Hilkka Jankkila, Principal Lecturer, ROVANIEMI POLYTECHNIC, School of Forestry and Rural Industries
Lectures = basic concepts and processes of – Marketing ( 3 x 3 h )– Product development ( 1 x 3 h )– Quality management ( 1 x 3 h )
Group working with practices ( 10 h ) Excursions / notes / analysis ( 24 h ) Exam and evaluation: ( 4,5-6 Hungarian credits )
-Active participating in the lectures + group reports; Hungarian and Finnis
students together prepare reports ( 2-3 groups ), see “Practises 1 and 2 “
-The Hungarian students give exam to professor Horvath Gabor
-The Finnish students have a written test and more practice in F inland
MARKETING -Jankkila 2004 -
MARKETING – PRODUCT DEVELOPMENT – QUALITY MANAGEMENT
Literature in English:
Lancester, Geoff - Reynolds, Paul. 2004.
“ Marketing “
Kotler, Philip – Amstrong, Gary. 2004.
“ Principles of Marketing “
MARKETING -Jankkila 2004 -
THE MARKET
• A environment where the demand and supply meets each other and the marketing occurs
• A group of people, who needs and wants products/services/experiences/information and who have buyingpower to satify their needs
• The set of all actual and potential buyers of a product or service ( Kotler-Amstrong 2004 )
MARKETING - Jankkila 2004 -
MARKETING -Jankkila 2004 -
MARKETING”A social and managerial process whereby individuals and groups obtain what they need and want through creating and exchanging products and value with others” –Kotler-Amstrong 2004; Principles of marketing
CONCEPTS*needs *wants *demands, *marketing offers = products, services, experiences*value *satisfaction *exchanges*transactions *relationships*markets
MARKETING > A comprehensive, well planned social and managerial process > Market and environment analysis to get information about demand, cutomers, competition > Studying the needs and wants of the customers/ creating needs> Developing products satifying those needs and wants > Pricing > Presentation ( information, Public Relations, sales promotion, advertising,
profiling ) > Distribution > Personnel, Service process, Physical Evidence
OBJECTIVES AND TARGETS> The business is economically profitable> The customers are satisfied
MARKETING -Jankkila 2004 -
THE MARKETING PROCESS MODEL- Lancester-Reynolds 2004 -
Marketing Sales Buyer
recearch forecastingbehavior
SUPPLIER CUSTOMER
Product Price Distribution Promotion Personal Segmentation
Channels Logistics selling targeting and
positioning
Information Public Relations
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Advertising Sales promotion
MARKETING AND PRODUCT DEVELOPMENT
Market recearch - Feedback MARKET - CUSTOMERS
Administration MARKETING Financing
PROMOTIONPRODUCT DISTRIBUTION SERVICE PRICING
Ideas Channels Logistics - StrategiesLegis- Ideageneration - Price -lation Ideascreening defining
Concept developmentCompe- Business planning Production Packingtitors and evaluation - procedures -materials
Product development - capacity -proceduresTest market - quality assurance -the needs of Launch - raw materials customers, retails and wholesalers,
MARKETING -Jankkila 2004 -
MARKETING ALONGSIDE OTHER ELEMENTS OF BUSINESS
Production
Marketing
Finance CUSTOMER Recearch and
development
Marketing
Human secource
management
MARKETING -Jankkila 2004 -
MARKETING MANAGEMENT ORIENTATIONS -Kotler-Amstrong 2004-
PRODUCTION CONSEPT
Consumers favor the products which are available and highly
affordable. Focus on improving production and distribution
efficiency
PRODUCT CONSEPT
Consumers favor products that offer the most quality,
performance and features. Focus on continous product
improvements
SELLING CONSEPT
Consumers do not buy enough unless the firm undertakes a
large-scale selling and promotion effort
MARKETING -Jankkila 2004 -
MARKETING MANAGEMENT ORIENTATIONS -Kotler-Amstrong 2004-
MARKETING CONSEPT Customer focus and value = paths to sales and profits.
Customer-centred sense and respond. Find the right products for customers.
CUSTOMER RELATIONSHIP MANAGEMENT = CRM
Create profitable relationships with the customers. Customer database management activity. Achieve customer’s loyalty
Bacic realtionship, full partnership Financial and social benefits, frequency marketing programs, club marketing programs
MARKETING -Jankkila 2004 -
MARKETING MANAGEMENT ORIENTATIONS -Kotler-Amstrong 2004-
Selling ( 1 )and marketing ( 2 )concepts contrated:
Starting point Focus Means Ends
1 Factory Existing Selling Profits throughproducts and promotion sales volume
2 Market Customer Intergated Profits throughneeds marketing customer
satisfaction
MARKETING -Jankkila 2004 -
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SOCIETAL MARKETING CONSEPT- Kotler-Amstrong 2004 –
organization / firm should determine the needs / wants / interests of target markets
deliver the desired satisfactions more effeciently and effective than the competitors do
in a way that maintains or improves the consumer´s and society´s well being
*Quality management and assurance !
*Environmental quality management !
MARKETING -Jankkila 2004
SOCIETAL MARKETING
SOCIETY Human welfare
SOCIETAL MARKETING CONCEPT
CONSUMERS COMPANY Want satisfaction Profits
Conflicts between consumer shot term wants and consumer long-run welfare??
