What is Mm

 Key part of a marketing plan

 Elements of a marketing strategy that are made to meet consumer needs

 4 main elements aka 4P’s

1. Product- new, exiting or adaptation of the existing

2. Price- too low( quality is compromised) too high( unwilling to afford it)

3. Promotion- advertise and convince others

4. Place- distributed properly

• Sometimes 4Ps become 5,6 or 7 Ps,

To meet consumer needs biz must produce the right product at the right price, make it available at the right place and let consumers
know it through promotion
 Right product
 Product is the end result of the production process sold in the
market to satisfy consumer needs
 Right product Long term customer loyalty
 Meet customer’s expectations regarding 1) quality 2) durability
3) performance 4) Appearance etc
 Product? Consumer or industrial goods and services
 Goods – physical existence e.g. washing machine, tv
 Service- no physical existence e.g. hairdresser , car repairs
 You could sell the same product for yrs or NPD (except not
always successful) R+D is req
 Right product
 Why is new product development so important?

 • Changing consumer tastes and preferences. • Increasing competition. • Technological

advancement.

 • New opportunities for growth. • Risk diversification • Improved brand image • Use of excess
capacity.

 For a new product to succeed, it must:

 • have desirable features that consumers are prepared to pay for

 • be sufficiently different from other products to make it stand out and offer a USP

 • be marketed effectively to consumers, who need to be informed about it.

 USP-unique selling point
 Something special and Differentiates from competitors
 E.g. Dominos 30min or free, vacuum 100% suction
 Benefits of USP
1. Free publicity from biz media
2. Higher sales than undifferentiated products
3. Customers more willing to buy brand loyalty
4. Effective promo that focuses on differentiated feature
5. Opportunity to charge a high price due to exclusive
design/service
 Tangible and intangible
attributes
 Tangible physical assets. you can see touch. Measurable
 Intangible non-physical assets. You cant see and touch. Subject to
opinions of customers. Cant be measured
 Brands: intangible assets. Distinguishes a product from others.
Effective branding?
 An identifying symbol, name, image, trademark
 Products and brands example: cell phone(product) and qmobile
(brand)
 Product positioning
 Creating a certain image of good/service in the consumer’s mind

 How will the new brand relate to other brands in the market

 Image can be related to health, affordability, quality or status

 Positioning is done by a technique called market mapping –

perceptual or market maps show the position of a products in a
market based on the perception of consumers rather than firms.

 Information req is based on market research

 Example from the book

 Biz can use this map to 1) identify gaps in the market 2) position its
product in the market 3) reposition itself in the market
 Product life cycle

 Product portfolio analysis- analyze the range of existing

products of a biz to help allocate resources effectively b/w
them
 Product life cycle- one of the main forms of product portfolio
analysis.
 Pattern of sales recorded by a product from launch to
withdrawal from the market
 The usual stages are development, introduction, growth,
maturity, saturation and decline
STAGES CASHFLOW
Development Vital for survival • Product is being designed and tested
CF is negative • Prototype/model of the idea
• Decision for launching a product is made
• Several products don’t go beyond. high risks
• No sales at all

Introduction Heavy promo expenses • Product is new in the market; launched

CF is negative • Sales are low. Risk high. Consumer awareness
• Many costs like the 3P’s
• Product is not profitable yet
• Length of stage varies technical vs fashion

Growth CF increases and is positive • Product is established and consumers are aware of it
• Sales begin to increase rapidly
• Product becomes profitable and costs fall
• Build customer loyalty
• Towards the end, competition increases

Maturity/saturation Most positive CF • Maturity-sales grow but at a declining rate

Max CF • Saturation- sales level off
• Product bought by majority
• Stable market share is maintained
• purchasing at a rate not likely to increase further

Decline Falling sales, price falls • Sales and profits fall

Low CF • Substitutes appear
• Products become obsolete
• 2choices: elimination or extension
 Extension strategies
 Aim to lengthen the life of a product before the market demands a new one

1. Find new uses of the product

2. Find new markets for existing

3. Develop a wider product range

4. Gear products towards specific markets

5. Change the appearance, packaging or form

6. Encourage people to use the product frequently

7. Change ingredients or components

It would be sensible for a biz to use extension strategies before they hit the fall. Use
extension strategies during the maturity stage before sales fall
 Uses/application of the product
life cycle
 3 main uses:

