Essential of Marketing

Think Marketing !
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Contents
1. Marketing Mix and Key Marketing Activities
2. Developing Market Segmentation

3. Product Planning and Development 4. Promotion Mix : Advertising, Publicity, Personal Selling and Sales Promotion 5. Distribution Planning and Pricing Strategy
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Marketing Mix and Market Segmentation
Marketing Credo
There is only one valid definition of business purpose : to create a customer

Peter Drucker
Marketing Mix
Product
Price
Target Market
Place
Promotion
Key Marketing Activities
Consumer Analysis
Product Planning
Distribution Planning Promotion Planning
Price Planning

Consumer Analysis
Examination and evaluation of consumer characteristics, needs, and purchase processes Development and maintenance of products, product assortments, product positions, brands, packaging, options, and deletion of old products Outlines price ranges and levels, pricing techniques purchase terms, price adjustments, and the use of price as an active or passive factor
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Product Planning
Price Planning

Distribution Planning
Establishment of channel relations, physical distribution, inventory management, warehousing, transportation, allocation of goods, and wholesaling
Promotion Planning
Combination of advertising, publicity, personal selling, and sales promotion to drive sales revenue
Product/Market Matrix
Existing Products Market Penetration Market Development New Products Product Development Diversification
Existing Markets
New Markets
Market Penetration
The firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share Effective when the market is growing or not yet saturated The firm seeks growth by targeting its existing products to new market segments Effective when a local or regional business looks to wider its market, new market segments are emerging due to changes in consumer life-style/demographics, and innovative uses are discovered for a mature product
Market Development
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Product Development
The firms develops new products targeted to its existing market segments Effective when the firm has a core of strong brands
Diversification
The firm seeks growth by targeting its existing products to new market segments Diversification is utilized so that the firm does not become overly dependent on one product line
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Market Segmentation
Market Segment The division of a market into different homogeneous groups of consumers
Should be: measurable accessible by communication and distribution channels different in its response to a marketing mix durable (not changing too quickly) substantial enough to be profitable
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Types of Market Segmentation

Based on regional variables such as region, climate, population density, and population growth rate.
Geographic
Demographic
Based on variables such as age, gender, ethnicity, education, occupation, income, and family status
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Types of Market Segmentation

Psychographic
Based on variables such as values, attitudes, and lifestyle
Behavioral
Based on variables such as usage rate and patterns, price sensitivity, brand loyalty, and benefits sought
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Step in Planning A Segmentation Strategy

Determining characteristics and needs of consumers for the product category of the company
Analyzing consumer similarities and differences
Developing consumer group profiles
Selecting consumer segment (s)
Positioning companys offering in relation to competition.
Establishing an appropriate marketing plan

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Product Planning and Development
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Products : Types of Goods

