mart corporation has increased its promotional mix has increased its promotional mix to include television, radio, to include television, radio, newspapers, special sales bulletins, newspapers, special sales bulletins, and a Wal-Mart web site in order and a Wal-Mart web site in order to promote its national network.to promote its national network.

Example:Example:

Product’s CompanyProduct’s Company

Tony’s Pizza

Kids eat free!

Ange’s Pizza

Free kids’ meals!

Competing businesses use similar promotional Competing businesses use similar promotional mixes and tend to follow the leader.mixes and tend to follow the leader.

CompetitionCompetition

Promotional Mix

Chapter 17.1

What is promotion?

• Any form of communication a business or organization uses to inform, persuade, or remind people about its products.

The Promotional Mix is a combination of the different

types of promotion.

Two types of promotion

• Product Promotion– Type of promotion that a business uses to

convince potential customers to buy products from them and not their competitors.

• Institutional Promotion– Type of promotion that a business uses to

create a favorable image for itself.

Four basic types of promotion….

• Personal selling

• Advertising

• Sales promotion

• Public relations

What is the largest form of promotion?

• Personal Selling!– This type of

promotion requires contact with potential buyers

Advertising….

• Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.

Advertise

here!

• All marketing activities, other than personal selling, advertising, and public relations is called….

Sales Promotion

Public Relations

• Any activity designed to create a favorable image toward a business, its products or its policies.

• A specific kind of public relations that involves placing positive and newsworthy information about a business, its products, or its policies in the media is called…..

Publicity

Publicity

• Advantage…

– It is free!

• Disadvantage…..

– Its contents cannot be controlled by the business

Principal function of publicity…

• Building an image

What do they do?

• Advertising– Creates awareness of a business’s product

• Public Relations– Creates a favorable image for the business itself

• Sales Promotion– Efforts stimulate sales

• Personal Selling– Builds on all of the other efforts by helping customers

complete the sale

Marketing Department• Establishes a promotion budget• Allocates resources• Coordinates the campaign• Determines the right promotional mix

for the company

Push Policy

• Promotion policy used only with the next partner in the distribution channel.

Manufacturers PUSH

a product to the retailers for sale….

Pull Policy

• Promotion policy designed to create consumer interest

When a product is consumer driven or PUSHED into a store….

DistributionManagement

Prepared by:

Ma. Anna Corina G. KagaoanInstructor

College of Business and Accountancy

ObjectivesThis chapter will enable you:

• To understand the role of distribution management in the marketing mix;

• To understand why distribution channels are required at all;

• To study how distribution channels add value to the marketing mix; and

• To get a brief introduction to distribution channel strategy.

Preview• Marketing – identifying customer’s needs and satisfying

them while generating profit.• Marketer analyzes the market, segments it, selects a

target market and positions his products to offer differential advantage to the customers.

• Marketers satisfy the needs of the target market in a better way (in other words they position the products to offer differential advantage) through a proper mix of Product, Price, Promotion and Place – called Marketing mix or 4Ps of Marketing.

Preview• Product – A Good, Service or an Idea that is provided

to satisfy the need and all the activities required to plan the product.

• Price – Money (or something of utility) required to exchange the product .

• Promotion – All activities required to inform and persuade the customers.

• Place – All activities required to make the product available where they are needed.

Distribution Management• Distribution management deals with the Place part of

the marketing mix.• One major aspect of the distribution management

process is the role and relevance of distribution channels in helping the “place” aspect of the marketing mix, which provides place, time and possession utility to the customer.

Distribution ManagementDistribution management ensures that:

• a product is made available to a consumer at a retail shop close to his residence, thus, providing the “place” utility;

• a product is available at the retail counter at a chosen time of the consumer, thus, providing the “time” quality;

• a consumer can pay for a product and take it home whereby he becomes the owner of it, thus, the “possession” utility has also been provided for.

