Marketing Mix

 marketing mix: is the tactical

tools that marketers use to
implement their strategies and
deliver superior customer value.
 The marketing mix brings
together all the tools available to
a success of a particular product
or brand
 Product
 It is a bundle of physical and intangible attributes
that have the potential that satisfy present and
potential customers wants.

 Product that are marketed include physical good,

services, experiences, events, person, place,
properties, organization, information and ideas
What Is a Product?
 We define a product as anything that can be offered
to a market for attention, acquisition, use, or
consumption that might satisfy a want or need.
 Services are a form of product that consists of
activities, benefits, or satisfactions offered for sales
that are essentially intangible and do not result in
the ownership of anything.
Products, Services, and Experiences
 Products are a key element in the overall market offering.
 Marketing mix planning begins with building an offering
that brings value to target customers.
 This offering becomes the basis on which the company
builds profitable customer relationships.

• Today, as products and services become more commoditized, many

companies are moving to a new level in creating value for their
customers.
• To differentiate their offers, beyond simply making products and
delivering services, they are creating and managing customer
experiences with their brands or company.
Levels of Product and Services
 Product planners need to think about products
and services on three levels.
Most basic level ─ core customer
What is the buyer really buying?

Second level ─ actual product

They need to develop product and service features, a design,

a quality level, a brand name, and packaging.

Third level ─ augmented product

Around the core benefit and actual product by offering
additional consumer services and benefits
Product and Service Classifications

Two
classes

Consumer Industrial
products products
Consumer Products
 Consumer products are products and services bought by
final consumers for personal consumption.
 Consumer products include convenience products,
shopping products, specialty products, and unsought
products.

They
They are
areconsumer
consumer products
products that
withcustomers,
unique in
They
Theyare consumer
are consumer products
productsand services that
that the consumer
Specialty
Unsought
Convenience
Shopping the process of
characteristics selecting
or brand and purchasing,
identification forusually
which
customers
either usually
does not buy
know frequently,
about or immediately,
knows about but
products
product
products compares on such attributes as suitability,
adoes
and significant
withnot
minimalgroup
normally of buyersbuying.
comparison
consider is willing
and buyingto make
quality,
a specialprice, and style.
purchase effort.
effort.
Individual Product and Service
Decisions
Branding
 A brand is a name, term, sign, symbol, or design, or a
combination of these, that identifies the products or
services of one seller or group of sellers and differentiates
them from those of competitors.
 Brand names help consumers identify products that might
benefit them.
 Brands also say something about product quality and
consistency ─ buyers who always buy the same brand
know that they will get the same features, benefits, and
quality each time they buy.
 Branding

Benefits of Branding :
 Identification
 Encourage repeat sales.
 Facilitates new product
introduction
 Branding
 A brand name is the verbal part of the brand.
A brand mark is the part of the brand that
appears in the form of a
symbol, design, distinctive coloring, or
lettering. It is recognized by
sight but cannot be uttered or vocalized.
Branding Strategy: Building Strong
Brands
 Some analysts see brands as the major enduring
asset of a company, outlasting the company’s
specific products and facilities.
Brand Equity
Brand Equity

• It’s the differential effect that knowing the brand name has on
consumer response to the product and its marketing.
• It’s a measure of the brand’s ability to capture consumer
preference and loyalty.

A brand has positive brand equity when consumers react

more favorably to it than to a generic or unbranded
version of the same product.

It has negative brand equity if consumers react less

favorably than to an unbranded version.
 Brand Development
• A major drawback of
• A brand extension gives a
multibranding is that
Multibrands New Brands new each productbrandinstant
might obtain
•a way • A
recognition company might
and faster
• Brand
It offers A company
Extensions to might believe that the
only power
a small market
Line Extensionsits existing brand name acceptance.
ofcurrent introduce
is waning, so line
• establish
It extends different
a
• It occurs when a company share, and none may be
new brand extensions
• It also saves the high
name is needed. as a low-
features
brand namethat appeal
to
extends •existing brandnew to very
cost,profitable.
low-risk way to
different Or it may create a new advertising
brand name costs
when
• Inintroduce usually
names tocustomer
or modified new forms, colors, required
this situation,
new these
products.
segments,
products initaenters
lock up
new a new product category
more forto buildshould
companies a newreduce
sizes, ingredients, or flavors • Or
brand name.it might want to
reseller
category. which
shelf space, none
andof its current brand names
the number of brands
of an existing product • And ifmeet
a consumer
brand extensiondesires
capture are appropriate.
a larger market they sell in a use
given
category. fails, for
it mayvariety,
harm excess
share. category
capacity, and
or set up
simply
consumer
tighter attitudes
screening toward
commandcarrying
otherprocedures
products more shelf
the
space name. for new
from resellers.
samebrands.
brand
New-Product Development Strategy
 A firm can obtain new products in two ways.
 One is through acquisition ─ by buying a whole company, a
patent, or a license to produce someone else’s product.

