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Chapter Thirteen
Dimensions ofMarketing Strategy
The Marketing Mix: Product, Price, Promotion, and Distribution
Target MarketPromotion Price
Distribution
Product
A Marketing Mix and the Marketing Environment
CustomerPromotion Price
Distribution
Product
SocialForces
Competitiveand EconomicForces
TechnologicalForces
Political, Legal, andRegulatoryForces
Marketing Environment
The Key to Successful Marketing Strategy
• The Right Marketing Mix to Satisfy the Customer:– The Right Product– The Right Promotion– The Right Price– The Right Distribution
The Product Mix or Strategy
A company’s product mix or strategy includes:
all products and product linesfrom idea development to phaseout.
The Right Product Mix or Strategy
• To satisfy the target market
• To create long-term relationships with customers
FAST FACT:Domino’s is the largest privately held restaurant chain in the world.In one year in the US, Domino’s used 25.5 million pounds of pepperoni and 146 million pounds of mozzarella cheese.
Source: Domino’s Web site, http://www.dominos.com/About/PR98Usage.cfm (accessed August 24, 2001).
What is a Product?
Distinguish between a Product Line and Product Mix.
Product Line and Product Mix
• Product Line– Closely related
products that are treated as a unit because of similar marketing strategy, production, or end-use considerations.
• Product Line– Closely related
products that are treated as a unit because of similar marketing strategy, production, or end-use considerations.
• Product Mix– All of the
products offered by an organization
• Product Mix– All of the
products offered by an organization
What is a Product?
Kleenex—9 kinds
Colgate toothpaste—19 varieties
Eggo waffles—16 flavors
PepsiCo Product Mix
Soft Drink Line
Snack Food Line
Restaurant Line
Pepsi Cola
Slice
Mountain Dew
Fritos corn chips
Ruffles potato chips
Doritos tortilla chips
Pizza Hut
Taco Bell
Kentucky Fried Chicken
Frito-Lay BrandsLay's Potato ChipsBaked Lay's Potato CrispsRuffles Potato ChipsBaked Ruffles Potato ChipsDoritos Tortilla Chips3D's SnacksTostitos Tortilla ChipsBaked Tostitos Tortilla ChipsSantitas Tortilla ChipsFritos Corn ChipsCheetos Cheese Flavored SnacksRold Gold PretzelsFunyuns Onion Flavored RingsSunchips Multigrain SnacksCracker Jack Candy Coated PopcornChester's PopcornGrandma's CookiesMunchos Potato CrispsSmartfood PopcornBaken-ets Fried Pork SkinsObertos Meat SnacksFrito-Lay Dips & SalsasOutside the U.S.Bocabits Wheat SnacksCrujitos Corn Snacks Fandangos Corn SnacksHamkas Snacks
Nibb-It Sticks and RingsNiknaks Cheese SticksQuavers Potato SnacksSabritas Potato ChipsTwisties Cheese SnacksWalkers Potato CrispsJack's SnacksSimba Snacks Pepsi-Cola BrandsPepsi-ColaDiet PepsiPepsi OneMountain DewWild Cherry PepsiSliceMug Sierra MistFruitworksAll SportLipton Brisk (Partnership)Lipton's Iced Tea (Partnership)Aquafina Frappuccino (Partnership)SoBeOutside the U.S.Mirinda 7UPPepsi Max
Tropicana BrandsTropicana Pure PremiumTropicana Season's BestTropicana TwisterDole (Under license)Pure TropicsOutside the U.S.LoózaCopella Fruvita
PepsiCo Product Mix
PepsiCo Product Mix
• Tropicana Pure Premium Juices
• Tropicana Season’s Best Juices
• Tropicana Pure Tropics Juices
• Tropicana Twister Juice Beverages
• Dole Juices
• Fruit Smoothies and Healthy Shakes
Tropicana Brands
• Tropicana 100% Pure Juices
• Copella Juices
• Fruvita Juices
• Hitchcock Juices
• Kirin-Tropicana Juices
• Looza Juices
• Looza Nectars
• Juice Bowl Juices
• Juice Bowl Nectars
PepsiCo Product Mix