Convenience Goods
Types of Goods
Shopping Goods
Specialty Goods
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Convenience Goods
Convenience Goods
Those purchased with a minimum of effort, because the buyer has knowledge of product characteristics prior to shopping The consumer does not want to search for additional information (because the item has been bought before) and will accept a substitute rather than have to frequent more than one store
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Convenience Goods
Convenience Goods
Staples are low-priced items that are routinely purchased on a regular basis, such as detergent, milk, and cereal Impulse goods are items that the consumer does not plan to buy on a specific trip to a store, such as candy, a magazine, and ice cream Emergency goods are items purchased out of urgent need, such as an umbrella during a rainstorm, a tire to replace a flat, or aspirin for a headache
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Shopping Goods
Shopping Goods
Those for which consumers lack sufficient information about product alternatives and their attributes, and therefore must acquire further knowledge in order to make a purchase decision
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Shopping Goods
Shopping Goods
For attribute-based shopping goods, consumers get information about and then evaluate product features, warranty, performance, options, and other factors. The goods with the best combination of attributes is purchased. Sony electronics and Calvin Klein clothes are marketed as attribute-based shopping goods For price-based shopping goods, consumers judge product attributes to be similar and look around for the least expensive item/store
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Specialty Goods
Specialty Goods
Those to which consumers are brand loyal. They are fully aware of these products and their attributes prior to making a purchase decision.
They are willing to make a significant purchase effort to acquire the brand desired and will pay a higher price than competitive products, if necessary. For specialty goods, consumers will not make purchases if their brand is not available. Substitutes are not acceptable.
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Services
Rentedgoods Service
Type of Services
Owned-goods service
Non-goods
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Services
Rentedgoods Service
Involves the leasing of a good for a specified period of time. Examples include car, hotel room, apartment, and tuxedo rentals
Owned-goods service
Involves an alteration or repair of a good owned by the consumer. Examples include repair services (such as automobile, watch, and plumbing), lawn care, car wash, haircut, and dry cleaning Provides personal service on the pan of the seller; it does not involve a goods. Examples include accounting, legal, and consulting services
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Non-goods
Characteristics of Services
The intangible nature of many services makes the consumer's choice more difficult than with goods The producer and his or her services are often inseparable The perishability of services prevents storage and increases risks Service quality may be variable
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Product Life Cycle

Growth Maturity
Introduction
Decline
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Product Life Cycle

Characteristics Marketing objective Introduction Attract innovators and opinion leader to new product Increasing None or small Growth Expand distribution and product line Rapidly increasing Some
Industry sales Competition
Industry profits
Customers Product mix
Negative
Innovators One or two basic models
Increasing
Affluent mass market Expanding line
Distribution
Pricing Promotion
Depends on product
Depends on product Informative
Rising number of outlets

Greater range of prices Persuasive
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Product Life Cycle

Characteristics Marketing objective Maturity Maintain differential advantage as long as possible Stable Substantial Decline (a) cut back, (b) revive, (C) terminate Decreasing Limited
Industry sales Competition
Industry profits
Customers Product mix Distribution Pricing Promotion
Decreasing
Mass market Full product line Greatest number of outlets Full line of prices Competitive
Decreasing
Laggards Best-sellers Decreasing number of outlets Selected prices Informative
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New Product Planning

Idea Generation
Product Screening
Concept Testing
Business Analysis
Product Development
Test Marketing
Commercialization
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Idea Generation
A continuous, systematic search for new product opportunities

It involves delineating sources of new ideas and methods for generating them
Product Screening
After the firm identifies potential products, it must screen them
Many companies use a new-product screening checklist for preliminary evaluation

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Screening Checklist
GENERAL CHARACTERISTICS OF NEW PRODUCTS Profit potential Existing competition Potential competition Size of market Level of investment Patentability Level of risk MARKETING CHARACTERISTICS OF NEW PRODUCTS Fit with marketing capabilities Effect on existing products (brands) Appeal to current consumer markets Potential length of product life cycle Existence of differential advantage Impact on image Resistance to seasonal factors PRODUCTION CHARACTERISTICS OF NEW PRODUCTS Fit with production capabilities Length of time to commercialization Ease of product manufacture Availability of labor and material resources Ability to produce at competitive prices
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Concept Testing
Concept testing presents the consumer with a proposed product and measures attitudes and intentions at this early stage of development Concept testing is a quick and inexpensive way of measuring consumer enthusiasm Business analysis for the remaining product concepts is much more detailed than product screening Because the next step is expensive and timeconsuming product development, critical use of business analysis is essential to eliminate marginal items 32
Business Analysis
Business Analysis Variables

Factors Demand projections Cost projections Considerations Price/sales relationship; short- and long-run sales potential; speed of sales growth; rate of repurchases; channel intensity Total and per unit costs; use of existing facilities and resources; startup vs. continuing costs; estimates of future raw materials and other costs; economies of scale; channel needs; break-even point Short-run and long-run market shares of company and competitors; strengths and weaknesses of competitors; potential competitors; likely competitive strategies in response to new product by firm
Competition
Required investment
Product planning (engineering, patent search, product development, testing); promotion; production; distribution
Time to recoup initial costs; short- and long-run total and perunit profits; control over price; return on investment (ROI) 33
Profitability