1. Assist planning marketing mix decisions

2. Identify how cashflow might depend on the cycle

3. Need for a balanced product portfolio

Explore the trend in revenues, profits and cashflow

When an extension strategy is required

Table 18.2

Final decision depends on competitors actions, state of the economy and marketing objectives
Evaluation of product life cycle

 Imp tool for assessing the performance of firm’s current

product range
 Marketing audit- regular check on performance of a firm’s
marketing strategy
 Based on past and current data; cant be used to predict slaes
 Product is the most imp element of the marketing mix
 If the product fails/ poorly designed/ugly, then other P’s don’t
matter or become irrelevant
 Boston matrix
Analyze exisiting product portfolio
future marketing strategies the business could take next
This analytical tool has relevance when:
• analysing the performance and current position of existing product portfolios
• planning action to be taken with existing products
• planning the introduction of new products.
 BCG Matrix

 This should help focus on which products need marketing support or which need corrective action.
This action could include the following marketing decisions:

 • Building – supporting question mark products with additional advertising or further distribution
outlets. The finance for this could be obtained from the established cash cow products.

 • Holding – continuing support for star products so that they maintain their good market position. Work
may be needed to freshen the product in the eyes of the consumers so that high sales growth can be
sustained.

 • Milking – taking the positive cash flow from established products and investing it in other products in
the portfolio.

 • Divesting – identifying the worst-performing dogs and stopping the production and supply of these
products. This strategic decision should not be taken lightly as it will involve other issues, such as the
impact on the workforce and whether the spare capacity freed up by stopping production can be used
profitably on another product.
 BCG Matrix

These strategies can only be undertaken if the business has a balanced portfolio of
products. If there are too many dogs or question marks, then the overall shortage of cash may
not allow the firm to take appropriate action

On its own, the Boston Matrix cannot tell a manager what will happen next with any
product. Detailed and continuous market research will help. However, decision-makers must
always be conscious of external factors

The Boston Matrix is only a planning tool and it has been criticised for simplifying the
complex set of factors that determine product success.

The Boston Matrix assumes that higher rates of profit are directly related to high market
shares. This is not necessarily the case when sales are being gained by reducing prices and
profit margins.
 Price

 Amount paid by customers for a product

 Appropriate price vital for mm

 Price  demand

 Why is price imp?

1. Degree of value added by the biz

2. Influence revenue, profit

3. Reflects on marketing obj

4. Establish brand image

 Pricing and its determinants

 Costs of production

 Competitors’ prices and actions

 Business and marketing objectives

 Price elasticity of demand: measures the

responsiveness of demand due to a
change in price
 Whether it is a new or an existing product:
 Pricing methods

Cost based methods: assess costs of producing/supplying each

unit and then add amount on top of the cost

[Link] price

[Link]-plus pricing

[Link] cost (MC) pricing

[Link] Leader
 Cost based methods
 Mark-up price – retailers

Price (producer/wholeseller) + %mark up (fix markup for profit to unit

price)
Markup depends on?
• Demand strength for product
• # of other suppliers
• Age/stage of life of product
Example?
TC= Rs 40
50% mark up on cost= Rs 20
S.P= Rs 40 +20 = Rs 60
 Cost based methods
 Cost plus pricing
Set a price by calculating a unit cost for the product and then add a
fixed cost profit margin
Overhead/fixed cost= Rs 10,000
Variable Cost= Rs 5/unit
Output= 5000 units/year
T.C= 10,000 + (5*5000)= Rs 35,000
Unit cost = 35000/5000= Rs 7- breakeven
300% profit= (300/100)*7= 21
Rs 21+Rs7 = Rs28
 Cost based methods
 Contribution cost ( marginal cost) pricing

Set prices based on variable cost of making a product in order to make a

contribution towards fixed cost and profit
Unit V.C + extra amount of contribution (towards F.C)
V.C= Rs 2/ unit
Total F.C= Rs 40,000/ year
Contribution  Rs 1/ unit
S.P= Rs 3
What output would you sell to cover fixed costs? 40,000 units F.C=
40,000
If you sell 60,000 units  profit of Rs 20,000
 Cost based methods

 Loss leader

1. Tactic used by retailers

2. Set a low price for some product even below variable cost

3. Used when selling >1 products

4. Used for complements  cheap razors, demand for

blades goes up
 Competition based pricing

 Price leadership- One dominant firm and other firms charge

based on the market leader
 Similar prices- No of firms same size; charge similar prices in
order to avoid price wars. E.g. large petrol companies
 Destroyer pricing- deliberately undercut prices to force
competitors out of the market
 Psychological Pricing -Price appears much lower than it is e.g.
Rs 999 instead of 1001. M.R to avoid setting an inappropriate
price. To high/ low
 Competition based pricing
 Market oriented pricing

