Transcript overivew of the marketing mix

BRIEF OVERVIEW OF THE
MARKETING MIX (4Ps)
LEARNING OBJECTIVES
• Work with marketing
mix tools to create
customer value
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SEGMENTATION
IDENTIFYING
MEANINGFULLY
DIFFERENT GROUPS
OF CUSTOMERS
TARGETING
PROUDCT
PRICE
SELECTING WHICH
SEGMENT(S) TO
SERVE
POSITIONING
PROMOTION
IMPLEMENTING
CHOSEN IMAGE AND
APPEAL TO CHOSEN
SEGMENT
DISTRIBUTION
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PRODUCT
• Product Assortment
• Product lines
• New product
introductions
• Branding
• International and crosscultural product
adaptations
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The Product-Service Continuum
• Most offerings have at least some component
of both a tangible and service component
Mostly Tangible Product
Mostly Service
______________________________________________________________________
Example
Cement
Microwave oven
Apple laptop
Car tune-up
Tax preparation
Tangible
component
Content, bagging
Hardware
Computer,
accessories
Sparkplugs, other
parts
Documents
Service
component
Retail availability,
instructions
Instruction
manual, warranty
Customer
service, updates,
warranty
Labor, warranty
Planning,
strategy,
calculations,
guarantees
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The Product Life Cycle (PLC)
• Products will generally be invented and start with low use.
• With decreased costs and improved technology, more people
tend to adopt.
• With more consumer interest, competition increases, driving
down prices and up quality, user friendliness, and features
offered.
The “classic”
curve—may
differ for
specific
innovations
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Product Category and Era Specificity
• Certain major improvements within a product
category are often seen as entirely “new”
categories—e.g., black and white TV  color
TV  HDTV
• The timing and shape of the Product Life Cycle
(PLC) curve will differ depending on how
general or specific evolutionary the level—TV
as a whole may be in maturity, but color TV is
in decline
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General and Era Specific Category
Examples
General
product
category
Evolutionary versions (note simultaneous existence of some
versions)
Television
Black & white TV; color TV; HDTV; Internet based portable device
Movie player
devices
VHS, DVD, BluRay, Streaming
Phone
Non-dialing, operator assisted only desktops; dialable desktops; car
phones (large); cell phones (big and clumsy); readily portable cell
phones; smart phones; VOIP
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Introductory Stage
• Typically:
– Low awareness category awareness
– Limited competition—greater interest in category awareness
– No finalized standards/protocols (might be unable to get apps for a new
cell phone OS)
– Fear that the technology may not survive (may fade away or be replaced a
different standard)
– Limited features
– Less reliable technology
– High prices
– Low unit sales
– High prices—limited sales
Examples: Fuel cell battery technology (hydrogen converted
to electricity for electric cars, allowing greater range than
and high expenses
charged batteries); Internet of Things.
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Growth Stage
• Typically:
Steep slope of growth
–
–
–
–
Greater consumer awareness
Higher sales volumes
Better and more user friendly products
Prices are lower, but not as low as they
are likely to get (adjusted for inflation,
at least)
– Although there are more competitors,
market growth is large enough to carry
the available supply.
– Greater interest in differentiation and
brand awareness.
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Examples: Electric cars (battery
powered); smart watches;
consumer and business drones
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Maturity Stage
• Typically:
– Greatly increased competition—lower
prices, more features, higher quality
– Both increased manufacturing and design in
less developed countries
– Limited growth opportunities (in either
domestic or world market)  limited
opportunities to reinvest profits in this
category  need to enter new product
and/or country markets
– Significantly lower prices (relative to
inflation)
– Sales may be mostly for replacements and
new population
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Very shallow growth
slope (sometimes
entirely “flat”)
Examples: Microwave
ovens; laser printers;
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Decline
• Typically:
– The product category is
increasingly being replaced by
other categories (which are often
cheaper than the original
category)
– Competition causes some—if not
most—of the manufacturers to
exit the market
– Product may be used as specialty
product (e.g., typewriter to fill
out “legacy” (old paper and
carbon) forms
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Examples: Cassette tape
players; typewriters; brick-andmortar travel agents; print
newspapers
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Some Alternatives
• In a plateau, the product
category is not being actively
replaced by anything else,
but growth ceases (or
remains small) (e.g., fast food
in U.S.)
• Under revitalization, a new
use for the product emerges
(or renewed interest
develops) (e.g., cranberry
juice; car cigarette lighters)
• Fad: Product spreads rapidly,
but quickly loses appeal
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The Product Life Cycle (PLC) involves ________
over time
• Demand for the product
• Awareness of the
product
• Competition in
supplying the product
– Price
– Features
– Differentiation
• Profitability
• Alternatives available to
the product
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• Investment
opportunities (Boston
Consulting Group
model)
• Appropriate strategies
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Branding
• Brands
– Product or product line specific brands
• Tide, Snickers, Subway
– Broader brands
• Samsung, Apple, Sony, Canon, Virgin, Microsoft, Disney
– “Umbrella Brands”
• 3M
– National vs. regional
– National vs. international
– Store brands
• Trademarks and “genericide” (potential loss of
trademark protection if the brand same comes to be
used as synonymous with the product category—
uncommon in practice)
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Branding
has been
traced
to whiskey
casks that
were
identified
for quality.
