Marketing Final 6 7 8-9-10

Introduction to Marketing
Ali Hasan Awan
Five stages of the PLC

Product development - sales are zero,
investment costs are high
Introduction - profits do not exist, heavy

expense of product introduction
Growth - rapid market acceptance and

increasing profits
Maturity - slowdown in sales growth. Profits

level-off. Increase outlay to compete
Decline - sales fall-off and profits drop
Goal clarity the objectives of the task are

jointly understood
The Ideal Climate for New Product Development
Resources adequate economic and noneconomic support for the task
Encouragement sincere emotional support

for the task
Freedom the ability to explore whatever

directions of inquiry that are needed
Integrity management does what it says it will

do
1. Idea generation conceptualize a list of new

product ideas
Stages in a Typical New Product Development Process
2. Idea assessment evaluate the ideas based

on a previously created list of criteria. In this stage ideas that are judged not to meet the criteria are removed from consideration.
3. Concept testing the idea is assessed

through discussion with potential customers or users. Or, representatives of the organization explore the product idea and assess its overall potential (No physical product yet exists).
4. Idea choice one or more ideas are selected

for initial investment
Stages in a Typical New Product Development Process
5. Idea prototype development an initial

working model of the product is created for testing and evaluation
6. Final version development a model of the

final version of the product is created
7. Commercialization the product is put into

production and the distribution of the new product to customers begins
The Boston Matrix (Growth/Share Matrix)

Market Share
High
1. Stars Market Growth
3. Question Mark (Problem Child)
Low
2. Cash Cows
4. Dogs
High
Low
Ansoffs Matrix (Product/Market Matrix) For Market Growth Strategy

Existing Markets New Markets
Market Penetration
Market Development
New Products
Product Development
Diversification
Ansoffs Matrix (Product/Market Matrix)

Existing Markets New Markets
E.g. Realignments of the marketing mix
E.g. Geographical expansion
New Products
Same outlets and sales strategy - new product
Diversification related or unrelated
Pricing Decisions
Pricing strategies Pricing exercise Ten ways to increase prices without increasing price
Introduction to Marketing Quality Low High
Low Price
Economy Strategy e.g. Metro spaghetti

Skimming e.g. New film or album
Penetration e.g. Chinas mobile phones
High
Premium e.g. Emirates first class
Price
What is Price ? The amount of money charged for a product or service Price is the only element in the marketing mix that produces revenue; all other elements represent costs
Factors to be Considered While Setting Price

a) Supply (or cost) b) Demand (or revenue) c) Competition and Competitors pricing strategies d) Government Regulation e) Companys desired pricing position
Considerations in Setting Price
Cost based Vs. Value Based pricing
Types of Costs
Fixed costs (overhead) - Costs that do not vary with production or sales level. Variable costs - Costs that vary directly with the level of production. Total costs - The sum of the fixed and variable
costs for any given level of production.
Major Pricing Strategies

Cost-based pricing - Setting prices based on
the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk.
Customer value-based pricing - setting

price based on buyers perceptions of value rather than on the sellers cost
Cost-plus pricing (markup pricing) Adding a standard markup to the cost of the product.

Good-value pricing - Offering the right
combination of quality and good service at a fair price
Value-added pricing - Attaching value-added

features and services to differentiate a companys offers and charging higher prices.
Competition-based pricing -
Setting prices based on competitors strategies, prices, costs, and market offerings

