Download Chapter 13 - Edwards School of Business

Chapter 13
Creating Marketing Strategies
Prepared by
Norm Althouse
University of Calgary
Copyright © 2011 by Nelson Education Ltd.
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Learning Outcomes
1 Describe what is meant by a product.
2 Explain the stages of the product life cycle.
3 Discuss the role of pricing and the strategies used for pricing products.
4 Explain distribution and distribution channels.
5 Illustrate how supply chain management can increase efficiency and
customer satisfaction.
6 Briefly list the goals of promotional strategy.
7 Discuss the elements of the promotional mix, and integrated marketing
communications.
Chapter 13
8 Identify the factors that affect the promotional mix.
9 List some of the trends in marketing.
Copyright © 2011 by Nelson Education Ltd.
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Creating the Marketing Mix
Chapter 13
Creating the marketing mix combines the four P’s into
a concise plan that will meet or exceed
the target market’s expectations
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What is a Product?
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Product
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Any good or service, along with its perceived
attributes and benefits, that creates value for
the customer.
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Chapter 13
Classifying Consumer Products
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Chapter 13
Classifying Business Products
Capital products
Large, expensive items with a long life span that
are purchased by businesses for use in making
other products or providing a service.
Expense items
Items, purchased by businesses, that are smaller
and less expensive than capital products and
usually have a life span of less than one year.
Copyright © 2011 by Nelson Education Ltd.
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Branding
Brand equity:
the value of company and brand names
Master brand:
a brand so dominant that consumers
think of it immediately when a product
is mentioned
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Brand loyalty:
a consumer’s preference for a
particular brand
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Benefits of Branding
1. Product Identification
–
brands allow marketers to distinguish their
products from all others
2. Repeat Sales
–
developing brand loyalty
3. New Product Sales
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–
brand equity fuels sales of new products
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Characteristics of Effective Brand Names
 Easy to pronounce
 Easy to recognize
 Easy to remember
 Short
 Distinctive, unique
 Describes the product
 Describes the product’s use
 Describes the product’s benefits
 Has a positive connotation
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 Reinforces the desired product image
 Is legally protectable in home and foreign
markets
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Levels of Brand Loyalty
Brand insistence
Brand preference
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Brand recognition
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Types of Brands
Manufacturer
Brands
Dealer
Brands
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Generic
Products
Brands that are owned by national
or regional manufacturers.
Brands that are owned by the
wholesaler or retailer.
Products that carry no brand name,
come in plain containers, and sell
for much less than
name-brand products.
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The Functions of a Package
Protect the product
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Help promote the product
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Labelling
Persuasive
labelling
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Informational
labelling
Focuses on a promotional
theme or logo – consumer
information is secondary
Designed to help
consumers make proper
product selections
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Warranties
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Warranty
Guarantees the quality of a good
or service.
Implied
Warranty
An unwritten guarantee that the
good or service is fit for the purpose
for which it was sold.
Express
Warranty
A written guarantee
Full
Warranty
The manufacturer must meet certain
minimum standards, including repair of
defects, product replacement, or
refunds.
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Product Development Process
1. Set new-product goals
2. Develop new-product ideas
3. Screen ideas/concepts
4. Develop the concept
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5. Test-market the new product
6. Introduce product to marketplace
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Chapter 13
The Product Life Cycle
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Chapter 13
Strategies for Success
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Chapter 13
Pricing Objectives
Profit maximization
Producing a product as long as
revenue exceeds the
cost of producing it.
Target return
on investment
The price of a product is set to
give a company the desired
profitability in terms of return
on its money.
Value pricing
Offering the target market a
high quality product at a
fair price and with good service.
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Chapter 13
How Managers Set Prices
Markup Pricing
A certain percentage
(the markup) is added to
the product’s cost to
arrive at the price.
Breakeven Point
(Breakeven Analysis)
The price at which a
product’s costs are
covered, so additional
sales result in profit.
