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Everything to Marketing...
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• A Business Organization is an integrated human matrix of interdependent entrepreneurs with subordinated goals aligned to the business of an organization for creating profit by satisfying the demand of market and in turn creating wealth for its stake holders
Defining a Business Organization
• Production of goods or creation of services.
•Marketing those goods and services.
Businesses have two major functions:
Copyright © 2001 by Harcourt, Inc. All rights reserved.
BUSINESSORGANISATION
PRODUCE SELL
VALUE CHAIN
The Operations System
• People
• Technology
• Capital
• Equipment
• Materials
• Information
Inputs Outputs
• Goods
• Services
TransformationProcess
© Prentice Hall, 2002 19-5
Definition
• Value Delivery Network– The network made up of the company,
suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system.
Value Chain Management• What is Value Chain Management?
– value - performance characteristics, features, and attributes, and any other aspects of goods and services for which customers are willing to give up resources• organizations must provide value to attract and keep
customers• value provided through the transformation of raw
materials into some product or service that end-users need where, when, and how they want it
© Prentice Hall, 2002 19-7
Fundamental Principles of Marketing
Customer Value
Differentiation Focus
WHAT IS VALUE ?
• Value is perceived benefits over perceived cost
• V= PB/PC
• HERE PB = ∑ Functional + Mental + Emotional Benefits
• HERE PC = ∑ Time + Money + Energy spent
Customer Value
• Goal: – create customer value that is greater than the value created
by competitors
• Strategy: – Expand or improve product and/or service benefits
– Reduce the price
– Combine these two elements
V = PB PC
Value Chain Management (cont.)
• Goal of Value Chain Management– create a value chain strategy that meets and exceeds
customers’ needs• recognizes that ultimately customers are the ones with power
– create a full and seamless integration among all members of the chain
• sequence of participants work together as a team
• each adds a component of value to the overall process
• the better the collaboration among chain participants, the better the customer solutions
© Prentice Hall, 2002 19-11
BUSINESSORGANISATION
PRODUCE SELL
VALUE CHAIN
SO ……………..HOW DOES BUSINESS ORGANISATIONS SELL ?AND WHERE DO THEY SELL ? WHAT IS A MARKET ?WHERE IS THE MARKET?WHAT IS MARKETING?HOW IS MARKETING DONE?WHAT ARE MARKETING STRATEGIES?
• Consumer
• Business
SALESPEOPLE WORK IN TWO MARKETS
Copyright © 2001 by Harcourt, Inc. All rights reserved.
Household –Is the individual who buys goods for his or her own use. Decision-making unit buying for personal use.
Firm – an organization that produces goods and services.
Government – an organization that has two functions: the provision of goods and services to households and firms and the redistribution of income and wealth.
There are three groups of customers:
Copyright © 2001 by Harcourt, Inc. All rights reserved.
BUSINESSORGANISATION
PRODUCE SELLING
VALUE CHAIN
MARKET TARGET CUSTOMER AUDIENCE
CONSUMERS(PERSONAL ENDUSE)
BUSINESS(RESALE, REMAKE
REUSE)
HOUSEHOLD MIDDLEMEN & FIRMS
GOVERNMENT & INSTITUTIONS
RETAILERSWHOLESALER, AGENT, BROKER, COMPANIES
Consumer Behaviour 2nd Ed. © Copyright 2001 Pearson Education Australia
The Marketing ConceptThe Marketing Concept
• To be successful, a company must determine the needs and wants of specific target markets and deliver the desired satisfactions better than the competition.
Consumer Behaviour 2nd Ed. © Copyright 2001 Pearson Education Australia
WHAT’S MARKETING IS ALLABOUT
• A HUMAN ACTIVITY DIRECTED AT SATISFYING NEEDS AND WANTS THROUGH EXCHANGE PROCESSES
PHILIP KOTLER
• IT IS HE PERFORMANCE OF BUSINESS ACTIVITIES THAT DIRECT THE FLOW OF GOODS AND SERVICES FROM PRODUCER TO CONSUMERS
AMERICAN MARKETING ASSOCIATION
What is Marketing??A. “A set of decisions and processes that every
organization uses to carry out an exchange with others”
B. “A series of activities leading to an exchange transaction between a seller and a buyer at a profit”
C. “The process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy organizational objectives”
D. “Everything from the formation of an idea to satisfying a consumer need”
MARKETING CONTINUED…
IT IS THE PROCES OF
• IDENTIFYING CUSTOMER NEEDS
• CONCEPTUALISING THOSE NEEDS IN TERMS OF ANORGANISATION’S CAPACITY TO PRODUCE.
• COMMUNICATING THAT CONCEPTUALISATION TO THE APPROPRIATE LAWS OF POWER IN THE ORGANISATION.
• CONCEPTUALISING THE CONSEQUENT OUTPUT IN TERMS OF THE CUSTOMER NEEDS EARLIER IDENTIFIED, AND
• COMMUNICATING THAT CONCEPTUALISATION TO THE CUSTOMER
JOHN.A. HOWARDCOLUMBIA UNIVERSITY
1973
MARKETING CONTINUED…
• IT IS THE PERFORMANCE OF THOSE ACTIVITIES WHICH SEEK TO ACCOMPLISH AN ORGANISATION’S OBJECTIVES BY ANTICIPATING CUSTOMER OR CLIENT NEEDS AND DIRECTING A FLOW OF NEED- SATISFYING GOODS AND SERVICES FROM PRODUCER TO CUSTOMER OR CLIENT
E.JEROME MC CARTHY
MICHIGAN STATE UNIVERSITY
SELLING AND ADVERTISING IS JUST THE TIP OF ICEBERG WHILE MARKETING IS THE ICEBERG ITSELF.
Marketing Defined
“Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives.”
The Art of Marketing & Sales
• Marketing is about Loving a Customer
• Sales is about marrying a customer
• Marketing Creates Value and Sales Delivers it
• The art of marketing is connecting Value with Values
• We are an expression of others U α ∑ Pn
• A successful Marketer is able to connect within self and also able to connect with others
Marketing vs. Selling
Customer Oriented
Pull Strategy
Value/Consumer Satisfaction
Need Based
Seller Oriented
Push Strategy
Revenue/ Profits
Product Based
Source Dr. Pramod Kumar “ An introduction to sales management”
Pulling and PushingPromotional Strategies
• Pulling strategyPulling strategy: promotional effort by a seller to stimulate demand among final users, who will then exert pressure on the distribution channel to carry the good or service, pulling it though the marketing channel
• Pushing strategyPushing strategy: promotional effort by a seller to members of the marketing channel intended to stimulate personal selling of the good or service, thereby pushing it through the marketing channel
MARKETING
IS
A
WAY
OF
LIFE
NO MORE SELLING FROM TODAY
THERE WILL ALWAYS, ONE CAN ASSUME, BE NEEDFOR SELLING. BUT THE AIM OF MARKETING ISTO MAKE SELLING SUPERFLUOUS.
THE AIM OF MARKETING IS TO KNOW AND UNDER-STAND THE CUSTOMER SO WELLTHAT THE PRODUCT OR SERVICE FITS HIM AND SELLS ITSELF.
IDEALLY, MARKETING SHOULD RESULT IN A CUSTOMER WHO IS READY TO BUY.
ALL THAT SHOULD BE NEEDED THEN IS TO MAKETHE PRODUCT OR SERVICE AVAILABLE.
PETER DRUCKER
AND ULTIMATELY
MARKETING IS WAR
WEAPONS MAY CHANGE BUT WARFARE IS BASED ON TWO IMMUTABLE CHARACTERISTICS
STRATEGIES ANDTACTICS
KARL VON CLAUSEWITZ AUTHOR OR “ON WAR”
THE TOOLS FOR MARKETING WARFARE
The Marketing Mix: Four P’s • Product: how to develop the firm’s products;
how to develop tangible and intangible product features that meet customer needs in diverse markets
• PRODUCT: IT’S MORE THAN YOU MIGHT THINK– A good is a physical object that can be purchased.– Service is an action or activity done for others for a
fee.– Product refers to both goods and services.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
• Pricing: how to price the products; how to develop pricing policies that bring in revenues and strategically shape the firm’s competitive environment
• Promotion: how to sell the products; how to devise ways to enhance the desirability of the product in the eyes of potential and actual buyers
• Place (distribution): how to distribute the product to customers; how to get the products into the hands of customers via transportation and merchandising
M a rk etin g M ix
FOUR MARKETING-MIX ELEMENTS AND FOUR PROMOTION ACTIVITIES
Product Price Place Promotion
Copyright © 2001 by Harcourt, Inc. All rights reserved.
