Elements of Marketing Lecture Notes PDF

ELEMENTS OF MARKETING LECTURE NOTE LEVEL 200 UNIVERSITY OF PROFESSIONAL STUDIES (All rights reserved) Course Outline for Elements of Marketing Course Code: PBBS 202 Lecture One and Two Overview of Marketing  What Is Marketing? The American Marketing Association...

ELEMENTS OF MARKETING LECTURE NOTE LEVEL 200 UNIVERSITY OF PROFESSIONAL STUDIES (All rights reserved) Course Outline for Elements of Marketing Course Code: PBBS 202 Lecture One and Two Overview of Marketing  What Is Marketing? The American Marketing Association (AMA’s) definition of marketing Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. (Approved July 2013)  The Nature of Marketing It is a concept Marketing is a function of business Marketing is an umbrella term for a range of techniques Marketing is an ongoing process Marketing operates as a system Assumptions About Marketing Marketing is advertising Marketing is selling Marketing is getting people to buy products they do not really want  Why Study Marketing Marketing offers many carrier opportunities, including opportunities in advertising, sales, product management, retail store management, customer relationship management and so on. The study of marketing principle can help you become a more productive, valuable co-worker.  Why Study Marketing In addition, many of the skills and tools of marketing can be applied in other functional areas of business. Marketing skills can also help you become a more knowledgeable consumer, as you will better understand the marketing practices that influence your purchases.  Functions of Marketing Distribution Financing Marketing Information Management Product / service management Promotion Selling What Is Marketing? The Marketing Process Understanding the Marketplace and Customer Needs Examination of five core customer and marketplace concepts: Needs, wants, and demands; Marketing offerings (products, services, and experiences); Value and satisfaction; Exchanges and relationships; and Markets. Understanding the Marketplace and Customer Needs Customer Needs, Wants, and Demands States of deprivation Physical—food, clothing, warmth, safety Needs Social—belonging and affection Individual—knowledge and self-expression Form that needs take as they are shaped by culture Wants and individual personality Demands Wants backed by buying power  Market Offerings-Products, Services, and Experiences Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want Marketing myopia is focusing only on existing wants and losing sight of underlying consumer needs  Customer value and satisfaction Consumers usually face a broad array of brands products and services that might satisfy a given need. How do they choose among these many market offerings? Customers form expectations about the value and satisfaction that various market offerings will deliver and buy accordingly. Dissatisfied customers often switch to competitors and disparage the products to others  Customer value and satisfaction Customer Value and Satisfaction Expectations Customers Value and satisfaction Marketers Set the right level of expectations Not too high or low  Exchanges and Relationships Exchange is the act of obtaining a desired object from someone by offering something in return  Markets Markets are the set of actual and potential buyers of a product  Markets The concepts of exchange and relationships lead to the concept of a market. A market is the set of actual and potential buyers of a product. These buyers share a particular need or want that can be satisfied through exchange relationships. Marketing means managing markets to bring about profitable customer relationships. However, creating these relationships takes work. Sellers must search for buyers, identify their needs, design good market offerings, set prices for them, promote them, and store and deliver them  Markets Exchange is generally viewed as the core element of marketing. Exchange has been defined as the “transfer of something tangible or intangible, actual or symbolic, between two or more social actors Marketing exchanges are not confined to transactions of money for products. Businesses engage in barter when they exchange their goods and services for the goods and services of another firm. Non-profit organizations colleges and universities, politicians and many other “social actors” are also involved in exchanges. Designing a Customer-Driven Marketing Strategy  Designing a Customer-Driven Marketing Strategy Marketing management is the art and science of choosing target markets and building profitable relationships with them – What customers will we serve? – How can we best serve these customers?  Designing a Customer-Driven Marketing Strategy Selecting Customers to Serve Market segmentation refers to dividing the markets into segments of customers Target marketing refers to which segments to go after  Designing a Customer-Driven Marketing Strategy Choosing a Value Proposition Value proposition Set of benefits or values a company promises to deliver to customers to satisfy their needs  Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Production Product Selling Marketing Societal concept concept concept concept concept  Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Production concept is the idea that consumers will favor products that are available or highly affordable  Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Product concept is the idea that consumers will favor products that offer the most quality, performance, and features. Organization should therefore devote its energy to making continuous product improvements.  Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Selling concept is the idea that consumers will not buy enough of the firm’s products unless it undertakes a large scale selling and promotion effort Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Marketing concept is the idea that achieving organizational goals depends on knowing the needs and wants of the target markets and delivering the desired satisfactions better than competitors do Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Societal marketing concept is the idea that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-term interests, and society’s long- run interests Designing a Customer-Driven Marketing Strategy Preparing an Integrated Marketing Plan and Program The marketing mix: set of tools (four Ps) the firm uses to implement its marketing strategy. It includes product, price, promotion, and place. Integrated marketing program: comprehensive plan that communicates and delivers the intended value to chosen customers. Building Customer Relationships Customer Relationship Management (CRM) The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction Building Customer Relationships Relationship Building Blocks: Customer Value and Satisfaction Customer- Customer perceived value satisfaction The difference The extent to between total which a customer value product’s and total perceived customer cost performance matches a buyer’s expectations Building Customer Relationships Customer Relationship Levels and Tools Basic Relationships Full Partnerships Building Customer Relationships The Changing Nature of Customer Relationships Relating with more carefully selected customers uses selective relationship management to target fewer, more profitable customers Relating more deeply and interactively by incorporating more interactive two way relationships through blogs, Websites, online communities and social networks Building Customer Relationships The Changing Nature of Customer Relationships Customer-managed relationships Marketing relationships in which customers, empowered by today’s new digital technologies, interact with companies and with each other to shape their relationships with brands.  Building Customer Relationships Partner relationship management involves working closely with partners in other company departments and outside the company to jointly bring greater value to customers Building Customer Relationships Partner Relationship Management Partners inside the company is every function area interacting with customers – Electronically – Cross-functional teams Partners outside the company is how marketers connect with their suppliers, channel partners, and competitors by developing partnerships  Building Customer Relationships Partner Relationship Management Supply chain is a channel that stretches from raw materials to components to final products to final buyers Supply chain management  Capturing Value from Customers Creating Customer Loyalty and Retention Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage  Capturing Value from Customers Growing Share of Customer Share of customer is the portion of the customer’s purchasing that a company gets in its product categories  Capturing Value from Customers Customer equity is the total combined customer lifetime values of all of the company’s customers  Capturing Value from Customers Building Customer Equity Right relationships with the right customers involves treating customers as assets that need to be managed and maximized Different types of customers require different relationship management strategies  Lecture Three The Marketing Environment  Analyzing the Marketing Environment The Company’s Microenvironment The Company’s Macroenvironment Responding to the Marketing Environment  The Marketing Environment The marketing environment includes the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers  The Marketing Environment Microenvironment consists of the actors close to the company that affect its ability to serve its customers -- the company, suppliers, marketing intermediaries, customer markets, competitors, and publics The Company’s Microenvironment The Company Top management Finance R&D