Principles Of Marketing PDF

Principles of Marketing Seventeenth Edition Chapter 1 Marketing: Creating Customer Value and Engagement 17 chapters 4...

Principles of Marketing Seventeenth Edition Chapter 1 Marketing: Creating Customer Value and Engagement 17 chapters 4 Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What is Marketing? Marketing is a process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Understanding the Marketplace and Customer Needs su AREdo.at Needs are states of felt deprivation. Wants are the form human needs take as they are shaped by culture and individual personality. Demands are human wants that are backed by buying power. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Maslow’s Hierarchy of Needs Self- actualization 1 2 Esteem needs (self-esteem, recognition, status) Social needs (sense of belonging, love) 3 Safety needs 4 (security, protection) 5 Physiological needs (food, water) Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Understanding the Marketplace and Customer Needs 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. focusing onselling products rather than and understanding fulfilling Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  customer's needs Understanding the Marketplace and Customer Needs Exchange is the act of obtaining a desired object from someone by offering something in return. Marketing actions try to create, maintain, and grow desirable exchange relationships. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Understanding the Marketplace and Customer Needs A market is set of actual and potential buyers. Consumers market when they: search for products interact with companies to obtain information make purchases CompankmanTtomedariesFinal suppliers consumer Competitors Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Understanding the Marketplace and Customer Needs Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Designing a Customer Value-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 (target market)? How can we best serve these customers (value proposition)? Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Designing a Customer Value-Driven Marketing Strategy A brand’s value proposition is the set of benefits or values it promises to deliver to customers to satisfy their needs. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Production Ford's Model T in early20thcent Henry F focused onefficientmassproductionto lowercostsandmake automobiles affordablefortheaverageconsumer Product Apple'syours onhighqualityinnovativeproducts liketheiPhone Designing a Customer Value-Driven Marketing Strategy Selling Insurancecompaniesrelyon extensiveadvertising directsaleseffortsto convin buyers quality consumersbuy jesduct offerhigh on customers focus Societal Production Product Selling Marketing Marketing concept concept concept concept concept on potus onhowto saletheproducts focus customers manufacture society lowercost as possible Ey Cocoon Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Marketing Amazonprioritises customer satisfaction personalised recommendation justdelivery and an easy to use platform Designing a Customer Value-Driven Marketing Strategy outdoorgear environmentalsustainabilityand Societal Patagonia highquality ethicalpractices benefitingsocietyat large Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Designing a Customer Value-Driven Marketing Strategy Societal marketing: The company’s marketing decisions should consider consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Designing a Customer Value-Driven Marketing Strategy The marketing mix is comprised of a set of tools known a the four Ps: product price promotion place Integrated marketing program—a comprehensive plan that communicates and delivers intended value Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Customer relationship management—the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Relationship Building Blocks Customer- Customer perceived value satisfaction The difference The extent to between total which perceived customer performance perceived matches a benefits and buyer’s customer cost expectations Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Customer-Engagement Marketing fosters direct and continuous customer involvement in shaping brand conversations, experiences, and community. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Partner relationship management involves working closely with partners in other company departments and outside the company to jointly bring greater value to customers. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing Customer Relationships and Capturing Customer Value Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage. end si lui toi Khachhang quen Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Butterflies highlyprofitable butnotloyal attractedbycompetitiveoffersor promotions and will leave once a better optionarises ourists Ifnagings booking Managing Customer Relationships one time luxury otelstay butare and Capturing Customer Value unlikelytoreturn Truefriends profitable highlyloyal believein thebra Applecustomerswhoupgrade exhibitrepeatpurchasin Strangers lowprofitability iPhoneregularly advocateforbrandbehaviors and are notloyal notalignwiththe company's alueofferingortargetmarket 5.0whopurchases a heavilydiscountedproductwithoutintention ofrepeatengagement Barnacles loyal but notprofitable engagefrequentlywithbrandbuttypically makesmall low marginitems ex water coffee frequentvisitorsto a cage whoonly buysmall low margin like water or coffee Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 2 Partnering to Build Customer Engagement, Value, and Relationships Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Company-Wide Strategic Planning (1 of 3) Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities, and its changing marketing opportunities. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Company-Wide Strategic Planning Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Company-Wide 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 Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Designing The Business Portfolio X 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. Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Designing The Business Portfolio X Strategic business units can be a Vinamilk 2007 brand portfolio Company division 17 Product line within a division 2 Single product or brand Fabic Lonny 1 Procter Gambe care 1BeautyCare Pantene 2 Olay Coca Cola sodas Esperate juices Minute Maid Simply Orange 3 Nike'sAir Jordanrepresents a singleproduct brand andapparel within its overallsports footwearCopyright portfolio © 2018 Pearson Education Ltd. All Rights Reserved. Designing The Business Portfolio Analyzing The Current Business Portfolio Identify strategic business units (SBUs) Assess the attractiveness of its various SBUs Decide how much support each SBU deserves Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  highmarket growth highrelativemarketshare investmentto maintainposition significant potentialtogeneratesubstantialrevenue Designing The Business Portfolio highmarketgrowthbut Ex Tested.gl flowrelativemarketshare heavyinvestment tobeStar Ex viggtain marketshare lowmarketgrowthhigh downbut low market theindustry is due growth low stillcan makemoney revenue share Ex Vin usesour companies from to relative marketsh p large market consumeresource Decide whichtoggelpp jostor others without significantretur consider divesting relativemarket share ExLtd. Blackberry Copyright © 2018 Pearson Education phone All Rights Reserved. 