The other is through the firm’s own new-product

development which is the development of original products,
product improvements, product modifications, and new brands
through the firm’s own product development efforts.
The New-Product Development Process
Idea Generation
 New-product development starts with idea
generation ─ the systematic search for new-
product ideas.
 Major sources of new-product ideas include
internal sources and external sources such as
customers, competitors, distributors and
suppliers, and others.
Idea Screening
 The first idea-reducing stage is idea screening, which
New-product
helps spot good ideas and drop poor ones as soon as
Screening
possible. framework
 Product development costs rise greatly in later stages, so
the company wantsAsks Three
to go Questions
ahead only with those product
1. Is it real?
ideas that will turn into profitable products.
2. Can we win?
 Many
3. Iscompanies require their executives to write up
it worth doing?
new-product ideas in a standard format that can be
reviewed by a new-product committee.
Concept Development and Testing
 A product concept is a detailed version of the new-
product idea stated in meaningful consumer terms.
 A product idea is an idea for a possible product that the
company can see itself offering to the market.
 A product concept is a detailed version of the idea stated
in meaningful consumer terms.
 A product image is the way consumers perceive an actual
or potential product.
Business Analysis
 Business analysis involves a review of the sales,
costs, and profit projections for a new product to
find out whether they satisfy the company’s
objectives.
Product Development
 Product development develops the product concept into
a physical product to ensure that the product idea can be
turned into a workable market offering.
 R&D hopes to design a prototype that will satisfy and
excite consumers and that can be produced quickly and at
budgeted costs.
 Often, products undergo rigorous tests to make sure that
they perform safely and effectively, or that consumers
will find value in them.
 Test Marketing

Controlled Test Markets• Test marketing gives the marketer

• If the product passes both the
experience with marketing a Both
concept test and the product test, the
product before going to the great
controlled test
New products and tactics are tested
next step is test marketing, the of full introduction. markets and
expense
among controlled panels of shoppers and
• Itand
stage at which the product letsitsthe company test the simulated test
stores.
proposed marketing program are and its entire marketing
product markets
introduced into realistic market
program ─ targeting and reduce the
Simulated
settings. Test Markets positioning strategy, advertising, costs of test
distribution, pricing, brandingmarketing
and and
Researchers measure consumer packaging,
responsesand budget levels.speed up the
to new products and marketing tactics in process.
laboratory stores or simulated online
shopping environments.
Commercialization
 If the company goes ahead with commercialization ─
introducing the new product into the market ─ it will face
high costs.
 A company launching a new product must first decide on
introduction timing.
 Next, the company must decide where to launch the new
product ─ in a single location, a region, the national
market, or the international market.
 Product Life-Cycle Strategies
 The product life cycle
 It is(PLC) hasoffive
a period distinctinstages:
slowdown sales
 It is a periodgrowth
of slow
because the product has
sales growth as the
 It begins when the company finds and develops
achieved acceptance by most potential
product is introduced in the market.  It is the period when
a new-product idea. buyers.
Product  Profits are nonexistent
Introduction
 in thisofstage
Growth sales fall off and
Maturity Decline
 During product development, It is a
 Profits sales period
level are
off zero,rapid market
or decline because of
development because of the heavy expenses of profits drop.
and the company’s investment acceptance
costs and
mount. increasing
increased marketing out lays to defend
product introduction.
theprofits.
product against competition.