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MARKETING ENVIRONMENT
MICRO ENVIRONMENT1. Elements over which a firm has control ( marketing mix = 4 + 3 Ps ) or which it can influence in order to gain information that will help it in its marketing operations –Lancester-Reynolds 2004-
2. Actors close to firm/company that affect its ability to serve the customers = company, suppliers, marketing intermediaries, customer markets, competitors- Kotler-Amstrong 2004 -
MACRO ENVIRONMENT-all forces and agencies external to the marketing firm itself>close to firm = customers, suppliers, agents, distributors, other íntermediaries, competing firms, public - Lancester-Reynolds 2004-,
>wider external = legal, cultural, economic,demographictechnological subenvironments, political -(Kotler-Amstrong & lancester-Reynolds -
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MARKETING ENVIRONMENT
• COMPANY>top management, finance, recearc&development,
purchasting, operations, accounting
• SUPPLIERS>raw material suppliers,
• INTERMEDIARIES>firms that helps the company to promote, sell, distribute the goods to
final buyers; resellers, phycical distribution firms, marketing service
agencies, financial intermediers
MARKETING -Jankkila 2004 -
MARKETING ENVIRONMENT
• CUSTOMERS>consumer markets = individuals and households > personal
consumption
>business markets = buy goods and services for further processing or
for use in their product process
>reseller markets = buy goods and services to resell at a profit
>government markets = buy goods and services to produce public
services or transfer them to people who need them
>international markets = buyers in other countries
• COMPETITORS>other firms
MARKETING -Jankkila 2004 -
MARKETING ENVIRONMENT
• PUBLICS>groups that have an actual or potential interest in or impact on an firm`s ability to achieve its objestives
-financial publics = banks, funds, investment houses, stocholders …-media publics = newpapers, television stations, editorial opinion …-government publics = product safety, truth of advertising ..-citizen action publics = consumer organisations, environmental groups, minority groups …-local publics = community organizatios …-general public and the public´s attitudes and images of company-internal publics = workers, manaagers, directors …
MARKETING -Jankkila 2004 -
MARKETING ENVIRONMENTMacro environment
• DEMOGRAPHIC
-human population’s size, density, location, age, gender,
race, occupation …
• ECONOMIC
-factors that affect consumer buying power and spending
patterns = income changes, income distribution, classes,
changing consumer spending patterns
• NATURAL
-natural recources that are needed as inputs by
marketers or that are affected by marketing activities
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MARKETING ENVIRONMENT
• TECHNOLOGICAL
-froces that create neeeew technologies, creating new product and market opportunities
• POLITICAL
-increasing legislation regulating business
-laws, government agencies, pressure groups, ethics and socially
responsible actions ( social codes and rules)
-protect compnies from each other, protect consumers from unfair
business practices
• CULTURAL FORCES
>institutions and forces that affect ssocietys´s bacic values,
perceptions, preferenc es and behaviors
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BUYER BEHAVIOURFocus on the consumer buyer behaviour
• The acts of individuals directly involved in obtaining and using economic goods and services, including the decision process that precede and determine these acts-Lancester-Reynolds-
• Consumer buyer behaviour - the buying behaviour of final consumers = individuals and households who buy goods and services for personal consumption –Kotler-Amstrong-
• Consumer = most important of the marketing environment
=> the firm must know : WHAT, WHEN, HOW, WHY the customer buyes
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MODEL OF BUYER BEHAVIOUR –Kotler-Amstrong
MARKETING AND BUYER’S BUYER’S
OTHER STIMULI BLACK BOX RESPONSES
Marketing Other Buyer Buyer Product choice
Product Economic character decision Brand choice
Price Technologicál istics process Dealer choice
Place Political Purchace timing
Promotion Cultural Purchace amount
MARKETING –Jankkila 2004 -
a
FACTORS INFLUENCING CONSUMER BEHAVIOUR –Kotler-Amstrong 2004 -
CULTURAL SOCIAL PERSONAL PSYCHOLOGICAL Culture Reference Age and life- MotivationSubculture groups cycle stage PerceptionSocial class Family Occupation Learning
Roles and Economic Beliefs andstatus situation attitudes
Lifestyle Personality and self-concept
For the most marketers can not control such factors – but they must be taken into account –
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Hierarcy of needs by Maslow
SELF
ACTUALISATION
Creativity fulfillment, Pursue
RESPECT AND SELF-ESTEEM
Achiement qualifications
SOCIAL NEEDS
Recognition and belonging, friends , family
SAFETY NEEDS;
Protection, security, stability, Freedom of fear
PHYSIOLOGICAL NEEDS; Hunger, Thirst, shelder, warmth
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BUYERS DECISION PROCESS –Kotler-Amstrong-
Lancester-Reynolds -
PROBLEM / NEED RECOGNITION
INFORMATION SEARCH
EVALUATION OF ALTERNATIVES
PURCHASE DECISION
POSTPURCHASE BEHAVIOUR
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STAGES IN THE ADOPTION PROCESS – NEW PRODUCT –Kotler-Amstrong- Lancester-Reynolds-
1. AWARENESS
2. INTEREST/INFORMATION
3. EVALUATION
4. TRIAL
5. ADOPTION
6. POST-ADOPTION CONFIRMATION
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DIFFUSION PROCESS OF INNOVATIONS Rogers, Kotler-Amstrong, La´ncester-Reynolds
34 % 34 %
Early Late
majority majority
2,5 % 13,5 % 16 %
Innovators Early Laggards
adopters
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SEGMENTATION–TARGETING– –Kotler-Amstrong 2004 -
MARKET SEGMENTATION =- Dividing the market into distinct groups with distinct
needs, characteristics or behaviour who might require separate products or markettin mixes - geographic, demographic, psychographic, behavioral
TARGET MARKETING =- The process of evaluating each market segment’s
attractiveness and selecting one or more segments - undifferentiated=massmarketing, ifferentiated=segmented marketing, concentrated=niche marketing, micromarketing =local or individual marketing
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POSITIONINGMARKET POSITIONINGArranging for a product to occuby a clear, distinctive anddesirable place relative to competing products in the minds of target consumersPRODUCT POSITIONThe Way the products is defined by consumers on importantattributes - the place the product occupies in consumers’ mindrelative to competing productsCONSUMERS ORGANIZE PRODUCTS INTO CATEGORIESThe consumers do not reevaluate the products every time they make a buying decision > they organize products, services and companies into categories and POSITION them in their minds
MARKETING MIX EFFORTS SUPPORT THE POSITIONING STRATEGY !
