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Marketing management
By
Dr. Raafat Youssef Shehata
Table of contents
 Introduction about marketing
 Components of marketing plan
 STP
 Product mix
 Pricing
 Distribution
 Promotional mix
 Budgeting
Marketing
Marketing is defined to be the process
responsible for anticipation, identification ,
and satisfaction of customer needs through
a profit
What is the relation between these 3 terms
ProductBrandLove mark
Brand versus product
“Products are made in the factory but
brands are created in the mind”
Walter Landon
Marketing manager
 He is the bridge between the company and the
customers
 His functions are (APIC)
Analysis
Planning
Implementation
Control
What are Consumers’ Needs,
Wants, and Demands?
Needs - state of felt
deprivation including
physical, social, and
individual needs i.e hunger
Wants - form that a human
need takes as shaped by
culture and individual
personality i.e. bread
Demands - human wants
backed by buying power i.e.
money
Production Concept
Product Concept
Selling Concept
Marketing Concept
Societal Marketing Concept
Marketing Management
Philosophies
Production concept
The production concept holds that consumers will
prefer products that are widely available and
inexpensive.
Product concept
-The product concept holds that consumers will favor those products that
offer the most quality, performance, or innovative features
-In order to compete effectively, the product needs to have features that
appeal to individual consumers. In a product-oriented firm, the
products are designed to incorporate a large number of features in
order to meet the needs of a large number of consumers.
Unfortunately, the cost becomes too high for most people, and of
course people do not want to pay for features that they are unlikely
ever to use.
Selling concept
The selling concept holds that consumers and
businesses, will ordinarily not buy enough of the
organization’s products, therefore, the
organization must undertake aggressive selling
and promotion effort.
Marketing concept
The marketing concept holds that the key to achieving
organizational goals consists of the company being more
effective than competitors in creating, delivering, and
communicating superior customer value to its chosen
target markets.
Reactive marketing orientation: understanding and meeting consumers’
expressed needs.
Proactive marketing orientation: researching or imagining latent
consumers’ needs through a “probe-and-learn” process
e.g. Wal Mart
Company Orientations towards
business
.
Marketing Concept
Reactive market
Understanding and meeting
consumers’ expressed needs
Proactive marketing
Finding latent consumers’
needs through a “probe-and-
learn” process.
Marketing Concept Evolution
Production Concept Consumers prefer products that are
widely available and inexpensive
Product Concept Consumers favor products that offer the
most quality, performance, and
innovative features
Selling Concept Consumers will buy products only if the
company aggressively promotes/sells
these products
Marketing Concept Focuses on needs/wants of target
markets & delivering value better than
competitors
Bad examples marketing
orientation
• Pampers in Japan
• Philips in China
The 4 P’s & 4 C’s of the
Marketing Mix
 4 P’s
 Product
 Price
 Place
 Promotion
 4 C’s
 Customer Solution
 Customer Cost
 Convenience
 Communication
Planning and budgeting
Chapter 2
Plan
-It is a way of achieving something
Example :the shopping list you take to the supermarket is
a simple example
-Planning includes:
1-Setting objectives
2-Selecting strategies , tactics and policies
Strategy ,Tactics and Objectives
-Strategy: the method used to achieve objectives
e.g. we will achieve our objective of increasing profits by growing
market share in existing market
-Tactics: how resources are deployed in an agreed
strategy
e.g. we will set up a new telephone call center and target new
customers
-Objectives: are quantified goals
The contents and structure
of the marketing plan
 The executive summary
 Situational analysis and target market
 Marketing objectives
 Marketing strategies
 Marketing tactics
 Marketing mix
 STP
 Schedules and budgets
 Implementation
 Control
Situational analysis
 SWOT analysis
 Gap analysis
 PESTEL analysis
 Market analysis
 Five forces analysis
SWOT analysis
Strengths (internal)
Weaknesses (internal)
Opportunities (external)
Threats (external)
Definitions
A particular skill or distinctive competence which
organization possesses & will aid in achieving its
stated goals
Strength
Any aspect of the company that may hinder the
achievement of stated goals.
Weakness
Any feature that creates advantageous conditions
to the firm in relation to a particular objective or
set of them
Opportunities
Any environmental development which present
problems & may hinder the achievement of org.
objectives
Threats
PESTEL analysis
 Political factors
 Economic factors
 Socio-cultural factors
 Technological factors
 Ecological
 Legal
Political
 Taxation policy
 Government policy
 Pressure group
Economic Factors
 Inflation
 Employment
 Disposable income
 Business cycles
 Energy availability and cost
 Others?
Socio-cultural factors
 Demographics
 Distribution of income
 Social mobility
 Lifestyle changes
 Consumerism
 Levels of education
 Others?
Culture
 Language
 Religion
 Superstitions
 Etiquette
 Customs
 Traditions
 Notion of time
Market analysis
 Market size
 Growth rate
 Market trends
Objectives
Objective should be SMART
S Specific
M Measurable
A Achievable
R Realistic
T Time related
Strategies
 SWOT strategies
 Competitive strategies (Porter )
 Growth strategies (Ansoff)
SWOT strategies
 Matching & Conversion are 2 major strategic options from a
SWOT analysis; to match the strengths to the opportunities & to
convert the weakness & threats to strengths & opportunities.
WeaknessStrength
ThreatsOpportunities
Conversion
Conversion
1. Market
Penetration
2. Market
Development
3. Product
Development
4. Diversification
Existing
Markets
New
Markets
Existing
Products
New
Products
Product/Market Expansion
Grid
Market Penetration
 making more sales to current customers without
changing its products.
 How? Add new stores in current market areas,
improvements in advertising, prices, etc.
Market Development
 identify and develop new markets for its current
products.
 How? Review new demographic (senior
consumers) or geographic (Asian, European &
Australian) markets.
Product Development
 offering modified or new products to current
markets.
 How? Increasing food offerings, extend to
Frappuccino drinks.
Diversification
 start up or buy businesses outside current
products and markets.
 How? Currently testing two new restaurant
concepts – Cafe Starbucks and Circadia, or
branded casual clothing.
Porter’s Generic Strategies
Michael Porter has proposed three generic strategies
that provide a good starting point for strategic
thinking:
• Overall cost leadership (WalMart)
• Differentiation (Sainsbury)
• Focus.
The marketing budget
 How much the company intend to spend
Methods:
1. Task method
2. Percentage of sales
3. Competitive parity
4. All you can afford
5. Same as Last Time (S.A.L.T.)
S.T.P
Market segmentation
Market Targeting
Market Positioning
Market Segmentation
“Market segmentation is a natural result of the
vast differences among people.”
Donald Norman
Connecting With Customers
 Market Segmentation: determining distinct groups of
buyers (segments) with different needs, characteristics,
or behavior.
 Market Targeting: evaluating each segment’s
attractiveness and selecting one or more segments to
enter.
 Market Positioning: arranging for a product to occupy a
clear, distinctive, and desirable place relative to
competing products in the minds of target consumers.
i.e. Chevy Blazer is “like a rock.”
Steps in Market Segmentation,
Targeting, and Positioning
Segmentation Variables
Geographic segmentation
 Cars in California always have air conditioning
 Cars in Sweden have headlights that stay on
constantly because of the poor quality of the
light for much of the year
Psychographic segmentation
personality
 The home insurance market may segment
into those who afraid of crime , those who
afraid of natural disasters and those who are
afraid of accidental damage to their property
Lifestyle segmentation
The Jeep Cherokee is aimed at lifestyle segment
that favors an outdoor ,adventure-some ,fun-
seeking style of life
Targeting
Once the firm has identified its market-segment
opportunities, it has to decide how many and
which ones to target. Marketers are increasingly
combining several variables in an effort to
identify smaller, better-defined target groups.