Purchasing Operations Accounting The Company’s Microenvironment Suppliers Provide the resources to produce goods and services Treated as partners to provide customer value The Company’s Microenvironment Marketing Intermediaries Help the company to promote, sell and distribute its products to final buyers The Company’s Microenvironment Types of Marketing Intermediaries Physical Resellers distribution firms Marketing Financial services agencies intermediaries The Company’s Microenvironment Customer Customers – They refers to all those who buy or patronize the output of an organization. They include individuals, businesses, the trade, institutions, non- governmental and governmental bodies. They determine the success or failure of any enterprise. You must constantly monitor the changing needs of your customers in the environment and provide appropriate products that will meet their needs more effectively than competition. The Company’s Microenvironment Competitors Firms must gain strategic advantage by positioning their offerings against competitors’ offerings The Company’s Microenvironment Publics Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives – Financial publics – Media publics – Government publics – Citizen-action publics – Local publics – General public – Internal publics  The Company’s Macroenvironment Demographic Environment Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics Demographic environment is important because it involves people, and people make up markets Demographic trends include age, family structure, geographic population shifts, educational characteristics, and population diversity  The Company’s Macroenvironment Demographic Environment Changing age structure of the population – Baby boomers include people born between 1946 and 1964 – Most affluent Americans  The Company’s Macroenvironment Demographic Environment Generation X includes people born between 1965 and 1976 – High parental divorce rates – Cautious economic outlook – Less materialistic – Family comes first – Lag behind on retirement savings  The Company’s Macroenvironment Demographic Environment Millennials (gen Y or echo boomers) include those born between 1977 and 2000 – Comfortable with technology – Includes: Tweens (ages 8–12) Teens (13–19) Young adults (20’s)  The Company’s Macroenvironment Demographic Environment Generational marketing is important in segmenting people by lifestyle of life state instead of age  The Company’s Macroenvironment Demographic Environment More people are: Divorcing or separating Choosing not to marry Choosing to marrying later Marrying without intending to have children Increased number of working women Stay-at-home dads  The Company’s Macroenvironment Demographic Environment Changes in the workforce – More educated – More white collar  The Company’s Macroenvironment Demographic Environment Increased Diversity Markets are becoming more diverse – International – National Includes: – Ethnicity – Gay and lesbian – Disabled  The Company’s Macroenvironment Economic Environment Economic environment consists of factors that affect consumer purchasing power and spending patterns Industrial economies are richer markets Subsistence economies consume most of their own agriculture and industrial output  The Company’s Macroenvironment Economic Environment Changes in income Value marketing involves ways to offer financially cautious buyers greater value— the right combination of quality and service at a fair price  The Company’s Macroenvironment Economic Environment Changes in Consumer Spending Patterns Ernst Engel—Engel’s Law As income rises: – The percentage spent on food declines – The percentage spent on housing remains constant – The percentage spent on savings increases  The Company’s Macroenvironment Natural Environment Natural environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities Trends – Shortages of raw materials – Increased pollution – Increase government intervention – Environmentally sustainable strategies  The Company’s Macroenvironment Technological Environment Most dramatic force in changing the marketplace Creates new products and opportunities Safety of new product always a concern  The Company’s Macroenvironment Political Environment Political environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society  The Company’s Macroenvironment Political Environment Legislation regulating business – Increased legislation – Changing government agency enforcement Increased emphasis on ethics – Socially responsible behavior – Cause-related marketing  The Company’s Macroenvironment Cultural Environment Cultural environment consists of institutions and other forces that affect a society’s basic values, perceptions, and behaviors  The Company’s Macroenvironment Cultural Environment Persistence of Cultural Values Core beliefs and values are persistent and are passed on from parents to children and are reinforced by schools, churches, businesses, and government Secondary beliefs and values are more open to change and include people’s views of themselves, others, organizations, society, nature, and the universe  The Company’s Macroenvironment Cultural Environment Shifts in Secondary Cultural Values People’s view of themselves – Yankelovich Monitor’s consumer segments: Do-It-Yourselfers—recent movers Adventurers People’s view of others – More “cocooning”  The Company’s Macroenvironment Cultural Environment Shifts in Secondary Cultural Values People’s view of organizations People’s view of society – Patriots defend it – Reformers want to change it – Malcontents want to leave it  The Company’s Macroenvironment Cultural Environment Shifts in Secondary Cultural Values People’s view of nature – Some feel ruled by it – Some feel in harmony with it – Some seek to master it People’s view of the universe – Renewed interest in spirituality  Responding to the Marketing Environment Views on Responding Uncontrollable Proactive Reactive React and Aggressive Watching adapt to actions to and reacting forces in the affect forces to forces in environment in the the environment environment  Lecture Four Company and Marketing Strategy Partnering to Build customer Relationships Companywide Strategic Planning Strategic Planning Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities Companywide Strategic Planning Steps in Strategic Planning  Companywide Strategic Planning Defining a Market-Oriented Mission The mission statement is the organization’s purpose, what it wants to accomplish in the larger environment We help you organize the world’s Market-oriented mission information and make it universally accessible and useful. statement defines the business in terms of satisfying basic customer needs Companywide Strategic Planning Setting Company Objectives and Goals Business Marketing objectives objectives Build profitable Increase customer market share relationships Create local Invest in partnerships research Increase Improve profits promotion  Companywide Strategic Planning Designing the Business Portfolio The business portfolio is the collection of businesses and products that make up the company Portfolio analysis is a major activity in strategic planning whereby management evaluates the products and businesses that make up the company  Companywide Strategic Planning Analyzing the Current Business Portfolio Strategic business units can be Company division Product line within a division Single product or brand Companywide Strategic Planning Analyzing the Current Business Portfolio Identify key businesses (strategic business units, or SBUs) that make up the company Assess the attractiveness of its various SBUs Decide how much support each SBU deserves  Companywide Strategic Planning BCG growth-share matrix BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand portfolio and its potential. It classifies business portfolio into four categories based on industry attractiveness (growth rate of that industry) and competitive position (relative market share)  Companywide Strategic Planning BCG growth-share matrix BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand portfolio and its potential. It classifies business portfolio into four categories based on industry attractiveness (growth rate of that industry) and competitive position (relative market share)  Companywide Strategic Planning BCG growth-share matrix Growth-share matrix is a business tool, which uses relative market share and industry growth rate factors to evaluate the potential of business brand portfolio and suggest further investment strategies. Companywide Strategic Planning:  Companywide Strategic Planning Problems with Matrix Approaches Difficulty in defining SBUs and measuring market share and growth Time consuming Expensive Focus on current businesses, not future planning  Companywide Strategic Planning Developing Strategies for Growth and Downsizing Product/market expansion grid is a tool for identifying company growth opportunities through market penetration, market development, product development, or diversification Companywide Strategic Planning Developing Strategies for Growth and Downsizing Product/Market Expansion Grid Strategies Ansoff’s growth strategies  Companywide Strategic Planning Developing Strategies for Growth and Downsizing Market penetration is a growth strategy increasing sales to current market segments without changing the product Market development is a growth strategy that identifies and develops new market segments for current products  Companywide Strategic Planning Developing Strategies for Growth and Downsizing Product development is a growth strategy that offers new or modified products to existing market segments Diversification is a growth strategy through starting up or acquiring businesses outside the company’s current products and markets  Companywide