market1 reviewer

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Session 1 Needs – states of felt deprivation; physical needs, security needs, social needs, esteem needs, and self-actualization needs. Wants – the form taken by human needs as they are shaped by culture and individual personality; objects that will satisfy the need. Demands – wants backed by buying power. Product – anything that can be offered in a market that will satisfy a need or a want. Market – a set of actual and potential buyers Value – the consumer’s estimate of the product’s overall capacity to satisfy his or her needs. Satisfaction – the extent to which a product’s perceived performance matches a buyer’s expectations. Exchange – the act or process of obtaining a product or service from someone by offering something in return. Transaction – the basic unit of exchange. Industry – a collection of sellers. Marketing – managing markets to bring about exchanges for the purpose of satisfying human needs and wants. Marketing – a social and managerial process by which individuals obtain what they need and want through creating, offering, and exchanging products of value with others. Marketing management – is the process of planning and executing the conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges that satisfy individual and organizational goals. Marketing Management Philosophies: 1. Production concept – holds that the market will favor products that are widely available and low in cost. Companies in this orientation concentrate on achieving high production efficiency and wide distribution. 2. Product concept – holds that the consumers will favor those products that offer the most quality, performance, or innovative features. Companies in this

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Page 1: Market1 Reviewer

Session 1

Needs – states of felt deprivation; physical needs, security needs, social needs, esteem needs, and self-actualization needs.Wants – the form taken by human needs as they are shaped by culture and individual personality; objects that will satisfy the need.Demands – wants backed by buying power.Product – anything that can be offered in a market that will satisfy a need or a want.Market – a set of actual and potential buyersValue – the consumer’s estimate of the product’s overall capacity to satisfy his or her needs.Satisfaction – the extent to which a product’s perceived performance matches a buyer’s expectations.Exchange – the act or process of obtaining a product or service from someone by offering something in return.Transaction – the basic unit of exchange.Industry – a collection of sellers.Marketing – managing markets to bring about exchanges for the purpose of satisfying human needs and wants.Marketing – a social and managerial process by which individuals obtain what they need and want through creating, offering, and exchanging products of value with others.Marketing management – is the process of planning and executing the conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges that satisfy individual and organizational goals.

Marketing Management Philosophies:1. Production concept – holds that the market will favor products that are widely

available and low in cost. Companies in this orientation concentrate on achieving high production efficiency and wide distribution.

2. Product concept – holds that the consumers will favor those products that offer the most quality, performance, or innovative features. Companies in this orientation focus their energy on making superior products and improving them over time.

3. Selling concept – holds that consumers, if left alone, will ordinarily not buy enough of the organization’s products. The organization must therefore undertake an aggressive selling and promotion effort.

4. Marketing concept – holds that the key to achieving organizational goals consists of being more effective than competitors in integrating marketing activities toward determining and satisfying the needs and wants of target markets.

5. Societal marketing concept – holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfaction more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well-being.

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Session 2

What are the 4Ps of Marketing? Product, Price, Placement, Promotion

Definition:Product – anything that can be offered to a market that can satisfy a need or a want.Price – the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.Placement – the distribution channels where the products can be made available to the market.Promotion – all communications that a marketer may use in the marketplace, or also called marketing communications program. The promotional mix includes advertising, sales promotion, public relations, and personal selling.

Product levels1. Core product – the core benefits (or problem solving benefits) that the consumers

are really buying when they obtain a product.a. Example – sony camcorder – core product is to capture important

moments.2. Actual product – a product’s parts, quality level, features, design, brand name,

packaging and other attributes that combine to deliver core product benefits.a. Example – sony camcorder – its parts, features, other attributes.

3. Augmented product – additional consumer services and benefits built around the core and actual product.

a. Example – toll free service numbers, free user orientation

Product classifications1. Consumer Products – products bought by final consumers for personal

consumption. They can be classified according to how consumers go about buying them:

a. Convenience products – consumer products that the customer usually buys frequently, immediately, and with a minimum of comparison and buying effort.

i. Staples – products that consumers buy on a regular basis, such as ketchup, toothpaste, crackers.

ii. Impulse products – products purchased with little planning or search effort like candy bars and magazines, which are usually placed near checkout counters because shoppers may not otherwise think of buying them.

iii. Emergency products – products purchased when their need is urgent, like umbrellas and raincoats during rainy season.

b. Shopping products – less frequently purchased consumer products that customers compare carefully on suitability, quality, price and style. Consumers buying shopping products spend much time and effort in information gathering and making comparisons.

