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Part 5 Marketing: Developing
Relationships
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-2
CHAPTER 11 Customer-Driven Marketing
CHAPTER 12 Dimensions of Marketing Strategy
CHAPTER 13 Digital Marketing and Social Networking
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-3
Learning Objectives
LO 12-1 Describe the role of product in the marketing mix, including how products are developed, classified, and identified.
LO 12-2 Define price and discuss its importance in the marketing mix, including various pricing strategies a firm might employ.
LO 12-3 Identify factors affecting distribution decisions, such as marketing channels and intensity of market coverage.
LO 12-4 Specify the activities involved in promotion as well as promotional strategies and promotional positioning.
LO 12-5 Evaluate an organization’s marketing strategy plans.
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-4
The Marketing Mix The marketing mix is the part of the marketing strategy that involves decisions regarding controllable variables After selecting a target market, marketers develop
and manage the dimensions of the marketing mix to give their firm an advantage over competitors
Successful companies offer at least one dimension of the marketing mix that surpasses all competitors
These companies must also maintain acceptable, and if possible distinguishable, differences in the other dimensions as well
DID YOU KNOW? Less that 10% of new products succeed in the marketplace, and 90% of
successes come from a handful of companies © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-5
Product Strategy
Product Development
Process
Thousands of new products are introduced annually, few succeed
It takes time to get a new product to market
Sometimes a product or idea is shelved, only to be returned to later
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-6
Inspiration for FedEx
While attending Yale in 1966, FedEx founder Fred Smith: Studied a
mathematical discipline called topology
Inspired his vision for creating the company
Realized potential efficiencies of connecting all points on a network through a central hub
Used what he learned to get FedEx off the ground
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-7
Developing New Products
Business Analysis
Analyze the product’s affects on sales, costs and profits
New Idea Screening Screening involves management looking at the company’s resources and its
ability to produce and market the product; most ideas are rejected in this phase
Idea Development New ideas come internally from marketing research or employees and from
external sources such as ad agencies, consultants and customers
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12-8
Idea Development
Nike has a separate division (Nike Sport Research Lab) Scientists, athletes, engineers, and designers work
together to develop technology of the future
Teams research ideas in biomechanics, perception, athletic performance, and physiology to create unique relevant and innovative products
Final products are tested in environmental chambers with real athletes to ensure functionality and quality before being introduced in the market
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-9
Developing New Products (cont.)
Commercialization The full introduction of a complete marketing strategy and the launch of the product for commercial success
Test Marketing A trial mini-launch of a product in limited areas that
represent the potential market
Product Development The few products to reach this stage get prototypes
and the development of a marketing strategy
Many consumers did not like the taste of BlãK, and Coca-Cola discontinued
the drink in 2008 © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-10
ACNielsen Market Decisions
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12-11
Classifying Products Products are classified as consumer or business products
Consumer products are products intended for household or family use
Convenience Products – items bought frequently with no planning, such as eggs,
milk, bread and newspapers
Shopping Products – purchased after consumer has “shopped around”
Specialty Products – require greater research and shopping effort; consumers unwilling to
accept a substitute
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12-12
Product Line and Product Mix
Business Products • Used directly or indirectly in the operation or manufacturing
processes of businesses
Product relationships are of key importance:
Product Line • A group of closely related products that are treated as a unit
because of similar marketing strategy, production or end-use considerations
Product Mix • All the products offered by an organization
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-13
Product Life Cycle The Life Cycle of a Product
Like people, products are born, grow, mature and eventually die
With redesign or new uses, products can be reborn
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12-14
Stages of the Product Life Cycle
As products pass through the four life cycle stages, they get new advertising and pricing strategies for each stage
Introductory Stage
Growth Stage
Maturity Stage
Decline Stage
Marketers focus on making consumers
aware of the product and its benefits
The firm tries to strengthen its
market position by emphasizing
benefits
Severe competition and heavy
costs
Firms may eliminate models, cut costs and
finally phase out products
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-15
Finding New Markets for Old Products Baking soda Baking was only used for cooking and reached
maturity stage quickly
