PowerPoint to accompany

1. 0 PowerPoint to accompany Philip Kotler, Stewart Adam, Linden Brown & Gary Armstrong

2. Exam Details • Exam date: • 244h June, 2011 ??? • Time: • 120 minutes (closed book exam) • Exam format & Chapters on Focus • Part 1: 15 MCQs (30marks ) – Chapters 5,7,8,9,10,12,13 • Part 2: 1written answer (choose one out of two) (30 marks) – Chapter s 9 & 10 • Part 3: 1 mini Case with 2 questions (40 marks) – Chapters 12 & 13

3. CHAPTERS TO BE EXAMINED • These slides are to be EXAMINED for PART II and PART III of the Exam. • The MCQs of PART I come from all chapters announced. • Cheers & Good luck to you guys

4. Chapter 9 New products

5. Figure 9.2 Major steps in new product development (NPD) process Business Analysis Marketing Strategy Concept Development and Testing Product Development Idea Screening Test Marketing Idea Generation Commercialisation

6. Test Marketing • Test Marketing • If the product passes functional and consumer tests, the next step is test marketing. • Test marketing is the stage at which the product and marketing program are introduced into more realistic market settings.

7. Test Marketing Approaches • Standard Test Markets • Standard test markets test the new consumer product in situations like those it would face in a full-scale launch. • Controlled test Markets • Several research firms keep controlled panels of stores that have agreed to carry new products for a fee. • Simulated Test Markets • Companies can also test new products in a simulated shopping environment. • The company or research firm shows a sample of consumers the ads and promotions for a variety of products, including the new product being tested.

8. Commercialisation • Commercialisation • Introducing a new product into the market • The company launching a new product must make four decisions: • When • Where • To whom • How

9. The Product Lifecycle (PLC) • After launching the new product, management wants the product to enjoy a long and happy life. • Although it does not expect the product to sell forever, management wants to earn a decent profit to cover all the effort and risk that went into it. • Management is aware that each product will have a life cycle, although the exact shape and length is not known in advance.

10. Product Development Begins when the company finds and develops a new product ideas. Introduction A period of slow sales growth as the product is being introduced to the market Growth Period of rapid market acceptance and sales growth Maturity A period of slowdown in sales growth as the product gained acceptance by most of buyers. Decline Period of drop in sales and profits as customers switch to new products The Product Lifecycle (PLC)

11. Chapter 10 Pricing considerations and approaches

12. What is Price? • Price is the amount of money charged for a product or service, or the sum of values consumers exchange for the benefits of having or using the product or service • Price is the only element of the marketing mix that produces revenue-all other elements represent costs • A company does not usually set a single price, but rather a pricing structure that covers different items in its product line • The company adjusts product prices to reflect changing costs and demand and to account for variations in buyers and situations

13. General Pricing Approaches • The price the company charges will be between one that is too low to produce a profit and one that is too high to produce any demand • Product costs set a floor to the price; consumer perceptions of the product’s value set the ceiling. • The company must consider competitors’ prices and other external and internal factors to find the best price between these two extremes.

14. General Pricing Approaches • Cost-based pricing: • Cost-Plus Pricing • Breakeven Analysis and Target Profit Pricing • Value Based Pricing • Competitor Based Pricing • Economic Value Pricing • Going-rate Pricing • Sealed-bid Pricing • Relationship Pricing • Special Relationship • Enrichment • Shared Risk and Reward

15. Cost-Plus Pricing The simplest pricing method is cost-plus pricing—adding a standard mark-up to the cost of the product. Construction companies, for example, submit job bids by estimating the total project cost and adding a standard mark-up for profit.

16. Cost-Plus Pricing Increased Certainty Minimise Price Competition Key Reasons for Cost-Plus Popularity Perceived Fairness

17. Breakeven Analysis and Target Profit Pricing • The company tries to determine the price at which it will break even or make the target profit it is seeking • Target pricing is used by many Australian importers as a means of setting prices to yield a given profit on investment. This pricing method is also used by public utilities, which are constrained to make a fair return on their investment. • Target pricing uses the concept of a breakeven chart. A breakeven chart shows the total cost and total revenue expected at different sales volume levels

18. Value-Based Pricing • Value-based pricing uses buyers’ perceptions of value, not the seller’s cost, as the key to pricing. The company uses the non-price variables in the marketing mix to build up perceived value in the buyers’ minds. Price is set to match the perceived value.

