Download Chapter 12 Slides

Part 5
Chapter 12
Marketing:
Developing
Relationships
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manner. This document may not be copied, scanned, duplicated, forwarded,
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CHAPTER 11
Customer-Driven Marketing
CHAPTER 12
Dimensions of Marketing Strategy
CHAPTER 13
Digital Marketing and Social Networking
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2
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.
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3
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
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4
Product Strategy
 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
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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
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Developing New Products (1 of 2)
• Idea Development
– New ideas come internally from marketing research
or employees and from external sources such as ad
agencies, consultants and customers
• New Idea Screening
– Management looks at company’s resources and
ability to produce and market the product; most ideas
are rejected in this phase
• Business Analysis
– Analyze the product’s affects on sales, costs and
profits
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7
Developing New Products (2 of 2)
• Product Development
– The few products to reach this stage
get prototypes and the development of
a marketing strategy
• Test Marketing
– A trial mini-launch of a product in
limited areas that represent the
potential market
• Commercialization
– The full introduction of a complete
marketing strategy and the launch of
the product for commercial success
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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
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ACNielsen Market Decisions
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Classifying 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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Product Line and Product Mix
 Business Products
♦
Used directly or indirectly in the operation or manufacturing
processes of businesses
 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
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Product Life Cycle
 Like people, products are born, grow, mature and
eventually die
 With redesign or new uses, products can be reborn
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The Product Life Cycle
Introduction
Growth
Maturity
Decline
Google Glass
Tablet computer
Laptop computer
Desktop computer
Smartwatch
LEGO Friends
Print newspaper
CD player
Electric car
Ford Focus
Chevrolet Corvette
PT Cruiser
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Stages of the Product Life Cycle
 Introductory Stage
 Marketers focus on making consumers aware of the product
and its benefits
 Growth Stage
 The firm tries to strengthen its market position by
emphasizing benefits
 Maturity Stage
 Severe competition and heavy costs
 Decline Stage
 Firms may eliminate models, cut costs and finally phase out
products
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Finding New Markets for Old Products

Baking soda
 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
 Focus on value by offering quality products inexpensively
 Iconia One 7 costs significantly less than competition
 Also introduced hybrid laptop/tablet
 Aiming for middle of market position for comeback
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Product Identification
• Branding is 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 is a brand registered with the U.S. Patent
and Trademark Office and is thus legally protected from
use by any other firm
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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
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18
Packaging, Labeling, Quality
 Packaging
 The external container that holds and describes the product;
influences consumers’ attitudes
 Provides: protection, economy, convenience and promotion
 Labeling
 The presentation of important information on a package; closely
associated with packaging
 Contains: ingredients, nutrition facts, warnings, instructions and
manufacturer’s address
 Quality
 The degree to which a good, service or idea meets the
demands and requirements of customers
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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 have a negative impact on consumers’
perceptions of GM’s brand
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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+
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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
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Pricing
• Price
– A key element in the marketing mix as it related directly to
revenue and profits
– Probably the most flexible variable; can be set or changed
in a few minutes
• Pricing Objectives
– Specify the role of price in an organization’s marketing mix
and strategy
– Four common pricing objectives: maximizing profits,
boosting market share, maintaining the status quo, and
survival
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23
Pricing New Products
 Price Skimming
– Charging the highest possible price buyers who want the
product will pay
 Penetration Price
– A low price designed to help a product enter the market and
gain market share rapidly
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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
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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
o
o
Quantity discounts
Seasonal discounts
Promotional discounts
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Distribution Strategy
• Marketing Channel
– A group of organizations that moves products from
their producer to customers; also called a channel of
distribution
– Makes products available to customers when and
where they desire to purchase them
• Middlemen
– Also called intermediaries, are organizations that
bridge the gap between a product’s manufacturer and
the ultimate consumer
– Create time, place and ownership utility
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Retailers
• Retailers
– 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

Move products from producers to a convenient retail
establishment (place utility)