Major Role of an Intermediary

Place Utility

TimeUtility

Possession

UtilityFig. 1. Major Role of an Intermediary

Distribution Management Definition

• Management of all activities which facilitates movement and co-ordination of supply and demand in creation of time and place utility in goods.

• Art and science of determining requirements, acquiring them, distributing them and finally maintaining them in an operationally ready condition for their entire lives.

• Broad range of activities concerned with the efficient movement of finished products from the end of the production line to the consumer and it also includes the movement of raw materials from the source of supply to the beginning of the production line.

Need for Distribution Management

A company could reach the ultimate consumer by several routes:

•Direct from the company if it runs a house-to-house campaign;

•Direct from the company if it has put up a stall in a consumer product exhibition to promote its products;

Need for Need for Distribution ManagementDistribution Management

• The company deliver the product in bulk to a Carrying and Forwarding Agent (C&FA) or a distribution center, which breaks bulk and gives it to distributors. The distributor sells convenient lot sizes to the retailers from where the consumer buys it; and

• The distributor could sell the product to a wholesaler who then sells it to the retailer from where the consumer buys it.

Need for Need for Distribution ManagementDistribution Management

• The channels or set of intermediaries help the process of “exchange” of the product or service at a certain margin to themselves.

• Intermediaries help in the smooth flow of goods and services.

• Intervention is necessary as there is a difference between the assortment of goods and services generated by the producer and the assortment demanded by the consumer. Consumers usually desire only a limited quantity of a wide variety of goods.

Need for Need for Distribution ManagementDistribution Management

• Distribution channels are required as the companies by themselves cannot directly reach and sell the products to their millions of consumers.

• Marketing channel decisions play an important role of long-term importance of ensuring the presence and success of a company in the marketplace.

• Presence ensures that the product gets wide distribution and it reaches out to the maximum number of customers and prospects.

Functions of Intermediaries

• To accumulate the right kind of goods, aggregating and sorting to meet consumer needs at the point of purchase;

• To believe in routine and simplified transactions and work with a large number of products (at the wholesaler and retailer level), so that distribution costs could get minimized;

• To provide information both to the sellers and the buyers to help them manage their business better.

Functions of Intermediaries

• To buy a large variety of goods and can compare costs and prices and make the right recommendations to their customers;

• To be aware of the environment in which they operate and hence isolate the companies from the direct impact of these local conditions; and

• To reduce the number of touch points. The company will not be able to meet the demands of thousands of its consumers directly and hence needs intermediation.

Role of an Intermediary

Intermediary

Large number of Consumers

Company 2Company 1 Company 3

Fig. 2. Role of an Intermediary

Are Intermediaries Necessary?• Not always, as sometimes the commitment of the intermediary

and his need for an excellent distribution effort may not be of the same intensity as that of the company.

• In case of technically complicated products, the company may want to handle the distribution themselves.

• Cost is a major consideration for a company wanting to handle the distribution function by itself.

• Distribution is a specialized function best left to experts—wholesalers and retailers.

• Cost efficiency and effectiveness of indirect distribution is higher than in the case of direct distribution.

A Combination Works BetterMost companies use a combination of direct and indirect

distribution. Choice of combination and contribution of each set is determined by:

•Nature of the company and its products;•Nature and dispersal of company customers;•Business goals of the company;•Market expectation of credit;•Company’s capabilities and strength;•Speed with which a company wants to increase its sales and

coverage of the market;•Nature of competition and how it operates; and•Company’s market shares. Small companies may not get the

interest of channel members.

Discrepancy and Distribution Channels

Discrepancy Character

Spatial Temporal

Break bulk

Assortment

Financial support

Helps reduce the distance between the producer and the consumer

Helps speed up in the meeting the requirement of the consumer

Reduces the large quantities into acceptable lot sizes for the consumer

Provides variety to the consumer to choose from

Helps fund the activities of reaching the product to the consumer

Table 1. Role of Distribution Channels

How Distribution Adds Value• The distribution function using the network of the channel

partners add value to the selling function by providing time, place, and possession utility to the consumer.