Break-even pricing (target return pricing) - Setting price to break even on the costs of
making and marketing a product or setting price to make a target return.
Pricing strategies
Premium pricing
Uses a high price, but gives a good product/service exchange e.g. Concorde, The Ritz Hotel
Penetration pricing
offers low price to gain market share - then increases price e.g. PTCL - to attract new corporate clients
Economy pricing
placed at no frills, low price e.g. Soups, spaghetti, beans - economy brands
Price skimming
where prices are high - usually during introduction e.g new albums or films on release ultimately prices will reduce to the parity
Psychological pricing
to get a customer to respond on an emotional, rather than rational basis .e.g 0.99Rs. not 1.01Rs. price point perspective
Product line pricing

rationale of a product range e.g. MARS 32Rs, Four-pack 99Rs.
Pricing variations
off-peak pricing, early booking discounts,etc e.g Cannon offers a cash back incentive for expensive models
Optional product-pricing
Add on for the product e.g. optional extras BMW famously under-equipped
Captive product pricing

products that complement others e.g Gillette razors (low price) and blades (high price)
Product-bundle pricing
sellers combine several products at the same price e.g software, books, CDs.
Promotional pricing
e.g. toothpaste, soups, etc
Geographical pricing
different prices for customers in different parts of the world e.g. Include shipping costs.
Value pricing
usually during difficult economic conditions e.g. Value menus at McDonalds
Revise the discount structure Change the minimum order size Charge for delivery and special services Invoice for repairs on serviced equipment Charge for engineering, installation Charge for overtime on rushed orders Collect interest on overdue accounts
Ten ways to increase prices without increasing price
Marketing Channels
Over the past three decades, the overwhelming emphasis in the Marketing Mix has been on: Product Strategy with Pricing Strategy and Promotional Strategy also being stressed.
But.....
Marketing Channel Strategy (Place); the fourth P in the Marketing Mix has been largely neglected
But this is changing....
Marketing Channel Strategy is Growing in Importance. Why? Five Reasons

(1) Search for Sustainable Competitive Advantage (2) Growing Power of Retailers in Marketing Channels (3) The Need to Reduce Distribution Costs (4) The Increased Role and Power of Technology (5) The New Stress on Growth
I. The Search for Sustainable Competitive Advantage
Sustainable Competitive Advantage:
A competitive advantage that cannot be quickly and easily copied by competitors
A sustainable competitive advantage is becoming more difficult to attain through:

Product Strategy- rapid technology transfer enables competitors to quickly produce similar products Pricing Strategy- global economy allows competitors to find low cost production to match prices Promotion Strategy- high cost, clutter, and short life promotional campaigns limit competitive advantage
Competitive Advantage Based on

Superior Marketing Channel Strategy is More Difficult for Competitors to Copy Because
Channel Strategy is Long Term Requires a Channel Structure Depends on Relationships and People Requires Effective Interorganizational Management
II. Growing Power of Retailers in Marketing Channels
Retailers....
Are Growing Larger Enjoy Substantial Channel Power Act as Buying Agents for Customers Rather than Selling Agents for Suppliers Often Operate on Low Price / Low Margin Model Operate in Saturated Markets and Fight for Market Share
Retailers Are Growing Larger
Concentration of Sales Among the Top 50 Retail Firms

77.6% 22.4%
Top 50 Rest
Kinds of Retailers Where Largest Four Firms Account for At Least 50% of Total Sales
44%
21% 79%
45%
56%
Conventional Department Stores
55%
Discount Mass Merchandisers
Variety Stores
31%
36%
42%
69%
64%
Athletic Footwear
58%
Four Largest Firms All Other Firms
Misc. General Merchandisers
Toy Stores
Percentage Distribution of Retail Firms and Sales 83.5 by Size of Firms