Marketing management dr. raafat shehata
Undifferentiated Marketing
 Appeals to a broad spectrum of people
 Efficient due to economies of scale
 Effective when most consumers have similar
needs
 Example: Wal-Mart
Differentiated Marketing
 Develops one or more products for each of several
customer groups with different product needs
 Appropriate when it is possible to identify one or
more segments with distinct needs for different types
of products
 Example: L’Oreal (Elseve, L’Oreal, Lancome)
Concentrated Marketing
 Entails focusing efforts on offering one or more
products to a single segment
 Useful for smaller firms that do not have the
resources to serve all markets
 Example: Rolex – Rolls Royce – Porsche
Positioning
How the customers are perceiving the
product versus other products in the
market
Domino’s positioning
 A good hot pizza, delivered to your door within
30 minutes of ordering, at a moderate price
Positioning criteria
1. Benefits
2. Specific product features e.g. speed
3. User category
4. Against another products
5. Occasion
6. Hybrid basis
Perceptual map
Brands can be positioned against competitive
brands on product maps
Chapter 4
Products and services
What is a Product?
 A PRODUCT is anything that can be offered to a market
for attention, acquisition, use, or consumption and that
might satisfy a want or need.
 Includes:
 Physical Objects
 Services
 Events
 Persons
 Places
 Organizations
 Ideas
 Combinations of the above
What is a Service?
 A SERVICE is a form of product that consist of activities,
benefits, or satisfactions offered for sale that are
essentially intangible and do not result in the ownership
of anything.
 Examples include:
 Banking
 Hotels
 Tax preparation
 Home repair services
Unsought Products
 New innovations
 Products consumers don’t
want to think about
 Require much advertising &
personal selling
i.e Life insurance, blood donation
Product Classifications:
Consumer
Specialty Products
 Special purchase efforts
 High price
 Unique characteristics
 Brand identification
 Few purchase locations
i.e Lamborghini, Rolex
Shopping Products
 Buy less frequently
 Higher price
 Fewer purchase locations
 Comparison shop
i.e Clothing, cars, appliances
Convenience Products
 Buy frequently & immediately
 Low priced
 Mass advertising
 Many purchase locations
i.e Candy, newspapers
Product portfolio
(product assortment or
product mix)
 A company product portfolio is all the product
lines and items that the company offers for sale
 Portfolio aspects:
-Width “breadth”
-Length
-Depth
Product Mix
Decisions
Procter & Gamble's Product Mix
Baby Care Beauty Care Fabric & Home
Care
Food &
Beverage
Crest Tartar
Protection
Crest Cavity
Protection
Crest Multicare
Six Toothpastes
in Line
Health Care
 Width – number of different product lines
 Length – total number of items the
company carries within product lines
 Depth – number of versions offered of
each product in line
P&G’s Product Width and
Depth
Strategic business unit
(SBU)
 A division , product line , or other profit center within the
parent company
Each of a firm’s Strategic Business Units (SBU ) has six
attributes:
1- A specific target market
2- Its own senior marketing executive
3- Control over its resources
4- Its own marketing strategy
5- Clear-cut competition
6- Distinct differential advantages
Question Marks
• High growth, low share
• Build into Stars or phase out
• Require cash to hold
market share
Stars
• High growth & share
• Profit potential
• May need heavy
investment to grow
Cash Cows
• Low growth, high share
• Established, successful
SBU’s
• Produce cash
Dogs
• Low growth & share
• Low profit potential
Relative Market Share
High Low
MarketGrowthRate
LowHigh
Analyzing Current SBU’s:
BCG Growth-Share Matrix
?
Criticisms of BCG
1-It concentrates only on 2 dimensions
2-The matrix assumes a relationship between
profitability and market share
Time
Product
Develop-
ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/
Investments ($)
Sales and
Profits ($)
Sales and Profits Over the Product’s Life From Inception to
Demise
Product Life Cycle
Criticisms of PLC
1. The stages are not always easily defined
2. Not all the products go through each stage
3. Strategic decisions can change the cycle
4. The life cycle varies between different industries
New-Product Development
Original
Products
Product
Improvements
Product
Modifications
New
Brands
Acquired
Companies
Acquired
Patents
Acquired
Licenses
New-Product Development
Strategy
Strategies for Obtaining New-Product Ideas
Degrees of newness
1. Completely new product
2. Partially new product
3. Major product change
4. Minor product change
Causes of New-Product
Failures
 One study estimated that as many as 80% of new
consumer packaged products fail.
 Only about 40% of new consumer products are around
5 years after introduction.
 Why?
 Overestimation of market size,
 Product design problems,
 Product incorrectly positioned, priced, or advertised,
 Product may have been pushed despite poor marketing
research findings,
 Costs of product development, or
 Competitive actions.
Major Stages in New-
Product Development
1.Idea Generation
Customers
Employees
Distributors
Competitors
R & D
Consultants
Creative Thinking
Sources of
New-Product
Ideas
On Line
http://www.ideo.com
2. Idea Screening
 Helps spot good ideas and drop poor ones as soon
as possible.
 Many companies have systems for rating and
screening ideas which estimate:
 Market Size
 Product Price
 Development Time & Costs
 Manufacturing Costs
 Rate of Return
 Then, the idea is evaluated against a set of general
company criteria.
1. Develop New Product Ideas
into Alternative Detailed
Product Concepts
2. Concept Testing - Test the
New-Product Concepts with
Groups of Target Customers
3. Choose the One That Has the
Strongest Appeal to Target
Customers
3. Concept Development
Product Image is the
Way Consumers
Perceive an Actual or
Potential Product
4. Marketing Strategy
Part One Describes Overall:
Target Market
Planned Product Positioning
Sales, Market Share, & Profit Goals
Part Two Describes First-Year:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Run:
Sales & Profit Goals
Marketing Mix Strategy
5 .Business Analysis
Considerations
in
Business
Analysis Stage
Demand
Cost
Sales
Profitability
If No, Eliminate
Product Concept
Business Analysis
Review of Product Sales, Costs, and Profits
Projections to See if They Satisfy Company Objectives
6. Product Development
If Yes, Move to
Product Development
Product Development
 In new product development products can be tested
at three levels
1. Alpha testing: does the product work in the
laboratory ?
2. Beta testing :does it work in the customers “In-use”
situation?
3. Gamma testing : does it do what the customer
wants?
7. Test Marketing
 Product and
marketing program
are introduced into
more realistic
market settings.
 Can be very
expensive and time
consuming.
 Test the following:
 Positioning
strategy,
 Advertising,
 Distribution,
 Pricing,
 Branding,
 Packaging,
 Budget levels.
When is the
Right Time to
Introduce
Product?
Where to
Launch a
New
Product?
Introducing the New Product into the
Market
8. Commercialization
Marketing management dr. raafat shehata
Adoption
Adoption is the process by which consumers
incorporate the product into the buying pattern
Innovators and early adopters are thought to
operate as opinion leaders
Stages in the Adoption
Process
 Awareness: Consumer becomes aware of the new
product, but lacks information about it.
 Interest: Consumer seeks information about new
product.
 Evaluation: Consumer considers whether trying the new
product makes sense.
 Trial: Consumer tries new product on a small scale to
improve his or her estimate of its value.
 Adoption: Consumer decides to make full and regular
use of the new product.
Adopter Categories
1-Relative advantage: The degree to which potential consumers
perceive a new product is superior to existing substitutes
2-Compatibility: The degree to which potential consumers feel a
new product is consistent with their present needs, values and
practices
3-Complexity: The degree to which a new product is difficult to
understand or use
4-Trialability: The degree to which a new product is capable of
being tried on a limited basis
5-Observability: The ease with which a product’s benefits or
attributes can be observed, imagined or described to potential
consumers
Product characteristics that influence
diffusion
Relative Advantage
 A product innovation is perceived as better than
existing alternatives
 Positively correlated with an innovation’s
adoption rate
 Exist when a new product offers:
 Better performance, increased comfort, saving in
time and effort, or immediacy of reward
Compatibility
 An innovation is perceived to fit into a person’s
way of doing things
 The greater compatibility, the more rapid a
product’s rate of adoption
 Overcome perception of incompatibility
through heavy advertising to persuade
consumers
Complexity
 The more complex the product, the more
slowly a product’s rate of adoption
 Overcome perception of complexity with
demonstrations, personal selling, and
emphasis on ease of use
Trialability
 An innovation can be used on a limited basis
prior to making a full-blown commitment
 The trial experience serves to reduce the risk
of a consumer’s being dissatisfied with a
product after having permanently committed
to it through outright purchase
Observability
 The product user or other people can observe
the positive effects of new product usage
 The higher the visibility, the more rapid the
adoption rate
Packaging
5 key functions:
1. Protection
2. Distribution
3. User convenience
4. Promotion
5. compliance
Service
Service is an activity or a benefit that one party
can offer to another that is essentially intangible
and does not result in the ownership of
anything.