MARKETING MIXIt is the set of marketing tools that the firm uses to pursue its marketing objectives
in the target market.
MARKETING MIX
TARGETMARKET
PRODUCT PLACE
QualityFeaturesOptionsStyleBrand NamePackagingSizesServicesWarrantiesReturns
ChannelsCoverageLocationsInventoryTransport
PRICE PROMOTION
List PriceDiscountsAllowancesPayment PeriodCredit terms
AdvertisingPersonal SellingSale promotionPublic Relations
The Four Ps of the Marketing Mix
BUSINESS ORGANISATION
MARKET
MARKETING + SELLING
PRODUCT PROMOTIONPRICE PLACE
BRAND
IMAGE
QUALITY
VARIETY
SIZES
WARRANTY
SERVICE
MRP
DISCOUNT
FINANCING
CREDIT
ADVERTISING
Personal Selling`
Sales Promotion
PUBLICITY
PR
MASS
DISTRIBUTION
INTENSIVE
DISTRIBUTION/ EXTENSIVE DISTRIBUTION
EXCLUSIVE OR SELECTIVE DISTRIBUTION
CHANNEL STRUCTURE
RETAILER
WHOLE SELLER/AGENT/BROKER
PHYSICAL DISTRIBUTION
PRODUCT PRICE PLACE PROMOTION
Brand name Credit term Channels Advertising
Features Discounts Inventory Coupons
Image List price Locations Free samples
Packaging Promotional allowances Retailers Personal selling
Quality level Transportation Product displays
Returns Wholesalers Publicity
Services Sales management
Sizes Trade shows
Warranties
EXAMPLES OF EACH MARKETING-MIX ELEMENT
Copyright © 2001 by Harcourt, Inc. All rights reserved.
MARKETING MANAGEMENTMarketing is so basic that it can’t be considered a separate function. It is the whole business seen from the point of view of its final result,that is, from the customer’s point of view
… Peter Drucker.
Key terms to be understand
-Needs - Wants - Demands -Product -Utility -Value -Satisfaction
Core concepts of Marketing Management
•Production Concept•Product Concept•Selling Concept•Marketing Concept
FUNDAMENTAL TERMINOLOGIES
NEEDS : FELT DEPREIVATIONWANTS : FORM TAKEN BY HUMAN NEEDS AS THEY ARE SHAPED BY
CULTURE AND PERSONALITY.DEMAND : WANTS BACKED BY PURCHASING POWER.PRODUCT : ANY OFFERING TO SATISFY NEEDS AND WANTS MAINLY
PHYSICAL OBJECTS, SERVICES, INFORMATION, PROPERTIES EXPERIENCES, EVENTS, PLACES, ORGANISATIONS, IDEAS, PERSONS.
FEATURES : PHYSICAL ATTRIBUTES OF THE PRODUCTADVANTAGES : OPERATIONAL FEATURES OF THE PRODUCTBENEFITS : IMPLICIT, SUBJECTIVE OUTCOME AFTER USE OF THE
PRODUCT WHICH LEADS SATISFACTION.VALUE : IT IS (FUNCTIONAL BENEFIT+ EMOTIONAL BENEFIT)/
(MONEY + TIME+ ENERGY + PSYCHIC COSTS)SATISFACTION : PERFORMANCE VS EXPECTATION FUNCTIONEXCHANGE : OBTAINING OF SOMETHING BY OFFERING SOMETHING ELSE
IN RETURN.TRANSACTION : MARKETING’S UNIT OF MEASUREMENT OF THE EXCHANGE.
CONCEPTS IN MARKETING
• PRODUCTION CONCEPT : WIDELY AVAILABLE AND INEXPENSIVE PRODUCTS WILL BE PREFERRED.
• PRODUCT CONCEPTS : MOST QUALITATIVE, HIGH PERFORMING AND INNOVATIVE FEATURES ORIENTED
PRODUCTS WILL BE PREFERRED.
• SELLING CONCEPTS : IF LEFT ALONE, CONSUMERS AND BUSINESS WON’T BUY ENOUGH OF PRODUCTS SO DO AGGRESSIVE SELLING
• MARKETING CONCEPT : MEETING NEEDS PROFITABLY; FIND WANTS AND FILL THEM;
LOVE THE CUSTOMER, NOT THE PRODUT;HAVE IT YOUR WAY… BURGER KINGYOU’RE THE BOSS… UNITED AIRLINES;PUTTING PEOPLE FIRST BRITISH AIRWAYS;
• SOCIAL MARKETING CONCEPTS: GIVE TASTE BUT NOT AT THECOST OF HEALTH
Exchange & Transactions
Five conditions for exchange potential
1. There are at least two parties2. Each party has something of value to other party.3. Each party is capable of communication and delivery.4. Each party is free to accept or reject the offer.5. Each party believers it is appropriate or desirable to deal with the other party.
Exchange is a process of value creation.
Transaction involves –two things of some value, agreed upon Conditions, a time of agreement, and a place of agreement and Above all a legal system to endorse it all.
STARTINGPOINT
FOCUS
MEANS
ENDS
SELLINGCONCEPT
FACTORY
EXISTINGPRODUCTS
SELLING/PROMOTING
PROFITS THROUGHSALES VOLUME
MARKETINGCONCEPT
MARKET
CUSTOMERNEEDS
INTEGRATEDMARKETING
PROFITS THROUGHCUSTOMERSATISFACTION
DIFFERENCES BETWEEN PRODUCTION-ORIENTED AND MARKET-ORIENTED ORGANIZATIONS
Business activity or function
Product offering
Product line
Pricing
Research
Packaging
Credit
Promotion
Production orientation
Company sells what it can make; primary focus on functional performance and cost.
Narrow.
Based on production and distribution costs.Technical research, focus on product improvement and cost cutting in the production process.
Protection for the product; minimize costs.
A necessary evil; minimize bad debt losses.
Emphasis on product features, quality and price.
Marketing orientation
Company makes what it can sell; primary focus on customers’ needs and market opportunities.
Broad.
Based on perceived benefits provided.
Market research; focus on identifying new opportunities and applying new technology to satisfy customer needs.
Designed for customer convenience; a promotional tool.
A customer service; a tool to attract customers.
Emphasis on product benefits and ability to satisfy customer’s needs orSolve problems.
Product Oriented vs Market Oriented Concept
Revlon
Ikea
Xerox
Bendigo Fertilisers
Esso
Columbia Pictures
Encyclopedia Britannica
Qantas
Kodak
We make cosmetics
We make furniture
We make copiers
We sell fertiliser
We sell petrol
We make movies
We sell encyclopedias
We run planes
We produce film
We sell hope
We create democracy
We improve office productivity
We improve agriculturalproductivityWe supply energy
We market entertainment
We are in the informationproduction and supply business
We bring people together
We bind families together
Company Product Oriented Market Oriented
How the Internet is Affecting the Four ‘P’s
• Place– From market place to market space (no borders!)
• Product– From batches to custom orders (CUSTOMer)
• Price– From cost plus to value minus (bidding, i.e. E-Bay)
• Promotion– From monologue to dialogue (interactive)
The Societal Marketing ConceptThe Societal Marketing Concept
• All companies prosper when society prospers.• Companies as well as individuals, would be better
off if social responsibility was an integral component of every marketing decision.
• Requires all marketers adhere to principles of social responsibility in marketing of their
goods and services endeavour to satisfy the needs and wants of their target
markets in ways that preserve and enhance the well-being of consumers
and society as a whole.