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Brand Value and Image
• Brand equity: Value added
to product based on brand
name
– Choice likelihood
– Ability to charge higher price
– Use of product as loss leader
• Benefit in market share, temporary
revenue (Coca Cola)
• Possible damage to long term brand
image (Louis Vuitton suitcases in Japan)
• Brand “personality:”
Associations with product
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Co-branding
• To take advantage of
assets of both firms
• Types
– Distributional
• Egalitarian: Carl’s Jr. and
Green Taco
• Hierarchical: Visa as
official credit card of the
Olympics
– Line filling—e.g.,
airline code sharing
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– Ingredients
• Cooperative: Dryers’ ice cream
with Mars M&Ms
• Independent: Local computer
maker advertises Maxtor hard
drive components
– Intrusive: “Intel Inside”
– Partial: McD’s serves Coca
Cola
– Sponsorship: Good
Housekeeping seal of
approval
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Brand Extensions
•
•
•
Use of an existing brand name
to a new-to-the-brand product
category
May lower cost of launching
new product line and increase
speed of market penetration,
but…
Considerations
– Perception of ability to
make product well
– Extension should not be
exploitative—making a
“trivial” product by high
image brand (e.g.,
Heineken Popcorn)
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– Congruence: Are
products seen by
customers as “sensible”
creations by the same
brand?
• Apple iPod made sense
as a “mini computer”
with hard drive based
music files; iPhone
made sense as an
extension of the iPod
• Would apple “stylish”
Apple furniture make
sense?
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Cross-country and Cultural Product
Adaptations
• Product adaptations to
match
– Cultural values and
tendencies
– Economic conditions
– Infrastructure
– Tastes and preferences
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Lessons from Japan
• Customers expect to
see the actual
product
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Lesson from Japan: Purposes of
Products
Relative bargain!
Just $45 a box!
Strawberries—
$75 a box!
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Japan: Product Adaptations
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DISTRIBUTION
• Intermediaries (wholesalers,
retailers, and others) generally
increase efficiency and reduce costs
through
– Specialization of labor
– Economies of scale
– Allowing the customer to do some of the
work
• Intermediaries help reduce
discrepancies between what is
produced and what the customer
wants
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REMINDER
In the vast majority of instances, “eliminating the middleman”
will greatly increase—rather than decrease—costs. The
middleman—who specializes and thus is highly skilled and has
economies of scale—can offer its services at a much lower cost
than what it would cost for the manufacturer to perform these
services by itself.
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Discrepancies
• Quantity: Delivering products in quantities
desired
– By end consumer
– By retailers
• Assortment: Wholesalers and retailers can combine
products from several manufacturers for convenience
of
– Retailers
– Consumers
• Temporal: Having products available at the
right time—e.g.,
– Thanksgiving Turkeys
– Summer fashions
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Intermediaries: Adding Value
MANUF. 1
WHOLESALER
(or agent) 1
RETAILER
MANUF. 2
MANUF. 3
WHOLESALER
(or agent) 2
PRODUCTS FROM
OTHER MANUFS.
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Value added:
•Breaking bulk (quantity
discrepancy reduced)
•Consolidating supplies
(assortment discrepancy
reduced)
•Holding inventory (temporal
discrepancy reduced)
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Distribution Efficiencies
• Certain VERY LARGE retail
chains—e.g., Wal-Mart and
Safeway—may be able to
distribute more efficiently than
independent wholesalers
– Integration with own demand
forecasts
• For most other retailers, buying
through wholesalers is more
efficient
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Potential Channel Structures (U.S.)
