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Marketing Mix. Introduction to Business. Product Marketing. Product is the core of the marketing mix and defines what will be priced, promoted, and distributed.
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Marketing Mix Introduction to Business
Product Marketing Product is the core of the marketing mix and defines what will be priced, promoted, and distributed. If you are able to create and deliver a product that provides exceptional value to your target customer, the rest of the marketing mix is easier to manage.
Types of Consumer Products Consumer products are often classified into four groups related to different kinds of buying decisions: • Convenience - bread, pain reliever, power cords • Shopping - shoes, microwaves • Specialty - highly differentiated, custom goods • Unsought products - funeral plots, pest-control
Practice Question 1 What type of product is shown here?
What is a brand? • An identifier • A promise • An asset • A set of perceptions • A “mind share”
Tangible and Intangible Elements Brands are a combination of tangible and intangible elements Tangible • Visual design elements - logo, color, images, tagline, packaging, etc. • Distinctive product features - quality, design sensibility, personality, etc. Intangible • Customers’ experience with a product or company - reputation, customer experience
Brands Convey Meaning • Attributes: specific product features • Benefits: attributes translate into functional and emotional benefits • Values: company values and operational principles • Culture: cultural elements of the company and brand • Personality: strong brands often project a distinctive personality • User: brands may suggest the types of consumers who buy and use the product
Brands Create Value for Consumers Brands help simplify consumer choices. Brands help create trust, so that a person knows what to expect from a branded company, product, or service. This builds customer loyalty, which is valuable to businesses.
Branding Strategies • Branded house - Apple, BMW • House of brands - Tang, Kool Aid • Private label or store branding - Safeway Organics • “No brand” branding • Personal and organizational • Place branding - Las Vegas • Co-branding - Liz Lange at Target • Licensing –see image to right • Brand extension and line extension - Diet Coke, Jell-O pudding pops
Business Case Analysis Before companies make a significant investment in a product’s development, they need to be sure that it will bring a sufficient return, by asking: • What is the market opportunity for this product? • What are the costs to bring the product to market? • What are the costs through the product life cycle? • Where does the product fit in the product portfolio and how will it impact existing product sales? • How does this product impact the brand? • How does this product impact other corporate objectives such as social responsibility?
Pricing Strategies • Profit-oriented pricing • Competitor-oriented pricing • Customer-oriented pricing
Profit Oriented Pricing • Focus on finances of business and product profit = revenue - price • Price per product is set higher than the total cost of producing and selling cost • Ensures company makes a profit on each sale Risks • Customers don’t care about a company’s costs • Competitors can undercut pricing • Limits pricing flexibility
Competitive Oriented Pricing • Price based on competitors costs • Price either to indicate that the company believes its product provides greater value or lower to be a low-price solution • Simple way to price products Risks • Does not fully take into account the value of the product to the customer • Might be priced too low for the value it provides, or too high
Customer Oriented Pricing Customer uses several criteria to decide how much they are willing to spend in order to satisfy that need. In order to increase value, the business can either increase the perceived benefits or reduce the perceived costs. Today’s marketing tends to favor customer-oriented pricing because it prioritizes the customer and the customer’s perception of value.
Van Westerndorp Price-sensitivity Meter • At what price would you consider the product to be so expensive that you would not consider buying it? (Too expensive) • At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good? (Too cheap) • At what price would you consider the product starting to get expensive, such that it’s not out of the question, but you would have to give some thought to buying it? (Expensive/High Side) • At what price would you consider the product to be a bargain—a great buy for the money? (Cheap/Good Value)
Cost-Plus/Gross Margin Pricing • A particular gross margin is selected that will produce a desirable profit level • Is designated by a percent of net sales • Company does not have to forecast general business conditions or customer demand • Consumers find fair, since the price they pay is related to the cost of producing the item Risks • Inflexibility • Does not take into account consumers’ perceptions of a product’s value
Markup The difference between the average cost and price of all merchandise in stock, for a particular department, or for an individual item Example: A tie costs $14.50 It is sold for $25.23 The markup is $10.73 ($25.23 - $14.50)
Discounting Strategies • Quantity discounts • Seasonal discounts • Cash discounts • Trade discounts (given to middlemen) • Personal allowances (rewards to salespeople) • Trade-in allowances (cars) • Price bundling (cable package)
Distribution Channels Distribution channels cover all the activities needed to transfer the ownership of goods and move them from the point of production to the point of consumption. These activities include: • product flow • negotiation flow • ownership flow • information flow • promotion flow
Channel Structures While channels can be very complex, there is a set of channel structures that can be identified in most transactions: • Direct channel • Retail channel • Wholesale channel • Agent channel
Supply Chain vs. Marketing Channels The supply chain and marketing channels can be differentiated in the following ways • Supply chain is broader than marketing channels • Marketing channels are purely customer facing • Marketing channels are part of the marketing mix
Practice Question 2 Here is a supply chain for peanut butter. How would a diagram of a marketing channel be similar? Different?
The Promotion Mix There are many different marketing communication methods that can be used in the promotion mix.
Integrated Marketing Communication The process of coordinating all the promotional activity across these different methods Seven common marketing communication methods are • Advertising • Public relations • Personal selling • Sales promotion • Digital marketing • Direct marketing • Guerrilla marketing
Advertising Advertising is any paid form of communication from an identified sponsor or source that draws attention to ideas, goods, services or the sponsor itself. Advertising has three primary objectives: to inform, to persuade, and to remind.
Public Relations Public relations (PR) is the process of maintaining a favorable image and building beneficial relationships between an organization and the public communities, groups, and people it serves. Unlike advertising, public relations does not pay for attention and publicity.
Personal Selling Personal selling uses in-person interaction to sell products and services. This type of communication is carried out by sales representatives, who are the personal connection between a buyer and a company or a company’s products or services.
Direct Marketing Direct marketing activities bypass intermediaries and communicate directly with the individual consumer. Direct marketing can be a powerful tool for anticipating and predicting customer needs and behaviors. Over time, as companies use consumer data to understand their target audiences and market dynamics, they can develop more effective campaigns and offers. The disadvantage of direct marketing is concerns about privacy and information security.
Digital Marketing Digital marketing is an umbrella term for using digital tools to promote and market products, services, organizations and brands. Email and mobile marketing overlaps with direct marketing. Other essential tools in the digital marketing tool kit: Web sites, content marketing, search-engine optimization (SEO), and social media marketing.
Social Media Marketing Social media marketing is the use of online applications, networks, blogs, wikis, and other collaborative media for communicating brand messaging, conducting marketing, public relations, and lead generation. The three main objectives are: • Creating buzz • Fostering community • Facilitating two-way communication
Guerrilla Marketing Guerrilla marketing is a relatively new marketing strategy that relies on unconventional, often low-cost tactics to create awareness of and goodwill toward a brand, product, service, or even a company.
Quick Review • How do organizations use common product marketing strategies? • How do organizations use common pricing strategies? • How do organizations use common product distribution strategies? • How do organizations use integrated marketing communication (IMC) to support their marketing strategies?