• For providing the possession utility, the channels simplify the transactions by maintaining contacts with their upstream partners (C&FA or company)—closer to the producer.

• Downstream channels involved are the distributors, wholesalers and retailers—closer to the consumers.

• Downstream channel partners do transactions like order taking, order communication, order processing, delivery of goods, and collection of payments.

• Service associated with products are done by channels.

Distribution Channel Strategy

Fig. 3. Evolution of a Distribution Strategy

Corporate Strategy

Marketing Strategy

Distribution Strategy

Distribution Channel Strategy

• Corporate Strategy. Spells out the overall strategy and direction.

• Marketing Strategy. Part of the overall business plan of the company and corporate strategy. Outlines how the overall strategy is achieved using company products and its distribution network.

• Distribution Strategy. Forms a critical part of the marketing strategy which cannot be frequently changed as it requires building a network based on sound, and long-term relationships. Part of it involves organizing and managing the distribution function.

Distribution Strategy Factors• Defining customer service levels. What the customer is most

interested in and hence requires extra care in defining.• Defining the distribution objectives to achieve these service levels.• Outlining the steps or activities required to achieve the distribution

channel objectives.• Deciding on the structure of the network to implement these

activities to achieve the distribution objectives.• Clearly defines policy and procedure for the network to carry out its

daily activities to achieve the objectives.• Stating the key performance indicators (KPIs). To check if the

strategy is working well.• Understanding the critical success factors (CSFs) to make the

distribution strategy effective.

Customer Service Levels• Nature of the industry in which the company is operating, its

products and services, its market share and the nature of competition help define the level of customer service the firm can promise its customers.

• Affordability also dictates service level.

• Companies could even think of categorizing their customer into A, B and C (Pareto’s Law) to decide different levels of service.

• Extent of competition could also decide level of service to be provided—number of distributors servicing the market, frequency of visits to the customers both by the channel partners and the company sales personnel, ready availability of stocks to service the market, etc.

Setting Distribution Objectives

• Distribution objectives clearly spell out what is expected out of the network in ensuring the desired level of customer service to meet the expectations of its customers.

• Expectations could only be in terms of the time, place, and possession utilities as well as the period of credit which the company may be willing to offer its customers.

Set of Activities• Defines the manner in which the company and its channel partners go

about taking into action the customer service objectives.

• Performed by the company sales personnel and channel partners. Some steps could be:

Periodic sales forecasts by geography. Arranging for dispatch of the products from the plants or C&Fas to a

point closest to the market. Developing beat plans for market coverage. Developing journey and beat plans for service engineers. Market visits to sell products. Collection of sales proceeds. Carrying out promotional activities. Calling regularly on A category customers to build long-term

relationships.

The Distribution Organization• Determines who will do what. Helps define structure to support the

entire strategy. Decision points are:

Extent of in-company (own sales team) and outsourcing (use of channel partners). Inventory planning, dispatches, credit management and collection are done by the salespeople and logistics of the company.

Affordability factors—own sales team functioning may mean higher fixed costs whereas a bigger outsourced network may mean higher variable costs if the volume goes up. Channel partners are compensated based on percentage of sales value. It indirectly affects the margins of the company.

The Distribution Organization• More decision points:

Selecting the channel partners including C&Fas and distributors, stockists or agents. Channel that cannot easily be changed.

Setting clear objectives for each channel partners and systems to monitor activities and measure performance.

Ensuring the correct and agreed level of financial investments by channel partners in the company business—size of warehouse distributors should have, number of vans to cover market, number of sales and back office people he has to employ, beat plans, and amount of credit he is expected to give in the market.

Policy and Procedure• Company sales personnel and channel partners should understand

what is expected of them and discharge roles and responsibilities faithfully.

• Operating manuals are very important to clearly define policy and implementation guidelines. It is an important tool to manage the distribution organization. It may also include:

System for redressal of complaints from channel partners; System for settling disputes; Additional payments or incentives to channel members—difficult

territories or for covering rural areas; and Coverage of institutional business and service levels to be extended.