“The behaviour that consumers display in seeking, purchasing,
using, evaluating, and disposing of products and services that they expect will satisfy their personal
needs”- Schiffman et al (2001: 5)
Consumer Behaviour
The Scope of Consumer BehaviourThe Scope of Consumer Behaviour• How do individuals make decisions to spend their
resources (time, money, effort)? Includes:– what they buy,
– why they buy it,
– when they buy it,
– where they buy it,
– how often they buy it, and
– how often they use it.
• How do individuals dispose of their once-new purchases? Do they store it, throw it or give it away, sell it, rent it, or lend it out?
Firm’s Marketing Efforts1. Product2. Promotion3. Price4. Channels of distribution
Sociocultural Environment1. Family2. Informal sources3. Other noncommercial
sources4. Social class5. Subculture and culture
Output
Process
Input
Ext
ern
al I
nfl
uen
ceC
onsu
mer
Dec
isio
n M
akin
gP
ost
dec
isio
n
Beh
avio
r
Post purchase Evaluation
Purchase1. Trial2. Repeat purchase
Need Recognition
Pre-purchase Search
Evaluation of Alternatives
Psychological Field1. Motivation2. Perception3. Learning4. Personality5. Attitudes
Experience
Figure 1-2A Simplified Model of Consumer Decision Making
Pre-purchase activities
Purchase/Selection
Post-purchase activities
Consumer Decision ProcessesConsumer Decision Processes
Decision Making ModelDecision Making Model
Need Recognition
Information SearchExternal External SearchSearch
Internal Search
Pre-purchase Evaluation
Purchase
Consumption, Post-consumption Evaluation & Divestment
Individual Influence
Individual Influence
Environmental Influences
Environmental Influences
Individual InfluencesIndividual Influences
Individual Determinants
of Consumer Behavior
Demographics, Geographic's
Intentions, Attitudes, Beliefs
& Feelings
Consumer MotivationInformation Processing
Consumer Knowledge &
Behavioral Learning
Psychographics & Behavior-
graphic
Environmental InfluencesEnvironmental Influences
Environmental Influences of Consumer Behavior
Culture, Ethnicity &
Social Class
Group, Family & Personal
Influences
Overall Model Of Consumer BehaviorOverall Model Of Consumer Behavior
PRODUCT
Definitions
• Product– Anything offered to a market for attention,
acquisition, use, or consumption that might satisfy a need or want.
• Service– Any activity or benefit that one party can
offer to another that is essentially intangible and does not result in ownership of anything.
A GOOD/SERVICE CONTINUUM
R elativ ely P ure
G o o d s Salt Soup
R elativ ely P ure
Serv ices B aby- sitt in g I n suran ce Teach in g
Serv ice- I n ten sive
G o o d s A utom obiles
G o o d s- I n ten sive Serv ices
A ir travel
H yb rid s R estau ran ts
Copyright © 2001 by Harcourt, Inc. All rights reserved.
SERVICES ARE PRODUCTS
They present their own selling challenges and opportunities:
• Intangibility – customers cannot sample.
• Inseparability – cannot be separated from the seller.
• Heterogeneity – cannot standardize output.
• Perishability and fluctuating demand – highly perishable, seasonal fluctuations.
• A tough sell – most challenging sales job.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
What is a Product?
• Product and Service Classifications– Organizations, persons, places, and ideas
• Organizational marketing makes use of corporate image advertising
• Person marketing applies to political candidates, entertainment sports figures, and professionals
• Place marketing relates to tourism
• Social marketing campaigns promote ideas
What is a Product?
• Product and Service Classifications– Consumer products– Industrial products
• Materials and parts
• Capital items
• Supplies and services
PRODUCT ANALYSIS
PRODUCT:
A PRODUCT IS SOMETHING THAT CAN BE OFFERED TO A MARKET FOR ATTENTION, ACQUISITION, USE OR CONSUMPTION:PRODUCT IS A SET OF TANGIBLE AND INTANGIBLE ATTRIBUTES THAT LEADS TO CUSTOMER SATISFACTION
IT INCLUDES
PHYSICAL OBJECTSSERVICESPERSONALITIESPLACESORGANIZATIONS, ANDIDEA
PRODUCT ATTRIBUTESQUALITY, FEATURES, DESIGN ADVANTAGE, BENEFITS
Feature
• A product feature is any physical characteristic of a product.
The Product’s Features : So What ?
Size Terms Packaging Color
Quantity Flavour Taste Price
Service Quality Shape Uses
Delivery Ingredients Technology
Advantage
• A product advantage is the performance characteristic of a product that describes how it can be used or will help the buyer.
• It is the fastest-selling soap on the market.
• You can store more information and retrieve it more rapidly with our computer.
• This machine will copy on both sides of the page instead of only one.
PRODUCT ATTRIBUTESQUALITY, FEATURES, DESIGN ADVANTAGE, BENEFITS
Benefit
• A product benefit is a favourable result the buyer receives from the product because of a particular feature or advantage that has the ability to satisfy a buyer’s need.
Two-carat diamond ring -- image of success, investment, or to please spouse.
Camera film -- memories of places, friends, and family.
STP motor oil -- engine protection, car investment, or peace of mind.
Movie tickets -- entertainment, escape from reality, or relaxation.
• General Example : Vacuum cleaner salesperson to householder. “This vacuum cleaner’s high speed motor (feature) works twice as fast (advantage) with less effort (advantage), saving you 15 to 30 minutes in cleaning time (benefit) and the aches and pains of pushing a heavy machine (benefit).
PRODUCT HIERARCHY• Need family. The core need that underlies the product family. Example : security.
• Product family All the product classes that can satisfy a core need with more or less effectiveness. Example : savings and income
• Product class. A group of products within the product family that are recognized as having a certain functional coherence. Example : financial instruments.
• Product line.. A group of products within a product class that are closely related because they function in a similar manner, or are sold to the same customer groups, or are marketed through the same types of outlets, or fall within given price ranges. Example : life insurance.
• Product type. Those items within a product line that share one of several possible forms of the product. Example : term life.
• Brand. The name associated with one or more items in the product line that is used to identify the source or character of the item(s). Example : Prudential.
• Item. A distinct unit within a brand or product line that is distinguishable by size, price appearance, or some other attribute. The item is called a stockkeeping unit, or product variant. Example : Prudential renewable term insurance.
PRODUCT-LINE DECISIONSA Product line is a group of products that are
closely related because they function in a similar manner, are sold to the same customer groups, are marketed though the same types of outlets, or fall within given price ranges.
A GROUP OF PRODUCTS WITHIN A PRODUCT CLASS THAT ARE CLOSELY RELATED
PRODUCT - MIX
THE COMPOSITE OF PRODUCTS OFFERED FOR SALE BY A FIRM OR BUSINESS UNIT
WIDTH + LENGTH + DEPTH
PRODUCT WIDTH
NUMBER OF DIFFERENT PRODUCT LINES IN A COMPANY
PRODUCT LINE - LENGTHS
TOTAL NUMBER OF ITEMS IN PRODUCT - MIX
PRODUCT DEPTH
VARIANTS OFFERED IN EACH PRODUCT IN THE LINENUMBER OF VERSIONS OFFERED OF EACH PRODUCT IN THE LINE
PRODUCT – LINE CONSISTENCY
PRODUCT LINES: HOW CLOSELY THEY ARE RELATED IN:
END - USE
PRODUCTION REQUIREMENTS
DISTRIBUTION CHANNELS ETC.
PRODUCT-MIX DECISIONSA product mix (also called product assortment is the
set of all product lines and items that a particular seller offers for sale to buyers.