62.8
Sales as a percentage of the total Firms as a percentage of the total
15.6 13.1 7.0 1.8 1.6
14.6
$10,000,000 $5,000,000 to $1,000,000 to or more $9,999,999 $4,999,999
Less than $1,000,000
Enjoy Substantial Channel Power
Retailer
Retailers Act as Buying Agents for Customers Rather than as Selling Agents for Suppliers
Retailers Often Operate on Low Price / Low Margin Model
Retailers Operate in Saturated Markets and Fight for Market Share
Power or Dominant Retailers are therefore the Gatekeepers into the Consumer Marketplace
Thus, Effective Channel Strategy for Dealing with Power Retailers is Crucial
III. The Need to Reduce Distribution Costs
Distribution Costs Often Account for a Significant Percentage of the Final Price of Products
Sometimes Distribution Costs are Higher than the Manufacturing Cost or the Costs of Raw Materials and Component Parts
Some Examples...
Autos Software Gasoline Fax Machines Packaged Foods
Distribution
15%
25%
28%
30%
41%
Manufacturing
40%
Raw Materials and Components
65%
19%
30%
33%
45%
10%
53%
40%
26%
While terms such as restructuring, flattening out, downsizing, and rightsizing have usually been mentioned in the context of corporate organizations, they also apply to Marketing Channels. The latest term....
Disintermediation
IV. Increasing Role and Usefulness of Technology
Technology has the power to greatly enhance the effectiveness and efficiency of Marketing Channels and could potentially change the entire structure of distribution around the world.
Some Examples...
The Internet Wireless Communications B2C and B2B E-Commerce Cell Phones Global Telecommunications Robotics & Automated Warehousing Computerized Salespeople
Firms that make effective use of these technologies in their channel strategy can gain a substantial competitive advantage
Competition
V. The New Stress on Growth Strategy
In Business Circles Growth has Overtaken Restructuring as the #1 Buzzword
Out
Reengineering Restructuring Downsizing Flat Organizations Lean and Mean
In
Growth Expansion New Markets Market Share Top Line Revenue
QUESTION In a relatively slow growth economy, how can an individual company selling mature products in mature markets grow?
ANSWER
Share of Mind = Share of Market
Translation
By getting channel members to focus on your products to a greater extent than your competitors, you gain market share and growth
Summary
(1) Search For Competitive Advantage (2) Growing Size and Power of Retailers (3) Need to Reduce Distribution Costs (4) Power and Potential of Technology (5) Stress on Growth Instead of Downsizing
Bottom Line
Marketing Channel Strategy Has Become Critically Important For Most Businesses
Strategy in Marketing Channels
Channel Strategy
The broad principles by which a firm expects to achieve its distribution objectives for satisfying its customers
Basic Strategic Questions

(1) What role should distribution play in the firms overall objectives and strategies? (2) What role should distribution play in the marketing mix? (3) How should the firms marketing channels be designed to achieve its distribution objectives? (4) What kinds of channel members should be selected to meet the firms distribution objectives? (5) How can the marketing channel be managed to implement the firms channel design effectively and efficiently on a continuing basis?
Introduction to Marketing The Relationship between customer satisfaction and the companys marketing mix can be represented as:
Cs = f (P1, P2, P3, P4)

where: Cs= degree of customer satisfaction P1= product strategy P2= pricing strategy P3= promotional strategy P4= place (channel strategy)
Distribution Channel Strategy should receive especially heavy emphasis if one or more of the following conditions prevails:
Distribution appears to be the most relevant variable for satisfying customers Parity exists among competitors in the other three marketing mix variables High degree of vulnerability exists because of competitors neglect of distribution Distribution channel strategy can foster synergies
Classic Marketing Channel Strategies Still Relevant Today

Dual Distribution Exclusive Dealing Full-Line Forcing Price Differentiation Price Maintenance Refusal to Deal Resale Restrictions Tying Agreements
The Most Basic Questions in the Design of Marketing Channels

When Do Customers Buy? Where Do Customers Buy? How Do Customers Buy? Who Buys? Who makes the actual purchase? Who uses the product? Who takes part in the buying decision?
Supply Chain Management
QUESTION
Is this just another buzzword for logistics - getting the right product in the right quantity, at the right time and right place?
OR
Is there something more substantive to this term?
ANSWER
There is something more than semantics here:
Supply Chain Management takes a broader perspective by viewing logistics as an integral part of the marketing channel relationship
Supply Chain Management Can Therefore be Defined as:
A long-term partnership among marketing channel participants aimed at reducing inefficiencies, costs, and redundancies in the logistical system in order to provide high levels of customer service
Common Issues in Supply Chain Management

