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Marketing Mix Concepts & Perspectives Ken Homa Product is the heart of marketing strategy. Product • Keep it simple • Constantly regenerate • Think “augmented” • Link product & processes Product is absolutely necessary, but alone is not sufficient. The Rest of the Story • Distribution • Brand • Price • Promotion DISTRIBUTION Distribution • Maximize availability & accessibility – Manage channels for “harmony” - Tailored programs - Derivative products - Open communications Distribution • Maximize availability & accessibility • Focus on the business system – Real, sustainable efficiencies R&D Mfg. Mktg. Sales Distrib. Serv. Distribution • Maximize availability & accessibility • Focus on the business system • Forge partnerships selectively – Mutual benefits, real efficiencies Distribution • • • • Maximize availability & accessibility Focus on the business system Forge partnerships selectively Beware the “mean & nasties” – Balance of power, concentrated risk Distribution • Maximize availability & accessibility • Focus on business system • Forge partnerships selectively • Beware the “mean & nasties” Volume, share & strong brands critical BRANDING Branding • Major company asset – Equity builds over time – Insulates from competition Branding • Major company asset • Basis for consumer “pull” – Especially if high value, or difficult to judge quality Branding • Major company asset • Basis for consumer “pull” • Frequently transferable – Requires logical linkage – Potential for devaluation Branding • Major company asset • Basis for consumer “pull” • Frequently transferable • Many alternative strategies – Multiple brands, sub-brands Black & Decker DeWalt Black & Decker Spacemaker Branding • Major company asset • Basis for consumer “pull” • Frequently transferable • Many alternative strategies Key : Clear positioning, aggressive support PROMOTION Promotion Objectives Build awareness Product,brand, benefits Establish brand preference Consumer “pull” Create Urgency “Call to action” Promote new uses Stimulate trial Increase usage Frequency usage Reinforce decision Cognitive dissonance Promotion Methods • Direct sales : trade & end users • Promotions • Consumer communications …Advertising …Public relations …Point-of-purchase PROMOTION Direct Selling Direct Selling Issues • High cost per contact – Lots of non-productive time – Multiple calls to close – Post-sale service Key measure : net cost per order Direct Selling Issues • High cost per contact • Wide performance differential …High independence …Pareto (still again) Direct Selling Issues • High cost per contact • Differential performance • High turnover – 2-way frustration – “Free agency” – Sales => Management Direct Selling Issues • High cost per contact • Differential performance • High turnover • Organizational complexity – Geographic coverage – Account diversity – Specialization or “1 face” – Intermediation Direct Selling Issues • High cost per contact • Differential performance • High turnover • Organizational complexity Potentially effective, sometimes necessary Requires scale … issues manageable Direct Selling Management Focus • Organization size / deployment • Human resource development – Recruiting, training, retention • Performance management – Objectives & quotas – Compensation structure Direct Selling Current Trends • Relationship marketing – Key account management • Account profitability – Activity-based costing • Sales force automation – Electronic communication High potential for self-driven achievers PROMOTIONS Promotions • Goal : create urgency to buy • Limited time period • Consumer and/or intermediaries • Frequently price-oriented – Promo. allowances (PA’s) – Coupons / rebates – Free goods , extra quantity Promotions • • • • • Goal : create urgency to buy Limited time period Consumer and/or intermediaries Frequently price-oriented Event “umbrellas” – Seasonal usage – Legitimized discounts – External “halo” Promotions • • • • • • Goal : create urgency to buy Limited time period Consumer and/or intermediaries Frequently price-oriented Event “umbrellas” Integrated programming Price incentives plus Communication Sell-in, sell-out Promotions Issues • “Entitlement” psychology …Waiting for deals …“Forward buying” • Brand “devaluation” …Quality perceptions …New perceived price • Logistical complexity …Special handling …Induced highs & lows Promotions Current Trends • Everyday Low Pricing …Less price emphasis …Muted perturbations • “Guerilla” tactics …Any time, any place • Big events …Breaking thru the clutter KFS = Integration + Execution PROMOTION Market Communication Market Communication • Goal : effective messages • Multiple objectives : – Awareness, preference, action – End users, intermediaries, “others” • Multiple attacks : – Mass vs. targeted – Alternative media Market Communication Alternative Media • Advertising • Public Relations • In-store merchandising • Direct Marketing Market Communication Direct Marketing • Extreme segmentation – Small groups & 1-on-1 • Leveraged technology – “800” phone service – Massive databases • Service-oriented – Fast order to delivery – Satisfaction guaranteed Market Communication Direct Marketing - Issues • Service requirements – People + infrastructure • Partnership dependent – Highly sensitive supply chain • Surprisingly easy entry – Uneven performance & ethics Trend : Test marketing & self-funding ads Market Communication In-Store Merchandising • Goal : “moment of truth” message • Multiple related formats …Packaging …Displays …Signage • Very difficult logistics …Multi-site consistency …Maintenance Clear advantage to direct suppliers Market Communication Public Relations • Goal : “free” exposure “in context” • Requires some newsworthiness …Hurdle surprisingly low • Frequent use of celebrities …High visibility …Easy placement …“Halo” effect …Risky business Market Communication Public Relations - KFS • Clear objectives & targets • Intense proactivity • Turnkey packages • Measured performance • Aggressive remediation Market Communications Advertising • How much ? • What message ? • Which media ? • When ? Market Communications Advertising - How much ? • Affordability ($$$ or % sales) • Sustained trend (tradition) • Competitive reference (“Share of Voice”) • Task and method – Bottoms up approach – Reach & frequency (GRP) Market Communications Advertising - Share of Voice Market Communications Advertising - Where ? • Media – Electronic (TV. radio) – Print (Magazines, newspapers) – “Alternative” (Context placements) • Buying Options – National / network – Local / spot – Up-front / “remnant” Trend : targeting … Tendency : ego Market Communications Advertising - When ? • Sustained, on-going • “Flighting” • Seasonal “pulsing” Opinion : discontinuity breeds forgetfulness, fast ! Market Communications Advertising - KFS • Don’t underspend …Critical thresholds, continuity …Rule of 3X • Tailor message to audience …Consumer perceptions ! • Match media to objectives …Caution : ego-driven business • Look for market inefficiencies …New media & “value” buys SO WHAT ? Mega-Takeaways • Product necessary but not sufficient • Pricing is the grand equalizer • Distribution can be an advantage … or a major threat / risk • Promotion has many facets : Use them! • Integration & implementation separates the winners from the losers