Strategic Planning Developing Strategies for Growth and Downsizing Downsizing is the reduction of the business portfolio by eliminating products or business units that are not profitable or that no longer fit the company’s overall strategy  Planning Marketing Partnering to Build Customer Relationships Value chain is a series of departments that carry out value-creating activities to design, produce, market, deliver, and support a firm’s products  Planning Marketing Partnering to Build Customer Relationships Value delivery network is made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve performance of the entire system Marketing Strategy and the Marketing Mix  Marketing Strategy and the Marketing Mix Customer-Driven Marketing Strategy Market segmentation is the division of a market into distinct groups of buyers who have different needs, characteristics, or behavior and who might require separate products or marketing mixes Market segment is a group of consumers who respond in a similar way to a given set of marketing efforts  Marketing Strategy and the Marketing Mix Customer-Centered Marketing Strategy Market targeting is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter  Marketing Strategy and the Marketing Mix Customer-Centered Marketing Strategy Market positioning is the arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of the target consumer  Marketing Strategy and the Marketing Mix Developing an Integrated Marketing Mix Marketing mix is the set of controllable tactical marketing tools—product, price, place, and promotion—that the firm blends to produce the response it wants in the target market Marketing Strategy and the Marketing Mix Developing an Integrated Marketing Mix Managing the Marketing Effort Managing the Marketing Effort Marketing Analysis – SWOT Analysis  Managing the Marketing Effort Internal Environment Analysis (Strengths and Weaknesses) Each business needs to evaluate its internal strength and weakness. The business does not have to correct all its weaknesses, nor should it gloat about all its strength. Sometimes a business does poorly not because its departments lack the required strength, but because they do not work together as a team it is therefore critical to assess interdepartmental working relationship as part of the internal audit.  Managing the Marketing Effort Strengths A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include: – strong brand names – good reputation among customers – cost advantages from proprietary know-how – exclusive access to high grade natural resources – favorable access to distribution networks  Managing the Marketing Effort Weaknesses The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses: – lack of patent protection – a weak brand name – poor reputation among customers – high cost structure – lack of access to the best natural resources – lack of access to key distribution channels  Managing the Marketing Effort External Environment Analysis [Opportunity and Threat Analysis] In general, a business unit has to monitor key Macro-environmental forces Demographic Economic Technological Political-legal and Social-cultural  Managing the Marketing Effort External Environment Analysis [Opportunity and Threat Analysis] Microenvironment actors Customers Competitors, Distributors, Suppliers that affect it ability to earn profits  Managing the Marketing Effort Opportunity The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include: – an unfulfilled customer need – arrival of new technologies – loosening of regulations – removal of international trade barriers  Managing the Marketing Effort Threats Changes in the external environmental also may present threats to the firm. Some examples of such threats include: – shifts in consumer tastes away from the firm's products – emergence of substitute products – new regulations – increased trade barriers Managing the Marketing Effort Market Planning—Parts of a Marketing Plan (SOSTAIC) Executive Situation Objective summary Analysis and issues Marketing Action Tactics strategy programs Implementa Controls tion  Managing the Marketing Effort Marketing Implementation Implementing is the process that turns marketing plans into marketing actions to accomplish strategic marketing objectives Successful implementation depends on how well the company blends its people, organizational structure, decision and reward system, and company culture into a cohesive action plan that supports its strategies Managing the Marketing Effort Marketing Department Organization Functional organization Geographic organization Product management organization Market or customer management  Managing the Marketing Effort Marketing Control Controlling is the measurement and evaluation of results and the taking of corrective action as needed to ensure the objectives are achieved. Operating control Strategic control  Measuring and Managing Return on Marketing Investment Return on Marketing Investment (Marketing ROI) Return on marketing investment (Marketing ROI) is the net return from a marketing investment divided by the costs of the marketing investment. Marketing ROI provides a measurement of the profits generated by investments in marketing activities.  Lecture Five Customer-Driven Marketing Strategy Creating Value for Target Customers  Introduction 1 Once it fully understands consumers and the marketplace, marketing management can de- sign a customer value-driven marketing strategy.  Introduction 2 We define marketing management as the art and science of choosing target markets and building profitable relationships with them. The marketing manager’s aim is to find, engage, keep, and grow target customers by creating, delivering, and communicating superior customer value.  Introduction 3 To design a winning marketing strategy, the marketing manager must answer two im- portant questions: – What customers will we serve (what’s our target market)? and – How can we serve these customers best (what’s our value proposition)?  Introduction 4 The company must first decide whom it will serve. It does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will go after (target marketing).  Market Segmentation Market segmentation is the process that companies use to divide large, heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs.  Market Segmentation Segmenting consumer markets Segmenting business markets Segmenting international markets Requirements for effective segmentation  The Importance of Market Segmentation Markets have a variety of product needs and preferences. Marketers can better define customer needs. Decision makers can define objectives and allocate resources more accurately  Market Segmentation Requirements for Effective Segmentation To be useful, market segments must be: Measurable Accessible Substantial Differentiable Actionable  Criteria for Effective Segmentation Clearly, there are many ways to segment a market, but not all segmentations are effective. To be useful, market segments must be: – Measurable: The size, purchasing power, and profiles of the segments can be measured. – Accessible: The market segments can be effectively reached and served.  Criteria for Effective Segmentation Substantial: the market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars especially for people whose height is greater than seven feet. – Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. – Actionable: Effective programs can be designed for attracting and serving the segments. Market Segmentation Segmenting Consumer Markets Geographic Demographic segmentation segmentation Psychographic Behavioral segmentation segmentation  Market Segmentation Segmenting Consumer Markets Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities  Market Segmentation Segmenting Consumer Markets Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality  Market Segmentation Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups Gender segmentation divides the market based on sex (male or female) No Market Segmentation  Segmented by Gender Copyright © 2012 Pearson Education 1- 132  Segmented by Age Copyright © 2012 Pearson Education 1- 133  Market Segmentation Segmenting Consumer Markets Income segmentation divides the market into affluent or low-income consumers Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits  Market Segmentation Segmenting Consumer Markets Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product Occasions Benefits sought User status Usage rate Loyalty status  Market Segmentation Using Multiple Segmentation Bases Multiple segmentation is used to identify smaller, better-defined target groups Geodemographic segmentation is an example of multivariable segmentation that divides groups into consumer lifestyle patterns  Market Segmentation Segmenting International markets Geographic Economic location factors Political- Cultural legal factors factors  Market Segmentation Segmenting Business Markets Intermarket segmentation divides consumers into groups with similar needs and buying behaviors even though they are located in different countries  Market Targeting Selecting Target Market Segments Market segmentation reveals the firm’s market segment opportunities. The firm now has to evaluate the various segments and decide how many and which segments it can serve best. We now look at how companies evaluate and select target segments.  