Price based on the conditions that prevail in the market- consumer based pricing –
action of consumers being looked at . 3 types:

1. Perceived value pricing (customer value pricing):

used in the market where there is inelastic demand for price as perceived by consumers
e.g. rolex

2. Price discrimination

Charge different consumers different prices for the same product

- Different elasticity of demand for different consumers

- Cant resell from one group of consumers to the others

[Link] Pricing

Constantly changing prices when selling goods to different consumers

Charge according to demand and consumers ability to pay

Pricing Strategies for new products
 2 pricing strategies for new products

 Approaches depend on the marketing objectives

of the business

1. Penetration pricing

Set a relatively low price often supported by strong

promotion in order to achieve high volume of
sales

Mass marketing  larger market share

Once established, slowly increase prices

2. Market skimming

Set a high price for new product when a firm has a

unique or differentiated product with low PED

Max SR profit before competition enters

e.g. pharmacy selling a particular drug

 Price- evaluation?
 One firm will not use same pricing strategy for all products

 Some maybe cost based while others will be competition based

 Conduct M.R to test impact of diff price levels on potential

demand
 Fast moving consumer goods (FMCG)

 Price is just one aspect of mm. all aspects need to be in

coordination with each other
 Promotion
 Promotion is about communicating with actual/ potential customers
 Increases awareness of the product
 Advertising is one form of promotion
 Other techniques: direct selling and sales promo offers
 Use of advertising, sales, promo, personal selling, direct mail, trade
fairs, sponsorship and public relations to inform consumers and
persuade them to buy
 Promo mix- combination of promo tech used to sell a product
 Promo budget- total amount spent + how money is allocated between
diff kinds of promo available
 Promo objectives
 Can be short or long term
 SR- increase sale in the next month Vs LR-
change image of biz
 Promo obj aim to:
1. Increase sales by consumer awareness
2. Remind consumers of an existing product
3. Demonstrate features and qualities/USP
4. Create/ reinforce brand image
5. Dev public image
 Advertising
 Aka above the line promo

 Above the line promo: a form of promo that is undertaken by a biz by paying for
communication with consumer

 Advertising: paid for communication with consumers to inform and persuade e.g.
TV, radio, newspapers, cinema advertising

 Adv is classified into 2 kinds: informative and persuasive

 Not all advertising is for final consumer

 Trade adv is for retailers in trade journals and magazines

 Adv agencies are available –advise biz on ways to promote products esp for
entering first time

 Expensive

 They take following stages:

research, advise on cost effective ways, devise adverts , film/print adverts, monitor PR
and feedback to client
Advertising agencies

 These are specialists that advise businesses on the most effective way to
promote products.

 Advertising agencies can offer a complete promotional strategy. This can be

important to a business that does not have its own marketing experts or may be
entering a new market.

 Charge substantial fees –

 • research the market

 • advise on the most cost-effective forms

 • creative designers to design adverts appropriate for each medium

 • film or print the adverts to be used in the campaign

 • monitor public reaction to the campaign and feed this data back to the client.
 Advertising methods

 Print advertising-This includes advertising in newspapers, magazines and

specialist publications.

 Broadcast advertising-This is advertising on TV and radio, and in cinemas.

 Outdoor advertising-This includes advertising on billboards and bus shelter

posters.

 Product placement advertising-Products are featured in TV shows and films.

 Guerrilla advertising-Products are advertised at surprising and

unconventional events to make the public take notice.

 Sponsorship-This involves payment by a business to become associated

with an event, an individual or a sports team.

 Digital advertising-This is a rapidly growing method

 Choice of media
 Cost- time of the day, national vs local newspapers, social media
 Size of audience- cost/person to be calculated. Wasted customers,
potential customers
 The profile of the target audience- in terms of age, income level,
interests and so on. Consumer profile
 Message to be communicated- written msg (detailed info) vs visual
ones (dynamic and colorful)
 Other aspects of mm- integration of mix is examined
 Legal and other constraints- tobacco ban, restrictions on TV
advertising
 Advertising expenditure and trade cycle
 Sales promotion

 This form of promotion is known as below the line

promotion
 Below the line promotion: a promotion that is not a
directly paid for means of communication but based on
short term incentives to purchase
 Sales promotion: incentives such as special offers or
special deals directed at consumers or retailers to achieve
short term sales increases and repeat purchases by
consumers e.g. price deals
 Sales promotion