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Markup Pricing
 Based on Cost
Markup percentage = markup amount ÷ item cost
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 Based on Selling Price
Markup percentage = markup amount ÷ selling price
Note: formulas on page 399 in the textbook are incorrect
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Breakeven Analysis
 Fixed costs – do not vary with different levels of output
 Variable costs – change with different levels of output
Breakeven point
(in Units)
=
Total Fixed Costs
Fixed-cost contribution*
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*(selling price per unit minus the variable costs per unit)
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Breakeven Analysis
$
Breakeven
point
Profit
Total
Revenue
Total
Costs
Loss
Variable
Costs
Fixed
Costs
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# of Units Sold
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Product Pricing
Price Skimming
Introducing a product
with a high initial price
and lowering the price
over time
Penetration Pricing
Selling new products at
low prices in the hope
of achieving a large
sales volume
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Chapter 13
Product Pricing
Leader Pricing
Pricing products below the normal markup
or below cost to attract customers to a
store where they would not otherwise
shop
Bundling
Grouping two or more related products
together and pricing them as a single
product
Odd-Even Pricing
Setting a price at an odd number to
connote a bargain and at an even
number to suggest quality
Prestige Pricing
Increasing the price of a product so that
consumers will perceive it as being of
higher quality, status, or value
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Distribution (Place)
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Distribution
(logistics)
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Efficiently managing the acquisition
of raw materials to the factory and
the movement of products from the
producer to industrial users
and consumers
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Chapter 13
Marketing Intermediaries
Agents and
Brokers
Agents are sales representatives of
manufacturers and wholesalers, and brokers
are entities that bring buyers and sellers
together.
Industrial
Distributors
Independent wholesalers that buy related
product lines from manufacturers and sell
them to industrial users.
Wholesalers
Firms that sell finished goods to retailers,
manufacturers, and institutions.
Retailers
Firms that sell goods to consumers and to
industrial users for their own consumption.
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Chapter 13
Channels of Distribution
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Functions of Distribution Channels
Reduce the number of transactions
Ease the flow of goods
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Perform needed functions
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Chapter 13
The Intensity of Market Coverage
Exclusive
Distribution
A manufacturer selects only one or
two dealers in an area to market its
products.
Selective
Distribution
A manufacturer selected a limited
number of dealers in an area (but
more than one or two) to market its
products.
Intensive
Distribution
A manufacturer tries to sell its
products wherever there are
potential customers.
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Responsibilities of Supply Chain Managers
 Managing the logistical components of the supply chain
 Sourcing and procurement
 Production scheduling
 Choosing a warehouse location and type
 Setting up a material-handling system
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 Making transportation decisions
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Transportation Decisions
Cost
Transit Time
Criteria
for
Mode of
Transportation
Reliability
Capability
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Accessibility
Traceability
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Chapter 13
Major Modes of Transportation
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Promotion
Promotion
Differential
Advantage
Chapter 13
(Competitive Advantage)
Copyright © 2011 by Nelson Education Ltd.
The attempt by marketers to
inform, persuade, or remind
consumers and industrial
users to engage in the
exchange process.
A set of unique features of
a product that the target
market perceives as
important and better than
the competition’s features.
Promotional Goals
1. Creating awareness
2. Getting consumers to try products
3. Providing information
4. Keeping loyal customers
5. Increasing the amount and frequency of use
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6. Identifying target customers
Copyright © 2011 by Nelson Education Ltd.
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Integrated Marketing Communications
The careful coordination of
all promotional activities
to produce a consistent,
unified message that is
customer focused.
Integrated
Marketing
Communications
Advertising
Personal
Selling
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Promotional
Mix
Public
Relations
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Sales
Promotion
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Factors that Affect the Promotional Mix
Nature of the Product
Market Characteristics
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Available Funds
Push and Pull Strategies
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Chapter 13
Push and Pull Promotional Strategies
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Trends in Marketing
Incorporating More Technology at All Levels
Yield Mangement Systems Help Companies
Maximize their Revenues
Category Management
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Outsourcing Logistics Functions
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Copyright © 2011 by Nelson Education Ltd.