Producer
Producer
Producer
Producer
Producer
Agents/
Brokers
National
Wholesalers
Customer
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Wholesalers
Regional
Wholesalers
Wholesalers
Retailers
Retailers
Retailers
Retailers
Customer
Customer
Customer
Customer
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PRICE
•
•
•
•
Meaning of price
Ways to change prices
Price discrimination
Pricing strategies
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One View of Price
• Price =
resources given up
_____________________________________
goods received
• E.g., 12 bullets for $6.00 =
$0.50 per bullet
• Ways to change the
price:
– Sticker price
– Quantity—same sticker
price but lesser quantity
– Quality—use of lower
cost materials—e.g.,
“gooeye” stuff rather
than chocolate in candy
– Terms
• E.g., support,
accessories, payment
terms, delivery
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Examples of Price Changes
• Cereal manufacturers put a smaller quantity of cereal in boxes
• Paper towel manufacturers use fewer sheets per roll
• Candy bar manufacturers use more “gooey” stuff (instead of
costlier chocolate)
• Some hamburger chains stop using tomato slices when prices
spike
• Software makers now charge for service (900 numbers or per
minute charge) but, adjusted for inflation, sticker prices are
lower in this later stage of the life cycle
• Most airlines now charge for checking baggage and domestic
meals
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Views of Consumers and Price
Response
• Marketing
• Economics
– Assumed to have
perfect information
about
• Quality of all brands
• Prices of each brand
at all locations
– Elasticity: A “downsloping” demand curve
means that a higher
quantity will be
demanded when the
price is reduced
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– Consumer knowledge
of product quality and
prices is imperfect
– Due to imperfect
information, a higher
price may sometimes
be used by consumers
to infer greater quality
(Research suggests that actual
product quality as rated by
Consumer Reports accounts
for about 25% of product
price differences among
brands)
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Supply, Demand, and Quantities
Supplied and Demanded
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Supply, Demand, and Quantities
Supplied and Demanded
•
Supply: The “schedule,” or “curve,” of
quantities supplied by the sellers at
various prices offered by buyers
–
•
•
Tends to increase with price—a
greater quantity will be supplied at a
higher level of incentive to produce
Equilibrium: The intersection of the
supply and demand curves—neither
side is interested in buying or selling
more or less given the resultant market
prices
–
Demand: The “schedule,” or “curve,”
of quantities demanded by the
buyers at various prices offered by
sellers
–
–
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Tends to decrease with price—the
marginal value of additional quantity
tends to decline with a greater price
Occasionally, higher prices may lead
to higher quantity demanded due to
a possible “signal” of quality
This equilibrium may be temporary and
may change once the market changes—
e.g.,
•
•
•
•
•
Changes in the availability  change in
supply
Changes in cost of production  change in
supply
Availability of new substitutes  change in
demand
Quantity supplied: The quantity that
will be supplied (sold) by sellers at a
given price point
Quantity demanded: The quantity that
will be demanded (bought) by buyers at
a given price point
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Price Discrimination
• Explicit
– Only some customers are
eligible for special
pricing—e.g.,
• Student discounts on
software
• Senior citizen discounts
• Geographic: Only customers
in the 900**-935** zip code
areas are eligible for discount
Disneyland Admission
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• Implicit
– No outright rule, but
discounted deal is
unattractive to some
customers
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• Airlines: Saturday night
stay-over or advance
purchase requirement
• Daily special meal—one
cheaper meal but no
choice
• Periodic discounting
(products going on and off
sale)
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Some Approaches to Pricing
• Cost-plus: Add fixed percentage markup
• Skimming: high intro price ---> take
advantage of price insensitive consumers
• Penetration pricing: low intro price --->
volume
• Buyer-based
• Perceived value
• Going-rate (competition)
---> Balancing cost and
market considerations
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Skimming Pricing
350
300
P1
250
P2
200
150
P3
100
50
Q1
0
0
200
Q3
Q2
400
600
800
1000
1200
The product is introduced at a high price, P1. Very few customers—only the least
price sensitive ones—buy at this price. When the price is later lowered to P2 and
then to P3, other customers who value the product less will start to buy.
The least price sensitive customers pay a premium for quick access to the new
product.
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Penetration Pricing
350
300
250
P1
200
150
100
50
Q1
0
0
200
400
600
800
1000
1200
The product is immediately introduced at a relatively low price (and will continue to
be sold at a low price.) The seller sacrifices the higher margins that would have
resulted from selling to some customers at a higher price, but, in return gains
immediate sales. Fewer competitors are attracted into the market since the
apparent profits are not as high. Because of economies of scale and experience
curves—the tendency of production costs to decline with the cumulative
production—costs are reduced.
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PROMOTION
• Ways to reach and
influence potential
customers
– “Triggering” (thoughts
–
–
–
–
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about the brand or
product)
Awareness
Behaviors (e.g., trial,
brand choice)
Beliefs
Preference
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Some Media Alternatives
• Television
–
–
–
–
Conventional advertisements
Infomercials
Sponsorship programming
“Placements”
• In programming
• “Superimposed”
• Radio
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•
•
•
•
•
•
Magazines
Newspapers
Outdoor
Internet
Point-of-purchase
Other
– Movie theaters
– On other products
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Reaching the Customer: Encoding,
“Noise,” and “Decoding”
NOISE
Other ads
News articles
Other store displays
SENDER
Marketing mgr
Advertising mgr
Advertising
agency
ENCODING
THE
MESSAGE
Advertisement
Coupon
Sales presentation
Press release
Store display
Note that things can go wrong in
steps 2, 3, and 4. The message
must compete with other ads
and for limited customer
attention. Repetition is crucial.
MESSAGE
CHANNEL
DECODING
THE
MESSAGE
Media, Salesperson
Retail store
News program
Receiver
Interpretation of
the message
RECEIVER
Customers
Media audience
News media
Clients
CHANNEL
FEEDBACK
Text, p. 211.
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Advertising Intensity and Return -A Typical Relationship
Response (e.g., sales, recall)
The “S”-Shaped Curve
1
0.8
Saturation
Point
0.6
0.4
Too little to do
much good
0.2
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0
0
5
10
15
Amount of Advertising Spending
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20
25
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