Products, Services, and
Experiences
Pure
Tangible
Good
Pure
Service
Soap
Tangible Good
With
Accompanying
Services
Auto With
Accompanying
Repair
Services
Hybrid
Offer
Restaurant
Service
With
Accompanying
Minor Goods
Airline Trip
With
Accompanying
Snacks
Doctor’s
Exam
Nature and Characteristic
of a Service
Service characteristics & how to
deal with each of them
(Marketing response)
* Provide tangibility through:
-Physical appearance of facility
-Furnishings
-Employee uniforms
-Logo
-Website
-Packaging
1-Intangability
2-Perishability
-The perishability of services is not a problem when demand
is steady however when demand fluctuates service firms
have difficult problems .
Example :because of rush- hour demand public
transportation companies have to own much more
equipment
-Adjust pricing to influence demand
-Capacity management: adjusting services to match
demand
3-Inseparability
-Employee training
-Disintermediation
4-Variability
-Service guarantees
- Improving service delivery process
- TQM
Chapter 5
Pricing
Old Russian proverb
There are two kinds of fools in any
market. One does not charge
enough. The other charges too
much
Pricing
Pricing is the monetary value placed upon a
product /service by the marketer
Revenue =price x quantity
Profit =revenue – cost
Types of Cost Factors that
Affect Pricing Decisions
Total Costs
Sum of the Fixed and Variable Costs for Any Given
Level of Production
Variable Costs
Costs that do vary
directly with the
level of production
Raw materials
Fixed Costs
(Overhead)
Costs that don’t
vary with sales or
production levels
Executive Salaries, Rent
Breakeven analysis
The point at which total revenue is exactly equal to
the total cost of production and marketing
Breakeven Analysis or Target
Profit Pricing
2
4
6
8
10
12
200 400 600 800 1,000
Total Revenue
Total Cost
Fixed Cost
Target Profit
($2 million)
Sales Volume in Units (thousands)
CostinDollars(millions)
Tries to Determine the Price at Which a Firm
Will Break Even or Make a Certain Target Profit.
Breakeven analysis
Breakeven analysis = fixed cost / contribution per unit
Factors Affecting Price Decisions
4 Cs on price setting
Cost
Company
Customer
Competitor
Marketing
Objectives
Survival
Low Prices Hoping to Increase Demand.
Current Profit Maximization
Choose the Price that Produces the
Maximum Current Profit, Etc.
Market Share Leadership
Low as Possible Prices to Become
the Market Share Leader.
Product Quality Leadership
High Prices to Cover Higher
Performance Quality and R&D.
Internal Factors Affecting Pricing
Decisions: Marketing Objectives
Price
Product Design
Distribution
Promotion
Nonprice
Positions
Internal Factors Affecting Pricing
Decisions: Marketing Mix Strategy
Market and
Demand
Competitors’ Costs,
Prices, and Offers
Other External Factors
Economic Conditions
Reseller Reactions
Government Actions
Social Concerns
External Factors Affecting
Pricing Decisions
Pure Competition
Many Buyers and Sellers
Who Have Little
Effect on the Price
Monopolistic
Competition
Many Buyers and Sellers
Who Trade Over a
Range of Prices
Pricing in Different Types of Markets
Market and Demand Factors
Affecting Pricing Decisions
Oligopolistic
Competition
Few Sellers Who Are
Sensitive to Each Other’s
Pricing/ Marketing
Strategies
Pure Monopoly
Single Seller
Price Elasticity of DemandPrice
Quantity Demanded per Period
A. Inelastic Demand -
Demand Hardly Changes With
a Small Change in Price.
P2
P1
Q1Q2
Price
Quantity Demanded per Period
P’2
P’1
Q1Q2
B. Elastic Demand -
Demand Changes Greatly With
a Small Change in Price.
Price Elasticity of Demand
Change in quantity demanded %
Change in price %
-When elasticity is greater than 1 ----- Elastic
-When elasticity is less than 1 ----- Inelastic
Pricing methods
Strengths of cost plus pricing
1. It is an easy method to be calculated
2. It can be seen to be fairer to both buyers and
sellers
3. It provides a means of trying to ensure that all
overheads are met in addition it tries to allow for
profit return
Weaknesses of cost plus
pricing
1. It takes no account of other elements in the
marketing mix like product or place
2. It may be difficult to identify direct costs and
overheads for each item
3. It does not reflect customers perceptions
:cheap price =poor product
4. It does not consider the needs of customers
5. It does not consider the elasticity of demand for
the product
Methods for
Setting Prices
Going-Rate
Company Sets Prices Based on What
Competitors Are Charging
Sealed-Bid
Company Sets Prices Based on
What They Think Competitors
Will Charge?
?
Competition-Based Pricing
New-Product Pricing Strategies
(Pioneer Pricing strategies)
Market-Skimming
 Setting a High Price for a
New Product to “Skim”
Maximum Revenues from
the Target Market.
 Results in Fewer, But
More Profitable Sales.
 I.e. Intel
 Use Under These
Conditions:
 Product’s Quality and
Image Must Support Its
Higher Price.
 Costs Can’t be so High
that They Cancel the
Advantage of Charging
More.
 Competitors Shouldn’t
be Able to Enter Market
Easily and Undercut the
High Price.
Example of skimming pricing
Apple launched its iPhone in this way, a high price
was set and product availability was through a
specific telephone network (rather than being
available on all networks)
Strengths of skimming pricing
1. It allows for quick recovery on investment in the
new product
2. It provides prestigious/quality image to customers
3. Higher prices are likely to appeal to innovator
groups
Weaknesses of skimming pricing
1. It may encourage the competitors to enter the
market quickly
2. It results in lower levels of sales and so fewer
economies of scale
3. It may attract attention from regulatory bodies
Skimming
 It is commonly used in consumer electronics
market
 Recent research shows that customers are
aware of skimming in electronics markets and
are delaying purchases of new electronic
devices until the prices drop
New-Product Pricing
Strategies
Market Penetration
 Setting a Low Price for a
New Product in Order to
“Penetrate” the Market
Quickly and Deeply.
 Attract a Large Number of
Buyers and Win a Larger
Market Share.
 I.e. Dell
 Use Under These
Conditions:
 Market Must be Highly
Price-Sensitive so a Low
Price Produces More
Market Growth.
 Production/Distribution
Costs Must Fall as Sales
Volume Increases.
 Must Keep Out
Competition & Maintain
Its Low Price Position or
Benefits May Only be
Temporary.
Strengths of penetration pricing
1. Large sales volume
2. Economy of scale
3. Prevent competitors from entering the market
Weaknesses of penetration
pricing
1. It is often difficult to raise price after using this
policy
2. It may not be appropriate due to costs of R&D
and competitor positions
New-Product Pricing
 Skimming Price
A very high, premium price
Product is new & highly desirable with unique benefits
Demand is highly inelastic
Allows the company to recover R&D & promotional costs
There is a high barrier for entry to competitors
 Penetration Pricing
A very low price to encourage consumers to buy
The objective is to sell more at a short period of time
Discourage competitors to enter the market (increase entry barriers)
 Trial Pricing
Pricing a new product low for a limited period of time in order to lower the
risk for consumers
Win customer acceptance first, and then make profits later
Perceived value pricing
 Is perhaps one of the most marketing oriented ways
of setting prices
 The price is set on the perceived value of the product
to the customer
 The marketer uses other elements of the mix
(product or promotion ) to build the perceived value
of the product or service in the mind of customers
Demand pricing
 This method is customer-oriented, because prices are
set at a level that will ensure that demand for the
product is at a point that will meet corporate objectives.
For example, a company may be able to produce
economically at a particular level, so the price will be set
to ensure that demand reaches that level, no more and
no less. Alternatively, demand pricing can be used to
determine the point at which profit will be maximized,
i.e. the point at which a further increase in price will
reduce the production run past the most economical
point.