1 thisstrategyfocuses on increasingsalesof existingproducts in existingmarker attract more customers or encourage current customers to buy more frequen Ex Coca Cola runningpromotional campaign to boostsales ofits soft Designing The Business Portfolio drinks in the USmarket 2 involvesintroducing existingproductsintonewmarkets than why't 4 2 3 2 athletic Ex Under Armourexpandingits wear to internationalmarkets or women consumers in addition to men targeting new products in new markets oftenrepresentingthe 3 involveslaunching highestrisk becausethe is Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  any ering en uncharted I err onbothfronts Ex Amazonenteringthestreamingindustryby launching PrimeVideo targetinga new market outsideits core e commer Marketing Strategy and the Marketing Mix business 4 thefocusis on developingnew products to sell to the company's existingcustom ase leveragingbrandloyaltyand market knowledge Ex AppleintroducingApple Watch to itsexistingcustom basewho alreadyuse iPhones Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Marketing Strategy and the Marketing Mix Customer Value-Driven Marketing Strategy Marketing strategy is the marketing logic by which the company hopes to create customer value and achieve profitable customer relationships. Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Marketing Strategy and the Marketing Mix Customer Value-Driven Marketing Strategy Market segmentation is the division of a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate products or marketing mixes. Market segment is a group of consumers who respond in a similar way to a v given set of marketing efforts. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Marketing Strategy and the Marketing Mix Customer Value-Driven Marketing Strategy Market targeting is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. Market positioning is the arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Differentiation begins the positioning process. heart learn by Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Marketing Strategy and the Marketing Mix Customer Value-Driven Marketing Strategy Positioning: The L’Oréal group serves major segments of the beauty market, and within each segment it caters to many sub segments. L’Oréal targets the larger segments through its major divisions; further within these major divisions, L’Oréal markets various brands that cater to customers of different ages, incomes, and lifestyles. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. 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. price 4ps place promotion Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Marketing Strategy and the Marketing Mix Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing the Marketing Effort Figure 2.6 Analysis, Planning, Implementation, and Control Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing the Marketing Effort Figure 2.7 Marketing Analysis: SWOT Analysis Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Measuring and Managing Return on Marketing Investment Return on Marketing Investment (Marketing ROI) Net return from a marketing investment divided by the costs of the marketing investment Measurement of the profits generated by investments in marketing activities Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Measuring and Managing Return on Marketing Investment Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 3 Analyzing the Marketing Environment Copyright © 2018 Pearson Education Ltd. All Rights Reserved. A Company’s 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. PESTLE Levels MKT environment ymam.org of economic go up products run more promotions down affordable go and technologyaffects MKT cheatsheet economy Why Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  1 on mySpending Economicconditions dictate purchasi consumer power driving demand for budget or premium products Ex McDonald's Dollar Menu the A Company’s Marketing Environment during 2008financial crisis to attract cost conscious consumers 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. Pricing and Promotions Inflation andgrowth affect pricing strategies and market focus 2 Technology Digitalreach enables globalmarketing via e commerce andsocialmedia Ex Amazon uses AI for personalised recommendations Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  dri es new pr duct 41 est a on s electi ears reshaping mkt strategies 3 Interconnection Economicshifts pushtech A Company’s Marketing Environment reliance like digitaltools during COVID 19 Macroenvironment consists of the larger societal forces that affect the microenvironment—demographic, economic, natural, technological, political, and cultural forces. COVID 19 Zoom thrived by EI During Spotify aligning with economic and technological shifts Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Microenvironment Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Macro environment ethical consciousbuyers Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Responding to the Marketing Environment Views on Responding Uncontrollable Proactive Reactive React and Take Watch and adapt to aggressive react to forces in the actions to forces in the environment affect forces environment in the environment Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 5 Consumer Markets and Buyer Behavior Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Consumer Markets and Buyer Behavior Consumer buyer behavior is the buying behavior of final consumers— individuals and households that buy goods and services for personal consumption. Consumer markets are made up of all the individuals and households that buy or acquire goods and services for personal consumption. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Consumer Markets and Buyer Behavior Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior learn by heart each howthis oneinfluence and otherm pick up culture how Ex influences society Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Cultural Factors Culture is the set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Cultural Factors Subcultures are groups of people within a culture with shared value systems based on common life experiences and situations. Subcultures include nationalities, religions, racial groups, and geographic regions. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior X Cultural Factors Social classes are society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. Measured as a combination of occupation, income, education, wealth, and other variables Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Cultural Factors Major American Social Classes Upper Class Middle Class Working Class Lower Class Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Social Factors Groups and Social Networks Membership Aspirational Reference Groups Groups Groups Groups with Groups an Groups that direct individual form a influence wishes to comparison and to belong to or reference which a in forming person attitudes or belongs behavior Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Groups and Social Networks Online social networks Buzz marketing Social media sites Virtual worlds Word of mouth Opinion leaders Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Social Factors Family is the most important consumer-buying organization in society. Role and status can be defined by a person’s position in a group. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Personal Factors Age and life-cycle stage Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Personal Factors Occupation affects the goods and services bought by consumers. Economic situations include trends in: Personal Interest Spending Savings income rates Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Personal Factors Lifestyle is a person’s pattern of living as expressed in his or her psychographics. Psychographics measure a consumer’s AIOs (activities, interests, opinions) to capture information about a person’s pattern of acting and interacting in the environment. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Personal Factors Personality refers to the unique psychological characteristics that distinguish a person or group. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Brand Personality Traits Sincerity Excitement Competence Sophistication Ruggedness Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Developing Marketing Information Psychological Factors Motivation Perception Learning Beliefs and attitudes Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Characteristics Affecting Consumer Behavior Psychological Factors A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction of the need. Motivation research refers to qualitative research designed to probe consumers’ hidden, subconscious motivations. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Developing Marketing Information Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Psychological Factors Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. Perceptual Processes Selective Selective Selective attention distortion retention Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Characteristics Affecting Consumer Behavior Psychological Factors Selective attention is the tendency for people to screen out most of the information to which they are exposed. kif Selective distortion is the tendency for people to interpret information in a way that will support what they already believe. class Selective retention is the tendency to remember good points made about a brand Multiple choice Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Psychological Factors Learning is the change in an individual’s behavior arising from experience and occurs through the interplay of: Drives Stimuli Cues Responses Reinforcement Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Characteristics Affecting Consumer Behavior Psychological Factors A belief is a descriptive thought that a person has about something based on: knowledge opinion faith An attitude describes a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Types of Buying Decision Behavior Complex buying behavior Dissonance-reducing buying behavior Habitual buying behavior Variety-seeking buying behavior Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Types of Buying Decision Behavior O Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  cheat sheet Figure 5.5 The Buyer Decision Process provide example learn by heart Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Buyer Decision Process Need Recognition Need recognition is the first stage of the buyer decision process, in which the consumer recognizes a problem or need triggered by: Internal stimuli External stimuli structure by marketing Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Buyer Decision Process Information Search Information search is the stage of the buyer decision process in which the consumer is motivated to search for more information. Sources of information: Personal sources Commercial sources Public sources Experiential sources Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Buyer Decision Process base on criteria Evaluation of Alternatives Alternative evaluation is the stage of the buyer decision process in which the consumer uses information to evaluate alternative brands in the choice set. of Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Buyer Decision Process Purchase Decision Purchase decision is the buyer’s decision about which brand to purchase. The purchase intention may not be the purchase decision due to: Attitudes of others Unexpected situational factors Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Buyer Decision Process Postpurchase Behavior Postpurchase behavior is the stage of the buyer decision process in which consumers take further action after purchase, based on their satisfaction or dissatisfaction. C worldof mouth Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Buyer Decision Process Postpurchase Behavior Cognitive dissonance is buyer discomfort caused by postpurchase conflict. voucher CS doihang Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Buyer Decision Process for New Products The adoption process is the mental process an individual goes through from first learning about an innovation to final regular use. Stages in the adoption process include: Awareness Interest Evaluation Trial Adoption Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Buyer Decision Process for New Products Individual Differences in Innovativeness Innovators Early Adopters Early Mainstream expand Late Mainstream Lagging Adopters Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Buyer Decision Process for New Products Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The five adopter groups shown in the slide have differing values E Iphone 17 order beforereleasing day Innovators are venturesome—they try new ideas at some risk. Early adopters are guided by respect—they are opinion leaders in their communities and adopt new ideas early but carefully. The early mainstream is deliberate—although they rarely are leaders, they adopt new ideas before the average person. The late mainstream is skeptical—they adopt an innovation only after a majority of people have tried it. Lagging adopters are tradition bound—they are suspicious of changes and adopt the innovation only when it has become something of a tradition itself. learn heart by 83 All Rights Reserved. Copyright © 2018 Pearson Education Ltd. Analyzing and Using Marketing Information Influence of Product Characteristics on Rate of Adoption Relative Compatibility Complexity advantage the degree to which the the degree to which the innovation fits the values and the degree to which the innovation is difficult to experiences of potential innovation appears superior to understand or use consumers existing products Divisibility Communicability the degree to which the the degree to which the results of innovation may be tried on a using the innovation can be observed limited basis or described to others Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 7 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers Copyright Copyright © 2018 © 2018 Pearson Pearson Education Education Ltd. Ltd. All All Rights Rights Reserved. Reserved.  