19. Cost Vs Value Based Pricing Customer Product Cost-Based Pricing Value-Based Pricing START Value Cost Price Price Cost Value Customers Product

20. Competition-Based Pricing • Economic Value Pricing • For many industrial products, the costs perceived by customers extend well beyond the price charged. • An industrial purchaser perceives the cost of equipment as including installation, maintenance, training and use of consumables, as well as the basic purchase price. • Equipment purchases are evaluated over their economic lives and comparisons between competitors go beyond straight price assessment.

21. Competition-Based Pricing • Going-Rate Pricing • The company bases its price largely on competitors’ prices, with less attention paid to its own costs or demand. • The company might charge the same, more or less than its major competitors. • In oligopolistic industries that sell a commodity such as steel, paper or fertiliser, companies normally charge the same price. • The smaller firms follow the leader: they change their prices when the market leader’s prices change, rather than when their own demand or cost changes.

22. Figure 10.13: Three levels of relationship

23. New-product pricing strategies: Pricing and innovative product • Market-skimming pricing: setting a high price for a new product to skim maximum revenue from the segments willing to pay the high price, the company makes fewer but more profitable sales • Market –penetration pricing: setting a low price for a new product in order to attract a large number of buyers and a large market share

24. Product/Service Line Pricing Setting Price StepsBetween ProductLine Items Product/Service-mix pricing strategies Optional-Product Pricing Pricing Optional ProductsSold With TheMain Product Captive-Product Pricing Pricing Products That Must Be UsedWith The Main Product By-Product Pricing Pricing Low-ValueBy-Products ToGet Rid of Them Product-Bundle Pricing Pricing BundlesOf Products SoldTogether

25. Price-adjustment strategies • Discount pricing and allowances: cash discounts, quantity discounts, functional discounts, seasonal discounts and allowances • Segmented pricing: setting different prices for different clients, product forms, places or times • Psychological pricing: adjusting the price to communicate the product’s intended competitive position

26. Price-adjustment strategies • Promotional pricing: loss leader pricing, special and psychological discounting • Value pricing: right combination of quality at fair prices • Geographic pricing: different pricing for distant customers, zone pricing, basing point pricing and freight absorption pricing • International pricing: the company adjusts its price to meet different conditions and expectation in different world markets

27. Chapter 12 IMC: advertising and public relations

28. Integrated Marketing Communication (IMC) • IMC entails co-ordinating the organisation’s promotional efforts using such major communication elements as: • advertising, • sales promotion, • public relations, • direct and online marketing, • and personal selling. • An organisation’s integrated marketing communication program consists of a specific blend of the above mentioned elements that will most effectively meet objectives such as to inform, persuade, and remind consumers as well as to reinforce their attitudes and perceptions.

29. Elements in the communications process • Sender: The party sending the message to another party • Encoding: The process of putting thought into symbolic form • Message: The set of symbols that the sender transmits-the actual advertisement. • Media: The communication channels through which the message moves from sender to receiver • Decoding: The process by which the receiver assigns meaning to the symbols encoded by the sender-a consumer watches the ad and interprets the words and illustrations it contains.

30. Elements in the communications process • Receiver: The party receiving the message sent by another party-the consumer who watches the ad. • Response: The reactions of the receiver after being exposed to the message-any of hundreds of possible responses. • Feedback: That part of the receiver's response communicated back to the sender- research shows that consumers like and remember the ad. • Noise: The unplanned static or distortion during the communication process that results in the receiver getting a different message from the one which the sender sent

31. Figure 12.2: Elements in the Communication Process

32. Decisions in Developing IMC • Identifying The Target Audience • Determine Response Sought • Selecting a Message • Selecting a Media • Selecting a Message Source • Collecting Feedback