----------------------------------------------------------------Product-Mix Width
Detergents Toothpaste Bar Soap Disposable CoffeeDiapers
Ivory Snow 1930 Gleem 1952 Ivory 1879 Pampers 1961 Folger’s 1963 Dreft 1933 Crest 1955 Camay 1927 Luvs 1975 Instant Folger’s 1963 Tide 1946 Denquel 1985 Lava 1928 High Point Instant 1975 Joy 1949 Kirk’s 1930 Folger’s Flaked Coffee 77 Cheer 1950 Zest 1952 Folger’s Decaffeinated 84 Oxydol 1952 Safeguard 1963 Dash 1954 Coast 1974 Cascade 1955 Duz 1956 Ivory Liquid 1957 Gain 1966 Dawn 1972 Era 1972 Bold 3 1976 Solo 1979
Product item 1Product item 2Product item 3Product item 4
Product line depth
Product mix width Product line 1 Product line 1 Product line 2Product line 2 Product line 3 Product line 3
Product Mix
The Product Offering
Core Benefit
Generic Product
Expected Product
Augmented Product
Potential Product
Source : Adapted from: P. Kotler, Marketing Management, 1994
What is a Product?• Kotler’s
Five levels to a product:
Generic Product
CORE BENEFIT
Expected Product
Augmented Product
Potential Product
What is a Product?• Kotler’s
Five levels to a product:
CORE BENEFIT
Generic Product
Expected Product
Augmented Product
Potential Product
The Fundamental Need or Want that consumers satisfy by consuming the product or service
What is a Product?• Kotler’s
Five levels to a product:
CORE BENEFIT
Expected Product
Augmented Product
Potential Product
Generic Product
Basic Version of the product containing only those elements absolutely necessary to function. No distinguishing features.
What is a Product?• Kotler’s
Five levels to a product:
CORE BENEFIT
Augmented Product
Potential Product
Generic Product
Expected Product
Attributes and Characteristics that buyers normally expect and agree to when they purchase a product
What is a Product?• Kotler’s
Five levels to a product:
CORE BENEFIT
Potential Product
Generic Product
Expected Product
Augmented Product
Additional product attributes, benefits, or related services that distinguish the product from competitors
What is a Product?• Kotler’s
Five levels to a product:
CORE BENEFIT
Generic Product
Expected Product
Augmented Product
Potential Product All the augmentations and transformations that a product might ultimately undergo in the future
What is a Product?• Kotler’s
Five Levels to a Product:
Generic Product
CORE BENEFIT
Expected Product
Augmented Product
Potential Product
The Fundamental Need or Want that consumers satisfy by consuming the product or service
Generic ProductBasic Version of the product containing only those elements absolutely necessary to function. No distinguishing features.
Expected ProductAttributes and Characteristics that buyers normally expect and agree to when they purchase a product
Augmented ProductAdditional product attributes, benefits, or related services that distinguish the product from competitors
Potential ProductAdditional Product attributes, benefits, or related services that distinguish the product from competitors
Three Levels of Product
Corebenefit
or service
Augmentedproduct
Actual Formalproduct
Coreproduct
Installation
Warranty After-sale service
Delivery and credit
Packaging
Brandname
Features
Quality level Design
Figure 8-1
PRODUCT CLASSIFICATIONS• Durable Goods, Nondurable
Goods and services
• Nondurable goods. Nondurable goods are tangible goods that normally are consumed in one or a few uses. Examples include beer, soap, and salt. Since theses goods are consumed fast and purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference.
• Durable goods. Durable goods are tangible goods that normally survive many uses. Example include refrigerators, machine tools, and clothing. Durable products normally require more personal selling and service, command a higher margin, and require more seller guarantees.
• Services. Services are activities, benefits, or satisfactions that are offered for sale. Examples include haircuts and repairs. Services are intangible, inseparable, variable, and perishable. As a result, they normally require more quality control, supplier credibility, and adaptability.
PRODUCT CLASSIFICATIONS• Consumer-Goods Classification• Convenience goods. Goods that the customer usually purchases frequently,
immediately, and with the minimum of effort in comparison and buying. Example include tobacco products, soap, and newspapers.
• Shopping goods. Goods that the customer, in the process of selection and purchase, characteristically compares on such bases as suitability, quality, price and style. Examples include furniture, clothing, used cars, and major appliances.
• Specialty goods. Goods with unique characteristics and/or brand identification for which a significant group of buyers are habitually willing to make a special purchasing effort. Examples would include specific brands and types of fancy goods, cars, hi-fi components, photographic equipment, and men’s suits.
• Unsought goods. Goods that the consumer does not know about or knows about but does not normally think of buying. New products, such as smoke detectors and food processors, are unsought goods until the consumer is made aware of them through advertising. The classic examples of known but unsought goods are life insurance, cemetery plots, gravestones, and encyclopedias.
What is a Product?
• Convenience• Shopping• Specialty• Unsought
• Frequent purchases bought with minimal buying effort and little comparison shopping
• Low price• Widespread distribution• Mass promotion by
producer
Types of Types of Consumer Consumer ProductsProducts
What is a Product?
• Convenience• Shopping• Specialty• Unsought
• Less frequent purchases requiring more shopping effort and price, quality, and style comparisons.
• Higher than convenience good pricing
• Selective distribution in fewer outlets
• Advertising and personal selling by producer and reseller
Types of Types of Consumer Consumer ProductsProducts
What is a Product?
• Convenience• Shopping• Specialty• Unsought
• Strong brand preference and loyalty, requires special purchase effort, little brand comparisons, and low price sensitivity
• High price
• Exclusive distribution
• Carefully targeted promotion by producers and resellers
Types of Types of Consumer Consumer ProductsProducts
What is a Product?
• Convenience• Shopping• Specialty• Unsought
• Little product awareness and knowledge (or if aware, sometimes negative interest)
• Pricing varies
• Distribution varies
• Aggressive advertising and personal selling by producers and resellers
Types of Types of Consumer Consumer ProductsProducts
Summary Types of Consumer Products
• Convenience:– Frequent purchase, low involvement, widespread distribution,
mass promotion
• Shopping:– Less frequent purchase, more effort, comparison of brands,
price, and quality, selective distribution and promotion
• Specialty:– Strong brand preference, special purchase effort, low price
sensitivity, exclusive distribution, targeted promotion
• Unsought:– Low product awareness, negative interest, use personal selling
Table 8-1
PRODUCT CLASSIFICATIONS• Industrial-Goods Classification
• Materials and parts. Goods that enter the manufacturer’s product completely. They fall into two classes : raw materials, and manufactured materials and parts.
• Capital items. Goods that enter the finished product partly. They include two groups : Installations and accessory equipment.
• Supplies and services. Items that do not enter the finished product at all.
Summary Types of Business Products
• Materials and parts:– Raw and manufactured materials, parts
• Capital items:– Buildings and equipment used in buyer’s production or
operations, long useful life
• Supplies and services:– Operating supplies, repair and maintenance items, and services
04/13/23 2004 Pearson Education Canada Inc. 84
Individual Product Decisions
• Product attribute decisions– Product quality, features, style and design
• Branding decisions– Brand equity, name selection, manufacturer’s versus private
brands, licensing, co-branding, line and brand extensions
• Packaging– Hold and protect contents, identify and promote the product and
brand
• Labeling– Ingredients, directions for use, identify and promote
• Product support services– Repair and maintenance, accessories
The Product Manager’s Interactions
Product Manager
Advertising agency
Manufacturing and distribution
Research anddevelopment
Legal
Fiscal
Marketresearch
Sales
Publicity
Purchasing
Packaging
Promotion services
Media
Agency media dept.Company media dept. Media sales reps
Premium suppliersPremium screening Store testing Sampling Couponing
Designers Researchers
Suppliers
TradeResearchSuppliers
Suppliers
Trade
Suppliers
PRODUCT DEVELOPMENT AS INTENSIVE GROWTH STRATEGIES
ACQUISITION
• Search for or buy other companies
• Buy Patents• Buy
License/franchise`
NEW PRODUCT DEVELOPMENT
• In its own laboratory• Independent research
or New product development agencies
New Product - Original , Improved, Modified & New Brands
SIX CATEGORIES OF NEW PRODUCTS
• New-to-the-world product. New products that create an entirely new market.
• New-product line. New products that allow a company to enter an established market for the first time.
• Additions to existing product lines. New products that supplement a company’s established product lines.
• Improvements in/revisions to existing products. New products that provide improved performance or greater perceived value and replace existing products.