EDLP
- An important type of value pricing is everyday low pricing
which involves charging a constant , everyday low price
with few or no temporary price discounts. In contrast ,
high –low pricing involves charging higher prices on an
everyday basis ,but running frequent promotions to
temporarily lower prices on selected items below the
EDLP level
The king of EDLP is Wal-Mart that practically
defined the concept
Pricing for Multiple Products
 Price bundling (e.g., monitor, keyboard, CPU in a
computer package)
 Captive pricing (e.g., razors and razor blades)
Product Mix-Pricing Strategies
 Optional-Product
 Pricing optional or accessory products sold with the
main product. i.e camera bag.
 Captive-Product
 Pricing products that must be used with the main
product. i.e. film.
Temporarily Pricing
Products Below List
Price Through:
Promotional Pricing
Special-Event Pricing
Cash Rebates
Low-Interest Financing
Longer Warranties
Free Maintenance
Discounts
Loss Leaders
Psychological Pricing
 Considers the psychology of prices and not simply the
economics.
 Customers use price less when they can judge quality of a
product.
 Price becomes an important quality signal when customers
can’t judge quality; price is used to say something about a
product.
Odd-even pricing
Certainly it is less effective in some markets. An
extension of this type of pricing is found in China,
where some numbers are regarded as lucky;
collectively, pricing that creates perceptions of this
type is called psychological pricing.
Chapter 6
Place or distribution
What is a Distribution Channel?
Set of interdependent organizations
involved in the process of making a
product or service available for use or
consumption by the consumer or
business user.
Distribution channels
 Avon cosmetics for example broke new ground by
selling products door to door rather than through
department stores and pharmacies
 By so doing the company opened up an entirely
new market among women who were house-bound
for whatever reason
Number of Channel Levels
Intermediaries
1. Retailers :sell directly to consumers
2. Wholesalers: sell to retailers
3. Distributor and dealers: sell to customers
through profit
4. Agents : they do not purchase the products but
they earn commission
5. Franchisees e.g. KFC
Types of Distribution Channels
 Consumer channels
 Direct
 Manufacturer-retailer-consumer
 Manufacturer-wholesaler-retailer-consumer
 Business-to-business channels
 Manufacturer-industrial distributor-business
customer
Marketing Systems
 Conventional - multi-level distribution channel in
which members work independently of one another
 Vertical - channel in which there is cooperation
among channel members at two or more different
levels of the channel
 Horizontal - two or more firms at the same
channel level agree to work together
Conventional Distribution Channel
Vs. a Vertical Marketing System
Corporate VMS
Common Ownership at Different
Levels of the Channel i.e. Sears
Contractual VMS
Contractual (formal) Agreements Among
Channel Members i.e Franchising (KFC)
Administered VMS
Leadership is Assumed through informal agreement
a Few Dominant Members i.e. Marks &Spencer
Degree of
Direct
Control
Types of Vertical Marketing
Systems
Intensive
Distribution
Selective
Distribution
Exclusive
Distribution
Number of Marketing
Intermediaries
Select a distribution channel
for each of the followings
1-Rolex watches
2-Cigarettes
3-Mid priced high-fi systems
Chapter 7
Promotion
Marketing Communication Mix
or Promotion Mix
Product’s
Design
Product’s
Price
Product’s
Package
Stores that Sell
the Product
Advertising is better for creating awareness; personal
selling is more effective at promoting action and
purchase behavior.
Communication strategies
1. Push strategy
2. Pull strategy
3. Strategy mix
Communications models
DRIP model:
D Differentiate
R Remind
I Inform
P Persuade
AIDA
Attention
Interest
Desire
Action
Public relations
The planned and sustained effort to establish and
maintain goodwill and mutual understanding
between an organization and its publics
PR people
 PR people are often ex-journalists who have
some contacts with the news media and who
know how to create a story that will be printed
in the way the company wants it to be done
Publicity
Unpaid communication about an organization
appearing in the mass media
- Non personal paid ------ advertising
- Personal non paid ------- personal selling
- Non personal non paid ----- publicity
Corporate image :
How a company is perceived by its publics
Corporate identity:
Relates to logos , preferred colors …..
Public relations
Public relation activities
1. Press release & video news release
2. Press conferences
3. Sponsorship
4. Exhibitions
5. Corporate social responsibility
6. Corporate literature
7. Corporate hospitality
8. Videos
9. Special events “celebrity store openings”
10. Website
Exhibitions
Purposes
1. Public relations
2. Promotion and selling
3. Networking
4. Testing the response
Sponsorship
It is an agreement between a company and an
event organizer where the company gives
money in exchange for rights to associate the
company name with the event
Sponsorship
Objectives:
-Awareness creation
-Media coverage by the sponsored event
-Association with prestigious event
-Opportunity for corporate hospitality
-Internal employee motivation
Sales Promotion
It is one of the promotional tools used to add
value for a product or service on the short run
Rapid Growth of Sales
Promotion
 Sales promotion can take the form of consumer promotions,
business promotions, trade promotions, or sales force
promotions.
 Rapid growth in the industry has been achieved because:
 Product managers are facing more pressure to
increase their current sales,
 Companies face more competition,
 Advertising efficiency has declined,
 Consumers have become more deal oriented.
Sales Promotion Objectives
 Consumer Promotions:
increase short-term sales or help build long-term market
share.
 Trade Promotions: get retailers to:
 carry new items and more inventory,
 advertise products,
 give products more shelf space, and
 buy product ahead.
Evaluation of sales promotion
1-Consumer audits:
This will indicate if there has been a change in consumer behavior
2-Retail audits:
Change in stock levels , distribution & market share
3-Sales force feedback
4-Sales information
Two-thirds of purchases result from
in-store decisions
Point of sale display ( POS)
-It refers to the in store display that can influence
consumers to purchase products in shops
It includes:
-Shop layout and design
-The way goods are presented
-In store display materials
Personal Selling
It is personal paid promotional tool in which there
is a face to face contact between a company
representative and a customer
Major Steps in Effective Selling
Advantages of personal selling
1. It contributes to a relatively high level of customer
attention
2. Message customization
3. Two ways communications allows immediate feedback
4. It is an opportunity to develop long term relations
5. Using visual elements
Disadvantages of personal selling
1. The main disadvantage is the cost as a
salesperson can only interact with one buyer at a
time
2. The control on the message is limited
Direct marketing
-The planned recording ,analysis and tracking of customer
behavior to develop relational marketing strategies
-It creates and develop direct one to one relationships
-To carry out direct marketing you need Databases
Tools of direct marketing
1. Direct mail (mail shots) “most common”
2. E-mail
3. Mobile phone text messaging (SMS)
4. Direct response advertising
5. Catalogue marketing /brochures / website
6. Call centers and telemarketing
7. “V-Reps “ : Virtual Reps
8. Door drops
9. E-commerce
Forms of Direct Marketing
Chapter 8
Advertising
Advertising Execution Techniques
Rational advertising
 Factual
 Demonstration
 Comparison
 Slice of life
Demonstration
 Headache remedies, floor cleaners and tyre
commercials have traditionally demonstrated the
pain, the dirt and the danger respectively, and
have then shown how the focus brand relieves the
pain (Panadol), removes the stubborn dirt (Flash)
or stops in the wet on a coin (or the edge of a
rooftop – Continental tyres).
Emotional advertising
 Testimonial or endorsement
 Animation
 Music
 Fear
 Humor
 Sex
 lifestyle
•Joy
•Love
•Pleasure
•Pride
•Safety
•Security
•Self-esteem
•Combinations
Fear advertising
 Fear is used in one of two ways. The first type
demonstrates the negative aspects or physical dangers
associated with a particular behavior or improper product
usage.
 Drink-driving, life assurance and toothpaste advertising
typify this form of appeal.
 The second approach is the threat of social rejection or
disapproval if the focus product is not used.
 This type of fear is used frequently in advertisements for
such products as anti-dandruff shampoos and deodorants,
and is used to support consumers’ needs for social
acceptance and approval.
Animation
 Animation techniques have advanced considerably in
recent years, with children as the prime target audience.
However, animation has been successfully used in many
adult-targeted advertisements, such as those by
Schweppes, Compaq, Tetley Tea, Direct Line Insurance
and the Electricity Board.
 The main reason for using animation is that potentially
boring and low-interest/involvement products can be
made visually interesting and provide a means of gaining
attention.