Market Targeting Selecting Target Market Segments Target market consists of a set of buyers who share common needs or characteristics that the company decides to serve  Market Targeting Evaluating Market Segments In evaluating different. market segments, a firm must look at three factors: Segment size and growth Segment structural attractiveness Company objectives and resources  Market Targeting Target Marketing Strategies Undifferentiated marketing targets the whole market with one offer – Mass marketing – Focuses on common needs rather than what’s different  Market Targeting Target Marketing Strategies Differentiated marketing targets several different market segments and designs separate offers for each Goal is to achieve higher sales and stronger position More expensive than undifferentiated marketing  Market Targeting Target Market Strategies Concentrated (niche) marketing targets a small share of a large market Limited company resources Knowledge of the market More effective and efficient  Marketing Targeting Target Market Strategies Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations Local marketing Individual marketing  Market Targeting Target Market Strategies Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups Cities Neighborhoods Stores  Market Targeting Target Market Strategies Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers Also known as: – One-to-one marketing – Mass customization – Markets-of-one marketing  Market Targeting Choosing a Targeting Strategy Depends on: Company resources Product variability Product life-cycle stage Market variability Competitor’s marketing strategies  Market Targeting Socially Responsible Target Marketing Benefits customers with specific needs Concern for vulnerable segments Children – Alcohol – Cigarettes – Internet abuses  Differentiation and Positioning Product position is the way the product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products – Perceptions – Impressions – Feelings  Differentiation and Positioning Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions  Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to build a position Choosing the right competitive advantages Selecting an overall positioning strategy Developing a positioning statement  Differentiation and Positioning Identifying Possible Value Differences and Competitive Advantages Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices  Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to build a position by providing superior value from: Product differentiation Services differentiation Channel differentiation People differentiation Image differentiation Differentiation and Positioning Choosing the Right Competitive Advantage Difference to promote should be: Important Distinctive Superior Communicable Preemptive Affordable Profitable  Differentiation and Positioning Choosing the Right Competitive Advantage Important. The difference delivers a highly valued benefit to target buyers. Distinctive. Competitors do not offer the difference, or the company can offer it in a more distinctive way. Superior. The difference is superior to other ways that customers might obtain the same benefit.  Differentiation and Positioning Choosing the Right Competitive Advantage Communicable. The difference is communicable and visible to buyers. Preemptive. Competitors cannot easily copy the difference. Affordable. Buyers can afford to pay for the difference. Profitable. The company can introduce the difference profitably  Differentiation and Positioning Selecting an Overall Positioning Strategy Value proposition is the full mix of benefits upon which a brand is positioned  Differentiation and Positioning Developing a Positioning Statement To (target segment and need) our (brand) is (concept) that (point of difference) Communication and Delivering the Chosen Position Choosing the positioning is often easier than implementing the position.  Lecture Six The Marketing Mix  The Marketing Mix The marketing mix is the specific combination of interrelated and interdependent marketing activities in which an organization engages to meet its objectives. The marketing mix may have many facets, but its elements can be placed in four basic categories: product, place (distribution), promotion, and price. These are commonly referred to as the four Ps of marketing, or because they can be influenced by managers – as the controllable variables of marketing.  The Marketing Mix The marketing mix is the specific combination of interrelated and interdependent marketing activities in which an organization engages to meet its objectives. The marketing mix may have many facets, but its elements can be placed in four basic categories: product, place (distribution), promotion, and price. These are commonly referred to as the four Ps of marketing, or because they can be influenced by managers – as the controllable variables of marketing. Product  Product The term product refers to what the business or nonprofit organization offers to its prospective customers or clients. The offering may be a tangible good, such as a car: such as an airline trip; or an intangible idea, such as the importance of parents’ reading to their children.  Product Product: Anything offered in a market for attention, acquisition, use, or consumption to satisfy a need or want. Good: A durable or non-durable object that can be physically used by the consumer immediately after its purchase. Service: Activities, benefits or satisfaction that is intangible and does not result in the ownership of anything.  Levels of Products Levels of Product and Services  What Is a Product? Product and Service Classifications Consumer products Industrial products  Product Consumer Product Types Convenience products Newspapers, Candy, Fast food Shopping products Furniture, Cars, Appliances Specialty products Medical services, Designer clothes, High-end electronics Unsought products Life insurance, Funeral services, Blood donations  Product Industrial Product Types Capital items Industrial products that aid in the buyer’s production or operations Materials and parts Raw materials, manufactured materials and parts Usually sold directly to industrial users Supplies and services Operating supplies, repair and maintenance items, business services  What Is a Product? Organizations, Persons, Places, and Ideas In addition to tangible products and services, marketers have broadened the concept of a product to include other market offerings; organizations, persons, places and ideas. Organization marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward an organization. Business firms sponsor public relations or corporate image advertizing campaigns to polish their images and market themselves.  What Is a Product? Organizations, Persons, Places, and Ideas Person marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward particular people.sometimes used to build reputation.  What Is a Product Organizations, Persons, Places, and Ideas Place marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward particular places or destinations. Ideas can also be marketed. Social marketing is the use of commercial marketing concepts and tools in programs designed to influence individuals’ behaviour to improve their well-being and that of society Social marketing goes well beyond the promotional P of the marketing mix to include every other element to achieve its social change objectives.  Product and Service Decisions Marketers make product and service decisions at three levels: Individual product decisions Product line decisions product Mix decisions I-Individual Product and Service Decisions  Product and Service Decisions Individual Product and Service Decisions Product attributes are the benefits of the product or service Quality Features Style and design  Product and Service Decisions Individual Product and Service Decisions Product quality is one of the marketer’s major positioning tools, it includes level and consistency. Quality level is the level of quality that supports the product’s positioning (TQM) Conformance quality is the product’s freedom from defects and consistency in delivering a targeted level of performance  Product and Service Decisions Individual Product and Service Decisions Product features are a competitive tool for differentiating a product from competitors’ products Product features are assessed based on the value to the customer versus the cost to the company Product and Service Decisions Individual Product and Service Decisions Style describes the appearance of the product Design contributes to a product’s usefulness as well as to its looks Good design begins with a deep understanding of customer needs.Designers should concentrate on how customers will use and benefit from the product.  New-Product Development Strategy Two ways to obtain new products Acquisition refers to the buying of a whole company, a patent, or a license to produce someone else’s product New product development refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development  New-Product Development Reasons for new product failure Overestimation of market size Poor design Incorrect positioning Wrong timing Priced too high Ineffective promotion Management influence High development costs Competition New-Product Development Process  The New-Product Development Process Idea Generation Idea generation is the systematic search for new-product ideas Sources of new-product ideas Internal External  New-Product Development Process Idea Generation Internal sources refer to the company’s own formal research and development, management and staff, and intrapreneurial programs External sources refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms  New-Product Development Process Idea Screening Identify good ideas and drop poor ideas R-W-W Screening Framework: – Is it real? – Can we win? – Is it worth doing?  