MARKETING -Jankkila 2004 -
BUSINESS IDEA
WHAT TO WHOProducts, services, experiences The market
experinces -customers needs/wants
- quality -market opportunities
- price -segmentation
-competition situation
HOW IMAGES/POSITION
- enterprice´s structure PROFILES - way of doing/actioning, manners - product/service/firm/
-marketing concept and processes managening profile
MARKETING -Jankkila 2004 -
FROM IDEA TO ACTIONFrom customer centred businessidea to action -Rope 1989 -
SEGMENTATION COMPETITORS-segment determining -present/future -needs of the segment
BUSINESS IDEA DESICIONS FIRM at present-what, to who, how, ímages -know-how
-recources BUSINESS IDEA REALIZATION-internal marketing SOCIETY
-economical/technical/EXTERNAL MARKETING attitude changes-profiling
-profiling
MARKETING -Jankkila 2004 -
MARKETING MIX -Kotler-Amstrong and Booms-Bitner
• The set of controllable tactical marketing tools• Everything the firm can do to influence the demand of
its products
Sellers view Customers view 4 Ps: 4 Cs:
> Product > Customer solution > Price > Customer cost
> Place > Convenience> Promotion > Communication
3 more Ps:> People> Process> Phycical evidence
MARKETING -Jankkila 2004 -
4 PsPRODUCT PRICEVariety, Quality List price, DiscountsDesign, Features Allowances,
PaymentBrand name, Packaging period, Credit terms
Services TARGET CUSTOMERS
INTENDED POSITIONING
PROMOTION PLACEAdvertising Channels, CoveragePersonal selling Assortments, LocationsSales promotion Inventory,
TransportationPublic Relations Logistics
MARKETING -Jankkila 2004 -
The 7 – Ps – Extended Marketing Mix–Booms-Bitner -
Marketing Strategy tool that expands the number of controllable variables from the four in the original Marketing Mix Model to seven.
People ( explicit faktor ) Process ( explicit faktor ) Phycical Evidence ( implicit faktor )
The traditional Marketing Mix model was primarily directed and useful for tangible products.
The 7-Ps model is more useful for services industries and arguably also for knowledge-intensive environments.
•
•
MARKETING -Jankkila 2004 -
7- Ps
PeopleAll people directly or indirectly involved in the consumption of a service are an important part of the extended marketing mix. Knowledge Workers, Employees, Management and other Consumers often add significant value to the total product or service offering.
ProcessProcedure, mechanisms and flow of activities by which services areconsumed (customer management processes)
Physical EvidenceThe ability and environment in which the service is deliveredboth tangible goods that help to communicate and perform the serviceand intangible experience of existing customers and the ability of the business to relay that customer satisfaction to potential customers.
MARKETING -Jankkila 2004 -
7 Ps
• Booms and Bitner also suggest that Place in a service-oriented company includes the accessibility of the service, and that Promotion in a service-oriented company includes the input of front-line service personnel.