Product Development Product development converts a product idea into a physical form and identifies a basic marketing strategy It involves product construction, packaging, branding, product positioning, and attitude and usage testing. Test marketing involves placing a product for sale in one or more selected areas and observing its actual performance under the proposed marketing plan. The purpose is to evaluate the product and pretest marketing efforts in a real setting prior to a full-scale introduction 34
Test Marketing
Commercialization
After testing is completed, the firm is ready to introduce the product to its full target market. This is commercialization and corresponds to the introductory stage of the product life cycle Commercialization involves implementing a total marketing plan and full production
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Promotion Mix : Advertising, Publicity, Personal Selling and Sales Promotion
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Promotion Mix
Advertising
Publicity
Target Market
Personal Selling Sales Promotion
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Promotion Mix
Factor Audience Message Advertising Mass Uniform Mass Uniform Publicity Personal Selling Small (one-to-one) Specific Sales Promotion Varies Varies
Cost
Low per viewer or reader
None for media space and time; can be moderate costs for press releases and publicity materials
No formal sponsor in that media are not paid Low None High To reach a mass audience with an independently reported message Newspaper article reporting on the unique features of a Kodak video camera
High per customer
Moderate per customer
Sponsor
Company
Company
Company
Flexibility Control over content and placement Credibility Major goal
Low High Moderate To appeal to a mass audience at a reasonable cost, and create awareness and favorable attitudes Television ad for a Kodak video camera
High High Moderate To deal with individual consumers, to resolve questions, to close sales Retail sales personnel explaining how a Kodak video camera works
Moderate High Moderate To stimulate short-run sales, to increase impulse purchases
Example
A Kodak video camera displayed at consumer photography shows
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Four Key Steps to Advertise

Determine message content and devise an ad Specify the location of an ad (media placement) Choose how many variations of a basic message to utilize
Outline a promotion schedule
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Things to Consider in Advertising

Waste is the portion of an audience that is
Waste
not in a firm's target market. Because media appeal to mass audiences, waste is a significant factor in advertising. Reach refers to the number of viewers or
Reach
readers in the audience
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Frequency
Frequency is how often a medium can be used. It is greatest for newspapers, radio, and television, where ads may appear daily and advertising strategy may be easily changed
Message permanence
Message permanence refers to the number of exposures one advertisement generates and how long it remains with the audience
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Persuasive impact
Persuasive impact is the ability of a medium to stimulate consumers. Television often has the highest persuasive impact because it is able to combine audio, video, color, animation, and other appeals. Clutter involves the number of ads that are contained in a single program, issue, etc. of a medium. Clutter is low when a limited number of ads is presented and high when many ads are presented.
Clutter
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Publicity : Poor and Good Response

Situation Fire breaks out in a company plant Poor Response Requests for information by media are ignored. Good Response Company spokesperson explains the cause of the fire and company precautions to avoid it and answers questions.
New product introduced

News story about product defects
Advertising is used without publicity

Requests for information by media are ignored, blanket denials are issued, hostility is exhibited toward reporter of story. The advertising campaign is stepped up.
Pre-introduction news releases, product samples, and testimonials are used.

