Lect 3 the Marketing Mix Continue 08w

8/8/2019 Lect 3 the Marketing Mix Continue 08w

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Innovation, product, price,place & promotionLecture 3

MBA4644Customer Focus


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1stLecture: Marketing environment iscomplex. We have various tools thathelps us structure & manage this

complexity 2nd Lecture: Product (1st P), Consumer

behaviour & Market segmentation

3rd

Lecture: Innovation, Price, Place &Promotion

Roadmap


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Marketing Inputs Product Place Promotion

Price

Purchase decision Product choice Location choice Brand choice

Psychological

inputs Culture Attitude Learning Perception

Buyer Decision Process, Cohen 1991

Putting it in context


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Marketing Mix various approaches

Product

Place

Promotion

Price

Process

Physicalevidence

People

4 Ps SIVA

Solution

Value

Access

Information

5 P / 5 C

Consumer desire

7 Ps

Cost

Convenience

Communication

Customer approach


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Core benefitor

service

Brand nameand image

Quality anddesign

Packaging

Actual product /service

Features

Capabilities

Customer servicecomponents / after sales

Augmented

product / service

Delivery

Guarantees

Installation

Warranty

Personnel

Product & Service offering


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Toothpaste

Gleem

Crest

Shampoo

Head &

Shoulders

Pantene Pro

Vidal Sasson

Bar soaps

Camay

Zest

Safeguard

(Oil of) Olay

Deodorants

Old Spice

Secret

Sure

Careful product mixing allows a company to assess its strengths andweaknesses relative to the competition and the requirements of the

marketplace

Product line & product mix

Product Mix width

Produc

tline

depth

Product lineProduct mix

Productitem


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Identify possible

positioning conceptsfor each targetsegment

Select, develop andcommunicate the

chosen positioningconcept

Identify

segmentationvariables andsegment the market

Develop profiles ofresulting segments

Evaluate

attractiveness ofeach segment

Select the targetsegment (s)

Product / Service Offering

Segmentation, Targeting &Positioning

Segment Target Position


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Benefits sought

Purchase occasion

Purchase behaviour

Usage

Lifestyle

Personality

Demographic

Geographic

What is a Base for Segmentation?A variable by which people can be divided into groups of similar

customers

Source: Jobber, D. (2004); Principles and Practice of Marketing, McGraw-Hill

Segmenting consumer markets

Consumer segmentationBehavioral Psychographic Profile


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Product/MarketMaturity

Diversity inBuyers

Preferences

SegmentAttractiveness

IndustryStructure

Opportunities forCompetitiveAdvantage

OrganisationalCapabilitiesResources

Choosing a targeting strategy

TargetingStrategy


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Learning outcomes

Explain & indentify thevarious strategiesfor innovation

To understand thecomplex nature ofthe marketing mix Price, Place &

Promotion


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What is a new product?

New products are nowwidely defined toinclude: Innovative products: truly

new products e.g.Television

Adaptive/Replacementproducts: lightdifferences fromexisting products

Imitative products:products that are newto the company: 'me-

too


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What is a new product?

Booz, Allen & Hamilton (1968) identified 6categories of new products in terms of theirnewness to the company and to the marketplace. In practice, new products emerge as

follows: New to the world :10%

New product lines : 20%

Additions to existing product lines : 26%

Improvements in/revisions to existing products :26%

Repositioning : 7%

Cost reductions : 11%


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For innovation to succeed,it must be:

Innovation strategies

Important: customersUnique: not availableSustainable: not easily copiedMarketable: company must

have capability to market theinnovation


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The relationship between

cost and product development

Idea generation

Idea screening

Concept development and testing

Market strategy development

Business analysis

Product development

Market testing

Commercialisation

NPD consists of 8 stages

New Product Development

$

$

$$$$$

$$$

$ $$$$

$$

$$$$$$$ $

$

$$ $

$ $


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Product portfolio & Adoption curve

Earlyadopters

Earlymajority

Latemajority

Laggards

Innovators

2.5%

13.5%

34% 34%

16%

GrowthIntro Maturity Decline

These will change overtime

ProductPricePlacePromotion


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Customer-focused innovations

Innovation Strategies

New forms of segmentation, reaching the target market andpositioning

New techniques for creating supplier to customer continuity

New mechanisms for product or service deliveryNew ways of increasing customer valueNew ways of ensuring operational excellenceNew products & service


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Customer-focused innovations



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External


The acquisition route can take three forms:

The company can search for and buy othercompanies

The company can buy patents from other companies

The company can license or franchise from anothercompany to make that companys product orservice

In all three cases the company does not developnew products, but simply acquires the rights toexisting ones


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External


What Makes 3Par Worth over $2 Billion?