MARKETING -Jankkila 2004 -
PRODUCT / SERVICEKotler-Amstrong 2004, Lancester-Reynolds 2004
• PRODUCT = Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need
>industrial goods = installations, assessories, raw materials, component parts and materials, supplies
>consumer goods =convenience goods, shopping goods, speciality goods, unsought goods
• SERVICE = Any activity or benefit that one party can offer to another that is esssenntially intangible and does not result in the ownership of anything
• EXPERIENCE = memorable, personal, take place in minds
MARKETING -Jankkila 2004 -
THREE LEVELS OF PRODUCT–Kotler-Amstrong-
AUGMENTED PRODUCT Delivery Credit After
sale ACTUAL PRODUCT service
Brand CORE Features name BENEFIT Core product Quality Design
Packing
Installation Warranty
MARKETING -Jankkila 2004 -
PRODUCT/SERVICE CLASSIFICATIONS –Kotler-Amstrong 2004 -
• CONSUMER PRODUCT> bought by final consumer for personal consumption
• CONVENIENCE PRODUCT> consumer product that the customer usually buys frequently with
a minimum of comparison and buying efforts ( fast food, newspaper )
• SHOPPING PRODUCT> consumer good that the customer in the selection and comparison
process and purchase buys ( suitable, quality, price, style )
• SPECIALTY PRODUCT> consumer product with unique characteristics or brand identifications
( specific brands and types of cars, cameras, phones, clothes, wines )
MARKETING -Jankkila 2004 -
PRODUCT/SERVICE CLASSIFICATIONS
• UNSOUGHT PRODUCT
> consumer product that the consumer either does nor know about or knows about but does not normally think of buying ( life insurance, consulting )
• INDUSTRIAL PRODUCT
> product bought by individual or organizations for further
processing or use in conducting business
1. Materials and parts ( raw materials, manufactured materials )
2. Capital items ( installations and accessory equipments )
3. Supplies and services ( operating supplies, repair items,
business services, business advisory services )
MARKETING -Jankkila 2004 -
MARKETING -Jankkila 2004 -
PRODUCT DEVELOPMENT STRATEGIES-Kotler-Amstrong, Lancester-Reynolds
ANSOFF MATRIX ( Igor Ansoff 1957 )
New markets Existing markets
New products True innovators Product development
Risky strategy strategy
Existing products Market development Market penetrations
MARKETING -Jankkila 2004 -
NEW PRODUCT DEVELOPMENT –Kotler-Amstrong, Lancester-Reynolds -
• ACQUISITION > By buying a whole company, a papent or a licence to
produce someone else’s product
• NEW PRODUCT DEVELOPMENT > innovative, original products
> replacement products, product improvements, product
modifications
> Imitative products ”me to” products
> Relaunced, products, new brands
MARKETING -Jankkila 2004 -
NEW PRODUCT DEVELOPMENT STAGES-Kotler-Amstrong, Lancester-Reynolds
IDEA GENERATION
IDEA SCREENING
CONCEPT DEVELOPMENT AND TESTING
MARKETING STRATEGY
BUSINESS ANALYSIS
PRODUCT DEVELOPMENT
TEST MARKETING
COMMERCIALIZATION
MARKETING -Jankkila 2004 -
NEW PRODUCT PROCESS …
ÍDEA GENERATION *The systematic search for new-products ideas
*Internal = new-product managers, committees, departments,
venture teams
*External = customers, competitors
IDEA SCREENING *Go or drop decisions- spot good ideas and drop poor ideas
as soon as possible
NEW-PRODUCT PROCESS …CONCEPT DEVELOPMENT AND TESTING
*Product concept = A detailed version of the new-product
idea stated in meaningsful consumer terms
*Concept testing = testing a new-product concept wit a group of tarket consumersto find out if thr concepts have strong consumer appeal.
MARKETING STRATEGY
*The target market; positioning, sales, market share, profit goals
*Outlines of the product; price, distribution, marketing budget
*Long run sales, profit goals, marketing mix strategy
MARKETING -Jankkila 2004 -
NEW-PRODUCT PROCESS …
BUSINESS ANALYSIS* A review of the sales, costs and profits projections for a new
product to find out whether these factors satisfy the firms’s objectives
PRODUCT DEVELOPMENT• Developing the product concept intoa phycical product in
order to ensure that the product idea can be turned into a workable product
MARKETING -Jankkila 2004 -
NEW PRODUCT PROCESS ….
PRODUCT DEVELOPMENT*prototypes, product appraisal tests*product refinement and modification by feedback,> development cost increace sharply !
TEST MARKETING*The product and marketing program are tested in more realistic market settings –Standard, Controlled, Simulated- Problem = competitors see your product !- Test marketing does not quarantee succees !
COMMERCIALIZATION*Introducing a new-product into the market – - few new-product ideas succeed !
MARKETING -Jankkila 2004 -
PRODUCT LIFE CYCLE MATRIX by Barksdale-Harris
PIONEERING GROWTH MATURITY DECLINE
-sales- stars cash cows war horses
high markethigh market high market
share, high share, low hare, negative growth growth growth
infants problem children dogs/cash dogs dodos
low market share low market share low market share
high growth low growth negative growth
Entry - time - Exit
MARKETING -Jankkila 2004 -
INDIVIDUAL PRODUCT / SERVICE DECISIONS – Kotler-Amstrong -
Product attributes
Branding
Packaging
Labeling
Product support services
MARKETING -Jankkila 2004
PRODUCT QUALITY – Kotler-Amstrong-
”When our customers come back and our products do not”
• Ability of a product to perform its functions• Characteristics of a product or service that satisfy
customer’s stated or implied needs • Is closely linked to customer value and satisfaction• One of the marketer’s major positioning tools• Has a direct impact on product or service performance• Freedom of defects – is it enough ?
MARKETING -Jankkila 2004 -
ATTRIBUTES OF PRODUCT – Kotler-Amstrong -
• Core benefit of the product• Product features;
- stripped-down model- more features as a tool of differentiating the
product from competitors• Product and Desing • Trade mark• Brand = Manufacturer’s brand, Private/Store brand,
Licencing, Co-Branding, Multibrands, New Brands,
With the help of Customer Relationship Marketing !