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i. Homogenous – closely similar in quality but there is a price difference, like, for example appliances (electric fans, aircons, etc.)

ii. Heterogenous – difference in style and price, where features are usually more important than the price factor, as is the case with clothing and furnitures.

c. Specialty products – Consumer products with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Examples include special car brands like Rolls Royce. Buyers of specialty products do not normally compare the product with others. Buyers also usually are willing to travel great distances to buy one.

d. Unsought products – consumer products that the consumer usually do not know about or knows about but do not think of buying. New innovations usually are considered unsought until awareness is generated through marketing communications. Life insurance is an example.

2. Industrial Products – products purchased for further processing or for use in conducting a business. If a person buys a lawn mower for home use, it is a consumer product. If he buys the same lawn mower for his landscaping business, it’s an industrial product.

a. Materials and Parts – industrial products that become part of the buyer’s product through further processing or as components. They include raw materials and manufactured materials and parts.

i. Raw materials – natural productsii. Manufactured materials and parts – can be component materials

(iron, yarn, cement), or component parts (iron made into steel, and yarn made into cloth)

b. Capital items – industrial products that aid in the buyer’s production or operations. They include installations and accessory equipments.

i. Installations – factory, officesii. Accessory equipment – can be factory equipment and hand tools

(hand pallets, hand tools) or office equipments (fax machines, computers, etc)

c. Supplies and services – supplies (operating supplies like pencil, lubricants, etc); business services (preventive maintenance, computer repair, etc)

Individual Product Line Decisions

1. Product Attributesa. Product Quality – quality level that matches the needs of the target market

and that of the competition.b. Product Features – adding features differentiate a company’s products

over competitors.c. Product Design – distinctive product design can add value to the customer.

i. Style pertains to the “looks” of the product only.

2. Branding

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a. Brand – a name, term, sign, symbol, or design, or a combination of these intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. It is a seller’s promise to deliver consistently a specific set of features, benefits and services to buyers. A brand can convey four levels of meaning:

i. Attributesii. Benefits

iii. Valuesiv. Personality

MercedesAttributes Well engineered, well built, durable, expensiveBenefits Comfortable, safe, need not be replaced often, makes a person feel

successful and admired.Values Buyers of Mercedes value the benefits that it offersPersonality People are attracted to the brands that embody their personality. A

young, wealthy, successful business executive will, for example, buy a Mercedes

b. Brand Equity – the value of a brand based on the extent to which it has high brand loyalty, name awareness, perceived quality, strong brand associations and other assets, such as patents, trademarks, and channel relationships. *High brand equity translates into high brand awareness and loyalty, and the company will incur lower marketing costs relative to revenues because of this. The company also has more leverage in bargaining with resellers in high brand-equity products because consumers expect stores to carry the brand. New products through brand extensions can also be easier for high brand-equity products.

c. Brand Name Selection – brand names should be carefully selected based on the product, its benefits, target market and proposed marketing strategies. It should:

i. Suggest something about the product’s benefits and qualities.ii. Be Easy to pronounce, recognize and remember

iii. Be distinctiveiv. Translate easily to foreign languagev. Be capable of registration and legal protection

d. Brand Sponsori. Manufacturer’s brand – a brand created and owned by the producer

of a product or service.ii. Private brand – a brand created and owned by a reseller of a

product or service.iii. Licensing – securing accreditation from one company to use

names, symbols, characters, etc. previously created for a fee, to provide instant or proven brand name.

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iv. Co-branding – two established brand names are used on the same product at the same time.

e. Brand Strategyi. Line extensions – occur when a company introduces additional

items in a given product category under the same brand name, such as new flavors, forms, colors, ingredients or package sizes.

1. example – Colgate total, Colgate Mintirinse, Colgate Fresh Confidence, etc.

ii. Brand extensions – involve the use of a successful brand name to launch new or modified products in a new category

1. example – ivory soap, ivory shampoo2. example – Honda cars, Honda motorcycles, Honda marine

engines, etc.iii. Multibrands – strategy wherein a seller develops two or more

brands in the same product category.iv. New brands – strategy employed when a company enters a new

product category with a new brand name.