1. Order Processing Time 2. Order Assembly Time 3. Delivery Time 4. Inventory Reliability 5. Order Size Constraints 6. Consolidation Stipulation 7. Consistency of Delivery 8. Frequency of Sales Visits 9. Ordering Convenience 10. Order Progress Information 11. Inventory Backup During Promotion 12. Invoice Formats 13. Physical Condition of Goods
14. Claims Response 15. Billing Procedures 16. Average Order Cycle Time 17. Order Cycle Time Variability 18. Rush Service 19. Product Availability 20. Competent Technical Reps 21. Equipment Demonstrations 22. Availability of Literature 23. Accuracy in Filling Orders 24. Terms of Sale 25. Protective Packaging 26. Degree of Cooperation
Strategic Alliances and Partnerships in Marketing Channels
Definition:
Continuing and mutually supportive relationship between the manufacturer and its channel members in an effort to provide a more highly motivated team, network, and alliance of channel partners
Traditional us-against-them mentality is replaced with a new cooperative perception of us in an effective channel partnership or strategic alliance Thus, partnerships or strategic alliances go well beyond the ad-hoc, on-again / off-again interactions typical of traditional relationships among channel members
Requirements for Partnerships or Strategic Alliances in Marketing Channels

(1) Recognition of interdependence of channel members (2) Close cooperation between channel members (3) Careful specification of roles, rights, and responsibilities in the relationship (4) Coordinated effort focused on common goals (5) Good communications and trust between channel members
Relationship Marketing via the Marketing Channel
Relationship Marketing
The practice of building long-term relations with key parties - customers, suppliers, distributorsin order to retain their long-term preference and business
Because of the importance of channels of distribution, building good relationships in the marketing channel is key to successful relationship marketing
Building Relationships with Channel Members

Find Out the Needs and Problems of Channel Members -informal information system (grapevine) -research studies of channel members -research studies by outside parties -marketing channel audit -distributor advisory councils
Offer Support to Channel Members that is Consistent with Their Needs and Helps Solve their Problems -cooperative arrangements -partnerships and strategic alliances -distribution programming Provide Leadership to Motivate Channel Members -use power effectively -recognize causes of conflict -resolve conflicts
Bases of Power in the Marketing Channel

Reward Power Coercive Power Legitimate Power Expert Power
Effective Channel Management Depends on How Well These Power Bases are Combined and Used
Causes of Marketing Channel Conflict

Role Incongruities Resource Scarcities Perceptual Divergencies Expectational Differences Decision Domain Disagreements Goal Incompatabilities Communication Difficulties
Ten Trends in Marketing Channels as We Move into the Next Millennium

1. Growing Emphasis on Marketing Channel Strategy 2. More and More Stress on Technology 3. Focus on Efficiency and Reducing Distribution Costs 4. Shortening and Flattening of Distribution Channels (Disintermediation) 5. Development of New Types of Intermediaries in Channels (Reintermediation)
Trends Continued...
6. Continued Growth in Partnerships and Alliances (Relationship Marketing) 7. Increasing Power for Retailers and Wolesalers (Gatekeepers) 8. Mergers and Acquisitions to Gain Distribution Influence 9. Flexible and Focused Distribution to Match Micro, Niche, and Database Marketing 10. Attention to the Behavioral Dimensions of Distribution to Augment Technology
Understanding & Capturing Customer Value
Building Customer Relationships

CRM Customer relationship management The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping and growing customers.
Value and Satisfaction

Perceived Value
The customers evaluation of the difference between benefits and costs. Customers often do not judge values and costs accurately or objectively.
Customer Satisfaction
Products perceived performance relative to customers expectations.
The Changing Nature of Customer Relationships

Selective relationship management Companies now use customer profitability analysis to weed out losing customers and target winning ones for pampering Direct Marketing
Partner Relationship Management

Partners inside the company: Every functional area inside a company can interact with customers, especially electronically Partners outside the company: Supply chain management
Not All Customers are Equal

Basic Relationships
Low-margin customers
Full Partnerships
Key customers
Selective relationship management

Weeding out unprofitable customers
Capturing Value from Customers

Customer Loyalty and Retention: Customer delight leads to emotional relationships and loyalty Customer Lifetime Value shows true worth of a customer

Share of Customer: Share of customers purchase in a product category. Achieved through offering greater variety, cross-sell and up-sell strategies.