Company spokesperson states that tests are being conducted on products, describes procedure for handling defects, and answers questions. Extensive news releases, statistics, and spokespeople are made available to media to present company's competitive features. Profitability is explained, data (historical and current) are provided, uses of profits are detailed: research, community development. There is an ongoing need for publicity, strong planning, and contingency plans for bad reports. 43
Competitor introduces new product High profits reported
Profits are rationalized and positive effects on the economy are cited.
Overall view of publicity
There is an infrequent need for publicity; crisis fighting is used when bad reports are circulated.
Developing a Publicity Plan

Setting objectives Outlining types of publicity Creating publicity messages
Selecting media
Timing publicity messages
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Publicity Type
Publicity Type News publicity Business feature article Service feature article Example Macy's describes its decision to sell its stores in the Midwest. Toyota explains its goals and objectives for the 2020. A trade association offers 10 tips on how to reduce home heating costs. General Electric distributes quarterly financial data about the company. Intel announces its new, fast-speed microprocessor Apple distributes photos showing all of its personal computer products and related software Mc Kinsey presents a biography of its president and his rise through the company. The Red Cross makes a request for aid to tornado victims.
Finance release
Product release Pictorial release
Background editorial release Emergency publicity
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Specific Personal Selling Objectives

Type of Objective Demand-Oriented Information Illustrations
To fully explain all good and service attributes To answer any questions To probe for any further questions
To clearly distinguish good or service attributes from those of competitors To maximize the number of sales as a per cent of presentations To convert undecided consumers into buyers To sell complementary items, e.g., film with a camera To placate dissatisfied customers To ensure delivery, installation, etc. To follow up after a good or service has been purchased To follow up when a repurchase is near To reassure previous customers when making a new purchase To maintain a good appearance by all personnel in contact with consumers To follow acceptable sales practices
Persuasion
Reminding
Image-Oriented Industry and company
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Personal Selling Process

Customer Wants
Prospecting
(blind, lead)
Approach
Sales Presentation
Answering Questions
(questions and objections)
Close
Follow up
(satisfaction, referrals, repurchase)
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Types of Sales Promotion

Type Characteristics Illustration P&G mails consumers a 25-centsoff coupon for Sure deodorant, which can be redeemed at any supermarket. First Alert home fire alarms provides $5 rebates to consumers submitting proof of purchase. Coupons Manufacturers or retailers advertise special discounts for customers who redeem coupons. Refund or A consumer submits proof-ofrebate purchase (usually to the manufacturer) and receives an extra discount. Samples Free merchandise or services are given consumers, generally for new items. Contests or Consumers compete for prizes by sweepstakes answering questions (contests) or filling out forms for random drawings of prices (sweepstakes). www.studyMarketing.org
When Sunlight dishwashing liquid was introduced, free samples were mailed to consumers. Publishers Clearinghouse sponsors annual sweepstakes and awards automobiles, houses, and other prices. 48
Types of Sales Promotion

Type Characteristics Illustration Some stores run I-cent sales, whereby the consumer buys one item and gets a second one for a penny. Chewing gum sales in supermarkets are high because displays arc placed at checkout counters. Virtually every major league baseball team has an annual "Old Timers' Day," which attracts large crowds. Savings banks offer a range of gifts for consumers opening new accounts or expanding existing ones. 49 Bonus or Consumers receive discounts multipacks for purchasing in quantity
Point-of- In-store displays remind purchase customers and generate displays impulse purchases. Special Manufacturers or retailers events sponsor celebrity appearances, fashion shows, and other activities. Gifts Consumers are given gifts for making a purchase or opening a new account.
Sales Promotion Advantages

It helps attract customer traffic and maintain brand or store loyalty Quick results can be achieved Some forms of sales promotion (calendars, t-shirts. Pens, etc) provide value to the consumer and are retained by them; and these forms can provide a reminder function Impulse purchases can be increased through in-store displays
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Sales Promotion Disadvantages

The image of the firm may be lessened if it continuously runs promotions. Consumers may view discounts as representing a decline in product quality and believe the firm could not sell its offerings without them. When coupons, rebates, or other special deals are used frequently, consumers may not make purchases if the items are sold at regular prices. Instead, they will stock up each time there is a promotion.
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Sales Promotion Disadvantages