Existing product category New product categoryExisting brand name Line extension Brand extensionNew brand name Multibrand New brands

3. Packaging – includes the activities of designing and producing the container or wrapper for a product.- packaging has the power to create instant consumer recognition for the company or the brand. It can create instant advantage over competitors in terms of attention, while good packaging ergonomics can avoid waste to the consumer, maximize efficiency, and reduce hassle.- The packaging concept states what the package should be or do for the product (for protection? For new dispensing method?).

a. Labeling – the label identifies the product or brand; it may be used to grade the product; it may be used to describe several things about the product; it may be used to promote the product through attractive graphics. It may range from simple tags attached to products to complex graphics that are part of the package.

4. Product Support Services – services that augment actual product

Product Mix DecisionsProduct mix – also called product assortment, is the set of all product lines and items that a particular seller offers for sale to buyers.

Product Mix Width

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Detergents Toothpaste Bar soap Disposable diapers

Paper tissue

Product line length

Tide Gleem Ivory Pampers CharminAriel Crest Kirk Luvs PuffsDreft Lava BannerIvory Snow Camay

*A company’s product mix has a certain width, length, depth and consistency.

Width of the product mix – counted in terms of how many different product lines a company carries.

Length of the product mix – total number of items in the product mix.

Depth of the product mix – total number of variants offered per product in the line.

Consistency of the product mix – refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.

The four dimensions of the product mix provide the handles for determining the company’s product strategy:

Add new product lines Lengthen each product line Deepen product mix by adding new variants Pursue more product line consistency

The New Product Development Process

1. Idea Generation – systematic search for new product ideasa. Internal sourcesb. Customersc. Distributorsd. Competitorse. Suppliersf. Others

2. Idea Screening – screening new-product ideas in order to spot good ideas and drop poor ones as soon as possible

3. Concept Development and Testing (product idea, product concept, and product image)

a. Concept development – development of different new product concepts, find out how attractive each concept is, and choose the best one.

b. Testing – testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.

4. Marketing Strategy Development – designing an initial marketing strategy for a new product based on the product concept. The marketing strategy statement

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consists of three parts – the target market, the planned product positioning, and sales, market share, and profit goals for the first few years. (assignment)

5. Business Analysis – a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives.

6. Product development – the stage after the product concept has passed the business test, where R&D/Engineering starts developing the concept into a physical product. After the prototype has been fully built, it will undergo functional testing as well.

7. Test Marketing – the stage at which both the product and the marketing program are tested in more realistic market settings; it is generally expensive and time consuming, which sometimes give competitors time to move ahead.

a. Standard test markets – small number of representative test cities, use full marketing campaign in these cities and uses surveys and store audits to gauge marketing performance.

b. Controlled test markets – controlled panel of storesc. Simulated test markets – the consumers are exposed to ads and promo of

several products including that of the company, then they are given money and asked to go to a laboratory store. They may keep the money or buy any product that they like, and the researchers take note of the consumers’ choice to buy the new product or its competing brand.

8. Commercialization – introducing the new product into the market

Product life-cycle

1. Introduction – period of slow sales growth as the product is being introduced into the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction.

2. Growth – period of rapid market acceptance and increasing profits.3. Maturity – slowdown in sales growth because the product has achieved

acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.

4. Decline – period when sales fall off and profits drop.

*Style – basic and distinctive mode of expression. Example: clothing – formal vs casual. Once a style is invented, it may last for generations, coming in and out of vogue. A style has a cycle showing several periods of renewed interest.*Fashion – a currently accepted or popular style in a given field. It grows slowly, remain popular for a while, then decline slowly. Example: clothing – transition from checkered to stripes.*Fads – fashions that enter quickly, are adopted with great zeal, peak early and decline very fast. Example: Drinks – “Zagu”

Five stages of the adoption process:1. Awareness – the consumer becomes aware of the innovation but lacks

information about it.2. Interest – the consumer is stimulated to seek information about the innovation.