Once discovered it could be used as deodorizer, baking soda moved back into growth stage
Acer Focusses on value by offering quality products
inexpensively
Iconia One 7, 7-in tablet that looks and functions as the competition but cost significantly less
Also introduced hybrid laptop/tablet
Aiming for middle of market position for comeback © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-16
Branding
Branding • The process of naming and identifying products
A brand is a name, term, symbol, design or combination that identifies a product
A brand name is the part that can be spoken and consists of letters, words and numbers
A brand mark is the part of the brand that is a distinctive design, such as McDonald’s arches
Trademark • A brand registered with the U.S. Patent and Trademark Office and
is thus legally protected from use by any other firm
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-17
Identifying Products
Manufacturer Brands
• Initiated and owned by the manufacturer to identify products from the point of production to the point of purchase
Private Distributor Brands
• May cost less than manufacturer brands, they are owned and controlled by a wholesaler or retailer
Generic Products
• Products with no brand name that often come in simple packages and carry only their generic name
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-18
Packaging, Labeling and Product Quality
• The external container that holds and describes the product; influences consumers’ attitudes
• Performs several functions: protection, economy, convenience and promotion
Packaging
• The presentation of important information on a package; closely associated with packaging
• Contains information required by law such as ingredients, nutrition facts, warnings, instructions and manufacturer’s address
Labeling
Quality • The degree to which a good, service or idea meets the
demands and requirements of customers © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-19
General Motors Recall
♦ Service quality is judged by consumers, not the service providers
♦ It is quite common for perceptions of quality to fluctuate from year to year
♦ General Motors recalled millions of vehicles due to quality control issues
Problems included faulty ignition switches that prompted GM to issue recall on Chevy Cobalt
These recalls are having a negative impact on consumers’ perceptions of GM’s brand
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-20
Google’s Brand Value
Google is the most valuable brand worldwide Owns a variety of brands: search engine Google, web
browser Chrome, video sharing site YouTube, and social networking site Google+
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-21
Calculating the Value of a Product
o Almost anything of value can be assessed by a price o Consumers vary in their response to price o The product’s perceived value in the marketplace
added to the production costs help determine price
Calculating the Value of a Product
Source: Rafi Mohammed, “Use Price to Profit and Grow,” Forbes.com, March 25, 2010, Use Price to Profit and Grow (accessed April 15, 2012).
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-22
Price and Pricing Objectives
Price is a key element in the marketing mix as
it related directly to revenue and profits
Pricing objectives specify the role of price
in an organization’s marketing mix and
strategy
Price is probably the most flexible variable; can be set or changed in a few minutes
Four common pricing objectives: maximizing profits, boosting market share, maintaining the status quo, and survival
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-23
Pricing New Products
Pricing strategies provide guidelines for achieving the pricing objectives
Pricing New Products Price Skimming is charging
the highest possible price buyers who want the
product will pay
Penetration price is a low price designed to help a product enter the market and gain market share
rapidly
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12-24
Psychological Pricing
Psychological Pricing encourages purchasing based on emotional rather than rational responses to price
Even/Odd Pricing assumes people will buy more of a product for
$9.99 than $10 because it seems to be a bargain at the odd price
Symbolic/Prestige Pricing assumes that high prices connote
high quality
Perfume and cosmetics prices are set artificially high to give the impression of superior quality
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-25
Reference Pricing and Price Discounting Reference Pricing
• A Type of psychological pricing in which a lower-priced item is compared to a more expensive brand in hopes that the consumer will use the higher price as a comparison price
Discounts • Temporary price reductions often employed to boost sales
o Quantity discounts are given for purchasing in large volumes
o Seasonal discounts are those given for purchasing goods or services out of season
o Promotional discounts attempt to improve sales by advertising price reductions on selected products; increasing customer interest and profits
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-26
Distribution Strategy
Marketing Channel
A group of organizations that moves products from their
producer to customers; also called a channel of distribution
Middlemen, or intermediaries, are organizations that bridge the gap between a product’s
manufacturer and the ultimate consumer
Makes products available to customers when and where
they desire to purchase them
Middlemen create time, place and ownership utility
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12-27
Retailers and Wholesalers