Sometimes sales promotions shift the focus away from the product onto secondary factors. Consumers may be attracted by calendars, coupons, or sweepstakes instead of by product quality, functions, and durability. In the short run this generates consumer enthusiasm. In the long run this may have adverse
effects on a brand's image and on sales, because a productrelated differential advantage has not been developed.
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Distribution Planning and Pricing Strategy
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Distribution Planning
Distribution planning is systematic decision making regarding the physical movement and transfer of ownership of a product from producer to consumer. It includes transportation, storage, and customer transactions. Distribution functions are carried out through a channel of distribution, which is comprised of all the organizations or people involved in the process.
These organizations or people are known as channel members or middlemen.
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Intensity of Channel Coverage

Characteristics Exclusive Distribution Selective Distribution Intensive Distribution
Objectives
Prestige image, channel control and loyalty, price stability and high profit margins
Moderate market coverage, solid image, some channel control and loyalty, good sales and profits
Widespread market coverage, channel acceptance, sales volume and profits
Channel members
Few in number, well-established reputable stores
Moderate in number, Many in number, all types well-established, better stores of outlets
Customers
Few in number, trend setters, willing to travel to store, brand loyal
Moderate in number, Many in number, brand conscious, conveniencesomewhat willing to oriented travel to store
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Intensity of Channel Coverage

Characteristics Marketing Emphasis Exclusive Distribution Personal selling, pleasant shopping conditions, good service Limited sales potential Automobiles, designer clothes, caviar Selective Distribution Promotional mix, pleasant shopping conditions, good service May be difficult to carve out a niche Furniture, clothing, watches Intensive Distribution Mass advertising, nearby location, items in stock Limited channel control Groceries, household products, magazines
Major Disadvantages Examples
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Methods of Channel Cooperation

Factor New-product introduction Manufacturer Action Thorough testing, adequate promotional support Prompt filling of orders, adherence to scheduled dates Channel Member Action Good shelf location and space, enthusiasm for product, assistance in test marketing Proper time allowed for delivery, shipments immediately checked for accuracy Attractive in-store displays, knowledgeable salespeople, participation in cooperative programs Proper installation and servicing of products
Delivery
Promotion
Sales force training, sales force incentives, development of national advertising campaign, cooperative programs Product guarantees
Product quality
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Pushing and Pulling Strategy

Pushing Strategy Manufacturer Pulling Strategy Manufacturer
Channel members
Channel members
Consumers
Consumers
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Price Planning
Represents the value of a good or service for both the seller and the buyer
A Price
Price Planning
Systematic decision making by an organization regarding all aspects of pricing
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Factors Affecting Pricing Decisions
Consumers
Competitors
Cost
Channel Members
Government Total Effects on Price Decisions
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Consumers and Price Decisions

The relationship between price and consumer purchases and perceptions is explained by two economic principles the law of demand and price elasticity of demand The law of demand states that consumers usually purchase more units at a low price than at a high price The price elasticity of demand defines the sensitivity of buyers to price changes in terms of the quantities they will purchase
Consumers
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Elastic Demand
Elastic demand occurs if relatively small changes in price result in large changes in quantity demanded Numerically, price elasticity is greater than 1 With elastic demand, total revenue goes up when prices are decreased and goes down when prices rise
In-elastic Demand
Inelastic demand takes place if price changes have little impact on quantity demanded Price elasticity is less than 1 With inelastic demand, total revenue goes up when prices are raised and goes down when prices decline
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Unitary Demand
Unitary demand exists if changes in price are exactly offset by changes in quantity demanded, so that total sales revenue remains constant. Price elasticity is 1
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Competitors and Price Decisions

Another element contributing to the degree of control a firm has over prices is the competitive environment within which it operates
Competitors
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Marketcontrolled price environment Characterized by a high level of competition, similar goods and services, and little control over price by individual companies
Companycontrolled priced environment
Characterized by moderate competition, well-differentiated goods and services, and strong control over price by individual firms
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Governmentcontrolled price environment Characterized by prices set by the government. Examples are public utilities, buses, taxis, and state universities
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Channel Members and Price Decisions