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3. Evaluation – the consumer considers whether to try the innovation.4. Trial – the consumer tries the innovation to improve his or her estimates of its

value.5. Adoption – the consumer decides to make full and regular use of the innovation.

Five adopter categories:1. Innovators – venturesome customers who are willing to take risks and try new

ideas.2. Early adopters – they adopt products with care, guided by respect, and their

community’s opinion leaders.3. Early majority – they adopt new ideas before the average person, but are rarely

the leaders.4. Late majority – skeptical about new ideas, and therefore adopt only when

majority has adopted the innovation.5. Laggards – tradition-bound, suspicious to changes, and will adopt an innovation

only when it takes on a measure of tradition itself.

Session 3

Marketing Environment

Marketing Environment – the actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful transactions with its target customers. It is composed of the microenvironment and a macroenvironment.

Microenvironment – the forces close to the company that affect its ability to serve its customers – the company, market channel firms, customer markets, competitors and publics.

Macroenvironment – the larger societal forces that affect the whole microenvironment – demographic, economic, natural, technological, political and socio-cultural.

Microenvironment1. The Company – in developing marketing programs, marketing managers must

consider different company departments. Top management takes mission into account. Finance looks at possible sources of funds. R&D focuses in designing safe and attractive products. Planning and purchasing is concerned with the availability of the raw materials. Manufacturing is responsible for producing the desired quality and quantity of goods. Accounting has to measure the revenues and costs to help marketing understand how well they are achieving their objectives.

2. Suppliers – availability of supply of raw materials, shortages and price increases can impact marketing decisions.

3. Marketing Intermediaries – firms that help the company to promote, sell, and distribute its goods to final buyers; they include middlemen, physical distribution firms, marketing service agencies, and financial intermediaries.

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Physical distribution firms – help stock goods from their point of origin to their destinations. Working with warehouse and transportation firms, a company must determine the best way to store and ship goods, balancing such factors as cost, delivery, speed and safety.

Marketing services agencies – marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its product to the right markets.

Financial intermediaries – banks and credit companies.- marketing intermediaries help a firm promote its product, sell and distribute its goods. Effective marketing intermediaries may make or break a marketing strategy.

4. Customers – each customer group has its own characteristics that call for careful study by the seller. Consumer markets behave differently from business markets.

5. Competitors – a company’s marketing strategy should consider its own size and industry position compared to competitors. Not all firms can implement the same strategies. Big firms vs small firms.

6. Publics – groups that have an actual or potential interest in or impact on an organization’s ability to achieve its objectives.

o Financial publics – banks, investment houses, stockholders.o Media publics – those that carry news, features, etc.o Government publics – government departments must be consulted for

product safety, etc.o Citizen-action publics – consumer organizations, environmental groups,

etc.o Local publics – neighborhood, residents, etc.o General publics – the general public’s attitudes toward its products and

serviceso Internal publics – workers, managers, board of directors

Macroenvironment

1. Socio-cultural – Institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors.

2. Economic – factors that affect consumer buying power and spending patterns.3. Political – laws, government agencies, and pressure groups that influence and

limit various organizations and individuals in a given society.4. Technological – forces that create new technologies, creating new product and

market opportunities.5. Natural – natural resources that are needed as inputs by marketers or that are

affected by marketing activities.6. Demographics – study of human population in terms of size, density, location,

gender, age, race occupation and other statistics.

Consumer Behavior

Characteristics affecting consumer behavior

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1. Culturala. Culture – the set of basic values, perceptions, wants, and behaviors learned

by a member of society from family and other important institutions. Example: Drive thru in China

b. Subculture – a group of people with shared value systems based on common life experiences and situations. It includes nationalities, religions, racial groups, and geographic regions. Example: Hispanic, Chinese, Indians, etc.

c. Social class – relatively permanent and ordered divisions in a society whose members share similar values, interests and behaviors.

2. Sociala. Groups – two or more people who interact to accomplish individual or

mutual goals.i. Membership groups

ii. Reference groups and opinion leadersb. Family – influences of husband and wives, parents to their children, etc.c. Roles and status

i. Roles – consists of the activities people are expected to perform according to the persons around them.

ii. Status – the expression of a role in society. Example: As a manager in a company, my role is to oversee the performance of my people. To reflect my status as a manager, I wear long sleeves, or clothes that will reflect it.