New-Product Development Process Concept Development and Testing Product idea is an idea for a possible product that the company can see itself offering to the market Product concept is a detailed version of the idea stated in meaningful consumer terms Product image is the way consumers perceive an actual or potential product  New-Product Development Process Concept Development and Testing Concept testing refers to testing new- product concepts with groups of target consumers  New-Product Development Process Marketing Strategy Development Marketing strategy development refers to the initial marketing strategy for introducing the product to the market Marketing strategy statement includes: – Description of the target market – Value proposition – Sales and profit goals  New-Product Development Process Business analysis Business analysis involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives  New-Product Development Process Product development Product development involves the creation and testing of one or more physical versions by the R&D or engineering departments Requires an increase in investment  New-Product Development Process Test marketing Test marketing is the stage at which the product and marketing program are introduced into more realistic marketing settings Provides the marketer with experience in testing the product and entire marketing program before full introduction New-Product Development Process Types of Test Markets Standard test markets Controlled test markets Simulated test markets  New-Product Development Process Commercialization Commercialization is the introduction of the new product When to launch Where to launch Planned market rollout  Managing New-Product Development Successful new-product development should be: Customer-centered new-product development Sequential new-product development Team-Based New-Product Development Systematic New-Product Development  Managing New-Product Development New-Product Development Strategies Customer-centered new product development focuses on finding new ways to solve customer problems and create more customer satisfying experiences Begins and ends with solving customer problems  Managing New-Product Development New-Product Development Strategies Sequential new-product development is a development approach where company departments work closely together individually to complete each stage of the process before passing along to the next department or stage Increased control in risky or complex projects Slow  Managing New-Product Development New-Product Development Strategies Team-based new-product development is a development approach where company departments work closely together in cross- functional teams, overlapping in the product- development process to save time and increase effectiveness  Managing New-Product Development New-Product Development Strategies Systematic new-product development is an innovative development approach that collects, reviews, evaluates, and manages new-product ideas Creates an innovation-oriented culture Yields a large number of new-product ideas  Product Life-Cycle Strategies Sales and profits over the product’s life from inception to decline  Product Life-Cycle Strategies Introduction Stage Slow sales growth Little or no profit High distribution and promotion expense  Product Life-Cycle Strategies Growth Stage Sales increase New competitors enter the market Price stability or decline to increase volume Consumer education Profits increase Promotion and manufacturing costs gain economies of scale  Product Life-Cycle Strategies Maturity Stage Slowdown in sales Many suppliers Substitute products Overcapacity leads to competition Increased promotion and R&D to support sales and profits  Product Life-Cycle Strategies Maturity Stage Modifying Strategies Market modifying Product modifying Marketing mix modifying  Product Life-Cycle Strategies Decline Stage Maintain the product Harvest the product Drop the product  Product Life-Cycle Strategies The PLC concept also can be applied to what are known as styles, fashions, and fads. Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.  Product Life-Cycle Strategies Style a basic and distinctive mode of expression. Fashion a currently accepted or popular style in a given field.  Group Discussions Outline three measures you can adopt to maintain the product in the market. Lecture Seven Pricing  What Is a Price? Price is the amount of money charged for a product or service. It is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service.  What Is a Price? Price is the only element in the marketing mix that produces revenue; all other elements represent costs  Setting Prices 3 factors to consider when setting prices: Customer perceptions, company costs, and competitor strategies.  Factors to Consider When Setting Prices: Customer Perceptions of Value Understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value Factors to consider in Pricing and the Major Pricing Strategies 1. Customer perception based pricing: – Customer value-based pricing – Good-Value Pricing – Value-Added Pricing 2. Company cost- – Cost based pricing: – Cost-Plus Pricing – Break-Even Analysis and – Target Profit Pricing 3. Competition based pricing Factors to consider in Pricing and the Major Pricing Strategies Factor: Customer Perceptions of Value Factors to consider in Pricing and the Major Pricing Strategies Factor: Customer Perceptions of Value Customer value-based: pricing uses the buyers’ perceptions of value, not the seller’s cost, as the key to pricing. Price is considered before the marketing program is set. Factors to consider in Pricing and the Major Pricing Strategies Factor: Customer Perceptions of Value Good-value pricing offers the right combination of quality and good service to fair price Existing brands are being redesigned to offer more quality for a given price or the same quality for less price Factors to consider in Pricing and the Major Pricing Strategies Factor: Customer Perceptions of Value Everyday low pricing (EDLP) involves charging a constant everyday low price with few or no temporary price discounts High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items Factors to consider in Pricing and the Major Pricing Strategies Factor: Customer Perceptions of Value Value-added pricing attaches value-added features and services to differentiate offers, support higher prices, and build pricing power Pricing power is the ability to escape price competition and to justify higher prices and margins without losing market share Factors to consider in Pricing and the Major Pricing Strategies Factor: Company and Product Cost-based pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk Factors to consider in Pricing and the Major Pricing Strategies Factor: Company and Product Cost-based pricing adds a standard markup to the cost of the product Factors to consider in Pricing and the Major Pricing Strategies Company and Product Costs Types of costs Fixed Variable Total costs costs costs Factors to consider in Pricing and the Major Pricing Strategies Factor: Company and Product Costs Fixed costs are the costs that do not vary with production or sales level Rent, machine, wages Heat Interest Executive salaries Factors to consider in Pricing and the Major Pricing Strategies Factor: Company and Product Variable costs are the costs that vary with the level of production Packaging Raw materials Factors to consider in Pricing and the Major Pricing Strategies Factor: Company and Product Total costs are the sum of the fixed and variable costs for any given level of production Average cost is the cost associated with a given level of output Factors to consider in Pricing and the Major Pricing Strategies Costs at Different Levels of Production  Factors to consider in Pricing and the Major Pricing Strategies Costs as a Function of Production Expence Experience or learning curve is when average cost falls as production increases because fixed costs are spread over more units  Factors to consider in Pricing and the Major Pricing Strategies Cost-Plus Pricing Cost-plus pricing adds a standard markup to the cost of the product Benefits – Sellers are certain about costs – Prices are similar in industry and price competition is minimized – Consumers feel it is fair Disadvantages – Ignores demand and competitor prices Factors to consider in Pricing and the Major Pricing Strategies Factor: Company and Product Break-Even Analysis and Target Profit Pricing Break-even pricing is the price at which total costs are equal to total revenue and there is no profit Target profit pricing is the price at which the firm will break even or make the profit it’s seeking Factors to consider in Pricing and the Major Pricing Strategies Break-Even Analysis and Target Profit Pricing Factors to consider in Pricing and the Major Pricing Strategies Contrasting cost-based and value-based pricing  Factors to Consider When Setting Prices Other Internal and External Considerations Affecting Price Decisions Customer perceptions of value set the upper limit for prices, and costs set the lower limit Companies must consider internal and external factors when setting prices  Factors to Consider When Setting Prices Other Internal and External Considerations Affecting Price Decisions Target costing starts with an ideal selling price based on consumer value considerations and then targets costs that will ensure that the price is met  Factors to Consider When Setting Prices Other Internal and External Considerations Affecting Price Decisions Organizational considerations include: Who should set the price Who can influence the prices  Factors to Consider When Setting Prices Other Internal and External Considerations Affecting Price Decisions The Market and Demand Before setting prices, the marketer must understand the relationship between price and demand for its products Factors to Consider When Setting Prices Other Internal and External Consideration Affecting Price Decisions Competition Pure competition Monopolistic competition Oligopolistic competition Pure monopoly  Factors to Consider When Setting Prices Other Internal and External Considerations Affecting Price Decisions The demand curve