Customer Equity: The combined customer lifetime values of all current and potential customers. Measures a firms performance, but in a manner that looks to the future. Choosing the best customers is key
1.
2. 3. 4.
Four customer relationship groups, according to their profitability and projected loyalty. Each group requires a different relationship management strategy Strangers show low profitability and little projected loyalty Butterflies are profitable but not loyal True friends are both profitable and loyal Barnacles are highly loyal but not very profitable
What is Marketing
The process of building profitable customer relationships by creating value for customers and capturing value in return
Marketing Channel Members

Also known as Channel of Distribution or Distribution Channel, a marketing channel is the path through which goods/services flow from one end to another(marketer to consumer), and monetary flow happens the other way around(consumer to marketer).
Promotional Mix Strategies
Push versus Pull and More
Sales Promotion:
To gain trial among nonusers of a brand/service. To increase repeat purchase and/or multiple purchases. To expand brand usage by suggesting new uses. To defend share against competition. To support advertising campaign, theme, image. To increase distribution and/or dealer, retailer cooperation. Short-term vs. long-term goals and relationships.
Sales Promotion
Creating an immediate sale is the primary objective. Extra incentives to enhance movement and sales. Helps the selling process.
Direct inducement that offers an extra value or incentive to sales force, distributors or the ultimate consumer. Stimulates Dealer and Channel Involvement.
Sales Promotion
Increasingly, the gimmicks are going away. More scanning data.
Step up to the challenge of real, brand building value, the kind that sparks genuine consumer and retailer interest.
Contribute to marketing goals. More Events and Product Licensing
Influences
Push Strategy
calls for using the sales force and trade promotion.
Pull Strategy
calls for spending on advertising and sales promotion to build consumer demand.
Push Strategy
Persuade wholesalers and retailers to carry brands. Give a brand shelf space. Promote a brand in coop advertising.
Producer
Wholesaler
Retailer
Customer
Push Strategy:
Be careful of those big displays at the end of the aisles. End Aisle Displays. End Caps. Look at the prices.
Only about 40% is actually on sale.
Because they are so bright, big and visual, we feel its on sale.
Producer Wholesaler Retailer Customer
Pull Strategy:
Entice customers to try a new product. Lure customers from competitive products. Hold and reward loyal customers.
Producer
Wholesaler
Retailer
Customer
Push Tools:
Deals- Allowances, Price-offs and Discounts Displays and Point of Purchase Dealer Premiums Samples and Free Goods Buy-Back Guarantees Cooperative Advertising Advertising Materials Push Money (Spiffs) Dealer Meetings and Contests Specialty Advertising Items
Pull Tools
Sampling---in-store, events, newspaper, in-pack Cents Off Promotions and Coupons (-2%) Continuity/Frequency and Loyalty Programs Premiums SLO (Self-Liquidating Offers/Premiums) Point of Purchase Displays Contests, Games and Sweepstakes Rebates and Cash refunds Advertising Specialty Items
Summary
Push strategy is appropriate with low brand awareness in a category and brand choice is made in store. Can be an impulse purchase and product benefits are understood. Pull strategy works best with high brand awareness and loyalty, or high involvement in category and customers look for product differences.
Above Line and Below Line

Above the line
Paid for communication in independent media E.g. advertising on TV or in newspapers
Below the line

Promotional activities where business has direct control E.g. direct mail, point of sale displays, giveaways
Above the line advertising

Done through media such as
TV Cinema Radio Print Banners Search engines to promote brands Major uses include television and radio advertising, web and Internet banner ads. This type of communication is conventional in nature and is
considered impersonal to customers.
Below the line Advertising

Short-term incentives, largely aimed at consumers. Direct mail Public relations Sales promotions
BTL - Shop Intercept