3. Personala. Age and lifecycle stage – when you were young, you liked Jollibee. When

you reached teens, you preferred KFC. When you started college, you preferred Gerry’s grill. When you began working, you preferred dining in Mandarin Hotel.

b. Occupation – managers travel by air, workers travel by sea.c. Economic situation – wealthy families go to El Nido, while less privileged

families go to Pansol hot springs.d. Lifestyle – a person’s pattern of living in the world as expressed in the

person’s activities, interests, and opinions. Lifestyle portrays the “whole person” interacting with his or her environment. (Psychographics)

e. Personality and self-concepti. Personality - a person’s distinguishing psychological

characteristics that lead to relatively consistent and lasting responses to his or her own environment. It is usually described in terms of traits such as self-confidence, dominance, sociability, autonomy, defensiveness, adaptability and aggressiveness. Example: Filipinos, in general are less likely to complain and more agreeable compared to Americans.

ii. Self-concept – self-image. The premise is that people’s possessions contribute to and reflect their identities, or “we are what we have”. Example: People who think and feel that they are

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sexy wear sexy clothes. People who think they are fashionable buy the latest fashion accessories and clothes.

4. Psychologicala. Motivation – a need that is sufficiently pressing to direct the person to

seek satisfaction of the need.i. Freud’s theory of motivation – people are largely unconscious

about the real psychological forces shaping their behavior. He sees the person as growing up and repressing many urges. These urges are never eliminated or under perfect control; they emerge in dreams, in slips of the tongue, in neurotic and obsessive behavior, or ultimately in psychoses. Example: Kris Aquino’s father figure.

ii. Maslow’s hierarchy of needs – physiological needs, security needs, social needs, esteem needs, self actualization needs.

iii. Herzberg’s two-factor model – satisfiers vs dissatisfiersb. Perception – the process by which an individual selects, organizes and

interprets information inputs to create a meaningful picture of the world.i. Selective attention:

1. People are more likely to notice stimuli that relate to a current need.

2. People are more likely to notice stimuli that they anticipate. (car brochures in car showrooms are noticed compared to road maps, because that’s what they expect)

3. People are more likely t notice stimuli whose deviations are large in relation to the normal size of the stimuli. ($1000 discount vs $50 discount)

ii. Selective Distortion – people tend to twist information into personal meanings. They will interpret information in a way that will support rather than challenge their preconceptions.

iii. Selective Retention – People will tend to retain information that supports their attitudes and beliefs. He will likely remember good points mentioned about his favored brand and forget good points mentioned about competing brands.

c. Learning – changes in an individual’s behavior arising from experience. It occurs through the interplay of drives, stimuli, cues, responses, and reinforcement.

i. Drive – a strong internal stimulus that calls for action. It becomes a motive when it is directed toward a particular drive-reducing stimulus.

ii. Cues – minor stimuli that determine when, where and how a person responds.

iii. Response – the behavior exercised after experiencing or attending to the cues.

iv. Reinforcement – the experience after the outcome will either reinforce the behavior (if the outcome is good) or not reinforce the behavior (if the outcome of the response is not good).

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d. Attribution – the causal inference that a person makes about a behavior. “I was lucky to have purchased a high quality product.”

e. Beliefs and attitudesi. Belief – a descriptive thought that a person holds about something.

(what is your belief about this product or this person?)ii. Attitude – a person’s consistently favorable or unfavorable

evaluations, feelings and tendencies toward an object or idea. (whether you like or dislike)

Five Consumer Buying Roles1. Initiator – the person who first suggests or thinks of the idea of buying a particular

product or service.2. Influencer – a person whose views or advise influences the buying decision3. Decider – the person who ultimately makes a buying decision or any part of it –

whether to buy, what to buy, how to buy or where to buy.4. Buyer – the person who makes an actual purchase.5. User – the person who consumes or uses a product or service

Types of Buying Decision Behavior

High involvement Low InvolvementSignificant differences

Complex buying behavior- highly involving purchase

with significant differences among brands.

- Product is usually involving if it is expensive, risky, purchased infrequently, and highly self-expressive.

Variety seeking buying behavior- significant differences and

low involvement.- Brand switching occurs

because people would like to try the product for the sake of variety.