• Repositioning. Existing products that are targeted to new markets or market segments.
• Cost reductions. New products that provide similar performance at lower cost.
PROBLEMS IN NEW PRODUCT DEVELOPMENT IN FUTURE
• Shortage of important new-product ideas in certain areas. Some scientists think there are too few feasible new technologies with the investment potential that was provided by automobiles, television, computers, xerography, and wonder drugs in times past.
• Fragmented markets. Keen competition is leading to increasingly fragmented markets. Companies have to aim new products at smaller market segments rather than the mass market, and this means lower sales and profits for each product.
• Social and governmental constraints. New products have to satisfy public-interest criteria such as consumer safety and ecological compatibility. Government requirements have slowed down innovation in the drug industry and have complicated product-design and advertising decisions in such industries as industrial equipments, chemicals, automobiles, and toys.
• Costliness of the new-product-development process. A company typically has to generate many new-product ideas in order to finish with a few good ones. Furthermore, the company has to face rising R&D, manufacturing, and marketing costs.
contd…
PROBLEMS IN NEW PRODUCT DEVELOPMENT IN FUTURE
• Capital shortage. Some companies with good ideas cannot raise the funds needed to research them. Venture capital has, in recent years, become much more cautious.
• Shortened time span to completion. Many competitors are likely to get the same idea at the same time, and the victory often goes to the swiftest. Alert companies have to compress development time by using computer-aided design and manufacturing techniques, joint partners, early concept tests, and advanced marketing planning. Japanese companies see the challenge as “achieving better quality at a cheaper price at a faster speed than competitors.”
• Shorter life spans for successful products. When a new product is successful, rivals are to quick to imitate it that the new product’s life cycle is considerably shortened. Thus IBM finds dozens of imitators offering IBM-compatible personal computers; and Apple finds foreign “knockoffs” of its computers being sold in the Far East.
IDEA GENERATION
IDEA SCREENING
CONCEPT DEVELOPMENT & TESTING
MARKETING STRATEGY DEVELOPMENT
BUSINESS ANALYSIS
PRODUCT DEVELOPMENT
MARKET TESTING
COMMERCIALIZATION
NEW PRODUCT DEVELOPMENT DECESION PROCESS
Should we send the idea back for product development
Would it help to modify the product or marketing program
Lay future plans
DROP
NO
NO
NO
NO
NO
NO
NO
YES
YES
YES
YES
YES
YES
YES
YES
YES
NO
NO
YES
PRODUCT LFE CYCLE
PLC PORTRAYS DISTINCT STAGES IN THE SALES HISTORY OF A PRODUCT PLC STAGE IDENTIFICATIO RESULTS IN BETTER MARKETING PLANNING PLC CONCEPT SUGGESTS:
PRODUCTS HAVE A LIMITED LIFE
PRODUCT SALES PASS THROUGH DISTINCTSTAGES, EACH POSING DIFFERENTCHALLENGES TO THE SELLER
PRODUCTS REQUIRE DIFFERENT MARKETING STRATEGIES IN EACH STAGEOF THEIR LIFE-CYCLES.
SALES AND PROFITS
SALES
PROFIT
A B C D
A- INTRODUCTIONB- GROWTHC- MATURITYD- DECLINE
TIME
STYLES FASHIONS FADS
STYLE
FASHION
FADS
BASIC AND DISTINCTIVE MODE OFEXPRESSIONCLOTHING – FORMAL VS. CASUAL
CURRENTLY ACCEPTED OR POPULARSTYLE IN A GIVEN FIELD
FASHION THAT ENTER QUCKLY, PEAK EARLY AND DECLINES VERYFAST
SALES
STYLE
TIME
SALES
FASHION
TIME TIME
FAD
SALES
(A) (B) (C)
PHASE- I INTRODUCTION
STAGE JUST AFTER THE LAUNCH
SALES GROWTH SLOW
PROFITS MAY BE LACKING
BECAUSE OF:
LOW SALES VOLUME
HIGH DISTRIBUTION ANDPROMOTION EXPENSES
HIGH COST OF MARKETDEVELOPMENT
TYPICAL FEATURES:
HIGH PRODUCT FAILURE RATE LITTLE COMPETITION FREQUENT PRODUCT MODIFICATION HIGH PRODUCTION AND MARKETING COST HIGH DEALER MARGINS
PROMOTION
RAPID SKIMMING
SLOW SKIMMING
RAPIDPENETRATION
SLOWPENETRATION
HIGH
LOW
HIGH LOWDIFFERENT PRICE/PROMOTION LEVELSCAN BE COMBINED
PRICE
STRATEGY
DEVELOP PRODUCT AWARENESS
INTENSIVE PERSONAL SELLING
SALE TO HIGH INCOME GROUPS
HEAVY SAMPLING / COUPENING FOR CONVE-NIENCE GOODS EDUCATIONAL ADVERTISING +PERSONAL SELLING FOR SPECIALITY PDT.
LIMITED DISTRIBUTION
PHASE – II GROWTH
IF PRODUCT SATISFIED MARKET ….. IT WILL ENTERGROWTH PHASE
SALES GROW AT INCREASING RATE
COMPETITION BUILDS UP FAST
NO. OF DISTRIBUTION OUTLETS GO UP
PROFITS HEALTHY ….. REACH AT PEAKPROMOTION/ SALES RATIO GO DOWN
STRATEGY
EFFORT IS TO SUSTAIN RAPID MARKET GROWTH RATEAND CAPTURING A DOMINANT POSITION
IMPROVING PRODUCT QUALITY AND ADDING NEWFEATURES AND MODELS
MORE PRODUCT EXPOSUREENTRY INTO NEW MARKET SEGMENTSAGGRESSIVE DISTRIBUTION STRATEGY
SWITCH FROM CATEGORY RELATED PROMOTION TOBRAND PROMOTION
PHASE – III MATURITY
LONGEST STAGE OF PLC MOST PRODUCTS … IN THIS STAGE MOST MARKETING STRATEGIES FOR MATURE PRODUCTS
GENERAL FEATURES:
CUT- THROAT COMPETITION
PROFIT – EROSION
WEAK AND MARGINAL COMPETITORS DROP OUT
STRONG COMPETITORS TRY FOR COMPETITIVE ADVANTAGE
PRICES AND PROFITS CONTINUE TO FALL
DEALERS MARGINS SHRINK AND RELUCTANCE TO PUSH THE PEODUCTS
BASIC STRATEGIES IN MATURITY STAGE
(A) MARKET MODIFICATION
LIFE OF PRODUCT CAN BE EXPANDED BY MARKETSTRETCHINGCONCENTRATING ON MARKET SEGMENTS YETUNTAPPEDSTIMULATING INCREASED USAGE AMONGCURRENT USERSPROMOTING MORE VARIED USAGE AMONGCURRENT USERS
- INCREASING NO. OF USE SITUATIONS USE OF BOROLINE FOR MANY PURPOSES
(B) THE PRODUCT MODIFICATION
PRODUCT RELAUNCH TO BOOST UP SALES
QUALITY IMPROVEMENTINCREASING FUNCTIONAL PERFORMANCE OFPRODUCT – DURABILITY, RELIABILITY ETC.
AMBASSADOR
VESPA XE
PREMIERPADMINI
AMBASSADOR- NOVA
VESPA 150
NEW LATCHESUNHOLSTRY, ETC.