Key Performance Indicators (KPIs)• Agreed on measurement criteria with channel partners. Some popular

KPIs include:Consistent achievement of targets by product groups, period, and

territories;Achievement of market shares;Achievement of profitability;Zero complaints from customers;No stock returns;Ability to handle emergencies and sudden spurs in demand;Balanced sales achievements rather than period sales skews;Market coverage with ready stocks;Excellent management of accounts receivables;Minimize sales losses on account of stock-outs; and Minimize damage to products.

Critical Success Factors (CSFs)• Top management should be involved in formulating of strategies.

Some CSFs are: Clear, transparent and unambiguous policy and procedure; Serious commitment of the channel partners; Fair dealing of the company with all its partners; Clearly defined customer service policy; High levels of integrity to be demonstrated by channel members; Equitable distribution in case of shortage of product; and Compensation to channel partners on special promotional activity

should be prompt and not delayed.

Scope of Distribution ManagementScope of Distribution Management

Channels of Channels of

DistributionDistribution

RetailingRetailing

Wholesaling and Wholesaling and Physical DistributionPhysical Distribution

Global Marketing, R & DGlobal Marketing, R & D

Global Marketing and R&D

Among different countries, why and how:

– It makes sense to vary the attributes of products

– Distribution strategy may vary

– Advertising and promotion strategies may vary

– Pricing strategy may vary

How globalization affects new-product

development

“A powerful force drives the world

toward a converging commonality,

and that force is technology”

(Prof. Ted Levitt, HBS)

Levitt, 1983

Globalization of Markets?Levitt’s “Converging commonality” has

not happened universallyConsumer product tastes converged less

than industrial product specificationsMedia, communications means have

– made consumers world-wide more aware of their mutual preferences

– have contributed to creation of world brands– have caused market segments to emerge

across some national markets--inter-market segments

Market Segmentation

The process of identifying groups of consumers

whose purchasing behavior is unique in important

ways

– Is based on demography, geography, social-cultural

factors, psychological factors

– Allows firms to adjust marketing mix to meet the needs of

separate market segments

Marketing mix variables:

product-price-place (distribution)-promotion

Market Segmentation Across National Markets

Standardization: companies may – Offer same products

– Adjust balance of marketing mix to market segments with similar needs across countries

Adaptation: companies may– Offer different products

– Adjust balance of marketing mix to market segments with differing needs across countries

Marketing Strategy Standardization (Global Integration Pressures)

– Efficiencies through integrated R&D, production, marketing

– Control implications

Adaptation (Local Responsiveness Pressures)– Buyer behavior (cultural, economic influence,

brand perception--country of origin idea)– Laws, regulations– Local environment needs– Responsiveness to local condition shifts

Implications on marketing mix

International Marketing Mix: ProductProduct: a bundle of attributes

– Hamburger: meat type, taste, texture, size– Automobile: power, design, quality,

performance, comfort, size/capacityAttributes need to be adapted to a greater or

lesser extent to satisfy– Consumer preferences/tastes due to culture– Economic development levels affect consumer

behavior– National product/technical standards state

mandated

Optimal channel a company chooses to deliver the product

The most locally responsive element of marketing mix because distribution channels vary dramatically across countries– Retail system: concentrated-

fragmented– Channel length: long, short– Channel exclusivity

International Marketing Mix: Place

International Marketing Mix: Promotion

How firm communicates the product attributes / benefits to customers

Barriers to international communication– Cultural barriers– Source effects (country of origin effects)– Noise levels

Standardized advertising strategy possible; standardized advertising strategy execution more difficult (culture, laws)

International Marketing Mix: Promotion

Push vs pull strategies– Push strategy: personal selling emphasis

• Industrial products; complex new products• Short distribution channels• Few print or electronic media