- Cookies, restaurantsFew differences

Dissonance reducing buying behavior

- highly expensive, risky, infrequent purchase, but see little difference among brands.

- Buying carpets

Habitual buying behavior- behavior in situations

characterized by low consumer involvement and few significant perceived differences.

- Consumers do not search extensively for information about brands, evaluate brand characteristics, and make weighty decisions about which brands to buy.

- Consumers do not form strong attitudes toward brand, but instead select a brand due to familiarity.

- Marketers link low

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involvement products to high involvement activities.

- Toothpaste linked to cavities- Coffee to evolving

relationships

Involvement – refers to consumer’s perceptions of importance or personal relevance for an object, event or activity. Consumers who perceive that a product has personally relevant consequences are said to be involved with the product and to have a personal relationship with it.

Buying Decision Process1. Need recognition – the consumer recognizes a problem or a need.2. Information search – the consumer is aroused to search for more information; the

consumer may simply have heightened attention.3. Evaluation of alternatives – the consumer uses information to evaluate alternative

brands in the choice set.4. Purchase decision – the consumer actually buys the product.5. Postpurchase behavior – the consumers take further action after purchase based

on their satisfaction or dissatisfaction.Buyer Decision Process for New Products (discussed already in the “new products” section)

Target Marketing (Market Segmentation, Targeting and Positioning)

Companies sometimes go through three stages:1. Mass marketing – seller mass produces, mass distributes and mass promotes one

product to all buyers in the same way. This leads to lowest cost and prices, and create the largest potential market.

2. Product variety marketing – seller produces two or more products that have different features, style, quality, sizes and so on.

3. Target marketing – the seller identifies market segments, selects one or more of them, and develops products and marketing mixes tailored to each.

Micromarketing – a form of target marketing in which companies tailor their marketing programs to the needs and wants of narrowly defined geographic, demographic, psychographic, or behavioral segments.

Market segmentation – dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products or marketing mixes.

Market targeting – he process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

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Market positioning – arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers; formulating competitive positioning for a product and a detailed marketing mix.

Steps in market segmentation, targeting and positioning:

1. Identify bases for segmenting the market. (segmentation)2. Develop profiles of resulting segment. (segmentation)3. Develop measures of segment attractiveness. (targeting)4. Select the target segments. (targeting)5. Develop positioning for each target segment. (positioning)6. Develop marketing mix for each target segment. (positioning)

Market Segmentation- markets consist of buyers who differ in their wants, resources, location, buying

attitudes, and buying practices.- Most sellers face larger numbers of smaller buyers and do not find complete

segmentation worthwhile. Instead, they look for broad classes of buyers who differ in their product needs or buying responses.

Levels of Segmentation1. Mass marketing – seller engages in the mass production, mass distribution and

mass promotion of one product for all buyers2. Segment marketing – a market segment consists of a large identifiable group

within a market. A company that practices segment marketing recognizes that buyers differ in their wants, purchasing power, geographical locations, buying attitudes, and buying habits. The company therefore tries to isolate broad profitable segments that make up a market.

3. Niche marketing – A niche is a more narrowly defined group, typically a small market whose needs are not being well served. Marketers usually identify niches by dividing a segment into subsegments or by defining a group with a distinctive set of traits who may seek a special combination of benefits. Niches are fairly small and normally attract only one or a few competitors.

4. Local marketing – local marketing involves the implementation of marketing programs that are tailored to the needs and wants of local customer groups.

5. Individual marketing – serving markets in segments of one.6. Self-marketing – a form of individual marketing wherein consumers take on more

responsibility for determining which products and brands to buy. This is very common in internet shopping, and interactive media.

Bases for Segmentation of Consumer Markets1. Geographic Segmentation – dividing the market into geographical units such as

nations, regions, states, countries, cities or neighborhoods.2. Demographic Segmentation – dividing the market into groups based on

demographic variables such as age, sex, family size, family life cycle, income, occupation, education, religion, race and nationality.

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- most popular segmentation basis because consumer needs and wants and usage rates vary closely with demographic variables.

- Easier to measure compared to other types of variables.

Age and lifecycle stage – consumer needs and wants change with age. Example: Mcdonald’s targets children, teens, adults, and senior citizens with different ads and media.