33. Selecting a message • Ideally the message should: • Get Attention • Hold Interest • Arouse Desires • Obtain Action ( A framework known as the AIDA model)

34. Decisions in developing IMC • Selecting a Message • Message content • Rational Appeals • Emotional Appeals • Moral Appeals • Message Structure • Whether to draw a conclusion or leave it to the audience • Whether to present a one-sided or two-sided argument • Whether to present the strongest arguments first or last • Message Format

35. Decisions in developing IMC • Selecting the message source • The message’s impact on the audience is also affected by how the audience views the sender. Messages delivered by highly credible sources are more persuasive

36. Setting the IMC budget • Four common methods used to set the total budget for advertising: • affordable method, • percentage-of-sales method, • competitive-parity method • objective-and-task method

37. Message Execution Testimonial Evidence Slice of Life Typical Message Execution Styles Scientific Evidence Lifestyle Fantasy Technical Expertise Personality Symbol Mood or Image Musical

38. Message Execution • Slice-of-life:This style shows one or more people using the product in a normal setting • Lifestyle: This style shows how a product fits in with a lifestyle • Fantasy: This style creates a fantasy around the product or its use • Mood or image: This style builds a mood or image around the product, such as beauty, love or serenity • Musical: This style shows one or more people or cartoon characters singing a song about the product

39. Message Execution • Personality symbol:This style creates a character that represents the product. • Technical expertise:This style shows the company’s expertise in making the product. • Scientific evidence:This style presents survey or scientific evidence that the brand is better or better liked than one or more other brands. • Testimonial evidence:This style features a highly believable or likeable source endorsing the product.

40. Public Relations Decisions • Another major mass-communication tool is public relations— it aims at building good relations with the company’s various publics using different tools: • Press relations • Product publicity • Corporate communication • Lobbying • Counselling

41. KOTLER’S PR MODEL • PR TOOLS – PENCILS TOOLS • Publications • Events • News • Community involvement • Lobbying • Social investments

42. 0 Chapter 13 IMC: Sales promotion and personal selling

43. Sales Promotion 0 • Sales promotion is the act of influencing customer/consumer perception and behaviour to build market share and sales which reinforces brand image • Sales promotion is a term that is closely linked with direct and online marketing, but has its origins in FMCG. • Although the term has as many confused meanings as the term direct marketing itself, nearly all marketing scientists and practitioners agree on what sales promotion tools do. • The term covers a range of incentives that are used with products promoted via either mass media advertising or by direct and online methods.

44. Sales Promotion 0 • The main tools falling into this category include: • samples • redeemable coupons • cash-back offers • cents-off deals or price packs • premium offers • advertising specialties • patronage rewards • point-of-purchase (POP) promotions • contests and games of chance and skill

45. Purpose of Sales Promotion 0 • Sellers use sales promotions to attract new triers, to reward brand-loyal customers and thereby retain them, to reduce the time between purchases, and even to turn light users into medium or heavy users. The aim might also be to regain past purchasers who have ceased buying. • New triers of a product category fall into one of three groups:  • non-users • loyal users of another brand • brand switchers.

46. Setting Sales Promotion Objectives 0 • Sales promotion objectives are as varied as the methods used. Sellers may use consumer promotions to increase short-term sales or to help build long-term market share. • The objective may be one of the following: • to entice consumers to try a new product or brand • to lure consumers away from competitors’ products or brands • to get consumers to ‘load up’ on a mature product • to hold and reward loyal customers.

47. Selecting Sales Promotion Tools Contests and games of skill and chance Samples Sales Promotion tools Point-of- Purchase Redeemable coupons Cash-back offers Patronage Rewards Advertising Specialties Cents-off deals or Price Packs Premiums

48. Developing sales promotion programs • A number of decisions must be made in order to define the full sales promotion program: • Size of the incentive • How to promote and distribute the program • The length of the promotion • Sales promotion budgeting

49. The Role of the Salesforce • The sales-force serves as a critical link between a company and its customers • The sales-force represents the company to the customers • The sales-force represents the customers to the company • Sales people are concerned with producing sales but should also be concerned with customer satisfaction and profit

50. Figure 13.1: Managing the Salesforce