shows the number of units the market will buy in a given period at different prices Normally, demand and price are inversely related Higher price = lower demand For prestige (luxury) goods, higher price can equal higher demand when consumers perceive higher prices as higher quality  Factors to Consider When Setting Prices Other Internal and External Considerations Affecting Price Decisions  Factors to Consider When Setting Prices Other Internal and External Considerations Affecting Price Decisions Price elasticity of demand illustrates the response of demand to a change in price Inelastic demand occurs when demand hardly changes when there is a small change in price Elastic demand occurs when demand changes greatly for a small change in price Price elasticity of demand = % change in quantity demand % change in price  Factors to Consider When Setting Prices Other Internal and External Considerations Competitor's Strategies Comparison of offering in terms of customer value Strength of competitors Competition pricing strategies Customer price sensitivity  Factors to Consider When Setting Prices Other Internal and External Consideration Affecting Price Decisions Economic conditions Reseller’s response to price Government Social concerns New-Product Pricing Strategies Pricing Strategies Market-skimming pricing Market- penetration pricing  New-Product Pricing Strategies Market-skimming pricing is a strategy with high initial prices to “skim” revenue layers from the market Product quality and image must support the price Buyers must want the product at the price Costs of producing the product in small volume should not cancel the advantage of higher prices Competitors should not be able to enter the market easily  New-Product Pricing Strategies Pricing Strategies Market-penetration pricing sets a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share Price sensitive market Inverse relationship of production and distribution cost to sales growth Low prices must keep competition out of the market  Product Mix Pricing Strategies Pricing Strategies Optional- Captive- Product product product line pricing pricing pricing Product By-product pricing bundle pricing  Price-Adjustment Strategies Discount and Segmented allowance pricing pricing Psychological Promotional pricing pricing Geographic Dynamic International pricing pricing pricing Lecture Eight Place  Introduction Producing a product or service and making it available to buyers requires building relationships not just with customers, but also with key suppliers and resellers in the company’s supply chain.  Supply Chain and Value Delivery Supply Chain consists of upstream and downstream partners. Upstream partners is a set of firms that supply raw materials, components, information, finances, and expertise needed to create a product or service. Downstream partners are made up of wholesalers and retailers.  Supply Chain and Value Delivery Most large companies today are engaged in building and managing a complex, continuously evolving value delivery network. Value delivery network is made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve the performance of the system.  The Nature and Importance of Marketing Channels Most firms use channels or intermediaries to bring products to the market. Marketing channels are a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user. A company’s channel decision directly affect every other marketing decision.  How Channel Members Add Value They create greater efficiency in making products available to the target market. Through their contacts, experience, specialization, and scale of operation intermediaries usually offer the firm more than it can achieve on its own. They transform the assortments of products made by producers into the assortments wanted by consumers.  How Channel Members Add Value Producers make narrow assortments of products in small quantities. Marketing channels on the other hand buy large quantities from many producers and break them down into smaller quantities and broader assortments wanted by consumers. Channel members also add value by bridging the major time, place, and possession gaps that separate the goods and services from those who would use them. Functions Performed by Channel Members Information gathering Promotion Contact Matching Negotiation Financing Risk taking  Number of Channel Levels Channel Level A layer of intermediary that performs some work in bringing the products and its ownership closer to the final buyer. The number of intermediary level indicates the length of a channel. E.g. Channel 1- Producer - Consumer Channel 2- Producer-Retailer-Consumer Channel 3-Producer-Wholesaler-Retailer-Consumer There are two (2) types of channel levels Direct channel level Indirect channel level  Channel Behaviour and Organization Conventional Distributions Systems Conventional distribution systems consist of one or more independent producers, wholesalers, and retailers. Each seeks to maximize its own profits, and there is little control over the other members and no formal means for assigning roles and resolving conflict. No channel member has much control over the other members, and no formal means exists for assigning roles and resolving channel conflict.  Channel Behaviour and Organization Vertical Marketing Systems Vertical marketing system is a channel in which members at different levels (hence, vertical) work together in a unified way to accomplish the work of the channel. One channel member owns the others, has contracts with them, or wields so much power that they must all cooperate. Vertical marketing systems (VMS) consist of: Corporate marketing systems Contractual marketing systems Administered marketing systems  Channel Behaviour and Organization Vertical Marketing Systems Corporate vertical marketing system integrates successive stages of production and distribution under single ownership. Channel leadership is established through common ownership. An example of a corporate vertical marketing system would be a company such as Apple selling the products it designs and manufactures through its own retail stores.  Channel Behaviour and Organization Vertical Marketing Systems Contractual vertical marketing system consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone. Channel members coordinate their activities and manage conflict through contractual agreements. The most common form is the franchise organization. Franchising, retail sponsored and wholesale sponsored are forms of a contractual vertical marketing system. McDonalds and Burger King are examples of franchises.  Channel Behaviour and Organization Vertical Marketing Systems Franchise organization links several stages in the production distribution process. – Manufacturer-sponsored retailer franchise system – Manufacturer-sponsored wholesaler franchise system – Service firm-sponsored retailer franchise system Channel Behaviour and Organization Vertical Marketing Systems In administered vertical marketing system (VMS) leadership is assumed not through common ownership and contractual ties but through the size and power of one or few dominant channel members. Administered vertical marketing system has a few dominant channel members without common ownership. Leadership comes from size and power. An example of this type of system could include a large retailer such as Wal-Mart establishing standards for makers of smaller products, such as a generic type of laundry detergent. Conventional vs. Vertical Marketing Systems Conventional marketing Vertical marketing channel system Manufacturer Manufacturer Wholesaler Wholesaler Retailer Retailer Consumer Consumer Channel Behavior and Organization Horizontal Marketing Systems Horizontal marketing systems are when two or more companies at one level join together to follow a new marketing opportunity. Companies combine financial, production, or marketing resources to accomplish more than any one company could alone. Companies might join forces with competitors or non- competitors. They might work with each other on permanent or temporal bases or they might create a separate company. Facebook relies on a horizontal marketing system to appeal to customers from almost any background.  Channel Behavior and Organization Multichannel Distribution Systems Hybrid Marketing Channels Multichannel Distribution systems (Hybrid marketing channels) are when a single firm sets up two or more marketing channels to reach one or more customer segments  Channel Behavior and Organization Multichannel Distribution Systems - Hybrid Marketing Channels  Channel Behavior and Organization Changing Channel Organization Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones Channel Design Decisions Analyzing Setting consumer channel needs objectives Identifying major Evaluation channel alternatives  Channel Design Decisions Setting Channel Objectives Targeted levels of customer service What segments to serve Best channels to use Minimizing the cost of meeting customer service requirements Channel Design Decisions Identifying Major Alternatives Intensive distribution Candy and toothpaste Exclusive distribution Luxury automobiles and prestige clothing Selective distribution Television and home appliance  Channel Management Decisions Selecting Managing Motivating Evaluating channel channel channel channel members members members members  Public Policy and Distribution Decisions Exclusive distribution is when the seller allows only certain outlets to carry its products Exclusive dealing is when the seller requires that the sellers not handle competitor’s products Exclusive territorial agreements is when producer or seller limit territory Tying agreements are agreements where the dealer must take most or all of the line  Marketing Logistics and Supply Chain Management Nature and