Gender – gender segmentation is often used in clothing, cosmetics, magazines, etc. Deodorants used to be for both sexes, now you have secret that caters to ladies. Head & Shoulders vs Clear Men and Women.

Income – Rustan’s department store vs SM department stores

Generation segmentation – different generations have different mindsets, and may be served in different ways by different offerings.

Family type – Asian families usually buy products that they share within the household, unlike in the west. As such, growth of kid’s toothpaste did not materialize in Asia as compared to the west.

Religion – halal food vs haram

Social class – companies create products that serve to satisfy particular social classes.

3. Psychographic Segmentation – divides buyers into different groups based on social class, lifestyle, or personality characteristics.

Lifestyle – people’s interest in different goods is affected by their lifestyles, and the goods they buy reflect those lifestyles. People who live a healthy lifestyle will probably buy non-fat milk, buy more than one pair of rubber shoes, buy jogging pants, gym clothes, etc.

Personality – marketers also use personality variables to segment markets, giving their products personalities that correspond to consumer personalities.

4. Behavioral Segmentation – divides buyers according to their knowledge, attitudes, uses, or responses to a product.

Occasions – buyers can be distinguished when they develop a need(or get the idea to buy), purchase a product, or use a product purchased. Example, travel may be triggered by occasions related to business, vacation, or family. People may travel for the purpose of spending time outside of work (vacation), or due to birthdays of special members of the family, or because there are business occasions that need to be attended (like induction of new board of directors, etc.)

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Benefits – classifying products according to the benefits that they seek from the product. Some people play badminton for exercise, while others play badminton to socialize.

User status – markets can be segmented into non-users, ex-users, potential users, first time users, and regular users of a product. Blood banks, for example, do not rely only on regular donors, but also recruit new donors. Each group will require different communication messages.

Usage rate – markets can also be segmented into light, moderate and heavy user groups. Heavy users usually have common demographics, psychographics and media habits.

Loyalty status – consumers can be classified as loyal according to the following brand loyalty status:

Hard-core loyals – consumers who buy one brand all the time.(AAA)Split loyals – consumers who are loyal to two or three brands. (AABBA)Shifting loyals – consumers who shift from favoring one brand to another(AAAABBBB)Switchers – consumers who show no loyalty to any brand (ACEBDFGA)

Buyer-readiness stage – some consumers are unaware about the product, some are aware, some are informed, some are interested, some desire the product, and some are interested to buy.

Attitude – enthusiastic, positive, indifferent, negative and hostile attitudes. Politicians usually spend time thanking enthusiastic voters, they spend more time in positive voters, and longer time in convincing indifferent voters. They do not try to convince voters with hostile and negative attitudes towards them.

5. Multiattribute model – due to modern technology, segmentation is no longer limited to a few market segments. Each segment can now be further defined into smaller target groups.

Requirements for effective segmentation:

1. Measurable – size, purchasing power, and profile of the segments can be measured.

2. Substantial – the segment should be big enough to be profitable.3. Accessible – the segment should be effectively served and reached.4. Differentiable – the segments are distinguishable and respond differently to

different marketing mix strategies.5. Actionable – effective programs can be formulated to attract and serve the

segments.

Evaluating Market Segments

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1. Determine whether the market segment is attractive in terms of size, growth, profitability, scale economies, low risk, and so on.

2. Determine the structural attractiveness of the segment (are competitors aggressive? Are there plenty of competitors? Are there substitutes? Is the barrier to entry high or low? Porter’s five forces)

3. Determine whether it is wise to invest in those selected markets considering the company’s long-term goals and objectives.

Selecting Market Segments

Five Patterns of Target Market Selection:1. Single-segment concentration – the company selects a single segment and focuses

all its efforts in that segment. Because it has all its effort in one segment, it is able to attain strong market position. The problem with this is that when the market segment suddenly turns sour, the business may go out of business.

M1 M2 M3P1P2 xxxxxxxxP3

P = product, M=market

2. Selective specialization – here, the firm selects several of segments, each objectively attractive and appropriate, givenits objectives and resources. There may be no or little synergy among the segments, but each of them is a money maker. This reduces the company’s risk by relying on several markets.