 A further reason for the use of animation is that it is easier
to convey complex products in a way that does not
patronize the viewer.
Sex advertising
 Sex appeals normally work well for products such as
perfume, clothing and jewellery but provide for poor
effectiveness when the product is unrelated, such as
cars, photocopiers and furniture.
 The use of sex in advertising messages is mainly
restricted to getting the
 attention of the audience and, in some
circumstances, sustaining interest. It can be
 used openly, as in various lingerie, fragrance and
perfume advertisements, such as
 WonderBra and Escape; sensually, as in the H‫ن‬agen
Dazs and Cointreau campaigns;
 and humorously, as in the Locketts brand.
Media scheduling patterns
1. Continuous pattern
2. Flighting patterns
3. Pulsing
Communication Effects
(Copy Testing)
Is the Ad Communicating
Well?
Advertising Program Evaluation
Sales Effects
Is the Ad Increasing
Sales?
Evaluating Advertising
Evaluating Advertising
1-Pre-testing :
-Focus group
2-Post-testing :
-Recognition test
-Recall test
Media Selection
Raafat Shehata
Raafatshehata@Hotmail.com
Thank You

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Marketing management dr. raafat shehata

  • 2. Table of contents  Introduction about marketing  Components of marketing plan  STP  Product mix  Pricing  Distribution  Promotional mix  Budgeting
  • 3. Marketing Marketing is defined to be the process responsible for anticipation, identification , and satisfaction of customer needs through a profit
  • 4. What is the relation between these 3 terms ProductBrandLove mark
  • 5. Brand versus product “Products are made in the factory but brands are created in the mind” Walter Landon
  • 6. Marketing manager  He is the bridge between the company and the customers  His functions are (APIC) Analysis Planning Implementation Control
  • 7. What are Consumers’ Needs, Wants, and Demands? Needs - state of felt deprivation including physical, social, and individual needs i.e hunger Wants - form that a human need takes as shaped by culture and individual personality i.e. bread Demands - human wants backed by buying power i.e. money
  • 8. Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept Marketing Management Philosophies
  • 9. Production concept The production concept holds that consumers will prefer products that are widely available and inexpensive.
  • 10. Product concept -The product concept holds that consumers will favor those products that offer the most quality, performance, or innovative features -In order to compete effectively, the product needs to have features that appeal to individual consumers. In a product-oriented firm, the products are designed to incorporate a large number of features in order to meet the needs of a large number of consumers. Unfortunately, the cost becomes too high for most people, and of course people do not want to pay for features that they are unlikely ever to use.
  • 11. Selling concept The selling concept holds that consumers and businesses, will ordinarily not buy enough of the organization’s products, therefore, the organization must undertake aggressive selling and promotion effort.
  • 12. Marketing concept The marketing concept holds that the key to achieving organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating superior customer value to its chosen target markets. Reactive marketing orientation: understanding and meeting consumers’ expressed needs. Proactive marketing orientation: researching or imagining latent consumers’ needs through a “probe-and-learn” process e.g. Wal Mart
  • 13. Company Orientations towards business . Marketing Concept Reactive market Understanding and meeting consumers’ expressed needs Proactive marketing Finding latent consumers’ needs through a “probe-and- learn” process.
  • 14. Marketing Concept Evolution Production Concept Consumers prefer products that are widely available and inexpensive Product Concept Consumers favor products that offer the most quality, performance, and innovative features Selling Concept Consumers will buy products only if the company aggressively promotes/sells these products Marketing Concept Focuses on needs/wants of target markets & delivering value better than competitors
  • 15. Bad examples marketing orientation • Pampers in Japan • Philips in China
  • 16. The 4 P’s & 4 C’s of the Marketing Mix  4 P’s  Product  Price  Place  Promotion  4 C’s  Customer Solution  Customer Cost  Convenience  Communication
  • 18. Plan -It is a way of achieving something Example :the shopping list you take to the supermarket is a simple example -Planning includes: 1-Setting objectives 2-Selecting strategies , tactics and policies
  • 19. Strategy ,Tactics and Objectives -Strategy: the method used to achieve objectives e.g. we will achieve our objective of increasing profits by growing market share in existing market -Tactics: how resources are deployed in an agreed strategy e.g. we will set up a new telephone call center and target new customers -Objectives: are quantified goals
  • 20. The contents and structure of the marketing plan  The executive summary  Situational analysis and target market  Marketing objectives  Marketing strategies  Marketing tactics  Marketing mix  STP  Schedules and budgets  Implementation  Control
  • 21. Situational analysis  SWOT analysis  Gap analysis  PESTEL analysis  Market analysis  Five forces analysis
  • 22. SWOT analysis Strengths (internal) Weaknesses (internal) Opportunities (external) Threats (external)
  • 23. Definitions A particular skill or distinctive competence which organization possesses & will aid in achieving its stated goals Strength Any aspect of the company that may hinder the achievement of stated goals. Weakness Any feature that creates advantageous conditions to the firm in relation to a particular objective or set of them Opportunities Any environmental development which present problems & may hinder the achievement of org. objectives Threats
  • 24. PESTEL analysis  Political factors  Economic factors  Socio-cultural factors  Technological factors  Ecological  Legal
  • 25. Political  Taxation policy  Government policy  Pressure group
  • 26. Economic Factors  Inflation  Employment  Disposable income  Business cycles  Energy availability and cost  Others?
  • 27. Socio-cultural factors  Demographics  Distribution of income  Social mobility  Lifestyle changes  Consumerism  Levels of education  Others?
  • 28. Culture  Language  Religion  Superstitions  Etiquette  Customs  Traditions  Notion of time
  • 29. Market analysis  Market size  Growth rate  Market trends
  • 30. Objectives Objective should be SMART S Specific M Measurable A Achievable R Realistic T Time related
  • 31. Strategies  SWOT strategies  Competitive strategies (Porter )  Growth strategies (Ansoff)
  • 32. SWOT strategies  Matching & Conversion are 2 major strategic options from a SWOT analysis; to match the strengths to the opportunities & to convert the weakness & threats to strengths & opportunities. WeaknessStrength ThreatsOpportunities Conversion Conversion
  • 33. 1. Market Penetration 2. Market Development 3. Product Development 4. Diversification Existing Markets New Markets Existing Products New Products Product/Market Expansion Grid
  • 34. Market Penetration  making more sales to current customers without changing its products.  How? Add new stores in current market areas, improvements in advertising, prices, etc.
  • 35. Market Development  identify and develop new markets for its current products.  How? Review new demographic (senior consumers) or geographic (Asian, European & Australian) markets.
  • 36. Product Development  offering modified or new products to current markets.  How? Increasing food offerings, extend to Frappuccino drinks.
  • 37. Diversification  start up or buy businesses outside current products and markets.  How? Currently testing two new restaurant concepts – Cafe Starbucks and Circadia, or branded casual clothing.
  • 38. Porter’s Generic Strategies Michael Porter has proposed three generic strategies that provide a good starting point for strategic thinking: • Overall cost leadership (WalMart) • Differentiation (Sainsbury) • Focus.
  • 39. The marketing budget  How much the company intend to spend Methods: 1. Task method 2. Percentage of sales 3. Competitive parity 4. All you can afford 5. Same as Last Time (S.A.L.T.)
  • 41. Market Segmentation “Market segmentation is a natural result of the vast differences among people.” Donald Norman
  • 42. Connecting With Customers  Market Segmentation: determining distinct groups of buyers (segments) with different needs, characteristics, or behavior.  Market Targeting: evaluating each segment’s attractiveness and selecting one or more segments to enter.  Market Positioning: arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. i.e. Chevy Blazer is “like a rock.”
  • 43. Steps in Market Segmentation, Targeting, and Positioning
  • 45. Geographic segmentation  Cars in California always have air conditioning  Cars in Sweden have headlights that stay on constantly because of the poor quality of the light for much of the year
  • 46. Psychographic segmentation personality  The home insurance market may segment into those who afraid of crime , those who afraid of natural disasters and those who are afraid of accidental damage to their property
  • 47. Lifestyle segmentation The Jeep Cherokee is aimed at lifestyle segment that favors an outdoor ,adventure-some ,fun- seeking style of life
  • 48. Targeting Once the firm has identified its market-segment opportunities, it has to decide how many and which ones to target. Marketers are increasingly combining several variables in an effort to identify smaller, better-defined target groups.