 Loyalty reward programmes- collection points, air miles

 Money-off-coupons- redeemed when the consumer buys the
product
 Point of Sale displays in shops- aisle interrupter, dump bin
 BOGOF
 Games and competitions e.g. on cereal products
 Sales promotion can be directed at final consumer, distribution
channel e.g. the retailer
 Direct promo
method:Personal selling
 A member of the sale staff communicates with one consumer
with the aim of selling the product and establishing a long term
relationship between company and consumer
 Expensive. Industrial products. Used for products such as
furniture, cars or home improvements
 Sales staff well trained. Paid a huge bonus for each sale made
 Don’t make a sale to a reluctant consumer who alters the
decision and tells friends to avoid biz in the future with the
company
Direct promo method:
Telemarketing
 This includes all marketing activities
conducted over the telephone (often from
customer call centres),
 including selling, market researching and
promoting products.
 Direct Promo methods:
Direct mail
 Directs information to potential customers, identified by market
research
 Contains detailed information e.g. about savings account.
 Well focused on potential customers by using databases that filter out
non-target consumer groups
 Cost effective
 Resentment as junk mail
 Postal msgs are being replaced by text messages and messages
communicated via social media
 Trade fairs and exhibitions

 Marketing to other businesses - sell products to the

traders i.e. retailers and wholesalers
 Firms stock the product after the fairs

 Don’t directly sell to consumers

 Contacts are made and awareness of product is created

 Sponsorships and PR
 Sponsorships

 Payment by a company to the organizers of an event/ team/ individuals so that the

company name becomes associated with the event/team/individual

 Not cheap but benefits can be huge

 Public relations

 the deliberate use of free publicity provided by newspapers, TV and other media
to communicate with the public

 All biz have PR dept that tries to arrange as much positive press and TV coverage
of their business

 Launch of a new product e.g. press conference, appears on TV later

 Sponsorships of major sports and cultural events  free PR

 Internet
 Internet is transforming the ways in which the biz market their products and manage rel with
customers

 Online marketing –advertising and marketing activities that use the internet, email and
mobile communication to encourage direct sales via….

 E-commerce- buying and selling of goods and services by biz and consumers through an
electronic medium

 Internet Marketing

1. B2C, B2B- orders placed online through c/c website/retailer e.g. Amazon

2. Online and mobile advertising using website , pop-up and social media-targeted at potential
people. Viral marketing

3. Sales contacts are established by visitors to a site leaving details and follow up with emails
and phone calls

4. Collecting market research data by making customers answer qs to aid NPD

5. Dynamic pricing- use online data about consumers to charge diff prices to diff consumers
over the internet . Gen lower compared to other retailers
 Methods of digital
promotion
 Social media-email-online-smartphone-Search engine optimization- viral
marketing

 The use of social media or text messages to increase brand awareness or sell
products

 Viral promo ex: video clips, interactive flash games, e-books and text messages

 Networking potential – influencers

 Biz impact of internet marketing. Adv/disadv table from book e.g. itunes, eBay

 Benefits, Limitation and measuring success of digital media:pg 533-534

 Consumer and industrial
markets
 Industrial products- goods and services sold to industry

 Trade/industry focused campaigns are unlikely to use Tv,

radio, newspapers etc
 Specialist magazines or journals , trade fairs etc

 Consumer goods are opposite of industrial products

 Branding

 Brand is the name given by a firm to a product or a range of products.

 Aims of branding products:

1. Aiding consumer recognition

2. Making the product distinctive from competitors
3. Giving the product an identity or personality that consumers can
relate to
Strategy of differentiating products from competitors by creating an
identifiable image and clear expectations about a product
 Branding
 Choice of brand name is very imp
 Proposed name is not registered by another company
 Effective brand identity will have the following benefits:

1. Increase the chances of brand recall by consumers

2. Clearly differentiates the product from others
3. Allows establishing a family of products with the same name
4. Increase consumer loyalty to brands
5. Reduce PED as consumers have preference for well known brands
Brand extension
 Strong brand identity – means of supporting new / modified products
 Mars extended its brand to ice cream
 Marketing or promotion
expenditure budgets
 Limits can be set by using a number of diff approaches

1. A percentage of sales – the marketing budget for expenditure will

vary with the level of sales
2. Objective-based budgeting- analyze what sales level is required to
meet objectives and assess how much supporting expenditure is
required to reach such targets (promo budget)
3. Competitor-based budget- firms of same size roughly, matches in
terms of marketing spiraling of costs. Effective vs non-effective
marketing
4. What the business can afford – finance is often ltd. After all expenses
have been paid for, marketing cost comes to play.(in line with Mkt
objectives)
5. Incremental budgeting- by taking last years budget and adding a % to
reflect inflation/ new sales target.
Is the marketing budget spent
effectively?
 Consumers?

