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SUMMARY OF LEARNING GOALS
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, along with its perceived
attributes and benefits, that creates customer value. Tangible
attributes include the good itself, packaging, and warranties.
Intangible attributes are symbolic, like a brand’s image.
Most items are a combination of goods and services.
Services and goods are often marketed differently. Products are
categorized as either consumer products or industrial products.
Consumer products are goods and services that are bought and
used by the end users. They can be classified as unsought
products, convenience products, shopping products, or
specialty products, depending on how much effort consumers
are willing to exert to get them.
Industrial products are those bought by organizations for
use in making other products or in rendering services. Capital
products are usually large, expensive items with a long life
span. Expense items are typically smaller, less expensive items
that usually have a life span of less than a year.
Products usually have brand names. Brands identify
products by words, names, symbols, designs, or a combination
of these things. The two major types of brands are
manufacturer (national) brands and dealer (private) brands.
Generic products carry no brand name. Branding has three
main purposes: product identification, repeat sales, and new
product sales.
Often the promotional claims of well-known brands are
reinforced in the printing on the package. Packaging is an
important way to promote sales and protect the product. A
package should be easy to ship, store, and stack on a store
shelf.
The steps in new product development are setting new
product goals, exploring ideas, screening ideas, developing the
concept (creating a prototype and building the marketing
strategy), test-marketing, and introducing the product. When
the product enters the marketplace, it is often managed by a
product manager.
2
What are the stages of the product life cycle?
After a product reaches the marketplace, it enters the product
life cycle. This cycle typically has four stages: introduction,
growth, maturity, and decline (and possibly death). Profits
usually are small in the introductory phase, reach a peak at the
end of the growth phase, and then decline.
3
What strategies are used for pricing products?
Price indicates value, helps position a product in the
marketplace, and is the means for earning a fair return on
investment. If a price is too high, the product won’t sell well,
and the firm will lose money. If the price is too low, the firm
may lose money even if the product sells well.
The two main strategies for pricing a new product are price
skimming and penetration pricing. Price skimming involves
charging a high introductory price and then, usually, lowering
the price as the product moves through its life cycle.
Penetration pricing involves selling a new product at a low
price in the hope of achieving a large sales volume.
Pricing tactics are used to fine-tune the base prices of
products. Among these tactics are odd–even pricing and
prestige pricing. Setting a price at an odd number tends to
create a perception that the item is cheaper than the actual
price. Prices in even numbers denote quality or status. Raising
the price so an item will be perceived as having high quality
and status is called prestige pricing. Consumers pay more
because of the perceived quality or status.
4
Describe the distribution channels and the manner in
which they are organized.
Distribution channels are the series of marketing entities
through which goods and services pass on their way from
producers to end users. Distribution systems focus on the
physical transfer of goods and services and on their legal
ownership at each stage of the distribution process.
A vertical marketing system is a planned, hierarchically
organized distribution channel. There are three types of vertical
marketing systems: corporate, administrative, and contractual.
In a corporate system, one firm owns the entire channel. In an
administrative system, a strong organization takes over as
leader and sets channel policies. In a contractual distribution
system, the independent firms coordinate their distribution
activities by written contract.
5
What are the logistical functions of the supply chain?
The logistics supply chain consists of several interrelated and
integrated logistical components: (1) sourcing and procurement
of raw materials and supplies, (2) production scheduling, (3)
warehousing, (4) materials-handling, and (5) transportation.
Integrating and linking all of the logistics functions of the
supply chain is the logistics information system. Information
technology connects the various components and partners of
the supply chain into an integrated whole. The supply chain
team, in concert with the logistics information system,
orchestrates the movement of goods, services, and information
from the source to the consumer. Supply chain teams typically
cut across organizational boundaries, embracing all parties who
participate in moving product to market. Procurement deals
with the purchase of raw materials, supplies, and components
according to production scheduling. Warehousing provides
storage of goods until needed by the customer while the
materials-handling system moves inventory into, within, and
out of the warehouse. Finally, the major modes of
transportation include railroads, motor carriers, pipelines,
waterways, and airways.
6
Explain the promotional mix and integrated marketing
communications.
The unique combination of advertising, personal selling, sales
promotion, and public relations used to promote a product is
the promotional mix. Advertising is any paid form of
nonpersonal promotion by an identified sponsor. Personal
selling consists of a face-to-face presentation in a conversation
with a prospective purchaser. Sales promotion consists of
marketing activities—other than personal selling, advertising,
and public relations—that stimulate consumers to buy. These
activities include coupons and samples, displays, shows and
exhibitions, demonstrations, and other selling efforts. Public
relations is the marketing function that links the policies of the
organization with the public interest and develops programs
designed to earn public understanding and acceptance.
Integrated marketing communications is the careful
coordination of all promotional messages for a product or
service to assure the consistency of messages at every contact
point where a company meets the consumer—advertising, sales
promotion, personal selling, public relations, as well as direct
marketing, packaging, and other forms of communication.
Marketing managers carefully coordinate all promotional
activities to ensure that consumers see and hear one message.
Integrated marketing communications has received more
attention in recent years due to the proliferation of media
choices, the fragmentation of mass markets into more
segmented niches, and the decrease in advertising spending in
favor of promotional techniques that generate an immediate
sales response.
7
Describe the trends affecting elements of the marketing
mix.
Yield management systems, category management, and
guerrilla marketing are key trends in maximizing the
effectiveness of the marketing mix.