• Baked Lay’s Brand Potato Crisps• Baked Tostitos Brand Tortilla Chips• Cheetos Brand Cheese flavored Snacks• Chester’s Brand Popcorn• Doritos Brand Crackers• Doritos Brand Dips• Doritos Brand Tortilla Chips• Fritos Brand Corn Chips• Funyons Brand Onion flavored Rings• Grandma’s Brand Cookies• Lay’s Brand Potato Chips
Frito-Lay Brands• Munchos Brand Potato Chips
• Rold Gold Brand Pretzels
• Ruffles Brand Potato Chips
• Santitas Brand Tortilla Chips
• Smartfood Brand Popcorn
• Sunchips Brand Multigrain Snacks
• Tostitos Brand Crackers
• Tostitos Brand Dip
• Tostitos Brand Tortilla Chips
• Baken-ets Brand Fried Pork Skins
PepsiCo Product Mix
• Pepsi-Cola• Diet Pepsi• Mountain Dew• Slice• Mug Root Beer• Mug Crème
• All Sport• Lipton (Partnership)• Aquafina• Josta• Frappuccino
Pepsi-Cola Brands
Product Mix
Where do product ideas come from?
Product Mix
Where do product ideas come from?
31,000 new consumer products each year.
Developing New Products
Idea DevelopmentIdea Development
Screening New Ideas Screening New Ideas
CommercializationCommercialization
Business AnalysisBusiness Analysis
Product DevelopmentProduct Development
Test MarketingTest MarketingFAST FACT:In 2001, Microsoft planned to spend $4 billion on R&D.
Source: Rebecca Buckman, “Window into the future,” Wall Street Journal, June 25, 2001, p. R19.
Classifying Products
• Consumer Products
• Industrial Products
Classifications of Consumer Products
•Convenience products--Products bought frequently without a lengthy search and bought for immediate consumption.
Classifications of Consumer Products
•Convenience products--Products bought frequently without a lengthy search and bought for immediate consumption.
•Requires a long distribution channel
Types of Market Coverage
Intensive Makes a product available inDistribution as many outlets as possible.
Classifications of Consumer Products
Convenience Products bought frequently without a products lengthy search and bought for
immediate consumption.
Shopping Products purchased after buyer has products compared competitive products.
Types of Market Coverage
Selective Uses only a small proportion distribution of all available outlets to expose products
Classifications of Consumer Products
Convenience Products bought frequently without a products lengthy search and bought for
immediate consumption.
Shopping Products purchased after buyer has products compared competitive products.
Specialty Products which consumers products will go out of their way to find and will accept no substitute.
Types of Market Coverage
Exclusive Exists when a manufacturer gives
distribution a middleman the sole right to sell
a product in a defined geographic territory.
Types of Market Coverage
Intensive Makes a product available in as many outlets as possible.
Selective Uses only a small proportion of all distribution available outlets to expose products.
Exclusive Exists when a manufacturer gives a distribution middleman the sole right to sell a
product in a defined geographic territory.
Classifications of Industrial Products
• Raw Materials
• Major Equipment
• Accessory Equipment
• Component Parts
• Processed Materials
• Supplies
• Industrial Services
• Raw Materials
• Major Equipment
• Accessory Equipment
• Component Parts
• Processed Materials
• Supplies
• Industrial Services
The Life Cycle of a Product
Introduction Growth DeclineMaturitySalesVolume
Profit
Time
0
Sales $
Identifying Products
• Branding– The process of naming and identifying products. Can
use a brand mark or trademark
• Packaging– The external container that holds and describes the
product.
• Labeling– The presentation of important information on a package.