– Pull strategy: mass media advertising emphasis

• Consumer goods• Long distribution channels• Marketing message may be carried via print /

electronic media

International Marketing Mix: Price

Price discrimination: demand elasticityStrategic pricing

– Predatory (quick share-of-market focus): • lower prices to drive competitors out, then raise prices

– Multipoint pricing: • pricing in one market may have an impact in another

market; subsidize low pricing in one market from profits in another

– Experience curve: • use aggressive pricing to build volume and move firm

down experience curve (lower marginal costs)

Regulatory issues: • antidumping, monopoly restriction

New Product DevelopmentNew product development

– High risk / high return– Technological innovation– Creative destruction

Location of R&D– Disperse R&D to trend/technology leading

markets• High investment on basic and applied research• Strong underlying demand; affluent consumers• Intense competition

Integrate R&D, marketing and ProductionEnsure:

– Product development driven by customer needs– New products can be manufactured

efficiently/effectively– Time to market is minimized

Plan clearly: goals, milestones, budgets

New Product Development

Use cross-functional, multinationally diverse teams Span: initial concept development to market

introduction Team composition critical

– Assign heavyweight project manager• High status in organization; high power and authority• Dedicated to fullest possible extent to project

– Team should have representative from each function Physical co-location

– When appropriate?– Build team culture– Communication and conflict resolution processes

New Product Development

Strategic Analysis

Why do organizations decide to enter international business? Passive entry:

Follow customers overseasRespond to enquiries from overseasCompetition is in overseas marketsSeek profitable growthSell capacity “as is”

Strategic Analysis

Eventually one or more of key distributors become a candidate for acquisition (FDI)

Foreign regional development organizations actively recruit FDI

Competitive pressures force examination of local assembly or production nearer to key international markets

Major international customers demand local support

Strategic Analysis

Organization acquires companies that are complimentary to existing businesses

Continued growth requires regional management, development, distribution, technical and customer support

Strategic Analysis

Issues involved in conducting international business become “significant”

Demands for organization’s resources increases:ManagementCashProduct adaptation or unique developmentCustomer support

Strategic Analysis

Eventually, these demands force the active planning of international business by the organization – Active strategy

Strategic Analysis

SWOT

Strength and Weaknesses – decisions made and controlled by management

Opportunities and Threats – business environment – events that are likely to occur

Marketing Mix (4 Ps)

Product Promotion PricingPlace (Distribution) – the most important

for international business entry

Marketing Mix (4 Ps)

Place (Distribution) – the most important for international business entry:Incoterms determine where title to goods

changesTransportation to international freight carrier,

freight, insurance, documentation, customs clearance, local transportation, logistic management “in the market”, currency risk

Marketing Mix (4 Ps)

Product – usually controlled by the exporter, initially the least impacted element of the marketing mix

However, “localization” often required: approvals and certificates packaging & labeling measures, etc

Marketing Mix (4 Ps)

Promotion – success at home leads to interest from potential importers, licensors, joint venture partners

Local knowledge essential on initial entries:Integrated market communicationTrade and consumer sales promotionSales managementTrade shows

Marketing Mix (4 Ps)

Pricing : What tasks need to be performed to get the product from place of manufacture to foreign customers?

The remainder of the marketing mix needs to be determined in order to set prices

Export Pricing Policy Issues

Channel length: longer channels than domestic markets, may drive up end user prices  

      Price influence: distribution partners negotiate

for the lowest possible “landed cost”      Price-setting authority: How much pricing

authority should be given to distributors or to subsidiaries?

Dumping

WTO: Sale of an imported product at ‘less than fair value’ and causes ‘material injury to a domestic industry’.

US: An unfair trade practice that results in injury, destruction, or the prevention of the establishment of an American industry.

US considers dumping when price is >5% below home market price or,

Price is below cost of production

Grey Marketing

Grey (or parallel marketing)Products are imported outside of the

established distribution channel – undercutting the authorized channel pricing

Usually results from high imported prices

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