Download Distribution Concepts

Product, PLC and Services
Chapters 10 - 12
What is a Product?
• Anything that can be offered to a market
to satisfy a want or need. It is usually
judged on (1) product features (2)
services mix & quality and (3) price
appropriateness
• Core benefit, Basic product, Expected
product, Augmented product, Potential
product
Augmented
Product
Installation
Packaging
Brand
Name
Delivery
& Credit
Quality
Level
Core
Benefit
or
Service
Warranty
Features
AfterSale
Service
Design
Product Classifications
PRODUCTS
Consumer
Products
Convenience
Products
Shopping
Products
Business
Products
Specialty
Products
Unsought
Products
Depth of the product lines
Gillette’s Product Lines
& Mix
Width of the product mix
Blades and
razors
Toiletries
Mach 3
Sensor
Trac II
Atra
Swivel
Double-Edge
Lady Gillette
Super Speed
Twin Injector
Techmatic
Series
Adorn
Toni
Right Guard
Silkience
Soft and Dri
Foamy
Dry Look
Dry Idea
Brush Plus
Writing
instruments
Lighters
Paper Mate
Flair
Cricket
S.T. Dupont
Product Line Strategies
• Extensions: Adding
additional products
to an existing
product line in order
to compete more
broadly in the
industry.
• Contractions:
deleting products
from product lines if
there are low sales,
cannibalization,
obsolesce or few
resources.
The Product Life Cycle
Introductory Growth
Stage
Stage
Maturity
Stage
Decline
Stage Product
Dollars
Category
Sales
Product
Category
Profits
0
Time
Introduction Stage
•
•
•
•
•
•
•
High failure rates
Little competition
Frequent product modification
Limited distribution
High marketing and production costs
Negative profits
Promotion focuses on awareness and
information
• Intensive personal selling to channels
Growth Stage
•
•
•
•
•
•
•
•
Increasing rate of sales
Entrance of competitors
Market consolidation
Initial healthy profits
Promotion emphasizes brand ads
Goal is wider distribution
Prices normally fall
Development costs are recovered
Maturity Stage
•
•
•
•
•
•
•
•
Declining sales growth
Saturated markets
Extending product line
Stylistic product changes
Heavy promotions to dealers and consumers
Marginal competitors drop out
Prices and profits fall
Niche marketers emerge
Decline Stage
• Long-run drop in sales
• Large inventories of unsold items
• Elimination of all nonessential marketing
expenses
• Options for Deleting Products:
•
•
•
•
Maintaining
Deletion
Harvesting
Contracting
Marketing Strategies for PLC
INTRODUCTION
Product
Strategy
Distribution
Strategy
Promotion
Strategy
Pricing
Strategy
Limited models
Frequent
changes
GROWTH
More models
Frequent
changes.
Limited
Expanded
Wholesale/
dealers. Longretail distributors term relations
MATURITY
DECLINE
Large number
Eliminate
of models.
unprofitable
models
Extensive.
Margins drop.
Shelf space
Awareness.
Aggressive ads. Advertise.
Stimulate
Stimulate Promote heavily
demand.Sampling
demand
Higher/recoup Fall as result of
Prices fall
competition &
development
(usually).
efficient produccosts
tion.
Phase out
unprofitable
outlets
Phase out
promotion
Prices
stabilize at
low level.
Percentage of Adopters
Categories of Product
Adopters
Early
Innovators Adopters
2.5%
13.5%
Early
Majority
34%
Time
Late
Majority
34%
Laggards
16%
Diffusion Process and
PLC Curve
Introduction
Growth
Decline
Maturity
Sales
Product
life cycle
curve
Early majority
Late majority
Early adopters
Innovators
Laggards
Diffusion
curve
Pricing Concepts
Chapters 13
Price and Value
• Value = perceived benefits/price
• Price = perception of quality
• Price = consumer perception of
prestige
• Example:
– Swiss firm TAG HEUER
– Changed prices from $250 to $1000
– Sales volume increased sevenfold
Step 1: Pricing Objectives
• Survival
• Maximum current profit/profit
oriented pricing
• Maximum market share/sales
oriented pricing
• Maximum market skimming
• Product quality leadership
Step 2: Determining
Demand
2.50
S
Surplus
D
Price
2.00
Price
Equilibrium
1.50
1.00
Shortage
S
.50
0
20
40
60
80
Quantity demanded
100
D
120
Elasticity of Demand
Consumers sensitivity to price
changes
Price Goes...
Revenue Goes...
Demand is...
Down
Up
Elastic
Down
Down
Inelastic
Up
Up
Inelastic
Up
Down
Elastic
Up or Down
Stays the Same
Unitary Elasticity
Factors that Affect
Elasticity
• DEMAND LESS ELASTIC IF:
– Few or no substitutes
– Buyers don’t notice higher price
– Buyers are slow to change habits
– Buyers think higher prices are
justified
Step 3: Estimating Cost
• Variable costs – changes with level of output
• Fixed costs – no change with output level
• Marginal costs – the change in total costs
associated with a 1 unit change in output
• Average variable costs – total variable costs
divided by quantity of output
• Average total costs – total costs divided by
quantity of output
Step 4: Analyzing
Competition
• Analyze competitors costs, prices
and offers
Step 5: Methods of Setting
Prices
• Markup pricing
– Target return pricing
• Perceived value pricing
Step 6: Selecting Final
Price
• Psychological pricing
• Marketing mix
• Company policies
Promotion
Concepts
Chapter 16
What is Promotion?