Maintain hours of operation (time utility)

Assume the risk of inventories (ownership utility)
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Wholesalers
• Wholesalers
– Intermediaries who buy from producers or from
other wholesalers and sell to retailers
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General Merchandise Retailers
 Department store
 Discount store
 Convenience store
 Supermarket
 Superstore
 Hypermarket
 Warehouse club
 Warehouse showroom
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Major Wholesaling Functions
Supply Chain
Management
Creating long-term partnerships among channel members
Promotion
Providing a sales force, advertising, sales promotion, and publicity
Warehousing,
shipping, and
product handling
Receiving, storing, and stockkeeping
Packaging
Shipping outgoing orders
Materials handling
Arranging/making local and long-distance shipments
Inventory control
and data
processing
Processing orders
Controlling physical inventory
Recording transactions
Tracking sales data for financial analysis
Risk taking
Assuming responsibility for theft, product obsolescence, and excess
inventories
Financing and
budgeting
Extending credit
Making capital investments
Forecasting cash flow
Marketing research
and Information
systems
Providing information about market
Conducting research studies
Managing computer networks to facilitate exchanges and relationships
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Marketing Channels for
Consumer Products
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Distribution Decisions
• Intensive Distribution
– Product 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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Zoom Systems
► To saturate market, wholesalers and retailers try to make the
product available at every location where a consumer might
desire to purchase it
► Zoom Systems vending machines for products beyond candy
 1,500 machines in airports and hotels across U.S.
 Selling Apple iPods, Neutrogena hair and skin products, Sony
products
 The vending machines accept credit cards and allow sales to
occur in places where storefronts would be impossible
 Today’s ZoomShops sell a variety of brands, including products
from Sephora, Best Buy, Macy’s, and Rosetta Stone
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Types of 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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Transportation
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
– Cost
– Capability
– Reliability
– Availability
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Warehousing and Materials Handling
♦
Warehousing is 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 refers to the physical handling
and movement of products in warehousing and
transportation
 Handling processes vary significantly due to product
characteristics
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Packaging

Medication bottles have been problematic…
 Incidents of children taking medication because the bottle was
easy for them to open led to the child-proof feature of the cap
design

Elderly also affected by insufficient packaging
 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
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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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39
Advertising
 Advertising
– A paid form of non-personal communication transmitted through
a mass medium, such as television commercials or magazine
advertisements
 Advertising Campaign
– Designing a series of advertisements and placing them in
various media to reach a particular target mark
– Several factors affect the campaign, including: product features,
target audience, marketing objectives and the choice of media
used
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Advertising Campaign
♦ Characteristics of the people in the
target audience influence both content
and form
♦ A product’s features, uses, and
benefits affect content of campaign
message and individual ads
♦ 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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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
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42
Six-Step Process of Personal Selling
1.
2.
3.
4.
5.
6.
Prospecting
Approaching
Presenting
Handling objections
Closing
Following up
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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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How Advertising and Publicity Differ
♦
Purpose
•
♦
Impact
•
♦
Advertising calls for action; publicity rarely does
Cost
•
♦
Advertising informative, persuasive; publicity informative
Companies pay for advertising; publicity is free
Duration
•
Advertising is repeated often; publicity appears once
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Buzz Marketing
• 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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46
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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47
Strategies

Push Strategy – An attempt to motivate
intermediaries to push the product down to their
customers

Pull Strategy – Uses promotion to create
consumer demand so consumers exert pressure
on marketing channel members to make it
available
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Push and Pull Strategies
• Personal selling indicates a push strategy
• The exclusive use of advertising is a pull strategy
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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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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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Solve the Dilemma (1 of 3)
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 to 50-year-old consumers who want to be more
health conscious
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52
Solve the Dilemma (2 of 3)
Better Health with Snacks
 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
© 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.
53
Solve the Dilemma (3 of 3)
Better Health with Snacks
 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?
© 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.
54
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.