Marketing strategy II: Product, Distribution and
Price
Learning ObjectivesDescribe the components of marketing mix.Analyze the product life cycle.Explain the components of product strategies.Analyze different types of distribution channels.Explain various pricing strategies and approaches.List the types of non-price competition.
Marketing mixThe combination of product, promotion, price and place (distribution) strategies of a company.
PProduct PPromotion PPrice PPlace
Marketing Mix
The Four P’s
Product
Combination of physical contents
and intangible attributes of a
product.
Industrial goods
Goods purchased in large
quantities and for further
commercial processing.
Consumers goodsGoods purchased by ultimate consumers.
Convenience goods
Goods that are purchased
frequently by consumers with little
shopping effort.
Shopping goodsGoods that are bought after comparing similar products in the market for price, quality or other features.
Specialty goods
Goods that carry unique features
and consumers are willing to make
a special effort to obtain them.
Product life cycle
A series of stages through which a
successful product passes in its life
cycle.
Product life cycleIntroductio
n Growth Maturity Decline
Sales $
Time
Product Life Cycle (PLC)(1) Introduction
• Early stages of marketing, sales tend to be low but large amount of capital continue to be consumed
(2) Growth• Product “takes off”, gaining market share and
sales and profits are steadily rising
(3) Maturity• Rate of sales growth begins to slow down. This is
often signaled by prior falling off of profits
(4)Decline• Sales volume shows a market fall, product has lost
its appeal
Introduction Growth Maturity Decline
Characteristics
Sales Low Fast growth Slow growth Decline
Profits Negligible Peak levels Declining Low or zero
Cash flow Negative Moderate High Low
Customers Innovative Mass market Mass market Laggards
Competitors Few Growing Many rivals Declining no.
Responses
Strategic focus Expand market Market penetration Defend share Productivity
Mkt. expenditures High High (declining %) Falling Low
Mkt. emphasis Product awareness Brand preference Brand loyalty Selective
Distribution Patchy Intensive Intensive Selective
Price High Lower Lowest Rising
Product Basic Improved Differentiated Rationalized
Profit in different stages of the product life cycle
Maturity stage Decline stage
Growth stage
Introduction stage
Profit $
Product lineA group of closely related products or services.
Product mixAn assortment of unrelated products.
Brand name
A word, phrase, sign or symbol
used to identify the product of a
company.
Family brand
A single brand name used for all
the items in a product line.
Trademark
The registered brand name,
pictorial design or symbol of a
product.
Warranty A statement of guarantee that the product meets certain standards or the customer can have it repaired, replaced or refunded.
Channels of distributionThe routes taken by the goods, or the titles of the goods, from producers to consumers.
Middlemen People or business that facilitate the transfer of title and delivery of goods form producers to the points of final sale.
Wholesalers Middlemen in channels of distribution who buy goods for resale in large quantities.
Retailers Middlemen in channels of distribution who sell goods directly to consumers.
Agents Middlemen in channels of distribution who do not take possession or title of the gods but contact other middlemen so as to make sales on behalf of their clients.
Services of wholesalersTo manufacturers:
Expand the markets to scattered locationsProvide market informationStore the goods temporarilyAssume the credit riskSpeed up the flow of goods
To retailers:Assemble goods from different producers Break bulk goods into smaller unitsProvide a buffer of seasonal stockProvide credit and delivery facilities
Services of retailersTo wholesalers:
Reduce the number of sales transactionsStore the goodsAssume credit riskCollect consumers’ feedback
To consumers:Assemble goods from numerous producersSell goods at convenient locationsBreak bulk goods into smaller quantities
Producer Consumer
Producer Retailer Consumer
ConsumerRetailerWholesalerProducer
Distribution channels for consumers goods
Trends in retailing and the reasons
Trends ReasonsNon-store retailing High rental costs
Advancements in communication
Vending machines Expensive labour costs
High rental costsWarehouse clubs Intensified
competition on pricesExpensive operating
costs
“Your price is another’s cost”
Pricing objectives1. Maximizing profits2. Increasing competitive power3. Increasing market share4. Driving out competitors5. Enhancing image 6. Serving the society
Cost pricing approachSetting the price of a product based on the total unit cost.
Market pricing approachSetting the price of a product based on the similar products offered by competitors in the market.
Factors affecting how companies set prices
Cost factor
Market size
Price sensitivity
Degree of competition
State of the economy
Skimming pricingSetting a relatively high price for a new product when it first enters the market and gradually lowering the price later in its life cycle.
Advantages and disadvantages of skimming pricing
Advantages:
High profit margin
Less risky
Disadvantages:
Hurts the growth of sales
Triggers intensified competition
Penetrative pricingSetting the lowest possible price right from the beginning in order to maximize sales as soon as possible.
Skimming Penetration
- demand is likely to be price-inelasticÕ - there are likely to be different price-market segments, thereby appealing to those buyers first who have a higher range of acceptable prices
- little is known about the costs of producing and marketing the productÕ - used at introductory stage
- demand is likely to be price-elasticÕ
- there are no distinct and separate price-market segmentsÕ - competitors are likely to enter the market quicklyÕ - there is a possibility of large savings in production and marketing cost if a large sales volume can be generated (the experience effect
Non-price Competition1. Good quality2. After-sale services3. Convenient location4. Promotion