MARKETING -Jankkila 2004
BRAND – BRANDING –Kotler-Amstrong -
• A name, term, sign, symbol, design or a combination of these• Intended to identify the goods or services of one
seller or group of another sellers• To differentiate these goods from these of
competitors• Consumer view a brand is an important part of
product – may add value• Branding = Perhaps the most distinctive skill of
professional marketers in their ability to create, maintain, protect and enhance brands of their product and services
MARKETING -Jankkila 2004
PACKAGE – PACKAGING – Lancaster-Reynolds , Kotler-
Amstrong--
• The end part of the product development; an external appereance
• A part of the promotion
• The activities of designing and producing te container or wrapper for the product– primary container
– secondary package
– package for storing
– labeling = printed information
MARKETING -Jankkila 2004
THE FUNCTIONS OF PACKAGING-Lancester-Reynolds-
• Protect and preserve its contents
• Help the distribution of the goods via a number of logistics intermediaries from the factory/producer to customer; transfering, stocking
• Selling; the promotional appeal, design, information, trademark, brand
• For conceniency of users; storage of contents, suitable sizes of package
• To conform the statutory and voluntary regulations in providing a list of contents/weight/the origin of product, E-numbers, ingrediants
MARKETING -Jankkila 2004
LABELING –PRODUCT SUPPORT SERVICES –
LABEL
= identifies and promote the product or brand,
= describes several things of the good; who, where, when made, contents, how to use, price per unit, open dating, nutritional labeling, health-related term
SUPPORT SERVICES
= Augmented parts of product
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PRODUCT LINE / MIX
PRODUCT LINE= A group of products that are closely related together;
function in similar manner, sold to same customer group, marketed through same types of outlets, given price ranges ”Nike athletic apparel” Nokia telecommunication products”
PRODUCT MIX – PRODUCT ASSORTIMENT= Set of all product lines and items which a particular seller offers for sale
*widht = number of different product lines*lenght = total number of items *depht = number of versions of each product in the line
*consistency = closeness of items ( distribution channels,
MARKETING -Jankkila 2004 -
PRICE – PRICING –Kotler-Amstrong, Lancecter-Reynolds -
PRICE = • The amount of money charged for a product or service or the sum of the values the customers exchange for the benefits of having or using the product or service• The means whereby an organisation covers costs of all
activities• The major factor affecting buyer choice – usually • A flexible element in the marketing mix – can change
quickly
DYNAMIC PRICING =• Charging different prices depending on individual customers and situations
MARKETING -Jankkila 2004 -
PRICING PERCPECTIVES – Lancecter-Reynolds -
• ECONOMIST’s approach The price is the means through which supply and
demand is brought into equilibrium
• ACCOUNTANTS’s approach The price covers the costs and make profits
• MARKETER’s approach Effect of price on the organisation’s competitive
market position
MARKETING -Jankkila 2004
FACTORS AFFECTING PRICING DECISIONS –Kotler-Amstrong,--
INTERNAL EXTERNAL
FACTORS P FACTORSMarketing objectives R Nature of the market
Marketing mix strategy I and demand
Costs C Competition
Organisational I Other environmental
considerations N factors ( economy, G resellers, government
MARKETING -Jankkila 2004
PRICING IN DIFFERENT TYPES OF MARKETS –Kotler-Amstrong, Lancecter-Reynolds –
PURE COMPETITION-Many buyers and sellers trading in uniform commodity – many fully informed buyers and sellers of similar products-No single seller or buyer has much effect on the going market price > going pricing PURE MONOPOLYA single producer of a product – no substitudes for product
– free price settingOLIGOPOLISTIC COMPETITION
Few sellers who are highly sensitive to each other’s pricing and marketing strategies
MARKETING -Jankkila 2004
MAJOR CONSIDERATIONS IN SETTING PRICE –Kotler-Amstrong-
Product Competitor’s Consumercosts prices and other perception of
internal and external of value factors
PRICE PRICEFLOOR CELLINGNo profits below No demand this price above this
price
MARKETING -Jankkila 2004
COST-BASED PRICING “Cost-plus”
• Adding a standard markup ( profit ) to the costs of the product
• Product driven pricing >Fixed costs = do not vary with production or sales level Variable costs = vary diriectly with the level of production Total costs = fixed costs + variable costs
PRODUCT COST PRICE VALUE CUSTOMER
MARKETING -Jankkila 2004
TARKET PROFIT PRICING –Kotler-Amstrong-
• Setting price to break even on the costs of making and marketing a product or
• Setting price to make a target profit
• Target pricing uses the concept of a break-even chart – it shows the total cost and total revenue expected at
different sales volume levels TOTAL REVENUE
Costs Target profit
TOTAL COSTS
FIXED COSTS
Sales volume in units
MARKETING -Jankkila 2004
VALUE-BASED PRICING –Kotler-Amstrong 2004-
• Setting price based on buyer’s perceptions of value rather than on the seller’s costs
• Offering just the right combination of quality and good service at the fair price