Money spent on promotion including advertising

Waste of resources?

For/against arguments promotional expenditure

 Biz?

Aims achieved cost effectively or not

Not always SR goals but also LR, therefore brand building image

How to assess whether it has been successful or not?

1. Sales performance before and after promo campaign

2. Consumer awareness data

3. Consumer panels

4. Response rates to advertisements

 Promo + Product life cycle
Stage of life cycle Promo options

Intro • Informative advertising

• Sales promo offering free samples
• Incentives offered to trade/stock the
product
Growth • Continue some informative
advertising but focus on persuasive
advertising and brand building
• Sales promo for repeat purchases
• Develop brand loyalty
Maturity • Advertising to differentiate b/w firm
and competitors
• Sales promo incentives to encourage
brand switching and customer
loyalty
Decline • Min advertising but special offers
• Add support (sales promo) to
withdraw
 Packaging

 Quality, design and colour of materials used in packaging 

promotion
 Packaging can perform the following functions
1. Protect and contain the product
2. Give info about contents, ingredients, instructions etc
3. Support the image of the product created by other aspects of
promotion
4. Aid the recognition of the product by consumers
 Packaging

 Cheap and nasty packaging quality and status image

destroyed
 Distinctive packaging  impression creation

 Pepsi and coke  blue and red

 Expensive and wasteful packaging  added cost, reduce

competitiveness ; environment aspect
 Placement

 Place decision  how products should pass from manufacturer to the final
consumer

 Channels of distribution: chain of intermediaries a product passes through from

producer to final consumer

 Why is chain of distribution imp?

1. May need easy access to a firms products –test before buy

2. Manufacturers need outlets for their products that give a wider market coverage

3. Retailers-firms that sell goods to the final consumer. Producer supply + mark up
(profit). If price is imp, no or min intermediaries would be an adv
 Distribution

 Getting the right product to the right consumer at the right

time in a way that it is most convenient to consumer

 Point of creation ----point of consumption (efficient and low

cost manner)

 “Supply chain”- all biz involved in getting the product to the

final consumer

Producer, manufacturer, wholesalers, transporters and retailers

 Distribution

 Customer service as obj of distribution

 Farmer example , supplying via internet
 Cost should be a factor in the dist strategy but shouldn’t be the
primary one
 Customer service is the key obj of dist
 Internet  info about products, competitors, price
 Trend of online selling not restricted to consumer markets but
B2B
 Channel strategy

 Channel strategy needs to be in line with marketing obj of the biz

 Distribution channel:

Direct selling to consumer

manu/service providerconsumer and e-commerce- 20.2 and 20.3

Single intermediary channel

manuretailerconsumer. Or manuwholesalerconsumer

Two intermediaries channel

manu wholesaler (warehouse)retailer(shop)consumer
 Factors influencing the
distribution channel
 Kind of products –industrial products tend to be sold more directly
fewer intermediaries compared to consumer goods
 Geographical dispersion of the target market- if its widely spread
target market, the chances of using intermediaries increases
 Service level expected from consumers- after sales service of a car,
internet selling is not an option
 Technical complexity of the product- e.g. biz needing a technical
know how among sales staff, supporting service
 Unit value of the product- if no of customers are few, then direct
selling is preferred to intermediaries
Recent trends in distribution
 Increased use of the internet- via mobiles and tablets. Internet banking and online
insurance policies

 Products that can be converted into digital format are now being widely distributed to
consumers by digital means over the internet rather than in a physical form. Digital
distribution bypasses the traditional physical distribution formats, such as paper, optical
discs and film cassettes. E.g itunes, spotify etc. streaming VS downloading

 Large supermarket chains perform functions as wholesalers and retailers, holding stock
in their warehouse. They own another link in the distribution chain aka “vertical
marketing.” ex sony owning its own shops

 Variety of diff channels usage has increased. Ice cream walas

 Increasing integration of services where a complete package is sold to consumers e.g.

air flight, accommodation etc