Importance of Marketing Logistics Marketing logistics (physical distribution) involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profit  Marketing Logistics and Supply Chain Management Nature and Importance of Marketing Logistics Supply chain management is the process of managing upstream and downstream value- added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers  Lecture Nine Marketing Communication (Promotion) The Role of Promotion Promotion Communication by marketers that informs, persuades, and reminds potential buyers of a product in order to influence an opinion or elicit a response. Promotion Strategy Promotional Strategy A plan for the optimal use of the elements of promotion: ♦ Advertising ♦ Public Relations ♦ Sales Promotion ♦ Personal Selling Competitive Advantage  The Role of Promotion in the Marketing Mix Overall Marketing Promotional Mix Objectives Advertising Public Relations Marketing Mix Sales Promotion Product Personal Selling Place Promotion Price Target Market Promotion Plan Competitive Advantage High product quality Rapid delivery Low prices Excellent service Unique features Goals and Tasks of Promotion Informing Reminding Target Audience Persuading Goals and Tasks of Promotion Informing Reminding PLC Stages: PLC Stages: Introduction Maturity Target Early Growth Audience PLC Stages: Growth Maturity Persuading Goals and Tasks of Promotion Reminder Promotion Remind customers that product may be needed Remind customers where to buy product Maintain customer awareness Marketing Communication Categories of Communication Interpersonal Mass Communication Communication UPSA DEPARTMENT OF MARKETING( DIP IN MARKETING) Integrated Marketing Communications Integrated Marketing Communications The careful coordination of all promotional messages to assure the consistency of messages at every contact point where a company meets the consumer. UPSA DEPARTMENT OF MARKETING( DIP IN MARKETING) IMC Popularity Growth ♦ Proliferation of thousands of media choices ♦ Fragmentation of the mass market ♦ Slash of advertising spending in favor of promotional techniques that generate immediate response  The Communication Process Noise Encoding Message Decoding Sender Receiver Message Channel Message Feedback Channel UPSA DEPARTMENT OF MARKETING( DIP IN MARKETING)  Marketing Communication As Senders As Receivers Inform Develop messages Persuade Adapt messages Remind Spot new communication opportunities  The AIDA Concept AIDA Model that outlines the process Concept for achieving promotional goals in terms of stages of consumer involvement with the message. Attention Interest Desire Action  The AIDA Concept Action Desire Conative (doing) Interest Affective (feeling) Attention Cognitive (thinking) The AIDA Concept  Push and Pull Strategies PUSH STRATEGY Manufacturer Wholesaler Retailer Consumer promotes to promotes to promotes to buys from wholesaler retailer consumer retailer Orders to manufacturer PULL STRATEGY Consumer Retailer Wholesaler Manufacturer demands demands demands promotes to product product product from consumer from retailer from wholesaler manufacturer Orders to manufacturer Factors Affecting Promotional Mix The Promotional Mix Promotional Mix Combination of promotion tools used to reach the target market and fulfill the organization’s overall goals. ♦ Advertising ♦ Public Relations ♦ Sales Promotion ♦ Personal Selling The Promotional Mix Impersonal, one-way mass communication about a product or organization that is paid for by a marketer. Advertising Advantages Disadvantages ♦ Reach large number ♦ Total cost is of people high ♦ Low cost per ♦ National reach contact is expensive for small ♦ Can be micro- companies targeted Advertising Media Traditional New Advertising Media Advertising Media ♦ Television ♦ Radio ♦ Internet ♦ Newspapers ♦ Banner ads ♦ Magazines ♦ Viral marketing ♦ Books ♦ E- mail ♦ Direct mail ♦ Interactive video ♦ Billboards ♦ Transit cards  Characteristics of the Elements in the Promotional Mix Advertising Communication Mode Indirect and impersonal Communication Control Low Feedback Amount Little Feedback Speed Delayed Message Flow Direction One-way Message Content Control Yes Sponsor Identification Yes Reaching Large Audience Fast Message Flexibility Same message to all audiences Public Relations The marketing function that evaluates public attitudes, identifies areas within the organization that the public may be interested in, and executes a program of action to earn public understanding and acceptance. UPSA DEPARTMENT OF MARKETING( DIP IN MARKETING) The Function of Public Relations  Characteristics of the Elements in the Promotional Mix Public Relations Communication Mode Usually indirect, impersonal Communication Control Moderate to low Feedback Amount Little Feedback Speed Delayed Message Flow Direction One-way Message Content Control No Sponsor Identification No Reaching Large Audience Usually fast Message Flexibility Usually no direct control Sales Promotion Marketing activities— other than personal selling, advertising, and public relations—that stimulate consumer buying and dealer effectiveness. UPSA DEPARTMENT OF MARKETING( DIP IN MARKETING) Sales Promotion Free samples End Consumers Contests Premiums Company Trade Shows Employees Vacation Giveaways Trade Coupons Customers  Characteristics of the Elements in the Promotional Mix Sales Promotion Communication Mode Usually indirect and impersonal Communication Control Moderate to low Feedback Amount Little to moderate Feedback Speed Varies Message Flow Direction Mostly one-way Message Content Control Yes Sponsor Identification Yes Reaching Large Audience Fast Message Flexibility Same message to varied target Personal Selling Planned presentation to one or more prospective buyers for the purpose of making a sale. Personal Selling Traditional Selling Relationship Selling  Characteristics of the Elements in the Promotional Mix Personal Selling Communication Mode Direct and face-to-face Communication Control High Feedback Amount Much Feedback Speed Immediate Message Flow Direction Two-way Message Content Control Yes Sponsor Identification Yes Reaching Large Audience Slow Message Flexibility Tailored to prospect  Lecture Ten The Extended Marketing Mix and Branding  THE EXTENDED MARKETING MIX More recently, with the growing importance of service marketing, the original marketing mix of the four P’s has been extended to seven P’s. The ‘extras’ are all elements that have always been important but may not have been given sufficient attention in the past, particularly for service marketing. The extra three P’s are: – People – Physical evidence – Process  Examples of Service Industries Health Care – hospital, medical practice, dentistry, eye care Professional Services – Marketing, accounting, legal, architectural Financial Services – banking, investment advising, insurance Hospitality – restaurant, hotel/motel, bed & breakfast, – ski resort, rafting Travel – airlines, travel agencies, theme park Others: – hair styling, pest control, plumbing, lawn maintenance, counseling services, health club  SERVICES VERSUS PRODUCTS Services are performances, deeds or efforts. Unique marketing challenges for services. Services are risky for clients. Intangible, perishable, variable, inseparable Satisfaction, value, and a client focus High quality, low prices, convenience, and service are desired by customers.  Services Marketing Nature and Characteristics of a Service  INTANGIBILITY Services are experienced when performed. Difficult for clients to understand. Difficult to display and communicate to clients. Quality is hard to determine for clients. Prices are difficult to set.  MARKETING STRATEGIES FOR INTANGIBILITY Develop strong visual symbols for firm. Advertise a caring company that creates successful results. Present professional qualifications of staff in advertisements. Stress personal selling and post-purchase follow-up programs.  INSEPARABILITY Client is required to participate in production. Service delivered is tied to a particular provider. Amount of service depends upon provider. Strong provider/client link can create capacity problems.  MARKETING STRATEGIES FOR INSEPARABILITY Continual training about quality, policies, and production techniques. Multiple locations, web page, and e-mail with clients for convenience. Training in frontline service and complaint resolution. Production process is a marketing activity. Hire competent employees who know marketing.  VARIABILITY Services are not always performed the same. Team selling can compound this problem. Variable quality raises perceived risk for client. Firms must reduce perceived risk. MARKETING STRATEGIES FOR VARIABILITY Standardize with automation of routine services to ensure quality. Spontaneity and flexibility are also important. Provide satisfaction guarantees for services. Deliver service in a group setting.  PERISHABILITY Services cannot be inventoried, returned, or resold. Opportunity to sell services is quickly lost. Idle services during slow times represent revenue lost forever.  MARKETING STRATEGIES FOR PERISHABILITY Increase personal selling for new clients during slow times. Increase selling new services to existing clients during slow times. Set higher fees at peak usage times and lower fees at nonpeak times. Use reservation system to sell services in advance. Cross-train personnel for surges in demand.  CONSUMER AND BUSINESS PRODUCTS Consumer products are those purchased by consumers for their personal use. Business products are those purchased by a firm or organization for its own use. CUSTOMERS VS. CONSUMERS Customers buy the product. Consumers are those people who actually use the product.  