FEATURE IMPROVEMENT
ADDING UP NEW FEATURES THAT EXPANDSPRODUCT’S VERSTALITY, SAFETY, OR CONVENIENCE
FORHAN’SCOLGATE
FORHAN’S FLOURIDE
COLGATE FLOURIGUARD
ONE PROBLEM: FEATURES HIGHLY IMITABLE
STYLE IMPROVEMENT
INCREASING AESTHETIC APPEAL IN CONTRASTTO FUNCTIONAL APPEAL
CHANGE IN COLOR / TEXTURE / PACKAGE
(C) MARKET – MIX MODIFICATION
SALES STIMULATION BY ALTERING MARKETINGMIX
SLASHING PRICES TO ATTRACT NEW CONSUMERS
MORE EFFECTIVE ADVERTISING CAMPAIGNS
HEAVY USE OF SALES PROMOTION TECHNIQUES
ALTERING DISTRIBUTION - CHANNELS
PROBLEM: ALL METHODS ARE HIGHLY IMITABLE
PHASE-IV DECLINE
WARNING SIGNAL: PERMANENT DROP IN SALESMOST PRODUCTS EVENTUALLY ENTERS IN DECLINE PHASERATE OF DECLINE DEPENDS ON:
CHANGE IN CONSUMERS’ TASTES AND ADOPTIONOF SUBSTITUTE PRODUCTS
TECHNOLOGICAL INNOVATIONS DEVELOPMENTOF EFFECTIVE SUSTITUTES
DECLINING DEMAND …. FORCE MANY COMPETITORS OUT OF MARKET
PROMOTION BECOMES SELECTIVE LESS EXPOSURE
STRATEGY IN DECLINE PHASE
IDENTIFY WEAK PRODUCTS THROUGH COMPREHENSIVE MARKETING RESEARCH
DETERMINE APPROPRIATE RESPONSE:
TO STAY ON OR
TO DROP THE PRODUCT
IF DECISIONS IS TO STAY:
THREE OPTIONS:
(A) CONTINUATION STRATEGY
- CONTINUE PAST PRACTICES
(B) CONCENTRATION - CONCENTRATE RESOURCES IN STRATEGY STRONGEST MARKETS
(C ) HARVESTING - REDUCING EXPENSES TO STRATEGY INCREASE PROFITS
IF DECISION IS TO DROP:
-WHEN PRODUCT’S RATING FAIL TO MEET COMPETITION ON CERTAIN KEY CRITERIA
OPTION
DROPPING ITCOMPLETELY
SELLING OR TRANSFERING IT TOOTHER COMPANY
PHASE-IV DECLINE
WARNING SIGNAL: PERMANENT DROP IN SALESMOST PRODUCTS EVENTUALLY ENTERS IN DECLINE PHASERATE OF DECLINE DEPENDS ON:
CHANGE IN CONSUMERS’ TASTES AND ADOPTIONOF SUBSTITUTE PRODUCTS
TECHNOLOGICAL INNOVATIONS DEVELOPMENTOF EFFECTIVE SUSTITUTES
DECLINING DEMAND …. FORCE MANY COMPETITORS OUT OF MARKET
PROMOTION BECOMES SELECTIVE LESS EXPOSURE
PRICE
Pricing Products:
Pricing Considerations and Approaches
Price• Price is the sum of all the values that consumers
exchange for the benefits of having or using the product or service.
• “rent, tuition, fees, fares, tools, rates, premiums, honoraria, bribes, dues, bids, assessments, retainers, salaries, wages, commissions, taxes…”
• Why is it so dangerous? (1) Price is the only element in the marketing mix that produces revenues (PxQ); all others represent costs. (2) It’s the easiest element to change.
SELECTING THE PRICE OBJECTIVE
• Survival• Maximum Current Profit• Maximum Current Revenue• Maximum Sales Growth• Maximum Market Skimming• Product-Quality Leadership
PRICING OBJECTIVES-PROFIT OBJECTIVE
PROFIT MAXIMIZATIONTARGET RETURN
-SALES OBJECTIVEGROWTH IN SALESGROWTH IN MKT SHARESURVIVAL-MINIMUM SALESSTATUS QUO-VAL/MKT SHARE
-COMPETITION OBJECTIVETO MEET OR PREVENT COMPETITIONTO DESTROY COMPETITION
-DEVELOPMENT OBJECTIVE-EXPANDING EXISTING MARKETS (NON-USERS TO USERS) -PRODUCT DEVELOPMENT
DETERMINING DEMAND1. Unique value effect. Buyers are less price-sensitive when the product is more
unique.
2. Substitute awareness effect. Buyers are less price-sensitive when they are less aware of substitutes.
3. Difficult comparison effect. Buyers are less price-sensitive when they cannot easily compare the quality of substitutes.
4. Total expenditure effect. Buyers are less price-sensitive the lower the expenditure is as a ratio to their income.
5. End-benefit effect. Buyers are less price-sensitive the less the expenditure is to the total cost of the end product.
6. Shared cost effect. Buyers are less price-sensitive when part of the cost is borne by another party.
7. Sunk investment effect. Buyers are less price-sensitive when the product is used in conjunction with assets previously bought.
8. Price-quality effect. Buyers are less price-sensitive when the product is assumed to have more quality, prestige, or exclusiveness.
9. Inventory effect. Buyers are less price-sensitive when they cannot store the product.
Marketing
Objectives
SurvivalLow Prices to Cover Variable Costs
andSome Fixed Costs to Stay in
Business.Current Profit Maximization
Choose the Price that Produces the Maximum Current Profit, Etc.
Market Share LeadershipLow as Possible Prices to Become
the Market Share Leader.
Product Quality LeadershipHigh Prices to Cover Higher
Performance Quality and R & D.
Internal Factors Affecting Pricing Decisions: Marketing Objectives
Types of Cost Factors that Affect Pricing Decisions
Total CostsSum of the Fixed and Variable Costs for a Given
Level of Production
Total CostsSum of the Fixed and Variable Costs for a Given
Level of Production
Variable Costs
Costs that do varydirectly with sales or
production levels.
Commissions, Raw materials
Fixed Costs(Overhead)
Costs that don’tvary with sales or production levels.
Executive Salaries, Rent
Pure CompetitionPure CompetitionMany Buyers and Sellers
Who Have Little Effect on the Price
Pure CompetitionPure CompetitionMany Buyers and Sellers
Who Have Little Effect on the Price
Monopolistic Monopolistic CompetitionCompetition
Many Buyers and Sellers Who Trade Over a
Range of Prices
Monopolistic Monopolistic CompetitionCompetition
Many Buyers and Sellers Who Trade Over a
Range of Prices
Pricing in Different Types of Markets
Market and Demand Factors Affecting Pricing Decisions
Oligopolistic Oligopolistic CompetitionCompetition
Few Sellers Who AreSensitive to Each Other’s
Pricing/ Marketing Strategies
Oligopolistic Oligopolistic CompetitionCompetition
Few Sellers Who AreSensitive to Each Other’s
Pricing/ Marketing Strategies
Pure MonopolyPure MonopolySingle Seller
Pure MonopolyPure MonopolySingle Seller
Pricing Strategies
• Companies face many problems in setting their prices.– Standard pricing methods such as uniform
pricing, standard markup of costs everywhere, or charging what the market will bear ignores cost differentials and local market conditions.
04/13/23 120International MKTG Pricing Strategy
METHODS OF PRICINGCost Plus Pricing: This method is prevalent in urban markets, but it suits the rural market more, because a company has to incur the cost of the product, distribution expenses, and also add a small profit margin.Value Pricing: It means assigning a low price tag for a product and providing the benefits of low-cost mass production to the customer.Power Price Points: It is mostly used for FMCG brands for rural markets. 1,2,3,5,8,10
Cost-Based Pricing
Certainty About Costs
Pricing is Simplified
Price Competition Is Minimized
UnexpectedSituational
Factors
Attitudes of
Others
Ethical
Ignores Current
Demand & Competitio
n
Cost-Plus Pricing is an
Approach That Adds a
Standard Markup to the
Cost of the Product (see
example)
Simplest Pricing Method
Much Fairer to Buyers & Sellers
04/13/23 International MKTG Pricing Strategy
123
1)Variable cost pricing:
• Marginal or incremental cost of producing goods charged
• Sell products abroad at lower net prices than the domestic market
• Used when a Co. has high fixed cost and unused production
04/13/23 International MKTG Pricing Strategy
124
2)Full cost Pricing:
• Total fixed cost + variable cost
• High variable cost relative to fixed cost
• Price= Total cost +profit
PRICING METHOD• Markup Pricing Unit Cost
Markup Pricing = -----------------------------------
(1 - Desired return on sales)
• Target Return Pricing
Desired return x Invested Capital
Target return price = Unit + ---------------------------------------
cost Unit Sales
Setting Prices
Sealed-BidCompany Sets Prices Based on What They Think Competitors
Will Charge.
