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Developing the Marketing Mix
Chapter 12
Chapter 12 Learning Goals
1. What is the role of the product in the
marketing mix, and how are products
classified and developed?
2. What are the stages of the product life
cycle?
3. What strategies are used for pricing
products?
4. Describe the distribution channels and
the manner in which they are organized.
Chapter 12 Learning Goals
(cont’d.)
5. What are the functions of physical
distribution?
6. Explain the promotional mix and its
primary elements.
7. Describe the trends affecting elements
of the marketing mix.
Learning Goal 1
• What is the role of the product in the marketing
mix, and how are products classified and
developed?
– A product is any good or service that creates
customer value
– Products are categorized as either:
• Consumer products
– Goods and services bought and used by the end users
– Unsought products, convenience products, shopping products, or
specialty products
• Industrial products
– Bought by organizations for use in making other products or in
rendering services
– Capital products are large, expensive items with long life span
– Expense items are smaller, less expensive items with a life span of
less than a year
Product:
In marketing, any good or
service, along with its perceived
attributes and benefits, that
creates value for the customer
• General Electric is shifting its emphasis
away from goods toward services:
– 1981, sales were 85% goods/15% services
– 2000, estimated 25% goods/75% services
(Source: Neff & Citrin, Lessons from the Top, 1999, p. 344)
Tangible & Intangible Attributes
Create Product Value
Service
after sale
Image
of store
Warranty
Product
Attachments
type of
material, size,
shape, smell
Image
of brand
Color
Packaging
Instructions
Product Successes vs. Failures
Successes:
Failures:
• aspirin tablet (1900) •
• laminated safety
•
glass (1909)
• mass-produced
•
tampons & pads
(1920s)
•
• adhesive tape (1925) •
• latex paint (1941)
New Coke (1985)
Apple Newton
(1993)
disposable dress
(1966)
Ford Pinto (1970)
quadraphonic
sound (mid-1970s)
Source: Consumer Reports, Jan. 2000, pp. 14-17.
Types of Products
Consumer
Product
 Unsought
 Convenience
 Shopping
 Specialty
Effort
Required
No effort
Examples
Life insurance
New products
Little or minimum Soft drinks
Bread
Considerable
Automobiles
Homes
Maximum
Expensive jewelry
Rare collectibles
Purposes of Branding
• Product identification
– brands allow marketers to distinguish
their products from all others
• Repeat sales; brand loyalty
• New product sales
– brand equity fuels sales of new
products
• Brand:
A company’s product identifier
that distinguishes the
company’s products from those
of its competitors
• Brand equity:
The value of company and
brand names
Importance of Packaging
• Protects the product
– prevent damage, prevent spoilage
• Distinguish product from competition
– Ben & Jerry’s® has an ecologically friendly
unbleached paperboard package for its ice
cream pints, consistent with its socially
conscious mission (Source: Ben & Jerry’s,
www.benandjerrys.com)
• Promote product
– brand identification, information
Creating New Products
1. Set new product goals
2. Develop new product ideas
3. Screen ideas/concepts
4. Develop the concept
5. Test-market the new product
6. Introduce the product to the marketplace
Creating New Products
Some new products that incorporate human
factors engineering:
– DaimlerChrysler’s Neon 2000 has higher
placement of manual window cranks
– Maytag offers an easy-to-load front-loading
washer
– warehouse lift trucks that improve operator
visibility by facing sideways
– coil tubing units that reduce the complexity and
work of oil drilling
Source: Fortune, Mar. 1, 1999, pp. 164B-D.
Learning Goal 2
• What are the stages of the product life
cycle?
– Four stages of the product life cycle
• Introduction
– Profits are usually small
• Growth
– Profits reach a peak at the end of this phase
• Maturity
– Profits begin to decline
• Decline (and possibly death)
Sales & Profits During Product Life
Cycle
Sales
Profits
Sales & Profits
Introduction
+
0
-
Growth
Maturity
Decline
Learning Goal 3
• What strategies are used for pricing
products?
– Price skimming
• Charging a high introductory price
• Lowering price as product moves through its life
cycle
– Penetration pricing
• Selling a new product at a low price in hopes of
achieving a large sales volume
Learning Goal 3
(cont’d.)
• What strategies are used for pricing products?
– Pricing tactics used to fine-tune base prices are:
• Odd-even pricing
– Creates a perception that the item is cheaper than actual price
• Prestige pricing
– Raising price so item will be perceived as having high quality
and status
Product Pricing Strategies
1. Price skimming
2. Penetration pricing
3. Odd-even pricing
4. Prestige pricing
Learning Goal 4
• Describe the distribution channels and the
manner in which they are organized.