  • 50. Undifferentiated Marketing  Appeals to a broad spectrum of people  Efficient due to economies of scale  Effective when most consumers have similar needs  Example: Wal-Mart
  • 51. Differentiated Marketing  Develops one or more products for each of several customer groups with different product needs  Appropriate when it is possible to identify one or more segments with distinct needs for different types of products  Example: L’Oreal (Elseve, L’Oreal, Lancome)
  • 52. Concentrated Marketing  Entails focusing efforts on offering one or more products to a single segment  Useful for smaller firms that do not have the resources to serve all markets  Example: Rolex – Rolls Royce – Porsche
  • 53. Positioning How the customers are perceiving the product versus other products in the market
  • 54. Domino’s positioning  A good hot pizza, delivered to your door within 30 minutes of ordering, at a moderate price
  • 55. Positioning criteria 1. Benefits 2. Specific product features e.g. speed 3. User category 4. Against another products 5. Occasion 6. Hybrid basis
  • 56. Perceptual map Brands can be positioned against competitive brands on product maps
  • 58. What is a Product?  A PRODUCT is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need.  Includes:  Physical Objects  Services  Events  Persons  Places  Organizations  Ideas  Combinations of the above
  • 59. What is a Service?  A SERVICE is a form of product that consist of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.  Examples include:  Banking  Hotels  Tax preparation  Home repair services
  • 60. Unsought Products  New innovations  Products consumers don’t want to think about  Require much advertising & personal selling i.e Life insurance, blood donation Product Classifications: Consumer Specialty Products  Special purchase efforts  High price  Unique characteristics  Brand identification  Few purchase locations i.e Lamborghini, Rolex Shopping Products  Buy less frequently  Higher price  Fewer purchase locations  Comparison shop i.e Clothing, cars, appliances Convenience Products  Buy frequently & immediately  Low priced  Mass advertising  Many purchase locations i.e Candy, newspapers
  • 61. Product portfolio (product assortment or product mix)  A company product portfolio is all the product lines and items that the company offers for sale  Portfolio aspects: -Width “breadth” -Length -Depth
  • 62. Product Mix Decisions Procter & Gamble's Product Mix Baby Care Beauty Care Fabric & Home Care Food & Beverage Crest Tartar Protection Crest Cavity Protection Crest Multicare Six Toothpastes in Line Health Care  Width – number of different product lines  Length – total number of items the company carries within product lines  Depth – number of versions offered of each product in line
  • 64. Strategic business unit (SBU)  A division , product line , or other profit center within the parent company Each of a firm’s Strategic Business Units (SBU ) has six attributes: 1- A specific target market 2- Its own senior marketing executive 3- Control over its resources 4- Its own marketing strategy 5- Clear-cut competition 6- Distinct differential advantages
  • 65. Question Marks • High growth, low share • Build into Stars or phase out • Require cash to hold market share Stars • High growth & share • Profit potential • May need heavy investment to grow Cash Cows • Low growth, high share • Established, successful SBU’s • Produce cash Dogs • Low growth & share • Low profit potential Relative Market Share High Low MarketGrowthRate LowHigh Analyzing Current SBU’s: BCG Growth-Share Matrix ?
  • 66. Criticisms of BCG 1-It concentrates only on 2 dimensions 2-The matrix assumes a relationship between profitability and market share
  • 67. Time Product Develop- ment Introduction Profits Sales Growth Maturity Decline Losses/ Investments ($) Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise Product Life Cycle
  • 68. Criticisms of PLC 1. The stages are not always easily defined 2. Not all the products go through each stage 3. Strategic decisions can change the cycle 4. The life cycle varies between different industries
  • 71. Degrees of newness 1. Completely new product 2. Partially new product 3. Major product change 4. Minor product change
  • 72. Causes of New-Product Failures  One study estimated that as many as 80% of new consumer packaged products fail.  Only about 40% of new consumer products are around 5 years after introduction.  Why?  Overestimation of market size,  Product design problems,  Product incorrectly positioned, priced, or advertised,  Product may have been pushed despite poor marketing research findings,  Costs of product development, or  Competitive actions.
  • 73. Major Stages in New- Product Development
  • 74. 1.Idea Generation Customers Employees Distributors Competitors R & D Consultants Creative Thinking Sources of New-Product Ideas On Line http://www.ideo.com
  • 75. 2. Idea Screening  Helps spot good ideas and drop poor ones as soon as possible.  Many companies have systems for rating and screening ideas which estimate:  Market Size  Product Price  Development Time & Costs  Manufacturing Costs  Rate of Return  Then, the idea is evaluated against a set of general company criteria.
  • 76. 1. Develop New Product Ideas into Alternative Detailed Product Concepts 2. Concept Testing - Test the New-Product Concepts with Groups of Target Customers 3. Choose the One That Has the Strongest Appeal to Target Customers 3. Concept Development Product Image is the Way Consumers Perceive an Actual or Potential Product
  • 77. 4. Marketing Strategy Part One Describes Overall: Target Market Planned Product Positioning Sales, Market Share, & Profit Goals Part Two Describes First-Year: Product’s Planned Price Distribution Marketing Budget Part Three Describes Long-Run: Sales & Profit Goals Marketing Mix Strategy
  • 78. 5 .Business Analysis Considerations in Business Analysis Stage Demand Cost Sales Profitability
  • 79. If No, Eliminate Product Concept Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Satisfy Company Objectives 6. Product Development If Yes, Move to Product Development
  • 80. Product Development  In new product development products can be tested at three levels 1. Alpha testing: does the product work in the laboratory ? 2. Beta testing :does it work in the customers “In-use” situation? 3. Gamma testing : does it do what the customer wants?
  • 81. 7. Test Marketing  Product and marketing program are introduced into more realistic market settings.  Can be very expensive and time consuming.  Test the following:  Positioning strategy,  Advertising,  Distribution,  Pricing,  Branding,  Packaging,  Budget levels.
  • 82. When is the Right Time to Introduce Product? Where to Launch a New Product? Introducing the New Product into the Market 8. Commercialization
  • 84. Adoption Adoption is the process by which consumers incorporate the product into the buying pattern Innovators and early adopters are thought to operate as opinion leaders
  • 85. Stages in the Adoption Process  Awareness: Consumer becomes aware of the new product, but lacks information about it.  Interest: Consumer seeks information about new product.  Evaluation: Consumer considers whether trying the new product makes sense.  Trial: Consumer tries new product on a small scale to improve his or her estimate of its value.  Adoption: Consumer decides to make full and regular use of the new product.
  • 87. 1-Relative advantage: The degree to which potential consumers perceive a new product is superior to existing substitutes 2-Compatibility: The degree to which potential consumers feel a new product is consistent with their present needs, values and practices 3-Complexity: The degree to which a new product is difficult to understand or use 4-Trialability: The degree to which a new product is capable of being tried on a limited basis 5-Observability: The ease with which a product’s benefits or attributes can be observed, imagined or described to potential consumers Product characteristics that influence diffusion
  • 88. Relative Advantage  A product innovation is perceived as better than existing alternatives  Positively correlated with an innovation’s adoption rate  Exist when a new product offers:  Better performance, increased comfort, saving in time and effort, or immediacy of reward
  • 89. Compatibility  An innovation is perceived to fit into a person’s way of doing things  The greater compatibility, the more rapid a product’s rate of adoption  Overcome perception of incompatibility through heavy advertising to persuade consumers
  • 90. Complexity  The more complex the product, the more slowly a product’s rate of adoption  Overcome perception of complexity with demonstrations, personal selling, and emphasis on ease of use
  • 91. Trialability  An innovation can be used on a limited basis prior to making a full-blown commitment  The trial experience serves to reduce the risk of a consumer’s being dissatisfied with a product after having permanently committed to it through outright purchase
  • 92. Observability  The product user or other people can observe the positive effects of new product usage  The higher the visibility, the more rapid the adoption rate
  • 93. Packaging 5 key functions: 1. Protection 2. Distribution 3. User convenience 4. Promotion 5. compliance
  • 94. Service Service is an activity or a benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.