cheat sheet Customer-Driven Marketing Strategy Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Market segmentation requires dividing a market into smaller segments with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Segmenting consumer markets Segmenting business markets Segmenting international markets Requirements for effective segmentation Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Market Segmentation Segmenting Consumer Markets Remember Geographi c Demograp hic segmentati segmentati on on Psychograp Behavioral hic segmentati segmentatio on n Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Demographic segmentation divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Age and life-cycle stage segmentation divides a market into different age and life-cycle groups. Gender segmentation divides a market into different segments based on gender. Income segmentation divides a market into different income segments. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Psychographic segmentation divides a market into different segments based on social class, lifestyle, or personality characteristics. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Behavioral segmentation divides a market into segments based on consumer knowledge, attitudes, uses of a product, or responses to a product. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Behavioral Segmentation Occasions Benefits sought User status Usage rate Loyalty status Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Segmenting Consumer Markets Multiple segmentation is used to identify smaller, better-defined target groups. Experian’s Mosaic USA system classifies U.S. households into one of 71 lifestyle segments and 19 levels of affluence. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Segmenting Business Markets Consumer and business marketers use many of the same variables to segment their markets. Additional variables include: Customer operating characteristics Purchasing approaches Situational factors Personal characteristics Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Market Segmentation Segmenting International Markets Geographic Economic location factors Political and Cultural legal factors factors Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Segmentation Segmenting International Markets Intermarket segmentation involves forming segments of consumers who have similar needs and buying behaviors even though they are located in different countries. Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Market Segmentation Requirements for Effective Segmentation Measurable Accessible Substantial Differentiable Actionable Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Targeting Evaluating Market Segments Segment size and growth Segment structural attractiveness Company objectives and resources Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Targeting Selecting Target Market Segments A target market is a set of buyers who share common needs or characteristics that the company decides to serve. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Targeting Figure 7.2 Market-Targeting Strategies. 1 offer productto whole market Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Targeting Selecting Target Market Segments Undifferentiated marketing targets the whole market with one offer. Mass marketing Focuses on common needs rather than what’s different Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Targeting Selecting Target Market Segments 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 Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Targeting Selecting Target Markets Concentrated marketing targets a large of a smaller market. Limited company resources Knowledge of the market More effective and efficient Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Targeting Selecting Target Market Segments Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Local marketing Individual marketing Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Targeting Selecting Target Market Segments Local marketing involves tailoring brands and promotion to the needs and wants of local customer segments. Cities Neighborhoods Stores Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Targeting Selecting Target Markets 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 Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Market Targeting Selecting Target Market Segments Choosing a targeting strategy depends on Company resources Product variability Product life-cycle stage Market variability Competitor’s marketing strategies Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Differentiation and Positioning Product position is the way the product is defined by consumers on important attributes. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Differentiation and Positioning Positioning maps show consumer perceptions of marketer’s brands versus competing products on important buying dimensions. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. 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 Communicating and delivering the chosen position to the market Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy 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. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to differentiate along the lines of: Product Services Channels People Image Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy A competitive advantage should be: Important Distinctive Superior Communicable Preemptive Affordable Profitable Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Value proposition is the full mix of benefits upon which a brand is positioned. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Positioning statement summarizes company or brand positioning using this form: To (target segment and need) our (brand) is (concept) that (point of difference) Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  X Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Positioning Statement Example for Evernote: “To busy multitaskers who need help remembering things, Evernote is a digital content management application that makes it easy to capture and remember moments and ideas from your everyday life using your computer, phone, tablet, and the Web.” Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Differentiation and Positioning Communicating and Delivering the Chosen Position Choosing the positioning is often easier than implementing the position. Establishing a position or changing one usually takes a long time. Maintaining the position requires consistent performance and communication. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 8 Products, Services, and Brands: Building Customer Value Copyright Copyright © 2018 © 2018 Pearson Pearson Education Education Ltd. Ltd. All All Rights Rights Reserved. Reserved. What is a Product? Product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want. Service is a product that consists of activities, benefits, or satisfactions and that is essentially intangible and does not result in the ownership of anything. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? Products, Services, and Experiences Products and services are becoming more commoditized. Companies are now creating and managing customer experiences with their brands or company. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? value What is the core Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  What Is a Product? Product and Service Classifications Consumer products Industrial products Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What is a Product? Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What is a Product? Product and Service Classifications Consumer products are products and services bought by final consumers for personal consumption. Convenience products 0 Shopping products Specialty products Unsought products Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? Product and Service Classifications Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort. Newspapers Candy Fast food Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? Product and Service Classifications Shopping products are less frequently purchased consumer products and services that the customer compares carefully on suitability, quality, price, and style. Furniture Cars Appliances Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? Product and Service Classifications Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Medical services Designer clothes High-end electronics Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? Product and Service Classifications Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying. Life insurance Funeral services Blood donations I Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  x What Is a Product? Product and Service Classifications Industrial products are those products purchased for further processing or for use in conducting a business. Materials and parts Capital items Supplies and services Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? Product and Service Classifications Materials and parts include raw materials and manufactured materials and parts. Capital items are industrial products that aid in the buyer’s production or operations. Supplies and services include operating supplies, repair and maintenance items, and business services. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? Product and Service Classifications Organizations, Persons, Places, and Ideas Organization marketing WH Person marketing Place marketing Social marketing T.in communitywelfare Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? Product and Service Classifications Organization marketing consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? Product and Service Classifications Person marketing consists of activities undertaken to create, maintain, or change the attitudes or behavior of target consumers toward particular people. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. What Is a Product? Product and Service Classifications Place marketing consists of activities undertaken to create, maintain, or change attitudes and behavior toward particular places. Social marketing uses commercial marketing concepts to influence individuals’ behavior to improve their well-being and that of society. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product and Service Decisions Figure 8.2 Individual Product Decisions Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions Communicate and deliver benefits by product and service attributes. Quality Features Style and design Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions Product quality refers to the characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs. Total quality management Return-on-quality Quality level Performance quality Conformance quality Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions Product Features Competitive tool for differentiating a product from competitors’ products Assessed based on the value to the customer versus its cost to the company Copyright © 2018 Pearson Education Ltd. All Rights Reserved. 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. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions Brand is the name, term, sign, or design or a combination of these, that identifies the maker or seller of a product or service. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions Packaging involves designing and producing the container or wrapper for a product. Labels identify the product or brand, describe attributes, and provide promotion. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product and Service Decisions Individual Product and Service Decisions Product support services augment actual products. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product and Service Decisions Product Line Decisions Product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product and Service Decisions Product Line Decisions Product line length is the number of items in the product line. Line stretching Line filling Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product and Service Decisions Product Mix Decisions Product mix consists of all the product lines and items that a particular seller offers for sale. Width Length Depth Consistency Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Services Marketing Types of Service Industries Government Private not-for-profit organizations Business organizations Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  cheat sheet Services Marketing Figure 8.3 Four Service Characteristics custom Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms In addition to traditional marketing strategies, service firms often require additional strategies. Service-profit chain Internal marketing Interactive marketing Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms Service-profit chain links service firm profits with employee and customer satisfaction. Internal service quality Satisfied and productive service employees Greater service value Satisfied and loyal customers Healthy service profits and growth Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Services Marketing Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms Internal marketing means that the service firm must orient and motivate its customer-contact employees and supporting service people to work as a team to provide customer satisfaction. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms Interactive marketing means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter. Service differentiation Service quality Service productivity Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms Managing service differentiation creates a competitive advantage. Offer Delivery Image Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms Managing service quality enables a service firm to differentiate itself by delivering consistently higher quality than its competitors provide. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Services Marketing Marketing Strategies for Service Firms Managing service productivity refers to the cost side of marketing strategies for service firms. Employee hiring and training Service quantity and quality Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Brand Strategy: Building Strong Brands Brand Equity and Brand Value Brand equity is the differential effect that knowing the brand name has on customer response to the product or its marketing. Brand value is the total financial value of a brand. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Brand Strategy: Building Strong Brands 0 Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Brand Strategy: Building Strong Brands Building Strong Brands Brand Positioning Marketers can position brands at any of three levels. Attributes Benefits Beliefs and values Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Brand Strategy: Building Strong Brands Building Strong Brands Brand Name Selection 1. Suggests benefits and qualities 2. Easy to pronounce, recognize, and remember 3. Distinctive 4. Extendable 5. Translatable for the global economy 6. Capable of registration and legal protection Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Brand Strategy: Building Strong Brands Brand Sponsorship Manufacturer’s brand Private brand Licensed brand Co-brand Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  co cant hot Khue may modghnf4 00 Brand Strategy: Building Strong Brands 1 I create her Sigeboychanges name manenproduct Ex a new product line for Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 9 Developing New Products and Managing the Product Life Cycle Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Strategy 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. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Process Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Process Idea Generation Idea generation is the systematic search for new product ideas. Sources of new product ideas Internal External Copyright © 2018 Pearson Education Ltd. All Rights Reserved. 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. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Process Idea Generation r Crowdsourcing involves inviting broad communities of people— customers, employees, independent scientists and researchers, and even the public at large—into the new product innovation process. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. 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? Copyright © 2018 Pearson Education Ltd. All Rights Reserved. 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. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Process Concept Development and Testing Concept testing refers to testing new product concepts with groups of target consumers. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Process Marketing Strategy Development Marketing strategy development is designing an initial marketing strategy for a new product based on the product concept. Marketing strategy statement consists of: Target market description Value proposition planned Sales, market-share, and marketing mix Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Process Business Analysis Business analysis is a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Process Product Development Product development is developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Process Test Marketing Test marketing is the stage of new product development in which the product and its proposed marketing program are tested in realistic market settings. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Process Test Marketing Marketing Strategy Development When test When test marketing is marketing is likely unlikely New product with Simple line large investment extension Uncertainty about Copy of product or competitor marketing product program Low costs Management confidence Copyright © 2018 Pearson Education Ltd. All Rights Reserved. New Product Development Process Commercialization Commercialization involves introducing a new product into the market. When to launch? Where to launch? Planned market rollout? Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing New Product Development Successful new product development should be: Customer centered Team based Systematic Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing New Product Development Customer-Centered New Product Development Customer-centered new product development focuses on finding new ways to solve customer problems and creating more customer-satisfying experiences. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing New Product Development Team-Based New Product Development Team-based new product development involves various company departments working closely together, overlapping the steps in the product development process to save time and increase effectiveness. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Managing New Product Development Systematic New Product Development Innovation management system  Creates an innovation-oriented company culture  Yields a large number of new product ideas New Product Development in Turbulent Times Tempted to reduce spending May become less competitive Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  cheat Product Life-Cycle Strategies veno cheat sheet inhumi nosale 10sale sale IF t.EE EiEosit profit negative Akes Thespian ginthick graph Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies Product development Zero sales and increasing investment costs Introduction Slow sales and nonexistent profits Growth Rapid market acceptance and increasing profits Maturity Slow sales growth and profits level off or decline Decline Sales fall off and profits drop Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies Introduction Stage Slow sales growth Little or no profit High distribution and promotion expenses Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies Growth Stage Sales increase New competitors enter the market Profits increase Economies of scale Consumer education Lowering prices to attract more buyers Copyright © 2018 Pearson Education Ltd. All Rights Reserved. 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 Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies Maturity Stage Modification Strategies Modify the market Modify the product Modify the marketing mix Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies Decline Stage Maintain the product Harvest the product Drop the product Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies Table 9.2 Part I Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product Life-Cycle Strategies Table 9.2 Part II Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Additional Product and Service Considerations Product Decisions and Social Responsibility Public policy and regulations regarding developing and dropping products, patents, quality, safety, and product warranties should be considered carefully. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Additional Product and Service Considerations International Product and Service Marketing Determining what products and services to introduce in which countries Standardization versus customization Packaging and labeling Customs, values, laws Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 10 Pricing: Understanding and Capturing Customer Value Copyright Copyright © 2018 © 2018 Pearson Pearson Education Education Ltd. Ltd. All All Rights Rights Reserved. Reserved. Major Pricing Strategies Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Customer Value-Based Pricing Value-based pricing uses the buyers’ perceptions of value rather than the seller’s cost. x Value-based pricing is customer driven. Cost-based pricing is product driven. Price is set to match perceived value. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Customer Value-Based Pricing Good-value pricing is offering just the right combination of quality and good service at a fair price. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Customer Value-Based Pricing Everyday low pricing (EDLP) involves charging a constant everyday low price with few or no temporary price discounts. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Customer Value-Based Pricing High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Customer Value-Based Pricing Value-added pricing attaches value-added features and services to differentiate the companies offers and thus their higher prices. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Cost-Based Pricing Cost-based pricing sets prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Cost-Based Pricing Fixed costs are the costs that do not vary with production or sales level. Rent Heat Interest Executive salaries Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Cost-Based Pricing Variable costs vary directly with the level of production. Raw materials Packaging Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Cost-Based Pricing Total costs are the sum of the fixed and variable costs for any given level of production. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Cost-Based Pricing x̅ Cost-plus pricing adds a standard markup to the cost of the product. Benefits  Sellers are certain about costs.  Price competition is minimized.  Buyers feel it is fair. Disadvantages  Ignores demand and competitor prices Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Cost-Based Pricing Break-even pricing (target return pricing) is setting price to break even on costs or to make a target return. Figure 10.5 Break-Even Chart for Determining Target Return Price and Break-Even Volume. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Major Pricing Strategies Competition-Based Pricing Competition-based pricing is setting prices based on competitors’ strategies, costs, prices, and market offerings. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Other Considerations Affecting Price Decisions Overall Marketing Strategy, Objectives, and Mix 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. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Other Considerations Affecting Price Decisions Organizational Considerations Who should set prices? Who can influence prices? Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Other Considerations Affecting Price Decisions The Market and Demand Before setting prices, the marketer must understand the relationship between price and demand for its products. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Other Considerations Affecting Price Decisions The Market and Demand Pricing In Different Types of Markets Pure competition Monopolistic competition Oligopolistic competition Pure monopoly Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Other Considerations Affecting Price Decisions The Market and Demand Analyzing the Price–Demand Relationship The demand curve shows the number of units the market will buy in a given period at different prices Demand and price are inversely related. Higher price = lower demand Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Other Considerations Affecting Price Decisions The Market and Demand Price Elasticity of Demand Price elasticity is a measure of the sensitivity of demand to changes in price. Inelastic demand is when demand hardly changes with a small change in price. Elastic demand is when demand changes greatly with a small change in price. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Other Considerations Affecting Price Decisions The Economy and Other External Factors Economic conditions Reseller’s response to price Government Social concerns Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 11 Pricing Strategies: Additional Considerations Copyright Copyright © 2018 © 2018 Pearson Pearson Education Education Ltd. Ltd. All All Rights Rights Reserved. Reserved. New Pricing Strategies Market-penetration pricing involves setting a low price for a new product in order to attract a large number of buyers and a large market share. sheeming Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Product Mix Pricing Strategies discount Ex Vinamilk promotes new product Buy 1 carton Optional Captive Product product product line pricing pricing pricing Product By-product bundle pricing pricing pain 1 sep tear them 1 sept re hor Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product Mix Pricing Strategies Product Line and Optional Product Pricing Product line pricing takes into account the cost differences between products in the line, customer evaluations of their features, and competitors’ prices. Optional product pricing takes into account optional or accessory products along with the main product. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product Mix Pricing Strategies Captive product pricing sets prices of products that must be used along with the main product. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Product Mix Pricing Strategies Product Line and Optional Product Pricing By-product pricing sets a price for by-products in order to make the main product’s price more competitive. Product bundle pricing combines several products at a reduced price. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Discount and allowance pricing reduces prices to reward customer responses such as making volume purchases, paying early, or promoting the product. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Segmented pricing involves selling a product or service at two or more prices, where the difference in prices is not based on differences in costs. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Segmented Pricing Customer-segment pricing Product-form pricing Location-based pricing Time-based pricing Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Segmented Pricing For segmented pricing to be effective: Market must be segmentable Segments must show different degrees of demand Costs of segmenting cannot exceed the extra revenue Must be legal Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Psychological Pricing Psychological pricing considers the psychology of prices and not simply the economics; the price is used to say something about the product. Reference prices are prices that buyers carry in their minds and refer to when they look at a given product. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Promotional Pricing Promotional pricing is characterized by temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales. Examples include: special-event pricing limited-time offers cash rebates low-interest financing, extended warranties, or free maintenance Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Geographical pricing is used for customers in different parts of the country or the world. FOB-origin pricing Uniform-delivered pricing Zone pricing Basing-point pricing Freight-absorption pricing Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Geographical Pricing FOB-origin (free on board) pricing is a geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination. Uniform-delivered pricing is a geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Geographical Pricing Zone pricing is a strategy in which the company sets up two or more zones where customers within a given zone pay the same price. Basing-point pricing means that a seller selects a given city as a “basing point” and charges all customers the freight cost from that city to the customer. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Geographical Pricing Freight-absorption pricing is a strategy in which the seller absorbs all or part of the freight charges in order to get the desired business. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies Dynamic pricing involves adjusting prices continually to meet the characteristics and needs of individual customers and situations. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Adjustment Strategies International pricing involves adjusting prices continually to meet the characteristics and needs of individual customers and situations. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Changes Initiating Price Changes Price cuts occur due to: Excess capacity Increased market share Price increases occur due to: Cost inflation Increased demand Lack of supply Copyright © 2018 Pearson Education Ltd. All Rights Reserved.  Price Changes Buyer Reactions to Pricing Changes Price Price cuts increases Product is New models “hot” will be Company available greed Models are not selling well Quality issues Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Changes Competitor Reactions to Pricing Changes Why did the competitor change the price? Is the price cut permanent or temporary? Is the company trying to grab market share? Is the company doing poorly and trying to increase sales? Is it a signal to decrease industry prices to stimulate demand? Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Changes Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Price Changes Responding to Pricing Changes Effective Action Responses Reduce price to match competition Maintain price but raise the perceived value through communications Improve quality and increase price Launch a lower-price “fighting” brand Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Public Policy and Pricing Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Public Policy and Pricing Pricing Within Channel Levels Price fixing legislation requires sellers to set prices without talking to competitors. Predatory pricing legislation prohibits selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Public Policy and Pricing Pricing Across Channel Levels Robinson-Patman Act prevents unfair price discrimination by ensuring that the seller offer the same price terms to customers at a given level of trade. Price discrimination is allowed if the seller: can prove that costs differ when selling to different retailers manufactures different qualities of the same product for different retailers Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Public Policy and Pricing Pricing Across Channel Levels Retail (or resale) price maintenance is when a manufacturer requires a dealer to charge a specific retail price for its product, which is prohibited by law. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Public Policy and Pricing Pricing Across Channel Levels Deceptive pricing occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers. Bogus reference or comparison prices Scanner fraud and price confusion Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Principles of Marketing Seventeenth Edition Chapter 12 Marketing Channels: Delivering Customer Value Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Supply Chains and Value Delivery Networks Upstream partners are firms that supply raw materials, components, parts, information, finances, and expertise needed to create a product or service. Downstream partners include the marketing channels or distribution channels that look toward the customer, including retailers and wholesalers. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Supply Chains and Value Delivery Networks Supply chain “make and sell” view includes the firm’s raw materials, productive inputs, and factory capacity. Demand chain “sense and respond” view suggests that planning starts with the needs of the target customer. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Supply Chains and Value Delivery Networks Value delivery network is composed of the company, suppliers, distributors, and, ultimately, customers who partner with each other to improve the performance of the entire system. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Nature and Importance of Marketing Channels Marketing channel (distribution channel) is a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Nature and Importance of Marketing Channels How Channel Members Add Value Transform the assortment of products into assortments wanted by consumers. Bridge the major time, place, and possession gaps that separate goods and services from users. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Nature and Importance of Marketing Channels Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Nature and Importance of Marketing Channels How Channel Members Add Value Information Promotion Contact Physical Matching Negotiation distribution Financing Risk taking Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Nature and Importance of Marketing Channels Number of Channel Levels Channel level is a layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. Direct marketing channel is a marketing channel that has no intermediary levels. Indirect marketing channel is a marketing channel containing one or more intermediary levels. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Nature and Importance of Marketing Channels Copyright © 2018 Pearson Education Ltd. All Rights Reserved. The Nature and Importance of Marketing Channels Number of Channel Levels Channel members are connected by several types of flows: Physical flow of products Flow of ownership Payment flow Information flow Promotion flow Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Channel Behavior Marketing channels consist of firms that have partnered for their common good with each member playing a specialized role. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Channel Behavior Channel conflict refers to disagreement among channel members over goals, roles, and rewards. Horizontal conflict Vertical conflict Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Vertical Marketing Systems Conventional distribution systems consist of one or more independent producers, wholesalers, and retailers, each separate business seeking to maximize its own profits, perhaps even at the expense of profits for the system as a whole. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Vertical Marketing Systems Vertical marketing systems (VMSs) provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system. Corporate marketing systems Contractual marketing systems Administered marketing systems Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Vertical Marketing Systems Corporate vertical marketing systems combine successive stages of production and distribution under single ownership. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Vertical Marketing Systems Contractual vertical marketing systems consist of independent firms at different levels of production and distribution who join together through contracts. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Vertical Marketing Systems Franchise organization is a contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production- distribution process. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Vertical Marketing Systems An administered vertical marketing system is a VMS that coordinates successive stages of production and distribution through the size and power of one of the parties. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Horizontal Marketing Systems Horizontal marketing system is a channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Copyright © 2018 Pearson Education Ltd. All Rights Reserved. Channel Behavior and Organization Multichannel Distribution Systems Multichannel distribution systems are systems in which a single firm sets up two or more marketing channels