• Pricing begins with analyzing consumer’s needs / wants and value perceptions and the price is set to match consumer’s percieved value > design the product
CUSTOMER VALUE PRICE COST PRODUCT
MARKETING -Jankkila 2004
COMPETITION-BASED PRICING –Kotler-Amstrong-
• Setting prices based on the price that competitors charge for similar products
• Going rate pricing
• Price represents the ”collective wishdom” of the industry sector when demand elasticity is hard to measure
MARKETING -Jankkila 2004
PRICING STRATEGIES –Kotler-Amstrong-
• MARKET-SKIMMING PRICING>Setting high price for a new product to skim maximum revenues from the segment willing to pay the high price. -Company makes rewer but more profitable sales-Product’s quality and image must support the high price-Enough buyers must want the product at that price-Competitors should not be able to enter the market and undercut the price 1. MARKET-PENETRATION PRICING>Setting a low price for a new product in order to attract a large number of buyers and a large market share
MARKETING -Jankkila 2004
PRICING STRATEGIES –Kotler-Amstrong-
• PRICE ADJUSTMENT STRATEGIES> Discount = price reduction > Allowance = promotional
money
• BY-PRODUCT PRICING -Setting a price for by-products in order to make the main product’s price more competitive
• SEGMENTED PRICING – two or more prices at same product
• PSYCHOLOGICAL PRICING – price says something of the product
• REFERENCE PRICE - prices that buyers carry in their minds
• PROMOTIONAL PRICING – temporarily, increase short-run sales
• GEOGRAPHICAL PRICING – different price on different regions / or not
INTERNATIONAL PRICING – prices in the international market
MARKETING -Jankkila 2004
PRICING > PRICE
+VARIABLE COSTS / product unit: raw materials, other variable costs, labour costs,
costs connected wit labour costs ( social costs, assurance )
+COVER = fixed costs, charges, rates, incometaxes, profit
=NET RRICE
+VALUE ADDED TAX
=SELLING PRICE
+SELLING REWARDS
+FREIGHTS THAT WILL BE PAYD
+DISCOUNTS PROVISOS,
=TOTAL PRICE
MARKETING -Jankkila 2004
CHANNELS OF DISTRIBUTION- Kotler-Amstrong, lancester-Reynols-
DISTRIBUTION
Channels /Supply chain Phycical distribution Agents Logistics Wholesalers Retailers Right place ! = intermediaries Right time !
Suitable amounts !With greatest ease !Favourable costs !
MARKETING -Jankkila 2004
MARKETING CHANNEL = DISTRIBUTION CHANNEL –Kotler-Amstrong-
A set of interdependent organizations involved in the process of making a product or service available for use or consumption by consumer or business user
SUPPLY CHAIN = VALUE DELIVERY NETWORK, -Information; gathers and distribute information-Promotion; developes and spread information about offers-Matching; shapes and fits the offer to the buyer’s need-Negotiation; reach the agreement of price and
-Phycical distribution and stocking-Financing, invoicing-Risk taking / dealing
MARKETING -Jankkila 2004
DIRECT – INDIRECT MARKETING CHANNELS -Kotler-Amstrong, Lancester-Reynolds-
DIRECT CHANNEL = no intermediariesINDIRECT CHANNEL = one or more intermediaries
AFFECTING TO THE CHANNEL DECISIONS:* Numbers of potential customers in the market* How concentrated or dispersed the customers are* How much each will buy in a given period = buying sensity* Costs including transportation, warehousing, stockholding* Product imago positioning, market share objective* The need of by-services
* Absolute price of the product and the profit objective * Firm’s recources
MARKETING -Jankkila 2004
DIRECT DISTRIBUTION INDIRECT
Small Amount of customrs LargeRarely Density of purchase OftenLarge Size of one purchasing SmallLarge Profit marginal SmallConcentrated The buyer placement Disperced High Complexity of product LowNo need Need of by-services YesYes Completely product No lines
MARKETING -Jankkila 2004
MULTICHANNEL DISTRIBUTION SYSTEM –Kotler-Amstrong-
Catalogs, telephone, internet, home-selling Customer 1
Own resailer places /warehouses Customer 2
Retailers Customer 3
Distributors Dealers Business segment 1
Sales force Business segment 2
MARKETING -Jankkila 2004
NUMBER OF MARKETING INTERMEDIARIES –Kotler-Amstrong-
INTENSIVE DISTRIBUTION
-stocking the product in as many outlets as possible -usually convenience productsEXCLUSIVE DISTRIBUTION
-giving a limited number of dealers the exclusive right to distribute the products in their territories-for exclusive products, product’s image, higher markupsSELECTIVE
-more than one dealer but not all dealers who are willingly to carry company’s produts, ”Label-retailer”-good market coverageto producer with more control and less cost than intensive distribution
MARKETING -Jankkila 2004
MARKETING CHANNELS DECISIONS ? Questions for a countryside firm
DIRECT MARKETING• reach few customers, • direct producer/customer contact, • not effective?• is product suitable for direct marketing? • larger profit marginal? • have producer time enouhg for producing and marketing? • small amounts of products can be marketed, • Important; quality, producers own capasity and
knowledge of marketingco, co-operation with other small producers?
MARKETING -Jankkila 2004
MARKETING CHANNELS DECISIONS ? Questions for a countryside firm
RETAILER
• more customers, customers find the products in the same place as other products=easier for customers,
• is the retailer interested in the small producer’s products?