Product
Develop- Introduction Growth Maturity Decline
ment
Product matrix
The End
 Pricing Mix
 What is a Price?
 In the narrowest sense, price is the amount of money charged
for a product or a service.
 More broadly, price is the sum of all the values that customers
give up to gain the benefits of having or using a product or
service.
 Price is the only element in the marketing mix that produces
revenue; all other elements represent costs.
Major Pricing Strategies
 The price the company charges will fall
somewhere between one that is too low to
produce a profit and one that is too high to
produce any demand.
Customer Value-Based Pricing
 Customer value-based pricing uses buyers’ perceptions
of value as the key to pricing.
 The company first assesses customer needs and value
perceptions.
 It then sets its target price based on customer perceptions
of value.
 The targeted value and price drive decisions about what
costs can be incurred and the resulting product design.


 Good Value pricing
Value-Added Pricing
 Many companies adopt value-added pricing
strategies.
 Rather than cutting prices to match competitors,
they attach value-added features and services to
differentiate their offers and thus support their
higher prices.
Cost-Based Pricing
 Cost-Based pricing involves setting prices based
on the costs of producing, distributing, and
selling the product plus a fair rate of return for its
effort and risk.
 A company’s costs may be an important element
in its pricing strategy.
Types of Costs
The sum of the fixed and
variable costs for any
given level of production.
Costs that do not vary
with production or sales
Fixe level.
Va
d To
ria
costs tal
(ove ble
r-
cos co
head
) ts sts
Costs that vary directly
the level of production.
with
Cost-Plus Pricing
To illustrate markup pricing, suppose a toaster manufacturer
 The simplest pricing method is cost-plus pricing (or
had the following costs and expected sales:
markup pricing) ─ adding a standard markup to the cost
of the product.Variable cost $10
Fixed costs $300,000
Expected unit sales 50,000
Then the manufacturer’s cost per toaster is given by the following:
unit cost = $10

Now suppose the manufacturer wants to earn a 20 percent

Markup on sales. The manufacturer’s markup price is given by the
following:
markup price = $20
Break-Even Analysis and Target Profit
Pricing
 Break-even pricing (target return) sets price to break
Theeven
totalon the costs
revenue and of making
total and marketing
cost curves a product,
cross at 30,000 or is the
units. This
setting price
break-even to make
volume. a target
At $20, return.must sell at least 30,000
the company
units
 to break
Target even,
return that is,uses
pricing for total revenue of
the concept to cover total cost. Break-
a break-even
even volume can be calculated using the following formula:
chart, which shows the total cost and total revenue
expected at different sales volume levels.
= = 30,000
Competition-Based Pricing
 Competition-based pricing involves setting
prices based on competitors’ strategies, costs,
prices, and market offerings.
 Consumers will base their judgments of a
product’s value on the prices that competitors
charge for similar products.
Analyzing the Price-Demand Relationship
 Demand curve is a curve that shows the number of
units the market will buy in a given time period, at
different prices that might be charged.
 companies need to understand the price sensitivity of
their customers and the tradeoffs people are willing to
make between price and product characteristics.
Price Elasticity of Demand
 Price Elasticity is a measure of the sensitivity of
demand to changes in price.
 It is given by the following formula:
% change in quantity demanded
price elasticity of demand =
% change in price
• If demand is elastic rather than inelastic, sellers will
consider lowering their prices.
• A lower price will produce more total revenue.
• Marketers need to work harder than ever to differentiate
their offerings when a dozen competitors are selling
virtually the same product at a comparable or lower price.
New-Product Pricing Strategies
 Pricing strategies usually change as the product passes
through its life cycle.
 The introductory stage is especially challenging.
 Companies bringing out a new product face the challenge
of setting prices for the first time.
 They can choose between two broad strategies: market-
skimming pricing and market-penetration pricing.
Market-Skimming Pricing
 Market-skimming pricing (or price skimming)
set a high price for a new product to skim
maximum revenues layer by layer from the
segments willing to pay the high price; the
company makes fewer but more profitable sales.
Market-Skimming Pricing
 For products that represent a drastic departure from accepted
ways of performing a service, a policy of relatively high prices
coupled with heavy promotional expenditures in the early stages
of market development (and lower prices at later stages) has
proved successful for many products.
 Demand is likely to be more inelastic with respect to price in the
early stages than it is when the product is full-grown
 Promotional elasticity is, on the other hand, quite high,
particularly for products with high unit prices such as television
sets. Since it is difficult for customers to value the service of the
product in a way to price it intelligently, they are by default
principally interested in how well it will work.
Market-Penetration Pricing
 Market-penetration pricing sets a low price for
a new product in order to attract a large number
of buyers and a large market share.
Market-Penetration Pricing
 The alternative policy is to use low prices as the principal instrument for
penetrating mass markets early. This policy is the reverse of the skimming
policy in which the price is lowered only as short-run competition forces.
 What conditions warrant aggressive pricing for market penetration?:
 A high price elasticity of demand in the short run, i.e., a high degree of
responsiveness of sales to reductions in price.
 Substantial savings in production costs as the result of greater volume—not a
necessary condition, however, since if elasticity of demand is high enough,
pricing for market expansion may be profitable without realizing production
economies.
 Product characteristics such that it will not seem bizarre when it is first
fitted into the consumers’ expenditure pattern.
 A strong threat of potential competition.
The End
communicating customers Value
 The Promotion Mix
Promotion Advertising: Any paid form of nonpersonal presentation and
tools
A company’s total
promotion promotion
of ideas, mix─also
goods, or services called sponsor.
by an identified
Advertising includes broadcast, print, Internet, outdoor, and other
its marketing communications mix─consists of
forms.
the specific blend of advertising, public relations,
personal Sales
selling, sales Short-term
promotion: promotion, and todirect
incentives encourage the
purchase or sale of a product or service.
marketing tools that the company uses to
Sales promotion includes discounts, coupons, displays, and
persuasively communicate customer value and
demonstrations
build customer relationships.
Personal selling: Personal presentation by the firm’s sales force
for the purpose of making sales and building customer
relationships.
Personal selling includes sales presentations, trade shows, and
incentive programs
Public relations: Building good relations with the company’s various
publics by obtaining favorable publicity, building up a good corporate
image, and handling or heading off unfavorable rumors, stories, and
Integrated Marketing Communications
 In past decades, marketers perfected the art of mass
marketing: selling highly standardized products to masses
of customers.
 In the process, they developed effective mass-media
communications techniques to support these strategies.
The Need for Integrated Marketing
Communications
 Integrated marketing communications (IMC) means
that the company carefully integrates its many
communications channels to deliver a clear, consistent,
and compelling message about the organization and its
brands.
 Each contact with the brand will deliver a
message─whether good, bad, or indifferent.
The New Marketing Communications
Model
 Several major factors are changing the face of
today’s marketing communications