Informing Reminding
Target
Audience
Persuading
Communication by
marketers that
informs, persuades,
and reminds
potential buyers of a
product in order to
influence an opinion
or elicit a response.
Developing Effective Marketing
Communications
•
•
•
•
•
•
•
•
Identify the target audience
Determine Communication objectives
Design the message
Select the communication channels
Budget
Determine the media mix
Measure the results
Manage the IMC process
Promotional Mix
Advertising
Elements
of the
Promotional
Mix
Public Relations
Personal Selling
Sales Promotion
Design the Message:
AIDA Concept
Action
Desire
Interest
Attention
AIDA and the
Promotional Mix
Awareness
Interest
Desire
Action
Advertising
Very
effective
Very
effective
Somewhat
effective
Not
effective
Public
Relations
Very
effective
Very
effective
Very
effective
Not
effective
Sales
Promotion
Somewhat
effective
Somewhat
effective
Very
effective
Very
effective
Personal
Selling
Somewhat
effective
Very
effective
Very
effective
Somewhat
effective
Designing the Message
• Message content
– Rational appeals, moral appeals, emotional
appeals
• Message structure
– One sided vs. two sided messages
• Message format
• Message source
– Source credibility
Select Communication
Channels
• Personal communication channels
• Nonpersonal communication channels
(which is what we will focus on for this
class)
Establishing the Budget
•
•
•
•
Affordable method
Percentage of sales method
Competitive parity method
Objective and task method
Factors Affecting the
Promotional Mix
Nature of Product
Stage in PLC
Target Market Factors
Factors
Affecting
Choice of
Promotional Mix
Type of Buying Decision
Promotion Funds
Push or Pull Strategy
Sales ($)
Product Life Cycle and the
Promotional Mix
Maturity
Introduction
Growth
Decline
Time
Light
Heavy use of
Advertising, advertising,
prePR for
introduction awareness;
Publicity
sales
promotion
for trial
Advertising,
PR, Brand
loyalty
Personal
Selling for
distribution
Ads
decrease.
Sales
Promotion,
Personal
Selling
Reminder &
Persuasive
AD/PR
decrease
Limited
Sales
Promotion,
Personal
Selling for
distribution
Push and Pull Strategies
PUSH STRATEGY
Manufacturer
promotes to
wholesaler
Wholesaler
promotes to
retailer
Retailer
promotes to
consumer
Consumer
buys from
retailer
Orders to manufacturer
PULL STRATEGY
Manufacturer
promotes to
consumer
Consumer
demands
product
from retailer
Retailer
demands
product
from wholesaler
Orders to manufacturer
Wholesaler
demands
product from
manufacturer
Distribution Concepts
Chapter 14 - 15
Value Networks &
Marketing Channels
• Value network: partnerships that a firm
creates to source, augment and deliver its
offerings.
• Marketing Channel: A set of interdependent
organizations that ease the transfer of
ownership as products move from producer
to business user or consumer.
• Functions of Channels:
– Specialization of labor
– Overcoming discrepancies & gaps
– Providing contact efficiency
Channel Structure for
Consumer Products
Direct
Channel
Producer
Retailer
Channel
Producer
Wholesaler Agent/Broker
Channel
Channel
Producer
Producer
Agents or
Brokers
Consumers
Wholesalers
Wholesalers
Retailers
Retailers
Retailers
Consumers
Consumers
Consumers
Alternative Arrangements
• Multiple channels – two+ channels to
distribute the same product
• Nontraditional channels – infomercials,
mail order, internet etc.
• Strategic channel alliances – use
another manufacturer’s already
established channel
Factors that Affect
Channel Choice
• Market factors
– Customer profiles
– Type of customer
– Market size and geographic location
• Product factors
– Product complexity
– Price
– PLC
• Producer factors
– Resources
– Desire for control
Levels of
Distribution Intensity
Intensity Level
Objective
Number of
Intermediaries
Intensive
Achieve mass market
selling.
Convenience goods.
Many
Selective
Work with selected
intermediaries.
Shopping and some
specialty goods.
Several
Exclusive
Work with single
intermediary. Specialty
goods and industrial
equipment.
One
Managing Channel Relationships –
Social Dimensions
• Channel power
• Channel control
• Channel conflict
– Horizontal conflict
– Vertical conflict
• Legal & ethical issues in channel
relations
Classification Summary
Type of Retailer
Service
Level
Assortment
Price
Gross
Margin
Department Store
Mod Hi-High
Broad
Mod-High
Mod High
Specialty Store
High
Narrow
Mod-High
High
Supermarket
Low
Broad
Moderate
Low
Convenience Store
Low
Med-Narrow Mod High
Mod High
Drugstore
Low-Mod
Medium
Moderate
Low
Full-line Discounter
Mod-Low
Med-Broad
Mod Low
Mod Low
Specialty Discounter
Mod-Low
Med-Broad
Mod Lo-low Mod Low
Warehouse Clubs
Low
Broad
Low-lower
Off-price Retailer
Low
Med-Narrow Low
Low
Restaurant
Low-High
Med-Narrow Low-High
Low-High
Low
Nonstore Retailing
Automatic Vending
Direct Retailing
Major Forms
of
Nonstore
Retailing
Direct Marketing
Electronic Retailing