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External


FerrariWorldAbu Dhabi


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Internal


Newproductconcept

EmployeesSales forceR&D

Overseas

CompetitorsCopyingLearning from

competitors

ConsumersDiscussion GroupsActivity analysisMarket research

techniques

SpecialistConsultantsAgencies

Creative GroupsAttribute listingSyncretics


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Pricing

Price is the most studied of the marketing mix variables Determining price has lead to marketers borrowing from

the disciplines of: Economics- demand and supply

Accounting costs

Behavioural sciences - why people buy

Price is seen in terms ofsacrifices to be made by theconsumer and revolves around: value, worth and cost

Price has also been placed in a triangular relationship:

company, competitorand costs Price is problematic to the firm because it tends to be

used both tactically and strategically to achieve thefirms goal


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Pricing is important..

Only means of income for thecompany

Determines image of product

Major determinant of householdexpenditure and resources

In times of inflation, plays anadjusting role

In some markets, may play the roleof segmentation variable

Plays a part in dissatisfactionexpressed by consumers

May be used as a differentiatingvariable

Influences new product adoption

Pricing SituationsNew product pricing

Life cycle pricing

Positioning strategy change

Countering competitive threats


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Positioning Strategy

Targetmarket andobjectives

Productstrategy

Value-Chainstrategy

Pricing

strategy

Promotionstrategy

Line or mix of

products yieldingrevenue

Intensive versus

select distributionchannels

How price fits into Positioningstrategy


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Controllable and uncontrollable factors

Factors influencing pricing

Price vs Valueadded

Marketingobjectives

Nature of

product

Organizationalobjectives

Companyresources

Channels ofdistribution

Costs

Product /Industrylifecycle

Demand &price elasticity

Legal &regulatory

Market

structure

Market type

Marketdevelopment

Competitors

Environmental

pressures

Customers &consumers


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Functional

Quality

Operational

Personal

Financial

PriceAssessm

ent

Factors influencing customers priceperception


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PriceStrategies

Cost-plus pricing Going-rate pricing

Break-even andtarget-profit pricing

What-the-market-will-bear pricing

Customerdriven pricing Psychological

pricing

Market penetration /skimming objectivesPrice

discrimination

Methods of Pricing


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Methods of Pricing


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Economy

position Value position

Excellent value

strategy. Under-priced?

Poor valueposition Over-

priced?

Medium valueposition

Value positionUnder-priced?

Poor valuestrategy Over-

priced?

Poor valueposition

Unsupportedprice premium

Premiumpositioning

Product Quality

High

High

Medium

Low

Pr

ice

Price Quality Matrix

Price setting strategies

MediumLow


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Product Quality

High

High

Medium

Low

Pr

ice

Price Quality Matrix


MediumLow


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Price competition

Price is the key tool

Low cost producers most effective

Must be flexible

Price wars

Non price competition

Differences must be easily perceived

Builds loyalty

Emphasise everything but the price

Price vs. Non Price Competition: considerations



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DiscountingTrade discounts

Quantity discounts

Cash discountsSeasonal discounts

One off quantity discounts

PricingFree on Board (FOB)

Geographical pricing

Transfer pricingPrice discrimination

Tendering

B2B Pricing


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Where the customer will expect to see

and purchase the product

Place

Direct

Customer

Indirect Indirect

Retailer Wholesaler

Retailer


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Where the customer will expect to see

and purchase the product

Three main strategies:

Intensive distributionSelective distribution

Exclusive distribution

Use ofintermediaries

Place


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Store retailing:Discount stores

Grocery Supermarkets /Superstores /

Hypermarket Retail Parks/ Outlet village

Speciality shops

Department stores Cashand carry wholesalers

Convenience stores

Franchise outlets

Non - Store retailing(direct marketing):

In-home retailing

Telemarketing

Automatic vending

Mail order

Internet

Place


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Agents Agents

Buyers

B2B Place

Supplier Supplier Supplier Supplier

Specialistdistributors

Specialistdistributors


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Functions of an intermediary:

Research: to facilitate the exchange processPromotion: to target segmentsMatching and Sorting of goodsNegotiation: price and other conditionsPhysical Handling of products

Financing: payment for goods to manufacturersRisk-Taking: translating customers' requirements

Exchanges that are performed include:

Physical Flow: actual movements of goodsTitle Flow: exchange of ownershipPayment Flow: from customers to manufacturersInformation FlowPromotion Flow: both to consumers and manufacturers

Therefore, theoverall role

performed by anintermediary iscrucial to the

success orfailure of a newproduct

Place


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Advertising

Sales Promotion

Direct Marketing

Public relations (PR) - Publicity

Personal Selling

A company has the following promotional tools open to it:

The choice of promotional tools are influenced by: resource availability and

cost of the promotionaltools; market size/concentration; customer information

needs; product characteristics; push versus pullstrategies

Internet Promotion

Promotion / Promotional Mix

ThePromotionalMix


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Push & Pull Promotion

Producer Retailer Customer

Producer

Tradepromotions &

advertising

Retailer Customer

Push

Advertising &sales promotions

Pull


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Budgets

Tactics:Securing leadsFollowing up

Techniques:

Sales-forcePublic RelationsPress advertisingTrade pressDirect marketingDirectories

Brochures, salesliteratureExhibitions / trade

shows / demonstrations

Promotion / Promotional Mix B2B

Documents

Lect 3 the Marketing Mix Continue 08w