A wholesaler or retailer can gain stronger control over price by stressing its importance as a customer to the manufacturer, refusing to carry unprofitable product, stocking competitive items, and developing strong dealer brands so
Channel Members
that consumers are loyal to the seller and not

the manufacturer Sometimes retailers engage in selling against the brand, whereby they stock merchandise, place high prices on it, and then sell other brands for lower prices. This is often done to increase the sales of their own brands
Channel Members and Price Decisions

To ensure channel member cooperation with price decisions, the manufacturer needs to consider four factors: channel member profit margins, price guarantees, special deals, and the impact of price increases
Channel Members
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Government and Price Decisions
Price fixing regulations
Government
Prohibitions against price discrimination among channel members
Unfair sales acts : predatory pricing

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Cost and Price Decisions
Cost
Cost of raw materials and supplies

Labor cost Advertising Cost
Pricing Decisions
Distribution Cost
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Price Strategy
Cost-based Price Strategy
Price Strategy
Demand-based Price Strategy
Competitionbased Price Strategy

Price Strategy
Cost-based Price Strategy
With a cost-based price strategy, the marketer sets prices by computing merchandise, service, and overhead costs, and then adding the desired profit to these figures
Demand-based Price Strategy
The marketer sets prices after researching consumer desires and ascertaining the range of prices acceptable to the target market
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Price Strategy
Competitionbased Price Strategy
The marketer sets prices in accordance with competitors Prices may be below the market, at the market, or above the market, depending on customer loyalty, services provided, image, real or perceived differences between brands or stores, and the competitive environment
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Recommended Further Readings

1. 2. Joel Evans and Barry Berman, Marketing, Prentice Hall Phillip Kotler, Marketing Management, Prentice Hall
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Think Marketing !

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2. Developing Market Segmentation

Marketing Mix and Market Segmentation

There is only one valid definition of business purpose : to create a customer

Key Marketing Activities

Distribution Planning Promotion Planning

Key Marketing Activities

Key Marketing Activities

Types of Market Segmentation

Types of Market Segmentation

Step in Planning A Segmentation Strategy

Analyzing consumer similarities and differences

Developing consumer group profiles

Selecting consumer segment (s)

Positioning companys offering in relation to competition.

Establishing an appropriate marketing plan

Product Planning and Development

Products : Types of Goods

Product Life Cycle

Product Life Cycle

Industry sales Competition

Rising number of outlets

Product Life Cycle

Industry sales Competition

New Product Planning

New Product Planning

A continuous, systematic search for new product opportunities

After the firm identifies potential products, it must screen them

Many companies use a new-product screening checklist for preliminary evaluation

New Product Planning

Business Analysis Variables

New Product Planning

New Product Planning

Promotion Mix : Advertising, Publicity, Personal Selling and Sales Promotion

Low per viewer or reader

High per customer

Moderate per customer

Flexibility Control over content and placement Credibility Major goal

Moderate High Moderate To stimulate short-run sales, to increase impulse purchases

A Kodak video camera displayed at consumer photography shows

Four Key Steps to Advertise

Outline a promotion schedule

Things to Consider in Advertising

readers in the audience

Things to Consider in Advertising

Things to Consider in Advertising

Publicity : Poor and Good Response

New product introduced

Advertising is used without publicity

Pre-introduction news releases, product samples, and testimonials are used.

Competitor introduces new product High profits reported

Overall view of publicity

Developing a Publicity Plan

Timing publicity messages

Product release Pictorial release

Background editorial release Emergency publicity

Specific Personal Selling Objectives

Image-Oriented Industry and company

Personal Selling Process

Types of Sales Promotion

Types of Sales Promotion

Sales Promotion Advantages

Sales Promotion Disadvantages