• do the customers find the products among other products?
• important; quality, reliable distribution, is it sure you can produce the amounts of products you aimed, producer’s own activity to reach retailers, package
MARKETING -Jankkila 2004
MARKETING CHANNELS DECISIONS ? Questions for a countryside firm
LARGE-SCALE KITCHENS ( restaurangs ..)
• one good possibilit for small firms, business to business
relation > product development together? easily to get feed
back from custemers, fresh raw materials, bigger ( suitable )
amounts to one place, saves distribution and packaking
SPECIAL / EXECUTIVE RETAILERS• the importance of quality and package and image !
• better profit by pricing strategy
MARKETING -Jankkila 2004
MARKETING CHANNELS DECISIONS ? Questions for a countryside firm
WHOLE SAILERS
• large-scale, concentrated distribution
> producers’s work decrease
• can you produce large amounts?
• is a long chain suitable for your ( fresh? ) goods?
• is the price competitive by the customers?
• packaging for the wholesailing and distribution >costs?
• logistics if the distribution ways are long?
• who does pay the freight?
MARKETING -Jankkila 2004
MARKETING CHANNELS DECISIONS ? Questions for a countryside firm
CONTRACTUAL CO-OPERATION ( franchising .. )PRODUCER NET WORK - THE SAME TRADEMARK- SUBCONTACTOR PRODUCING• small-scale producing is possible • producer’s own name not seemed in the products • the producer can concentrate to producing/marketing
/delivering/retailing EXPORT• a long, difficult and expencice process• co-operation ! export know how !
MARKETING -Jankkila 2004
LOGISTICS – PHYSICAL DISTRIBUTION–
Kotler-Amstrong
MARKETING LOGISTICSThe tasks involved in planning, implementing, and
controlling the phycical flow of materials, final goods, and
related information from points of origin to points of
concumption to meet customer requirements at a profit
SUPPLY CHAIN MANAGEMENT =Managing upstream and downstream value-added flows of
material, final goods, and related information among
suppliers, the company, resellers and final consumers
MARKETING -Jankkila 2004
LOGISTICS – PHYSICAL DISTRIBUTION–
Kotler-Amstrong
SUPPLIERS Inbound logistics
COMPANY ReverseOutbound logistics
RESELLERS logistics
CUSTOMERS
MARKETING -Jankkila 2004
PROMOTION –MARKETING COMMUNICATION MIX
The specific mix
advertising, personal selling, sales promotion, public relations and information
MARKETING -Jankkila 2004
PROMOTION –MARKETING COMMUNICATION MIX –
Kotler-Amstrong -
MARKETING -Jankkila 2004
• The specific mix of advertising, personal selling, sales promotion , public relations and information
ADVERTISING = any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor
SALES PROMOTION = short-term incentives to encourage the purchase or sale of a product or a servi´ce
PROMOTION – MARKTING COMMUNICATION MIX –Kotler-Amstrong -
PERSONAL SELLING = personal presentation by the
firm’s sales force for the purpose of making sales and
building customer relationships
PUBLIC RELATIONS = building good relations with the firm’s various publics by obtaining favourable publicity, good corporate image, and handing or heading unfavourable stories and events
DIRECT MARKETING = direct connections with
carefully targeted individual consumers to obtain new or cultivate lasting relationships
MARKETING -Jankkila 2004
ELEMENTS OF COMMUNICATION PROCESS
SENDER RECEIVER
IDEA MESSAGE IMAGE
Encoding to Decoding to an
a message MEDIA image
Disruptions
Disorders
FEEDBACK = knowledge that the receiver
has reacted to the communication
MARKETING -Jankkila 2004
ADVERTISING Kotler-Amstrong-
OBJECTIVE SETTINGcommunication objectives, sales objectives
BUDGET DECISIONSaffordable approach, percent of sales, competitive parity,
objective and task
MESSAGE DECISIONS MEDIA DECISIONS- message strategy - reach, frequenc, impact
- message execution - major media types- specific media vehicles
- media timing
CAMPAINGN EVALUATIONCommunication and sales impact
MARKETING -Jankkila 2004
POSSIBLE OBJECTIVES -Kotler-Amstrong-
• INFORMATIVE ADVERTISING gives information about a new product, the firm, new uses
of product, price change, explain how the product works ..
• PERSUASIVE ADVERTISING brand building, changing customer’s perceptions of
product attributes ..
• REMINDER ADVERTISING remind consumer of the goods and services, remind the
selling palaces..