• Intermediaries who buy products from manufacturers (or other intermediaries) and sell them to consumers for home and household use rather than for resale or for use in producing other products
Retailers
Move products from producers to a convenient retail establishment (place utility)
Maintain hours of operation (time utility) Assume the risk of inventories (ownership
utility)
• Intermediaries who buy from producers or
from other wholesalers and sell to retailers Wholesaler
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12-28
General Merchandise Retailers
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12-29
Major Wholesaling Functions
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12-30
Marketing Channels for Consumer Products
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12-31
Intensive and Selective Distribution
A major distribution decision is how widely to distribute a product – how many and what type of outlets
Intensive Distribution
• A product is made available in as many outlets as possible
• Used for frequently purchased items
Selective Distribution
• Only a small number of all available outlets are used to expose products
• Used most often when consumers buy only after shopping and comparing price, quality and style
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12-32
Zoom Systems ► To saturate markets, wholesalers and many varied retailers
try to make the product available at every location where a consumer might desire to purchase it
► Zoom Systems provides robotic vending machines for products beyond candy and drinks
► Zoom has 1,500 machines in airports and hotels across the United States, some selling items such as Apple iPods, Neutrogena hair and skin products, and Sony products ♦ The vending machines accept credit cards and allow sales to
occur in places where storefronts would be impossible
► Through partnering with different companies, today’s ZoomShops sell a variety of brands, including products from Sephora, Best Buy, Macy’s, and Rosetta Stone
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12-33
Exclusive and Physical Distribution
Exclusive Distribution
• The awarding by a manufacturer to an intermediary of the sole right to sell a product in a defined geographic territory
• Includes high-quality merchandise
Physical Distribution
• All the activities necessary to move products from producers to customers – inventory control, transportation, warehousing and materials handling
• Both goods and services require physical distribution
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12-34
Transportation Transportation is the shipment of products to buyers: Railways – least expensive Motor vehicles – greater
flexibility Inland waterways – cheap
but slow Pipelines – transport
petroleum and natural gas Airways – costly but speedy
Factors affecting choice include cost, capability, reliability and availability
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12-35
Warehousing and Materials Handling
Warehousing • The design and operation of facilities to receive,
store and ship products Companies can own their own warehouse, lease a
private warehouse or rent space in a public warehouse
Materials Handling • The physical handling and movement of products in
warehousing and transportation Handling processes vary significantly due to
product characteristics © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-36
Packaging
Design thinking produces products that creatively solve problems that touch several people For example, medication bottles have been problematic for a long
time… Incidents of children taking medication because the bottle was easy
for them to open led to the child-proof feature of the cap design
The elderly are also affected by insufficient designs in packaging Generally they have multiple medications in their cabinets, and all
the bottles look the same and the dosage directions are difficult to read
ClearRx was designed specifically for this problem:
♦ It has a larger flat front surface where the label can be easily read and comes with colored bands so the patient can differentiate between medications based on color
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-37
Promotion Strategy Promotion encourages consumers to accept products
and influences opinions and attitudes Advertising, personal selling, publicity and sales
promotion are collectively known as the promotion mix
Integrated Marketing Communications • Coordinating the promotion mix elements and
synchronizing promotion as a unified effort
This approach results in delivery of the desired message to consumers
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12-38
Advertising and Advertising Campaign
• A paid form of non-personal communication transmitted through a mass medium, such as television commercials or magazine advertisements
Advertising
• Designing a series of advertisements and placing them in various media to reach a particular target market
Advertising Campaign
Several factors affect the campaign, including: product features, target audience, marketing objectives and the choice of media used
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12-39
Advertising Campaign
A product’s features, uses, and benefits affect the content of the campaign message and individual ads
♦ Characteristics of the people in the target audience influence both content and form
♦ When Procter & Gamble promotes Crest toothpaste to children, the company emphasizes daily brushing and cavity control, whereas it promotes tartar control and whiter teeth when marketing to adults
Hot Wheels uses colorful packaging and fun
advertisements to appeal to children
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12-40
Personal Selling