  • 95. Products, Services, and Experiences Pure Tangible Good Pure Service Soap Tangible Good With Accompanying Services Auto With Accompanying Repair Services Hybrid Offer Restaurant Service With Accompanying Minor Goods Airline Trip With Accompanying Snacks Doctor’s Exam
  • 97. Service characteristics & how to deal with each of them (Marketing response)
  • 98. * Provide tangibility through: -Physical appearance of facility -Furnishings -Employee uniforms -Logo -Website -Packaging 1-Intangability
  • 99. 2-Perishability -The perishability of services is not a problem when demand is steady however when demand fluctuates service firms have difficult problems . Example :because of rush- hour demand public transportation companies have to own much more equipment -Adjust pricing to influence demand -Capacity management: adjusting services to match demand
  • 101. 4-Variability -Service guarantees - Improving service delivery process - TQM
  • 103. Old Russian proverb There are two kinds of fools in any market. One does not charge enough. The other charges too much
  • 104. Pricing Pricing is the monetary value placed upon a product /service by the marketer Revenue =price x quantity Profit =revenue – cost
  • 105. Types of Cost Factors that Affect Pricing Decisions Total Costs Sum of the Fixed and Variable Costs for Any Given Level of Production Variable Costs Costs that do vary directly with the level of production Raw materials Fixed Costs (Overhead) Costs that don’t vary with sales or production levels Executive Salaries, Rent
  • 106. Breakeven analysis The point at which total revenue is exactly equal to the total cost of production and marketing
  • 107. Breakeven Analysis or Target Profit Pricing 2 4 6 8 10 12 200 400 600 800 1,000 Total Revenue Total Cost Fixed Cost Target Profit ($2 million) Sales Volume in Units (thousands) CostinDollars(millions) Tries to Determine the Price at Which a Firm Will Break Even or Make a Certain Target Profit.
  • 108. Breakeven analysis Breakeven analysis = fixed cost / contribution per unit
  • 110. 4 Cs on price setting Cost Company Customer Competitor
  • 111. Marketing Objectives Survival Low Prices Hoping to Increase Demand. Current Profit Maximization Choose the Price that Produces the Maximum Current Profit, Etc. Market Share Leadership Low as Possible Prices to Become the Market Share Leader. Product Quality Leadership High Prices to Cover Higher Performance Quality and R&D. Internal Factors Affecting Pricing Decisions: Marketing Objectives
  • 112. Price Product Design Distribution Promotion Nonprice Positions Internal Factors Affecting Pricing Decisions: Marketing Mix Strategy
  • 113. Market and Demand Competitors’ Costs, Prices, and Offers Other External Factors Economic Conditions Reseller Reactions Government Actions Social Concerns External Factors Affecting Pricing Decisions
  • 114. Pure Competition Many Buyers and Sellers Who Have Little Effect on the Price Monopolistic Competition Many Buyers and Sellers Who Trade Over a Range of Prices Pricing in Different Types of Markets Market and Demand Factors Affecting Pricing Decisions Oligopolistic Competition Few Sellers Who Are Sensitive to Each Other’s Pricing/ Marketing Strategies Pure Monopoly Single Seller
  • 115. Price Elasticity of DemandPrice Quantity Demanded per Period A. Inelastic Demand - Demand Hardly Changes With a Small Change in Price. P2 P1 Q1Q2 Price Quantity Demanded per Period P’2 P’1 Q1Q2 B. Elastic Demand - Demand Changes Greatly With a Small Change in Price.
  • 116. Price Elasticity of Demand Change in quantity demanded % Change in price % -When elasticity is greater than 1 ----- Elastic -When elasticity is less than 1 ----- Inelastic
  • 118. Strengths of cost plus pricing 1. It is an easy method to be calculated 2. It can be seen to be fairer to both buyers and sellers 3. It provides a means of trying to ensure that all overheads are met in addition it tries to allow for profit return
  • 119. Weaknesses of cost plus pricing 1. It takes no account of other elements in the marketing mix like product or place 2. It may be difficult to identify direct costs and overheads for each item 3. It does not reflect customers perceptions :cheap price =poor product 4. It does not consider the needs of customers 5. It does not consider the elasticity of demand for the product
  • 120. Methods for Setting Prices Going-Rate Company Sets Prices Based on What Competitors Are Charging Sealed-Bid Company Sets Prices Based on What They Think Competitors Will Charge? ? Competition-Based Pricing
  • 121. New-Product Pricing Strategies (Pioneer Pricing strategies) Market-Skimming  Setting a High Price for a New Product to “Skim” Maximum Revenues from the Target Market.  Results in Fewer, But More Profitable Sales.  I.e. Intel  Use Under These Conditions:  Product’s Quality and Image Must Support Its Higher Price.  Costs Can’t be so High that They Cancel the Advantage of Charging More.  Competitors Shouldn’t be Able to Enter Market Easily and Undercut the High Price.
  • 122. Example of skimming pricing Apple launched its iPhone in this way, a high price was set and product availability was through a specific telephone network (rather than being available on all networks)
  • 123. Strengths of skimming pricing 1. It allows for quick recovery on investment in the new product 2. It provides prestigious/quality image to customers 3. Higher prices are likely to appeal to innovator groups
  • 124. Weaknesses of skimming pricing 1. It may encourage the competitors to enter the market quickly 2. It results in lower levels of sales and so fewer economies of scale 3. It may attract attention from regulatory bodies
  • 125. Skimming  It is commonly used in consumer electronics market  Recent research shows that customers are aware of skimming in electronics markets and are delaying purchases of new electronic devices until the prices drop
  • 126. New-Product Pricing Strategies Market Penetration  Setting a Low Price for a New Product in Order to “Penetrate” the Market Quickly and Deeply.  Attract a Large Number of Buyers and Win a Larger Market Share.  I.e. Dell  Use Under These Conditions:  Market Must be Highly Price-Sensitive so a Low Price Produces More Market Growth.  Production/Distribution Costs Must Fall as Sales Volume Increases.  Must Keep Out Competition & Maintain Its Low Price Position or Benefits May Only be Temporary.
  • 127. Strengths of penetration pricing 1. Large sales volume 2. Economy of scale 3. Prevent competitors from entering the market
  • 128. Weaknesses of penetration pricing 1. It is often difficult to raise price after using this policy 2. It may not be appropriate due to costs of R&D and competitor positions
  • 129. New-Product Pricing  Skimming Price A very high, premium price Product is new & highly desirable with unique benefits Demand is highly inelastic Allows the company to recover R&D & promotional costs There is a high barrier for entry to competitors  Penetration Pricing A very low price to encourage consumers to buy The objective is to sell more at a short period of time Discourage competitors to enter the market (increase entry barriers)  Trial Pricing Pricing a new product low for a limited period of time in order to lower the risk for consumers Win customer acceptance first, and then make profits later
  • 130. Perceived value pricing  Is perhaps one of the most marketing oriented ways of setting prices  The price is set on the perceived value of the product to the customer  The marketer uses other elements of the mix (product or promotion ) to build the perceived value of the product or service in the mind of customers
  • 131. Demand pricing  This method is customer-oriented, because prices are set at a level that will ensure that demand for the product is at a point that will meet corporate objectives. For example, a company may be able to produce economically at a particular level, so the price will be set to ensure that demand reaches that level, no more and no less. Alternatively, demand pricing can be used to determine the point at which profit will be maximized, i.e. the point at which a further increase in price will reduce the production run past the most economical point.
  • 132. EDLP - An important type of value pricing is everyday low pricing which involves charging a constant , everyday low price with few or no temporary price discounts. In contrast , high –low pricing involves charging higher prices on an everyday basis ,but running frequent promotions to temporarily lower prices on selected items below the EDLP level The king of EDLP is Wal-Mart that practically defined the concept
  • 133. Pricing for Multiple Products  Price bundling (e.g., monitor, keyboard, CPU in a computer package)  Captive pricing (e.g., razors and razor blades)
  • 134. Product Mix-Pricing Strategies  Optional-Product  Pricing optional or accessory products sold with the main product. i.e camera bag.  Captive-Product  Pricing products that must be used with the main product. i.e. film.