Going-Rate Company Sets Prices Based on What
Competitors Are Charging.
??
Competition-Based Pricing
Low High
Low
High
EconomyStrategye.g. Acer
Penetratione.g. Nokia
Skimminge.g. Class
Premiume.g. Kingfisher
Price
Quality
Pricing strategies• Premium pricing
• Uses a high price, but gives a good product/service exchange e.g. Honda, The Ritz Hotel
• Penetration pricing• offers low price to gain market share - then
increases price
• e.g. Vodafone- to attract new corporate clients
• Economy pricing• placed at ‘no frills’, low price
• e.g. Soups, spaghetti, Perk - ‘economy’ brands
• Price skimming• where prices are high - usually during introduction
• e.g new albums or films on release
• ultimately prices will reduce to the ‘parity’
• Psychological pricing• to get a customer to respond on an emotional, rather than
rational basis
• .e.g 99p not £1.01 ‘price point perspective
• Product line pricing• rationale of a product range
• Detergents
• Pricing variations• ‘off-peak’ pricing, early booking discounts,etc
• e.g Maruti offers a ‘cash back’ incentive for Wagon R
• Optional product-pricing• e.g. optional extras - BMW famously under-
equipped
• Captive product pricing• products that complement others
• e.g Gillette razors (low price) and blades (high price)
• Product-bundle pricing• sellers combine several products at the same price
• e.g software, books, CDs.
• Promotional pricing• e.g. toothpaste, soups, etc
• Geographical pricing• different prices for customers in different parts of
the world
• e.g.Include shipping costs, or place on PLC
• Value pricing• usually during difficult economic conditions
• e.g. Value menus at McDonalds
Penetration Pricing: A company introduces a product in the rural market at a low price, and hike the price once the brand succeeds.Differentiation Pricing: This involves different prices for different markets.
ConclusionAn analytical and quantitative approach is required in arriving at pricing decisions.Co Depot -> District Level – Level – Layer village (HAAT) or -> Retailer -> HUBS & SPOKES SYSTEM (SATELITE)
Product Mix-Pricing Strategies:Product Line Pricing
• Involves setting price steps between various products in a product line based on:– Cost differences between
products,
– Customer evaluations of different features, and
– competitors’ prices.
Discount and Allowance Pricing
Cash Discount Seasonal Discount
Quantity Discount T rade-In Allow ance
Functional Discount Prom otional Allow ance
A djus ting Bas ic Price to Rew ard C ustom ersF or C erta in Responses
Cash Discount Seasonal Discount
Quantity Discount T rade-In Allow ance
Functional Discount Prom otional Allow ance
A djus ting Bas ic Price to Rew ard C ustom ersF or C erta in Responses
Psychological Pricing
• Considers the psychology of prices and not simply the economics.
• Customers use price less when they can judge quality of a product.
• Price becomes an important quality signal when customers can’t judge quality; price is used to say something about a product.
Value $22.00Sale $14.99
Buyer reaction to pricing.
When Gibson lowered its prices, sales fell. Why?
What is it about a guitar that would cause this to happen?
What other products share these qualities?
•Computers?•Cars?•What else?
Click or press spacebar to return.
Special-Event PricingSpecial-Event Pricing
Cash RebatesCash Rebates
Low-Interest FinancingLow-Interest Financing
Longer WarrantiesLonger Warranties
Free MerchandiseFree Merchandise
DiscountsDiscounts
Loss LeadersLoss Leaders Temporarily Pricing Products Below List Price
to Increase Short-Term Sales
Through:
Promotional Pricing
This Sprint ad offers f ree long distance on Fridays.
Why can Sprint afford t o offer this promotion on Fridays rat her than on another day (like Monday)?
Promotional Pricing & Discriminatory Pricing
PROMOTIONAL PRICING
• Loss leader pricing• Special event pricing• Cash rebates• Low-interest
financing• Psychological
discounting
DISCRIMINATORY PRICING
• Customer-segment pricing
• Product-form pricing• Image pricing• Location pricing• Time pricing
PROMOTION
Types of Communication
Promotion
Personal Selling Advertising
Public Relations & Publicity
Marketing
Product Place Price
Sales Promotion Direct Marketing
Copyright © 2001 by Harcourt, Inc. All rights reserved.
PROMOTIONAL ACTIVITIES
• Advertising. Non- personal communication of information paid for by an identified sponsor such as an individual or an organization. Modes of advertising include television, radio, direct mail, catalogs, newspapers, and outdoor advertising such as billboards.
• Publicity. Non-personal communication of information that is not paid for by an individual or organization. Information appears in media such as television, radio, and newspaper.
• Sales promotion. Involves activities or materials used to create sales for goods or services. The two types of sales promotion are consumer and trade sales promotion. Consumer sales promotion includes free samples, coupons, con-tests, and demonstrations to consumers. Trade sales promotion encourages wholesalers and retailers to purchase and to sell aggressively using devices such as sales contests, displays, special purchase prices, and free merchandise.
• Personal selling. Personal communication of information to persuade a prospective customer to buy something – a good, service, idea, or whatever
that satisfies an individual’s needs.
Copyright © 2001 by Harcourt, Inc. All rights reserved.
Types of Promotion
Advertising Public Relations
Sales Promotion Personal Selling
Promotion Promotion MixMix
Copyright © 2001 by Harcourt, Inc. All rights reserved.
Advertising
• Public presentation
• Pervasiveness
• Amplified expressiveness
• Impersonality
Copyright © 2001 by Harcourt, Inc. All rights reserved.
Personal selling
• Personal interaction
• Cultivation of prospects
• Response to customers
• Relationship more than transaction
Copyright © 2001 by Harcourt, Inc. All rights reserved.
Sales Promotion
• Communication
• incentive
• invitation
Copyright © 2001 by Harcourt, Inc. All rights reserved.
Publicity• High credibility• Off guard• Dramatization
Copyright © 2001 by Harcourt, Inc. All rights reserved.
•Sponsorships, Scholarships•Contributions, Donations (Time, Money, materials & Services, web sites, online communities•Events, Community relations, news letter, material or ads, board memberships, subscriptions, etc •Employee Volunteer Programmes•Exhibitions and conferences
Public Relations
COMMON COMMUNICATION/PROMOTION TOOLS
--------------------------------------------------------------------------- Sales Personal
Advertising Promotion Publicity Selling
---------------------------------------------------------------------------Print and Contests,games Press kits Sales presentationsbroadcast ads sweepstakes, Speeches Sales meetingsPackaging-outer lotteries Seminars TelemarketingPackaging inserts Premiums and gifts Annual reports Incentive programsMailings,Catalogs Sampling Charitable Salesmen samplesMotion pictures Fairs and trade show donations Fairs and trade showsHouse magazines Exhibits Public relationsBrochures and Demonstrationsbooklets Coupon, RebatesReprints of ads Low-interest financingBillboards EntertainmentDisplay signs Trade-in allowancesPoint-of-purchase Trading stampsdisplay Tie-insAudiovisuals material
Symbols and logos Copyright © 2001 by Harcourt, Inc. All rights reserved.
THE COMMUNICATION PROCESS
Noise
ResponseFeedback
Message
Media
Sender Encoding Decoding Receiver
Copyright © 2001 by Harcourt, Inc. All rights reserved.
PERSONAL SELLING
PROCESS OF INDUCING AND ASSISTING A PROSPECTIVEBUYER TO BUY A COMMODITY OR SERVICE OR TOACT FAVOURABLY UPON A IDEA THAT HAS COMMER-CIAL SIGNIFICANT TO THE SELLER
PROCESS WHEREBY THE SELLER ASCERTAINSACTIVATES AND SATISFIES THE NEEDS AND WANTS OFTHE BUYER TO THE MUTUAL, CONTINUOUS BENEFIT OF THE BUYER AND THE SELLER
THIS TOOL IS A DIALOGUE & REST OF THE PROMOTOOLS ARE MONOLOGUES.