Finally, sweeping
advances in
communications
Second, marketing technology are causing
First, consumers remarkable changes in
strategies are
are changing. the ways in which
changing. companies and
customers
communicate with each
other.
A View of the Communication Process
 Today, marketers are moving toward viewing
communications as managing the customer relationship
over time.
 Communication involves the nine elements.
Steps in Developing Effective Marketing
Communication
Identify the target audience

Determine the communication objectives

Design a message

Choose the media through which to send the message

Select the message source

Collect feedback
Identifying the Target Audience
 A marketing communicator starts with a clear
target audience in mind.
 The audience may be current users or potential
buyers, those who make the buying decision or
those who influence it.
Determining the Communication
Objectives
 The target audience may be in any of six buyer-
readiness stages, the stages consumers normally
pass through on their way to making a purchase.
Designing a Message
 When putting a message together, the marketing
communicator must decide what to say (message
content) and how to say it (message structure and
format).
Message Content
 There are three types of appeals:
• They relate to the audience’s self-
Rational interest.
• They show that the product will
appeals produce the desired benefits.

• They attempt to stir up either

Emotional negative or positive emotions that
appeals can motivate purchase.

• They are directed to an audience’s

Moral appeals sense of what is “right” and
“proper”.
Choosing Media
 There are two broad types of communication
channels: personal and nonpersonal.
Selecting the Message Source
 In either personal or nonpersonal communication,
the message’s impact also depends on how the
target audience views the communicator.
 Messages delivered by highly credible sources
are more persuasive.
Collecting Feedback
 This involves asking target audience members
whether they remember the message, how many
times they saw it, what points they recall, how
they remember the message, and their past and
present attitudes toward the product and
company.
The End
Marketing Channels
Supply Chains and the Value Delivery
Network
 This supply chain consists of upstream and
downstream partners.