UNIQUE SELLING PROPOSITION (USP) The differentiating factor, often called the Unique Selling Point or Unique Selling Proposition (USP), can be real or imagined. Real USP - A physical difference between one product and the others, perhaps protected by a patient, gives the consumer a real benefit Imagined or Perceived USP - This is where the difference is created and held in the minds of consumers. Effective advertising can give a product an image that appeals to a certain market segment, either by using carefully chosen imagery Branding  Introduction The term brand is derived from the past when it referred to the mark made on cattle to signify identification and ownership. Nowadays, organisations recognise the importance of a brand to identify their product in the market place. Some people buy brands in order to reflect a certain image or status. It also demonstrates how important it is for an organisation to protect its brand name from fraud.  Brand Name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of the competition. (AMA)  Brand Consumers view a brand as an important part of a product branding can add value to a product Branding has become so strong that today hardly anything goes unbranded Brand names help consumer’s identity products that might benefit them Brands also say something about product quality and consistency  Brand The brand name becomes the basis on which a whole story can be built around a product’s special qualities The seller’s brand name and trademark provide legal protection for unique product features that otherwise might be copied by competitors  Concepts of Brands Brand Name Brand Mark and Trademark  Brand A brand name refers to the element of the brand that can be vocalized, such as the Nike Air Jordan, the Cincinnati Reds, and the University of Kentucky Wildcats. A brand name is a word, letter (number) group of words, or letters (numbers) than can be spoken. It is therefore, the part of brand that can be vocalized. Example, YMCA, DASANI, VOLTIC.  A brand mark is a symbol, design, or distinctive colouring or lettering that can not be spoken. Examples are Lexus, Stylizes L, Shell seashell symbol and the well know Mercedes-Benz symbol.  A trademark is a brand name or brand mark, or combination thereof with legal protection. When registered, a trademark is followed by  Guidelines for selecting brand names The name should be positive, distinctive, generate positive feelings and associations, be easy to remember, and easy to pronounce The name should be translatable into a dynamite attitude-oriented logo The name should imply the benefits the product delivers. For example, the name communicates the product attributes the target market desires.  Guidelines for selecting brand names The name should be consistent with the image of the rest of the product lines, organization, and/or city The name should be legally and ethically permissible  Importance of Branding Products identification is eased. Customers are assured that a good or service has a certain level of quality if the same brand is recorded. The firm responsible for the product is known. The producer of the items cannot be as directly identified. Price comparisons are reduced when customers perceive distinct brands. This is most likely if special attributes are linked to different brands.  Importance of Branding A firm can advertise (position) its products and associate each brand and in a characteristics in the buyer’s mind. This aids the customers in forming brand images, which are the perceptions a person has of particular brands. As social visibility becomes more meaningful, a product’s prestige is enhanced via a strong brand name.  Importance of Branding People feel less risk when buying a brand with which they are familiar and for which they have a favorable attitude. This is why brand loyalty occurs. Branding helps segment markets by creating tailored images. By using two or more brands, multiple segments can be attracted. A brand may help enter a new product category.  Advantages of branding The seller It helps to differentiate its product(s) from competitors. It helps to create loyalty. It allows for premium pricing. It can create a certain image and help in targeting/positioning.  Advantages of branding to customers It can act as a guarantee of a certain level of quality. It makes identifying products easier (for example in crowded supermarkets  Approaches to branding Introduction There are two main branding strategies for an organization with a number of products. Umbrella branding Portfolio of brands  Umbrella’ Branding This branding makes maximum use of a well- established brand name by using it on all the organization's productions. It has two main variations: – Use of the company name on all products, often with more descriptive, individual product names e.g. Kellogg’s Cornflakes, Kellogg’s Frosties, Kellogg’s Rice Crispies, Kellogg’s Fruit ‘n’ Fibre, etc. – Use of one brand name for all products or a group of products which is different to the company name e.g. Marks & Spencer’s use of the St Michael label for their own products.  Advantages Marketing costs are lower both for established products and when introducing new products, as the umbrella brand name is already well known. The main disadvantage is that if the company name suffers it will have a bad effect on all the products  Portfolio’ of Brands This approach means using different brand names for different products, not associated with the organization’s name. It has two main variations: Different brands for products in different markets; for example, Reckitt & Coleman markets both Veuve de Vernay sparkling wine and Harpic toilet cleaner. Different brands in competition in the same market, for example Procter and Gamble owns Ariel, Daz and Bold washing liquids.  Advantage consumers are usually unaware of the ownership of brands and will appear to have more choice. The organization can also aim different products at slightly different markets If one product is not doing well or receiving bad publicity, it will not affect the image or reputation of the other brands.  Disadvantage it will be very costly in terms of marketing (particularly promotion) There is a danger of unnecessary overlap or cannibalization – this means that one of the brands might take customers from another brand owned by the same company.  Choosing a Brand Name 4. With a licensing agreement, a company pays a fee to use a name whose trademark rights are held by another firm. Due to the high consumer recognition of many trademarks sales for a new product may be facilitated by paying a royalty fee to use one. Examples of names used in licensing agreements are Coca-Cola, Amstel and Tampico  Choosing a Brand Name There are several potential sources when a firm chooses brand names. These may include: 1. Under brand extension, an existing name is applied to a new product. (Hewlett Packard LaserJet Printer) 2. For a private brand, the middle man specifies the name. E.g. sankofa rice.  Choosing a Brand Name 3. If a new name is sought, these alternatives are available. – Initials (e.g. HBO, BMW) – Invented name (e.g. Exxon) – Numbers (e.g. Boeing 777, DC 10) – Personal name (e.g. Ford) – Foreign word (e.g. Nestle) – Combination of words, initials, numbers etc (e.g. Head and shoulders shampoo).  Characteristics of Effective Brand Names Be easy to pronounce, recognise and remember. Short names such as Raid, Bic meet these requirements. Suggest something about a producer’s use of attributes. Visa suggests a credit card with global use.  Characteristics of Effective Brand Names Be applied to a whole line of products (Calvin Klein clothing). Have a pleasant or at least neutral meaning internationally (Kodak). Convey a different advantage (Savings plus).  Lecture Eleven Strategies For Competitive Marketing  Introduction It would seem a simple task for a company to identify its competitors. – Coca-Cola knows that PepsiCo is its major competitor; – DHL knows that Fedex Express is a major competitor, and – MTN knows that Airtel is a major competitor. However, the range of a company’s actual and potential competitors is in reality much broader  Introduction A company is more likely to be hurt by emerging competitors or new technologies than by current competitors. A focus on current competitors (competitor myopia) rather than latent ones has rendered some businesses extinct. Analysis of Competition Dealing with the Competition Poor firms ignore their competitors; average firms copy their competitors; winning firms lead their competitors. Philip Kotler  Why analyze competitors? Knowing the competitors is critical to effective marketing planning A company must constantly compare its products, prices, places and promotion with those of its competitors In this way, it can identify areas of competitive advantage and disadvantage The company can launch more precise attacks on its competitors as well as prepare stronger defenses against attacks Sometimes competitor can become a partner  Basic Questions 1. Who are our competitors? + who are not our competitors yet but they can be? (why they are not competing now?) 2. What are their objectives? 3. What are their strategies? „4 Ps“ 4. What are their strengths and weaknesses? Analyze competitors’ ability to: Conceive and design new products Produce the product or deliver the service Market their products Finance Manage 5. What are their reaction patterns? Michael Porter model of 5 competitive forces Five Forces Determining Segment Structural Attractiveness Threat of: 1. intense segment rivalry 2. new entrants 3. substitute products 4. buyers’ bargaining power 5. suppliers’ bargaining power  Designing Competitive Strategies We can gain further insight by classifying firms by the roles they play in the target market; leader, challenger, follower, or nichers. These firms, by the roles they play will have to employ different competitive strategies. Below are some c