  • 135. Temporarily Pricing Products Below List Price Through: Promotional Pricing Special-Event Pricing Cash Rebates Low-Interest Financing Longer Warranties Free Maintenance Discounts Loss Leaders
  • 136. Psychological Pricing  Considers the psychology of prices and not simply the economics.  Customers use price less when they can judge quality of a product.  Price becomes an important quality signal when customers can’t judge quality; price is used to say something about a product.
  • 137. Odd-even pricing Certainly it is less effective in some markets. An extension of this type of pricing is found in China, where some numbers are regarded as lucky; collectively, pricing that creates perceptions of this type is called psychological pricing.
  • 138. Chapter 6 Place or distribution
  • 139. What is a Distribution Channel? Set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.
  • 140. Distribution channels  Avon cosmetics for example broke new ground by selling products door to door rather than through department stores and pharmacies  By so doing the company opened up an entirely new market among women who were house-bound for whatever reason
  • 141. Number of Channel Levels
  • 142. Intermediaries 1. Retailers :sell directly to consumers 2. Wholesalers: sell to retailers 3. Distributor and dealers: sell to customers through profit 4. Agents : they do not purchase the products but they earn commission 5. Franchisees e.g. KFC
  • 143. Types of Distribution Channels  Consumer channels  Direct  Manufacturer-retailer-consumer  Manufacturer-wholesaler-retailer-consumer  Business-to-business channels  Manufacturer-industrial distributor-business customer
  • 144. Marketing Systems  Conventional - multi-level distribution channel in which members work independently of one another  Vertical - channel in which there is cooperation among channel members at two or more different levels of the channel  Horizontal - two or more firms at the same channel level agree to work together
  • 145. Conventional Distribution Channel Vs. a Vertical Marketing System
  • 146. Corporate VMS Common Ownership at Different Levels of the Channel i.e. Sears Contractual VMS Contractual (formal) Agreements Among Channel Members i.e Franchising (KFC) Administered VMS Leadership is Assumed through informal agreement a Few Dominant Members i.e. Marks &Spencer Degree of Direct Control Types of Vertical Marketing Systems
  • 148. Select a distribution channel for each of the followings 1-Rolex watches 2-Cigarettes 3-Mid priced high-fi systems
  • 150. Marketing Communication Mix or Promotion Mix Product’s Design Product’s Price Product’s Package Stores that Sell the Product
  • 151. Advertising is better for creating awareness; personal selling is more effective at promoting action and purchase behavior.
  • 152. Communication strategies 1. Push strategy 2. Pull strategy 3. Strategy mix
  • 153. Communications models DRIP model: D Differentiate R Remind I Inform P Persuade
  • 155. Public relations The planned and sustained effort to establish and maintain goodwill and mutual understanding between an organization and its publics
  • 156. PR people  PR people are often ex-journalists who have some contacts with the news media and who know how to create a story that will be printed in the way the company wants it to be done
  • 157. Publicity Unpaid communication about an organization appearing in the mass media - Non personal paid ------ advertising - Personal non paid ------- personal selling - Non personal non paid ----- publicity
  • 158. Corporate image : How a company is perceived by its publics Corporate identity: Relates to logos , preferred colors ….. Public relations
  • 159. Public relation activities 1. Press release & video news release 2. Press conferences 3. Sponsorship 4. Exhibitions 5. Corporate social responsibility 6. Corporate literature 7. Corporate hospitality 8. Videos 9. Special events “celebrity store openings” 10. Website
  • 160. Exhibitions Purposes 1. Public relations 2. Promotion and selling 3. Networking 4. Testing the response
  • 161. Sponsorship It is an agreement between a company and an event organizer where the company gives money in exchange for rights to associate the company name with the event
  • 162. Sponsorship Objectives: -Awareness creation -Media coverage by the sponsored event -Association with prestigious event -Opportunity for corporate hospitality -Internal employee motivation
  • 163. Sales Promotion It is one of the promotional tools used to add value for a product or service on the short run
  • 164. Rapid Growth of Sales Promotion  Sales promotion can take the form of consumer promotions, business promotions, trade promotions, or sales force promotions.  Rapid growth in the industry has been achieved because:  Product managers are facing more pressure to increase their current sales,  Companies face more competition,  Advertising efficiency has declined,  Consumers have become more deal oriented.
  • 165. Sales Promotion Objectives  Consumer Promotions: increase short-term sales or help build long-term market share.  Trade Promotions: get retailers to:  carry new items and more inventory,  advertise products,  give products more shelf space, and  buy product ahead.
  • 166. Evaluation of sales promotion 1-Consumer audits: This will indicate if there has been a change in consumer behavior 2-Retail audits: Change in stock levels , distribution & market share 3-Sales force feedback 4-Sales information
  • 167. Two-thirds of purchases result from in-store decisions
  • 168. Point of sale display ( POS) -It refers to the in store display that can influence consumers to purchase products in shops It includes: -Shop layout and design -The way goods are presented -In store display materials
  • 169. Personal Selling It is personal paid promotional tool in which there is a face to face contact between a company representative and a customer
  • 170. Major Steps in Effective Selling
  • 171. Advantages of personal selling 1. It contributes to a relatively high level of customer attention 2. Message customization 3. Two ways communications allows immediate feedback 4. It is an opportunity to develop long term relations 5. Using visual elements
  • 172. Disadvantages of personal selling 1. The main disadvantage is the cost as a salesperson can only interact with one buyer at a time 2. The control on the message is limited
  • 173. Direct marketing -The planned recording ,analysis and tracking of customer behavior to develop relational marketing strategies -It creates and develop direct one to one relationships -To carry out direct marketing you need Databases
  • 174. Tools of direct marketing 1. Direct mail (mail shots) “most common” 2. E-mail 3. Mobile phone text messaging (SMS) 4. Direct response advertising 5. Catalogue marketing /brochures / website 6. Call centers and telemarketing 7. “V-Reps “ : Virtual Reps 8. Door drops 9. E-commerce
  • 175. Forms of Direct Marketing
  • 178. Rational advertising  Factual  Demonstration  Comparison  Slice of life
  • 179. Demonstration  Headache remedies, floor cleaners and tyre commercials have traditionally demonstrated the pain, the dirt and the danger respectively, and have then shown how the focus brand relieves the pain (Panadol), removes the stubborn dirt (Flash) or stops in the wet on a coin (or the edge of a rooftop – Continental tyres).
  • 180. Emotional advertising  Testimonial or endorsement  Animation  Music  Fear  Humor  Sex  lifestyle •Joy •Love •Pleasure •Pride •Safety •Security •Self-esteem •Combinations
  • 181. Fear advertising  Fear is used in one of two ways. The first type demonstrates the negative aspects or physical dangers associated with a particular behavior or improper product usage.  Drink-driving, life assurance and toothpaste advertising typify this form of appeal.  The second approach is the threat of social rejection or disapproval if the focus product is not used.  This type of fear is used frequently in advertisements for such products as anti-dandruff shampoos and deodorants, and is used to support consumers’ needs for social acceptance and approval.
  • 182. Animation  Animation techniques have advanced considerably in recent years, with children as the prime target audience. However, animation has been successfully used in many adult-targeted advertisements, such as those by Schweppes, Compaq, Tetley Tea, Direct Line Insurance and the Electricity Board.  The main reason for using animation is that potentially boring and low-interest/involvement products can be made visually interesting and provide a means of gaining attention.  A further reason for the use of animation is that it is easier to convey complex products in a way that does not patronize the viewer.
  • 183. Sex advertising  Sex appeals normally work well for products such as perfume, clothing and jewellery but provide for poor effectiveness when the product is unrelated, such as cars, photocopiers and furniture.  The use of sex in advertising messages is mainly restricted to getting the  attention of the audience and, in some circumstances, sustaining interest. It can be  used openly, as in various lingerie, fragrance and perfume advertisements, such as  WonderBra and Escape; sensually, as in the H‫ن‬agen Dazs and Cointreau campaigns;  and humorously, as in the Locketts brand.
  • 184. Media scheduling patterns 1. Continuous pattern 2. Flighting patterns 3. Pulsing
  • 185. Communication Effects (Copy Testing) Is the Ad Communicating Well? Advertising Program Evaluation Sales Effects Is the Ad Increasing Sales? Evaluating Advertising
  • 186. Evaluating Advertising 1-Pre-testing : -Focus group 2-Post-testing : -Recognition test -Recall test