Business Essentials: Chapter 11 Marketing Mix PDF

Business Essentials Thirteenth Edition Chapter 11 Marketing Mix Copyright © 2022, 2019, 2016 Pearson Education, Inc. Learning Outcomes (1 of 3) 1 Explain the definition of a product as a value packa...

Business Essentials Thirteenth Edition Chapter 11 Marketing Mix Copyright © 2022, 2019, 2016 Pearson Education, Inc. Learning Outcomes (1 of 3) 1 Explain the definition of a product as a value package and how to classify goods and services. 2 Describe the new product development process. 3 Describe the stages of the product life cycle (PLC) and methods for extending a product’s life. Copyright © 2022, 2019, 2016 Pearson Education, Inc. Learning Outcomes (2 of 3) 4 Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 5 Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. Copyright © 2022, 2019, 2016 Pearson Education, Inc. Learning Outcomes (3 of 3) 6 Explain the meaning of distribution mix and identify the different channels of distribution. 7 Identify the objectives of promotion and the considerations in selecting a promotional mix. 8 Discuss advertising promotions, outline the tasks involved in personal selling, describe the various types of sales promotions and distinguish between publicity and public relations. Copyright © 2022, 2019, 2016 Pearson Education, Inc. What Is a Product? A physical good, a service or some combination of the two Product Features – tangible and intangible qualities that a company builds into its products Value Package – a product is marketed as a bundle of value-adding attributes, including a reasonable cost Copyright © 2022, 2019, 2016 Pearson Education, Inc. Classifying Goods and Services Consumer – person who purchases products for personal use Industrial Buyer – a company or other organization that buys products for use in producing other products (goods or services) Consumer Product Organizational Product Copyright © 2022, 2019, 2016 Pearson Education, Inc. Categories of Consumer Products Categories of Consumer Products Category Description Examples Convenience goods Consumed rapidly and regularly Milk and services Inexpensive Newspaper Purchased often and with little input Fast food of time and effort Shopping goods and Purchased less often Television set services More expensive Tires Consumers may shop around and Hotel reservation compare products based on style, performance, color, price, and other criteria. Specialty goods and Purchased infrequently Luxury jewelry services Expensive Wedding gown Consumer decides on a precise Healthcare product and will not accept insurance substitutions and spends a good deal of time choosing the “perfect” item. Copyright © 2022, 2019, 2016 Pearson Education, Inc. Organizational Products Organizational Products Category Description Examples Production items Goods or services used directly in the Loads of tea processed into tea production process bags Information processing for real- time production Jet fuel used by airline services Expense items Goods or services that are consumed Oil and electricity for machines within a year by firms producing other Building maintenance goods or supplying other services Legal services Capital items Permanent (expensive and long- Buildings (offices, factories) lasting) goods and services Fixed equipment (water towers, Life expectancy of more than a year baking ovens) Purchased infrequently so transactions Accessory equipment (information often involve decisions by high-level systems, airplanes) managers Financial advisory services Copyright © 2022, 2019, 2016 Pearson Education, Inc. The Product Mix Product Mix – the group of products that a firm makes available for sale – Example: Nestle – grocery (milo, maggie), confec(chocolate, kit-kat), ice-cream, chill (yogurt ) Product Line – group of products that are closely related because they function in a similar manner or are sold to the same customer group who will use them in similar ways – Example: Nescafe—rich, regular, mild Copyright © 2022, 2019, 2016 Pearson Education, Inc. Developing New Products Speed to Market – strategy of introducing new products to respond quickly to customer or market changes Copyright © 2022, 2019, 2016 Pearson Education, Inc. The Seven-Step Development Process (1 of 3) 1. Product ideas – typically come from consumers, the sales force, R&D departments, suppliers, or engineering personnel 2. Screening – eliminate ideas that do not mesh with the firm’s abilities or objectives 3. Concept testing – companies use market research to get consumers’ input about benefits and prices Copyright © 2022, 2019, 2016 Pearson Education, Inc. The Seven-Step Development Process (2 of 3) 4. Business analysis – marketers compare production costs and benefits 5. Prototype development – engineering, R&D, or design groups produce a prototype 6. Product testing and test marketing – test the product to see if it meets performance requirements, sell on trial basis in limited area Copyright © 2022, 2019, 2016 Pearson Education, Inc. The Seven-Step Development Process (3 of 3) 7. Commercialisation – the company begins full-scale production and marketing Copyright © 2022, 2019, 2016 Pearson Education, Inc. Product Life Cycle Product Life Cycle (PLC) – series of stages in a product’s commercial life Stages in the PLC – Introduction – Growth – Maturity – Decline Copyright © 2022, 2019, 2016 Pearson Education, Inc. Product Life Cycle A. Introduction begins when the product reaches the marketplace extensive promotional and development costs erase all profits B. Growth if the new product attracts enough consumers, sales start to climb rapidly the product starts to show a profit C. Maturity sales growth starts to slow, towards the end, sales start to fall Profit levels are high D. Decline sales and profits continue to fall, as new products in the introduction stage take away sales. Copyright © 2022, 2019, 2016 Pearson Education, Inc. Four Phases of the PLC Copyright © 2022, 2019, 2016 Pearson Education, Inc. Profits in the PLC Copyright © 2022, 2019, 2016 Pearson Education, Inc. Extending Product Life Product Extension – marketing an existing product globally instead of just domestically Product Adaptation – modifying an existing product for greater appeal in different countries Reintroduction – reviving obsolete or older products for new markets Copyright © 2022, 2019, 2016 Pearson Education, Inc. Pricing to Meet Business Objectives (1 of 3) Pricing – process of determining what a company will receive in exchange for its products Pricing Objectives – the goals that sellers hope to achieve in pricing products for sale – profit-maximizing, Establishing market share Copyright © 2022, 2019, 2016 Pearson Education, Inc. Pricing to Meet Business Objectives (2 of 3) Profit-Maximizing Objectives – the seller’s pricing decision is critical for determining the firm’s revenue, which is the result of the selling price times the number of units sold Revenue = Selling price × Units sold Copyright © 2022, 2019, 2016 Pearson Education, Inc. Pricing to Meet Business Objectives (3 of 3) Market Share (or Market Penetration) – company’s percentage of the total industry sales for a specific product type Copyright © 2022, 2019, 2016 Pearson Education, Inc. Price Setting Tools Cost-Oriented Pricing – pricing that considers the firm’s desire to make a profit and its need to cover production costs Selling price = Seller’s costs + Desired Profit Copyright © 2022, 2019, 2016 Pearson Education, Inc. Price Setting Tools Markup – amount added to an item’s purchase cost to sell it at a profit 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 −𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 Markup percentage = x100% 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 For example, if your product costs $50 to make and the selling price is $75, then the markup percentage would be 50%: ( $75 – $50) / $50 =. 50 x 100 = 50%. Copyright © 2022, 2019, 2016 Pearson Education, Inc. Breakeven Analysis: Cost-Volume-Profit Relationships (1 of 2) Variable Cost – cost that changes with the quantity of a product produced and sold Fixed Cost – cost that is incurred regardless of the quantity of a product produced and sold Breakeven Analysis – for a particular selling price, assessment of the seller’s costs versus revenues at various sales volume Copyright © 2022, 2019, 2016 Pearson Education, Inc. Breakeven Analysis: Cost-Volume-Profit Relationships (2 of 2) Breakeven Point – sales volume at which the seller’s total revenue from sales equals total costs (variable and fixed) with neither profit nor loss Profit = Total Revenue − (Total Fixed Cost + Total Variable Cost) Copyright © 2022, 2019, 2016 Pearson Education, Inc. Breakeven Analysis Copyright © 2022, 2019, 2016 Pearson Education, Inc. Pricing Strategies: Pricing Existing Products – Three Options 1. Pricing above prevailing market prices for similar products to take advantage of the common assumption that higher price means higher quality 2. Pricing below market prices while offering a product of comparable quality to higher-priced competitors 3. Pricing at or near market prices Copyright © 2022, 2019, 2016 Pearson Education, Inc. Pricing Strategies: Pricing New Products Price Skimming Penetration Pricing – setting an initially high – setting an initially low price to cover new price to establish a new product costs and product in the market generate a profit Copyright © 2022, 2019, 2016 Pearson Education, Inc. Pricing Tactics (1 of 2) Bundling Strategy – grouping several products together to be sold as a single unit at a reduced price, rather than individually Price Lining – setting a limited number of prices for certain categories of products Psychological Pricing – pricing tactic that takes advantage of the fact that consumers do not always respond rationally to stated prices Copyright © 2022, 2019, 2016 Pearson Education, Inc. Pricing Tactics (2 of 2) Examples of psychological pricing: Odd-Even Pricing – psychological pricing tactic based on the premise that customers prefer prices not stated in even dollar amounts Discount – price reduction offered as an incentive to purchase Copyright © 2022, 2019, 2016 Pearson Education, Inc. The Distribution Mix Distribution Mix – combination of distribution channels by which a firm gets its products to end users Copyright © 2022, 2019, 2016 Pearson Education, Inc. Intermediaries and Distribution Channels (1 of 2) Distribution Channel – network of interdependent companies through which a product passes from producer to end user Copyright © 2022, 2019, 2016 Pearson Education, Inc. Intermediaries and Distribution Channels (2 of 2) Intermediary – individual or firm that helps to distribute a product consisting of wholesaler and retailer. Wholesaler – intermediary who sells products to other businesses for resale to final consumers Retailer – intermediary who sells products directly to consumers Copyright © 2022, 2019, 2016 Pearson Education, Inc. Channels of Distribution Copyright © 2022, 2019, 2016 Pearson Education, Inc. The Value-Adding Intermediary Copyright © 2022, 2019, 2016 Pearson Education, Inc. Nonstore Retailing (1 of 2) Direct-Response Retailing – form of nonstore retailing in which firms directly interact with customers to inform them of products and to receive sales orders. (E-commerce pop up) Mail Order (catalog marketing) – form of nonstore retailing in which customers place orders for catalog merchandise received through the mail Copyright © 2022, 2019, 2016 Pearson Education, Inc. Nonstore Retailing (2 of 2) Telemarketing – form of nonstore retailing in which the telephone is used to sell directly to consumers Direct Selling – form of nonstore retailing typified by door-to-door sales Copyright © 2022, 2019, 2016 Pearson Education, Inc. Online Retailing (1 of 2) Online Retailing – Nonstore retailing in which information about the seller’s products and services is connected to consumers’ computers, allowing consumers to receive the information and purchase the products in the home E-catalog – Nonstore retailing in which the Internet is used to display products Copyright © 2022, 2019, 2016 Pearson Education, Inc. Online Retailing (2 of 2) Electronic Storefront – commercial website at which customers gather information about products and buying opportunities, place orders, and pay for purchases Cybermall – collection of virtual storefronts (business websites) representing a variety of products and product lines on the Internet Copyright © 2022, 2019, 2016 Pearson Education, Inc. The Importance of Promotion Promotion – aspect of the marketing mix concerned with the most effective techniques for communicating information about and selling a product Positioning – process of establishing an identifiable product image in the minds of consumers Copyright © 2022, 2019, 2016 Pearson Education, Inc. The Promotional Mix Promotional Mix – combination of tools used to promote a product Advertising Personal selling Sales promotions Publicity Public relations Copyright © 2022, 2019, 2016 Pearson Education, Inc. Advertising Promotions (1 of 2) Advertising – promotional tool consisting of paid, nonpersonal communication used by an identified sponsor to inform an audience about a product Copyright © 2022, 2019, 2016 Pearson Education, Inc. Advertising Promotions (2 of 2) Advertising Media – variety of communication devices for carrying a seller’s message to potential customers Media Mix – combination of advertising media chosen to carry a message about a product Copyright © 2022, 2019, 2016 Pearson Education, Inc. Personal Selling Personal Selling – promotional tool in which a salesperson communicates one-on-one with potential customers – order processing, creative selling, missionary selling Copyright © 2022, 2019, 2016 Pearson Education, Inc. Personal Selling Tasks (1 of 2) Order Processing – personal-selling task in which salespeople receive orders and see to their handling and delivery Creative Selling – personal-selling task in which salespeople try to persuade buyers to purchase products by providing information about their benefits Copyright © 2022, 2019, 2016 Pearson Education, Inc. Personal Selling Tasks (2 of 2) Missionary Selling – personal-selling task in which salespeople promote their firms and products rather than try to close sales – Mainly to promote not close sales. Copyright © 2022, 2019, 2016 Pearson Education, Inc. Sales Promotions (1 of 2) Sales Promotion – short-term promotional activity designed to encourage consumer buying, industrial sales, or cooperation from distributors – coupons, premiums, point-of-sale displays Coupon – sales-promotion technique in which a certificate is issued entitling the buyer to a reduced price Copyright © 2022, 2019, 2016 Pearson Education, Inc. Sales Promotions (2 of 2) Premium – sales-promotion technique in which offers of free or reduced-price items are used to stimulate purchases Point-of-Sale (POS) Display – sales-promotion technique in which product displays are located in certain areas to stimulate purchase or to provide information on a product Copyright © 2022, 2019, 2016 Pearson Education, Inc. Publicity and Public Relations Publicity – promotional tool in which information about a company, a product, or an event is transmitted by the general mass media to attract public attention Public Relations – company-influenced information directed at building goodwill with the public or dealing with unfavorable events Copyright © 2022, 2019, 2016 Pearson Education, Inc. The Consumer Buying Process and the Promotional Mix Copyright © 2022, 2019, 2016 Pearson Education, Inc. Summary Copyright © 2022, 2019, 2016 Pearson Education, Inc.