Personal Selling • Direct, two-way communication with buyers and
potential buyers
o Most flexible promotional method but expensive
o Three categories of salesperson: Order takers – retail sales clerks Creative salespersons –
automobiles sales Support salespersons – customer
educators © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-41
Six-Step Process of Personal Selling
Personal selling is a six-step process
Prospecting: identifying
potential buyers Approaching:
referral or cold call Presenting:
demonstrating the product
Handling Objections:
countering reasons for purchase
Closing: asking for a purchase
Following Up: checking back after purchase
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12-42
Publicity
Publicity
Non-personal communication
transmitted through mass
media but not paid for directly by the
firm
Message is presented as a
news story and the company is not
seen as the originator of the
message
Most companies have a public
relations department trying to gain favorable
publicity and minimize negative
publicity
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12-43
How Advertising and Publicity Differ
Advertising and publicity are both carried by mass media but they differ is several ways
Purpose • Advertising in
informative, persuasive, or both; publicity is informative
Impact • Advertising
calls for action; publicity rarely does
Cost • Companies
pay for advertising; publicity is free
Duration • Advertising is
repeated often; publicity appears once
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12-44
Buzz Marketing
Buzz marketing is a variation of traditional advertising where marketers attempt to create a trend
Companies seek out trend setters in a community and
get them to “talk up” their product
The idea is that accepted members
of a group have more credibility than
any form of paid communication
Works best as part of an integrated marketing plan
A related concept is viral marketing, which gets Internet users to pass on ads and promotions to others
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12-45
Sales Promotion
Sales Promotion • Direct inducements offering added value or some
other incentive for buyers to enter into an exchange
Easier to measure and less expensive than advertising
Includes: store displays, premiums, samples and demonstrations, coupons, contests and sweepstakes, refunds, and trade shows
Used to enhance and supplement other forms of promotion
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12-46
Push and Pull Strategies
When developing a promotion mix, companies must decide whether to push or pull the product
An attempt to motivate intermediaries to push the product
down to their customers
Uses promotion to create consumer demand so consumers exert
pressure on marketing channel members to make it available
Push Strategy
Pull Strategy
A company can use either strategy or a combination
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12-47
Push and Pull Strategies (cont.) Personal selling indicates a push strategy
The exclusive use of advertising is a pull strategy © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-48
Objectives of Promotion
Typical objectives of promotion Stimulate Demand • Often through ads and
sales promotion, particularly important when using a pull strategy
Stabilize Sales • Decreasing sales call
for sales promotions and ads
Inform, remind and reinforce
customers
Promotional positioning uses promotion to create and maintain an image of a product in buyers’ minds
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12-49
The Importance of Marketing Strategy
Marketing creates value through the marketing mix o The marketing mix must be carefully integrated
into an effective marketing strategy o Companies with an effective marketing mix gain
competitive advantage o Advantages often come when a company excels
at one or more elements of the marketing mix o Companies must monitor demand and adapt the
marketing mix when needed
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12-50
Solve the Dilemma Better Health with Snacks
Deluxe Chips’ Deluxos tortilla chips are the number-one selling brand in North America and its Ridgerunner potato
chips is also a market share leader ► Wants to stay on top of the market by changing
marketing strategies to: ♦ Match changing consumer needs and preferences
► As middle-aged consumers modify their snacking habits, Deluxe Chips is considering new product line of light snack food ♦ With less fat and cholesterol ♦ Targeted at 35-50 year-old consumers who want to be
more health conscious © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-51
Solve the Dilemma Better Health with Snacks (cont.) New healthy chips:
• Will succeed if taste good and consumers may be willing to pay more
• More advertising to overcome competition
• Possible to analyze customer profiles and retail store characteristics
• Match right product with right neighborhood
• Store-specific micromarketing spend promotional dollar more efficiently
Discussion Questions
• Design a marketing strategy for the new product line.
• Critique your marketing strategy in terms of its strengths and weaknesses.
• What are your suggestions for implementation of the marketing strategy?
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12-52
Discussion
? What is the product life cycle? How does a product’s life cycle stage affect its marketing strategy?
? How do publicity and advertising differ? How are they related?
? Distinguish between the two ways to set the base price for a new product.
? What does the personal selling process involve? Briefly discuss the process.
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.