– Channels:
• Reduce the number of transactions
• Ease the flow of goods
• Increase channel efficiency
– Vertical marketing systems
• Corporate system
– One firm owns the entire channel
• Administrative system
– A strong organization takes over as leader
– Sets channel policies
• Contractual system
– Independent firms coordinate their distribution activities by written
contract
Distribution Channels:
A series of marketing entities
through which goods and services
pass on their way from producers
to end users
Functions of Distribution Channels
• Reduce number of transactions
• Ease the flow of goods
– account numbers help keep track of goods
• individual digits can indicate type of account,
locations & addresses, & delivery routes
• 15-digit numbers provide a quadrillion unique
combinations (Source: Fortune, Sept. 28, 1998, p. 66)
• Perform needed functions
Some Different Distribution Channels
• Agents & brokers
– electronic marketplaces on the Internet are
doing what brokers have traditionally done
• requests for proposals, verifying credit, lining
up financing, arranging inspections,
scheduling deliveries, collecting payment
(Source: Entrepreneur, Jan. 2000, p. 22)
• Industrial distributors
• Wholesalers
• Retailers
Wholesalers:
Channel members that buy finished
products from manufacturers and
sell the products to consumers
–merchant wholesalers
–agents and brokers
Wholesaling
Wholesaling
Intermediaries
Manufacturer
Merchant
Wholesalers
Full-service
Retailers or
industrial users
Customers
Agents &
Brokers
Limited service
Types of Retailers
In-store:
• department store
• specialty store
• variety store
• convenience store
• supermarket
• discount store
• factory outlet
• hypermart
Non-store:
• vending machine
• direct selling
• direct-response
marketing
• home shopping network
• e-commerce
Vertical Marketing System:
An organized, formal distribution
channel in which firms are aligned
in a hierarchy from manufacturer to
wholesaler to retailer
Types of Vertical
Marketing Systems
• Corporate Distribution Systems
– forward integration, backward
integration
• Administrative Distribution Systems
• Contractual Distribution Systems
Intensity of Market Coverage
• Exclusive distribution
– 1-2 dealers market all products
• Selective distribution
– a few dealers market all products
• Intensive distribution
– products sold wherever possible
Learning Goal 5
• What are the functions of physical distribution?
– Choosing a warehouse location and type
– Setting up a materials-handling system
– Choosing modes of transportation
• Criteria for selecting a mode of transportation include:
–
–
–
–
–
–
Cost
Transit time
Reliability
Capability
Accessibility
Traceability
Physical Distribution to Increase
Efficiency & Satisfaction
• Choose warehouse location & type
• Set up materials-handling system
• Make transport decisions
– cost
–capability
– transit time
–accessibility
– reliability
–traceability
Comparing Modes of Transportation
Highest
Lowest
Relative cost
air
truck
rail
pipe
water
Transit time
water
rail
pipe
truck
air
Reliability
pipe
truck
rail
air
water
Capability
water
rail
truck
air
pipe
Accessibility
truck
rail
air
water
pipe
Traceability
air
truck
rail
water
pipe
Learning Goal 6
• Explain the promotional mix and its primary
elements?
– Promotional mix is the combination of the following to
promote a product
• Advertising
– Paid form of nonpersonal promotion by an identified sponsor
• Personal selling
– Face-to-face presentation with a prospective buyer
• Sales promotion
– Marketing activities that stimulate consumers to buy
• Public relations
– Marketing function that links policies of the organization with public interest
– Develops programs designed to earn public understanding and acceptance
Promotion:
the attempt by marketers to
inform, persuade, or remind
consumers and industrial users
to engage in the exchange
process
Components of Promotional Mix
1. Advertising
2. Personal selling (face-to-face)
3. Sales promotion
includes coupons, free samples,
demonstrations
4. Public relations
Advertising:
any paid form of nonpersonal
promotion by an identified
sponsor
Advertising Media
Types of media:
newspaper, magazine, radio,
television, outdoor advertising,
direct mail, Internet
Factors influencing choice of media:
–cost
–audience reached
Personal Selling:
a face-to-face presentation to a
prospective buyer
Steps of the Selling Process
1. Prospecting and qualifying
2. Approaching customers
3. Presenting and demonstrating
4. Handling objections
5. Closing the sale
6. Following up the sale
Sales Promotion:
marketing activities that
stimulate consumer buying,
including coupons and samples,
displays, shows and exhibitions,
demonstrations, and other
types of selling efforts
Promotional Goals Depend
on Type of Customer
Type of customer
1. loyal to your
brand
2. competitor’s
customer
3. brand switchers
4. price buyers
Promotional goal
 reinforce behavior,
increase consumption
 break loyalty, switch to
your brand
 buy your brand more
often
 appeal with low prices or
add value for same price
Public Relations:
the linking of organizational
goals with key aspects of the
public interest and the
development of programs
designed to earn public
understanding and acceptance
Public Relations Activities:
•
•
•
•
•
•
•
Press relations
Product publicity
Corporate communication
Public affairs
Lobbying
Employee & investor relations
Crisis management
Factors That Affect the Promotional Mix:
• Nature of the product
• Market characteristics
• Available funds
• Push and pull strategies
Learning Goal 7
• Describe the trends affecting elements
of the marketing mix.
– Mass customization
– Growth in service distribution
• minimize waiting, increase capacity, new
distribution channels
– Integrated marketing communications
(IMC)