Upstream from the company is the set of firms that supply the
raw materials, components, parts, information, finances, and
expertise needed to create a product or service.

Downstream marketing channel partners, such as wholesalers

and retailers, form a vital link between the firm and its
customers.
Supply Chains and the Value Delivery
Network
 The value delivery network is made up of the
What is the nature of marketing channels and why
company,
are suppliers, distributors, and, ultimately,
they important?
customers who “partner” with each other to
improveHow
thedo channel firms interact
performance of the and organize
entire to do
system.
the work of the channel?
 We examine four major questions concerning
Whatchannels:
marketing problems do companies face in designing and
managing their channels?

What role do physical distribution and supply

chain management play in attracting and
satisfying customers?
 How Channel Members Add Value
Why do producers give some of the selling
job to channel partners?
Match
ing
Physic
al Promo
distrib tion
ution
Risk Negoti Inform
taking
From economic system’s point ofation Marketing channel
ationmembers buy
view, the role of marketing
Financ large quantities from many
Contac
intermediaries is to transform
ing the producers and break them down
t
assortments of products made by into the smaller quantities and
producers into the assortments broader assortments desired by
wanted by consumers. consumers.
Number of Channel Levels
 Each layer of marketing intermediaries that
performs
• This some
shows some work in bringing the product and
common
business distribution
its owner ship closer to the final buyer is a
channels.
channel
• The level.
business marketer can The remaining channels are
Channel
use its own sales force to 1, called a direct
indirect marketing
marketing
sell directly to business channel, has no
channels, containing one or
customers. intermediary levels ─ the
more intermediaries.
company sells directly to
• Or it can sell to various
consumers.
types of intermediaries,
who in turn sell to these
customers.
Channel Design Decisions
 Marketing channel design calls for analyzing
consumer needs, setting channel objectives,
identifying major channel alternatives, and
evaluating those alternatives.

Identifyin Analyzing
g major consumer
alternativ needs
es

Setting
channel
objectives
Analyzing Consumer Needs

Each channel member and level adds value for

the consumer.

Thus, designing the marketing channel starts

with finding out what target consumers want
from the channel.
The company and its channel members may
not have the resources or skills needed to
provide all the desired services.
Also, providing higher levels of service results
in higher costs for the channel and higher
prices for consumers.
The success of discount retailing shows that
consumers will often accept lower service levels
in exchange for lower prices.
Setting Channel Objectives
 The company’s channel objectives are also
influenced by the following things:

The nature of the Marketing

Products
company intermediaries

Competitors Environment
Identifying Major Alternatives
 Three major channel alternatives:

Responsibi
Types of Number of lities of
intermedia intermedia each
ries ries channel
member
Number of Marketing Intermediaries
• A strategy in which they stock their products in
Intensive as many outlets as possible.
• These products must be available where and
Distribution when consumers want them.

• The producer gives only a limited number of

Exclusive dealers the exclusive right to distribute its
products in their territories.
Distribution • It’s often found in the distribution of luxury
brands.

• The use of more than one but fewer than all of

Selective the intermediaries who are willing to carry a
company’s products.
Distribution • Most television, furniture, and home appliance
brands are distributed in this manner.
Responsibilities of Channel Members
 The producer and the intermediaries need to
agree on the terms and responsibilities of each
channel member.
 They should agree on price policies, conditions
of sale, territory rights, and the specific services
to be performed by each party.
Retailing

Retailing Retailing includes all the activities involved in selling

products or services directly to final consumers for their
personal, nonbusiness use.

But most retailing is done by retailers, businesses

whose sales come primarily from retailing.

In fact, many marketers are now embracing the concept of

shopper marketing, using point-of-purchase promotions and
advertising to extend brand equity to “the last mile” and
encourage favorable point-of-purchase decisions.

The dramatic growth of digital shopping, or combined

digital and in-store shopping, has added a new
dimension to shopper marketing.
Wholesaling
Selling and
Transportation
promoting
 Wholesaling includes all the activities involved
in selling goods and services to those buying
Buying and
themassortment
for resale or business use.Financing
building
 Firms engaged primarily in wholesaling activities
are called wholesalers.
Bulk breaking Risk bearing
 Wholesalers add value by performing one or
more of the following channel functions:
Market
Warehousing
information
Management
services
and advice