The 10 Most Valuable Brands in the World
Rank: Brand: 2001 Brand Value ($billions)1 Coca-Cola 68.92 Microsoft 65.13 IBM 52.84 GE 42.45 Nokia 35.06 Intel 34.77 Disney 32.68 Ford 30.19 McDonald’s 25.310 AT&T 22.8
Source: Gerry Khermouch, Stanley Holmes, and Moon Ihlawn, “The Best Global Brands,” Business Week, August 6, 2001, p. 50.
Categories of Brands
• Manufacturer Brands– Kellogg’s, Ford, Sony
• Private Distributor Brands– Kenmore appliances (Sears)
• Generic Brands– Peanut Butter, Dog Food, Kitty
Litter
Packaging
Packaging
• The external container that holds and describes the product inside.
• Packaging Functions:– Protection– Economy– Convenience– Promotion
FAST FACT:While shopping, the average time a consumer looks at a package is 2.5 seconds.
Labeling
Labeling
• The presentation of important information on a package:– Product content information may be
required by law
– Useful information – manufacturer’s toll-free number and address
– Directions and suggestions for use
Product Quality
• The degree to which a good, service, or idea meets the demands and requirements of customers.
• In the global marketplace, product quality is a key means of differentiating products and positioning them above the competition in the consumer’s mind.
The Product* Mix
• Questions on the first “P”?
* Total Product Concept
The Marketing Mix: Product, Price, Promotion, and Distribution
Target MarketPromotion Price
Distribution
Product
Pricing Strategies
Pricing Strategies
• Pricing Objectives
• Pricing Strategies
Pricing Objectives
Four Common Pricing Objectives:
1. Maximize Profits and Sales
2. Boost Market Share
3. Maintain the Status Quo
4. Survival
Pricing Strategies
• New-product strategiesPrice skimming Penetration pricing
• Psychological pricing strategiesOdd/EvenPrestige pricing
• Price DiscountingQuantity discountsSeasonal discountsPromotional discounts
ImplementPricingStrategies
The Marketing Mix: Product, Price, Promotion, and Distribution
Target MarketPromotion Price
Distribution
Product
Distribution Strategy
Distribution Strategy
• Marketing Channels– Retailers (Wal-Mart, Sears)
– Wholesalers (food brokers to restaurants)
– E-tailers (Amazon.com)
• Supply Chain Management– Long-term partnerships among channel
members to reduce costs, waste, and unnecessary movement through the channel to satisfy customers.
Distribution Strategy
• Channels of distribution
• Intermediary involvement
Marketing Channels forConsumer Products
Producer
Agents(Middlemen)
Wholesalers(Middlemen)
Retailers(Middlemen)
Consumers
Producer Producer Producer
Wholesalers(Middlemen)
Retailers(Middlemen)
Retailers(Middlemen)
Consumers Consumers Consumers
Physical Distribution
Materials Handling
Transportation
Warehousing
Consumer
Producer
Inventory Planning & Control
Distribution Decisions are the Least Flexible
Marketing Decisions
• Distribution decisions:– Use committed resources– Establish contractual relationships– Are bound by time
• Distribution decisions:– Use committed resources– Establish contractual relationships– Are bound by time
The Marketing Mix: Product, Price, Promotion, and Distribution
Target MarketPromotion Price
Distribution
Product
The Promotion Mix
Publicity
PersonalSelling
SalesPromotion
Advertising
Objectives of Promotions
• Stimulate demand
• Stabilize sales
• Inform, remind, and reinforcecustomers
Promotional Positioning
The use of promotion to create and maintain an image of a product in the buyer’s mind.
A natural result of market segmentation.
Assists in product differentiation.
Push and Pull Strategies
Producer
Producer
Wholesalers
Wholesalers
Retailers
Retailers
Consumers
Consumers
Pushing Strategy
Pulling Strategy
Flow of Communications
The Promotion Mix
Publicity
PersonalSelling
SalesPromotion
Advertising
Advertising
A paid form of non-personal communication transmitted through a mass medium, such as television commercials or magazine advertisements.