Another interesting and very effective BTL is Shop Intercept. Trained sales personnel, often young women, are deployed at Retail Stores, near the shelves of targeted products. These young women convince customers visiting these shelves about the better aspects of their brand compared with others. This is ideal for new launches as it generates trials, which if successful result in repeat sales.
Benefits and Problems for Above the line promotion

Advantages Disadvantages
Wide coverage Control the message Repetition Used to build brand loyalty
Expensive Impersonal One way communication Lacks flexibility Limited capacity to close the sale
Advantages Higher customer attention Message is customised Interactivity Potential to develop a relationship Adaptable Opportunity to close a sale
Benefits and Problems for Below the line promotion

Disadvantages Labour intensive Can only reach a limited number of customers.
When to use Which

Above the line is much more effective when the target group is very large and difficult to define. But if the target group is limited and specific, it is always advisable to use BTL promotions for efficiency and costeffectiveness.
You decide on which factors are + or for above / below the line Adaptable Limited capacity to close the
Can only reach a limited number of customers. Control the message Expensive High cost Higher customer attention Impersonal Interactivity Labour intensive Lacks flexibility sale Message is customised One way communication Opportunity to close a sale Potential to develop a relationship Repetition Used to build brand loyalty Wide coverage
Thank you.

Marketing Final 6 7 8-9-10

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Introduction to Marketing

Five stages of the PLC

Introduction - profits do not exist, heavy

Growth - rapid market acceptance and

Maturity - slowdown in sales growth. Profits

Decline - sales fall-off and profits drop

Goal clarity the objectives of the task are

The Ideal Climate for New Product Development

Resources adequate economic and noneconomic support for the task

Encouragement sincere emotional support

Freedom the ability to explore whatever

Integrity management does what it says it will

1. Idea generation conceptualize a list of new

Stages in a Typical New Product Development Process

2. Idea assessment evaluate the ideas based

3. Concept testing the idea is assessed

4. Idea choice one or more ideas are selected

Stages in a Typical New Product Development Process

5. Idea prototype development an initial

6. Final version development a model of the

7. Commercialization the product is put into

The Boston Matrix (Growth/Share Matrix)

3. Question Mark (Problem Child)

Ansoffs Matrix (Product/Market Matrix) For Market Growth Strategy

Ansoffs Matrix (Product/Market Matrix)

E.g. Realignments of the marketing mix

E.g. Geographical expansion

Same outlets and sales strategy - new product

Diversification related or unrelated

Introduction to Marketing Quality Low High

Economy Strategy e.g. Metro spaghetti

Penetration e.g. Chinas mobile phones

Premium e.g. Emirates first class

Factors to be Considered While Setting Price

Considerations in Setting Price

Cost based Vs. Value Based pricing

Major Pricing Strategies

Customer value-based pricing - setting

Major Pricing Strategies

Value-added pricing - Attaching value-added

Major Pricing Strategies

Product line pricing

Captive product pricing

Ten ways to increase prices without increasing price

But this is changing....

Marketing Channel Strategy is Growing in Importance. Why? Five Reasons

I. The Search for Sustainable Competitive Advantage

Sustainable Competitive Advantage:

A competitive advantage that cannot be quickly and easily copied by competitors

A sustainable competitive advantage is becoming more difficult to attain through:

Competitive Advantage Based on

II. Growing Power of Retailers in Marketing Channels

Retailers Are Growing Larger

Concentration of Sales Among the Top 50 Retail Firms

Discount Mass Merchandisers

Four Largest Firms All Other Firms

Misc. General Merchandisers

Percentage Distribution of Retail Firms and Sales 83.5 by Size of Firms

15.6 13.1 7.0 1.8 1.6

$10,000,000 $5,000,000 to $1,000,000 to or more $9,999,999 $4,999,999

Less than $1,000,000

Enjoy Substantial Channel Power

Retailers Often Operate on Low Price / Low Margin Model

Retailers Operate in Saturated Markets and Fight for Market Share