MARKETING -Jankkila 2004
SALES PROMOTION TOOLS–Kotler-Amstrong-
• SAMPLE• COUPON
• CASH REFND OFFER ( RABATE )• PRICE PACK• PREMIUM
• ADVERTICING SPECIALITY• PATRONAGE REWARD
• POINT-OF-PURCHASE ( POP )• PROMOTIONAL EVENTS
MARKETING -Jankkila 2004
BUSINESS PROMOTION TOOLS
• DISCOUNT
a straight reduction in price on purchase during stated period of time
• ALLOWANCE
promotional money paid by manufactures to retailers in return for agreement to feature the manufacture’s products in some way
MARKETING -Jankkila 2004
DIRECT MARKETING Kotler-Amstrong -
• FACE TO FACE MARKETING• TELEMARKETING• DIRECT-MAIL MARKETING• CATALOG MARKETING• DIRECT RESPONSE TELEVISION
MARKETING• KIOSK MARKETING• ONLINE MARKETING
MARKETING -Jankkila 2004
-COMPETITION -Porter 1980-
Potential new firms
Threat
Suppliers Competitions in BuyersNegotiation the branch Negotiation
power power
Threat
Substitutes
MARKETING -Jankkila 2004
COMPETITION STRATEGIES –Porter 1980-
• Overall cost leadership-producing a standard product at low cost or engaging in heavy advertising in order to undercut competetion – price competition• Differentiation-selling at a higher price than average, in the product unique feature of quality, image or design • Focus concentrates-focusing on a specialist product rangeor a unique segment of the market or a combination of them both
MARKETING -Jankkila 2004 -
-MARKETING INFORMATION SYSTEMMkiS Kotler 1997, Lancester-Reynolds 2004
A marketing information system ( MkiS )
concists of people, equipment and procedures
> to gather, sort analyse, evaluate and distribute needed, timely and accurate information to marketing desicion makers
MARKETING -Jankkila 2004
MARKETING INFORMATION SYSTEM –
Lancester-Reynolds -
MANAGINGMarketing Analysis, Planning, Tactics, Implementation,
Actions Control, Review, Monitoring, Contingency
Defining information needs Distiribution of information
Internal accounting system Marketing research system
Component
parts
Marketing intelligence system Analytical marketing system
MARKETING ENVIRONMENTTarket markets, Marketing channels, Communication, Logistics
Competition, International aspects, MacroénvironmentMARKETING -Jankkila 2004 -
MARKETING INTELLIGENCE SYSTEM
SALES TRANSPORT OTHERPERSONNEL PERSONNEL PERSONNEL
intelligence gathered fromCompetition Telephone calls andExhibitions Visiting customers requestsConferences General chats with Visitors to firmTraining courses other drivers Letters and direct mailsCustomers Visiting suppliers Press and journalsSponsored events General observastion General observation
MARKETING RESEARCH SYSTEM- Primary data
- Secondary data
INTERNAL ACCOUNTING SYSTEM
MARKETING -Jankkila 2004 -
-
PRACTICE 1. Analyse the business idea of the ( small/medium size, countryside branch ) firm and give ideas to develop the business concept by using the theoretic knowledge you got on the lectures and from the booksThe firm identification:
WHAT TO WHOM-product, service, experience - market, segmentation, market region-quality - custome’s needs/wants for the product-price, pricing strategy - competition situation-how they have developed the product
HOW IMAGES/POSITION-organization structure -positioning on the market, -how they use the parts marketing -profiling; trademark, brand …. of marketing mix -your own opinion or image of the product-quality policy and the quality management-why the company has choosed this way of operating?
MARKETING -Jankkila 2004
PRACTICE 2. Create a new product / service /experience idea on the basis of local ( in Hungry+ in Finland ) possibilities or renew an old product; what, customer segment, quality, pricing strategy, distribution, marketing, feature, package, marketing communicatio …Compare the Hungrian and Fnnish cases; are there similarities / dissimilarities?
USE SWOT ANALYSIS TOOStrengt ( Strengthen ) Weakness ( Improve )
Opportunities ( Utilize ) Threats ( Avoid )
MARKETING -Jankkila 2004 -
EVALUATION OF THE COURSEGive your evaluation of the coure, please
• Good points ; contents, practises, presentation, teaching• Not good points; contents, practises, presentation, teaching• What did you learn? Can you use this knowledge in your job in future?• Evaluate your own learning stage in numbers 1-5 • Your experience and opinion of studying in an
international group? Should this kind of operation continue or not? Why?
• Please, send reports and evaluation by e-mail: [email protected]
THANK YOU
MARKETING -Jankkila 2004 -
From an idea to a product
Type of product: Identification number: Date:
• Name of product and the description of the product:• Origin of the idea?• Why the idea have been produced?• What kind of need or want the product does solve?• Competing products and substitudes?• Critical and hazardous points on tproduct development, production and marketing? SWOT-analysis• Objectives: Product quantity, marketing share, returns?• What next? Item Timing Responsible
-core product -packing
-pricing -distribution
- - promotion
MARKETING -Jankkila 2004
TOURIST PROGRAM DESCRIPTION
• Name:
• Timing, when:
• Duration:
• Place:
• Description of content:
• Price, min/max/discounts:
• Price including:
• Further information:
• How it is reached:
• Information of the firm/ reservations
• Information of the retailer / reservations:
MARKETING -Jankkila 2004
BLUE PRINT FOR A TOURIST PROGRAM
• CONCRETE ELEMENTS; hotel, means of transfer,
accomandation during the program, food, reindeer, snowmobile
• THE CUSTOMER PROCESS; what / how does the
customer do during the program
• VISIBLE SERVICE PROCESS – front office personnel,
responsible persons
• INVISIBLE SERVICE PROCESS – back office personnel
• THE TIMING OF THE PROGRAM – from the
beginning to the end minutes, hours, days
MARKETING -Jankkila 2004