Advertising Media
Print media
Electronic media
• Newspapers• Magazines• Direct mail• Outdoor advertising
• Television• Radio• Cyberads
Ad Spending per American
$303$370
$229$304
$74$94
$69$89
$25
$104
$246 $241
Newspaper Television Magazines Radio On-line All others
U.S. ad spending per capita this year is $946 and is expectedto be $1,202 by 2003. Per-capita spending in leading mediaand expected spending in 2003:
1998
2003
Who’s Watching Commercials
1-30
31-50 51-100
101-300
300 or more
Men Women
25%
25%27%
15%
9%15%
20%
30%
18%
17%
Americans are exposed to about 270 ads a day1 inall media, but few seem to notice. How many ads aday they thing they saw/heard:
1McKinsey & Co.
Internet Advertising
Total revenues from advertising, paid content, and e-commerce on mobile devices in the U.S. is projected to grow from $100 million today to $3.3 billion in 2005.
Source: “E-MONEY,” American Demographics, June, 2001, p. 32.
Internet Advertising
‘95 ‘96‘98‘97‘96 ‘98‘97
$0.03$0.2
$0.5
$1.3
7351,050
1,345
Internet advertisingspending($billions)
Web sites thataccept advertising
The Promotion Mix
Publicity
PersonalSelling
SalesPromotion
Advertising
Personal Selling
• Direct, two-way communication with buyers and potential buyers.
FAST FACT:A typical sales call on an industrial customer can cost between $200 and $300 per call.
Personal Selling
Three Categories of Salespersons:
1. Order Takers
2. Creative Salespersons
3. Support Salespersons
Personal Selling is a Six Step Process
1. Prospecting2. Approaching3. Presenting4. Handling Objections5. Closing – Asking for the Order6. Following Up
In Personal Selling, Appearance Sells
• Sales managers tell what personal attributes they feel work against a salesperson’s ability to sell:– Sloppy dresser 94%– Unstylish dresser 75%– Physically unattractive 59%– Overweight 54%– Heavy accent 54%– Young looking 32%
Source: “Appearance sells,” USA Today Snapshots, October 9, 2001, p. B1.
The Promotion Mix
Publicity
PersonalSelling
SalesPromotion
Advertising
Publicity
• Non-personal communication transmitted through mass media but not paid for directly by the firm.
• May be done by the Public Relations Department or an outside PR firm.
Principal Publicity Mechanisms
• News releases
• Feature articles
• Captioned photographs
• Press conferences
• Interviews
The Promotion Mix
Publicity
PersonalSelling
SalesPromotion
Advertising
Major Tools of Sales Promotion
• Point-of-purchase displays• Premiums• Sampling and demonstrations• Coupons• Consumer contests and sweepstakes• Refunds• Trade shows
Coupon Clippers
Less than $15,000 79%
$15,000-$24,999 91%
$25,000-$49,000 78%
$50,000 or more 83%
Source: NCH NuWorld 1998 Consumer Behavior Study,American Coupon Council from USA Today Snapshot, October 28, 1998.
Income % that Clip Coupons
Per Contact Cost
ad in specialized business publication $0.32
the Internet $0.98
direct mail $1.68
business letters $13.60
telemarketing $31.16
trade shows $162.00
industrial sales calls $277.00
Source: Matthew J. Cravatta, “Goodwill Targeting,” Marketing Tools,June 1998.
Method Cost
The Marketing Mix: Product, Price, Promotion, and Distribution
Target MarketPromotion Price
Distribution
Product
Chapter ThirteenDimensions of
Marketing Strategy
Next Class–Exam 5
Comparison of Transportation Modes
Type of Carrier
Total
Expend.
Intercity Volume Speed Cost
Truck 74% 28% Fast High
Rail 13% 37% Average Medium
Water 6% 15% Very Slow Very Low
Air 4% 1% Very Fast Very High
Pipeline 3% 19% Slow Low back