VERY STRONG PROMO-TOOL
INVOLVES TWO-WAY FACE-TO-FACE OR DIRECT RELATIONSHIP BETWEEN SELLER ANDBUYER
A PERSUASIVE PROCESS
FOCUS ON PROBLEM- SOLVING PERSPECTIVE
EDUCATIVE PROCESS
MODERN TREND: TOWARD …. “PRO- ACTIVE”
APPROACH – HIGHLY CREATIVE
PERSONAL SELLING
AMA
THE PERSONAL OR IMPERSONAL PROCESS OF ASSISTINGAND / OR PERSUADING A PROSPECTIVE CUSTOMER TOBUY A COMMODITY OR SERVICE OR TO ACTFAVOURABLY UPON AN IDEA THAT HAS A COMMER-CIAL SIGNIFICANCE TO THE SELLER
ART OF SUCCESSFULLY PERSUADING PROSPECTS ORCUSTOMERS TO BUY PRODUCTS OR SERVICES FROMWHICH THEY CAN DERIVE SUITABLE BENEFITS,THEREBY, INCREASING THEIR TOTAL SATISFACTION,
PERSONAL SELLING PROCES
PROSPECTING GETTING SALES LEADS
• INTERNAL SOURCES• EXTERNAL SOURCES
QUALIFYING GATHERING MORE INFOABOUT PROSPECTS
• CAN THEY BENEFIT FROM PURCHASE• CAN THEY AFFORD IT• ARE QUALIFIED TO MAKE DECISION?
COLLECTING SPECIFIC INFO ABOUT PROSPECT’S BACKGROUND, PDT NEEDS
• DETAIL HOME WORK FOR BETTER SALES PRESENTATION
PREPARING THEPRE-APPROACH
3.
APPROACHINGTHE PROSPECT4.
APPROACH CHOOSEN TOESTABLISH CONTACT WITHPROSPECT
MAKING THE SALESPRESENTATION
5.HEART OF PERSONAL SELLING
• COMMUNICATE PDT.MESSAGE• BUILDS UP DESIRE FOR PRODUCT APPROACHES:• STIMULUS- RESPONSE SELLING
BARRIERS SELLING• Traditional barrier approach• never ending spiral
FORMULIZED SELLING NEED SATISFACTION SELLING
HANDLINGOBJECTIONS
6. ENCOURAGING PROSPECTS TOVOICE OBJECTION
• TO PROVIDE FEEDBACK• HANDLES OBJECTIONS IN POSITIVE FASHION
CLOSING THESALES
7. ASKING THE PROSPECT FORORDER PICKING UP CUES AND SIGNALS FROM PROSPECTS TO KNOW WHEN THEY ARE READY TO BUY
FOLLOW-UPTHE SALES
8. ENSURING TIMELY DELIVERY
• PRODUCT …. DAMAGE FREE• INSTALLED PROPERLY
THE SALES PROCESS P ro sp ec ting
P reap p ro ach (P rec all P lann ing )
A p p ro ach
P resentatio n
P artic ip atio n D em o nstratio n D ram atiz atio n
P ersuasive C om m un ic atio n P ro o f V isualiz ation
T rial C lo se
D eterm in e O b jection s
M eet O b jec tio ns
T rial C lo se
C lo se
F o llow -up and Serv ic eCopyright © 2001 by Harcourt, Inc. All rights reserved.
PR: BUILDING UP GOOD RELATIONS WITH THE COMPANY’S VARIOUS PUBLICS BY OBTAININGFAVORABLE PUBLICITY, BUILDING UP AGOOD “CORPORATE IMAGE” AND HANDLINGOF UNFAVORABLE RUMOURS, STORIES OREVENTS:
PR TOOLS• PRESS RELATIONS •PRODUCT PUBLICITY
• CORPORATE COMMUNICATIONS
• LOBBYING
• COUNSELING
PR : USED TODAY TO PROMOTE
PRODUCTSPEOPLEPLACES
IDEASACTIVITIES
ORGANIZATIONS
ADVERTISING
TRANSLATED FROM GREEK … MEANS“TO TURN PEOPLE TO IDEA”
IT IS A COMMUNICATION PROCESS THATPERSUADES OTHERS TO ACT FAVOURABLY UPON THE IDEA, PRODUCT OR SERVICE WHICHTHEN PRODUCES PROFIT FOR SELLER
ANY PAID FORM OF NON-PERSONAL PRESENTA-TION AND PROMOTION OF IDEAS, GOODS ORSERVICES BY AN IDENTIFIED SPONSOR
NON-PERSONAL FORM OF COMMUNICATIONCONDUCTED THROUGH PAID MEDIA UNDERCLEAR SPONSORSHIP
CHARACTERISTICS OF ADVERTISING:
1. PAID FORM
2. NON-PERSONAL PRESENTATION
3. AN IDENTIFIED SPONSOR
4. INFORMATION AND PERSUASION
5. CONTROLLED FORM CONTENTTIMINGFOCUS
CONTROLLED BYSPONSOR
TYPES OF ADVERTISING
COMMERCIALADVERTISING
NON-COMMERCIALADVERTISING
OBJECTIVE.. TO EARN PROFIT SOUND BUSINESS PURPOSE
FOR PROMOTING SOCIALCAUSES ABSENCE OF ANYPROFIT MOTIVE
PRIMARY DEMAND TO CREATE DEMAND FORBASIC PRODUCTSvs
SELECTIVE DEMANDADVERTISING
TO CREATE DEMAND FORSPECIFIC BRANDS(BRAND ADVERTISING)
DIRECT ACTION TO GET IMMEDIATE SALESvs
INDIRECT ACTIONADVERTISING
TO CREATE A FAVORABLEATTITUDE TOWARDS THEPRODUCT FOR LONG-TERMGAIN
Major Decisions in Advertising Management
Objectives settingCommunication Objectives Sales Objectives
Budget decisions
Affordable approach Percent of sales Competitive parity Objectives and task
Message decision
Message generationMessage evaluation and selectionMessage execution
Media decision
Reach, frequency, impact Major media typesSpecific media vehicles Media timing
Advertising evaluation
Communication impact Sales impact
Possible Advertising Objectives
• To inform :Telling the market about a new product Describe available service
Suggesting new uses for a product Correcting false impression
Informing the market of a price change Reducing consumers’ fears
Explaining how the product works Building a company image
• To persuade : Building brand preference Persuading customer to purchase now
Changing customers’ perception of Persuading customer to receive a
product attributes sales call
• To remind Reminding consumers that the product may Keeping it in their minds during off
be needed in the near future seasons
Reminding them where to buy it Maintaining its top-of-mind awareness
DECIDING ON THE MEDIA
• Reach (R) : The number of different persons or households exposed to a particular media schedule at least once during a specified time period.
• Frequency (F) : The number of times within the specified time period that an average person or household is exposed to the message.
• Impact (I) : The qualitative value of an exposure through a given medium (thus a food ad in TV would have a higher impact than in the Times Ascent.)
FACTORS AFFECTING SELECTION OF MEDIA
1. SOCIAL CLASSES AND INTENTIONS2. CONSUMER RECEPTIVITY3. GROWING BRAND CONSCIOUSNESS4. LIFE STYLES5. BUYING ROLES Man v/s woman/Children6. Purchase Needs7. Community & Personal value Proposition – (Large
Screen TV for neighbors8. Value – for – Money Proposition.
EXPLORING MEDIA
MASS MEDIA RADIO (Dev. Pgms, News),TVCINEMA(IN VCDS/CDS, IN THEATRE, IN MOVIE), PRESS(POOR LITERACY)LOCAL MEDIAHAATS, MELAS, FAIRS HOARDINGS, WALL PAINTINGS, LEAFLETS, VIDEO VANS, FOLK MEDIA(Theatres, Songs, Dance, Narratives, Puppetry, Magic, Acrobatics, Martial Arts), ANIMAL PARADE, TRANSIT MEDIA (MOBILE DISPLAYS)