M1 M2 M3P1 XxxxxxP2 xxxxxxxxP3 xxxxxxxx

3. Product specialization – here, the firm concentrates on making a certain product for several segments. Example would be companies who specialize in the waterproofing of walls and roofings. They gain reputation by their ability to serve different markets with specialized products for each. However, one loophole of this is that if a new technology suddenly comes out, the company may lose business.

M1 M2 M3P1 xxxxxxxx Xxxxxx xxxxxxxxP2P3

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4. Market specialization – the firm concentrates on serving several needs of a particular customer group.

M1 M2 M3P1 xxxxxxxxP2 xxxxxxP3 xxxxxxxx

5. Full market coverage – the firm attempts to serve all customer groups with all the products that they might need. Only large firms are able to undertake such a strategy. (Example Panasonic/National/Matsushita)

M1 M2 M3P1 xxxxxxxx Xxxxxxxxx XxxxxxxxP2 xxxxxxxx Xxxxxxxxx XxxxxxxxP3 xxxxxxxx Xxxxxxxxx Xxxxxxxx

Competitive Differentiation

Differentiation – is the act of designing a set of meaningful differences to distinguish the company’s offering from competitors’ offerings.

Five Basic Dimensions of Differentiation (Differentiation Variables):

1. Product Differentiation Features – characteristics that supplement the product’s basic function;

color, shape, size, etc. Performance quality – the level at which the product’s primary

characteristics operate. Conformance quality – the degree to which all the produced units are

identical and meet the promised target specifications. Durability – a measure of the product’s expectd operating life under

natural and/or stressful conditions. Reliability – measure of the probability that the product will not

malfunction or fail within a specified period of time. Repairability – a measure of the ease of fixing a product that malfunctions

or fails. Style – describes how well the product looks and feels to the buyer. (the

“look” and the “feel”) Design – totality of features that affect how a product looks and functions

in terms of customer requirements. It involves the decision on tradeoffs as to how much to invest in features, performance, conformance, reliability, repairability, style and so forth.

2. Services Differentiation

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Ordering ease – how easy to place an order Delivery – how well the product or service is delivered to the customer; it

includes speed, accuracy and care. Installation – the work done to make a product operational in its planned

location. Customer training – training the customer’s employees on how to use the

equipment/product properly Customer consulting – data information systems and advising services that

the seller offers free or for a price to buyers. Maintenance and repair – the company’s service program for helping

customers to keep the product in good working order. Miscellaneous services – other services

3. Personnel Differentiation

Better trained personnel exhibit six personnel characteristics: Competence Courtesy Credibility Reliability Responsiveness Communication

4. Channel Differentiation – companies can differentiate their product by distributing through different channel coverage, channel expertise, and channel performance.

5. Image Differentiation – brands develop a distinctive personality that consumers identify with.

Identity comprises the ways that a company aims to identify itself to its public.Image is the way the public perceives the company.

An effective image should: Convey a singular message Convey the message in a distinctive way so that it is not confused with

competitors Delivers emotional power to stir the hearts and minds of buyers

Identity-building tools include: Symbols – a strong image consists of one or more symbols that trigger

company or brand recognition. Written and audio/visual media – the chosen symbols must be worked into

advertisements that convey the company or brand personality. The ads should convey a storyline, a mood, a performance level – something distinctive. The message should be replicated in other publications, such

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as annual reports, brochures, and catalogs. The company’s stationery and business cards should reflect the same image that the company wants to convey.

Atmosphere – the physical space in which the organization produces or delivers its products and services becomes another powerful image generator. Example: hotels

Events – a company can build an identity through the type of events it sponsors.

Positioning for Competitive Advantage

Product position – the way the product is defined by consumers on important attributes – the place the product occupies in consumers’ minds relative to competing products.

Seven positioning strategies

1. Attribute positioning – example: Samsung 1.3 megapixel camera phone2. Benefit positioning – example: Colgate toothpaste fights tooth decay3. Usage/Application positioning – example: C2 can be positioned as a healthy juice

drink(green tea), but it can also be positioned as an ordinary flavored drink to quench thirst and keep yourself cool in summer.

4. User positioning – example: Johnson’s baby shampoo repositioned as a mild shampoo for adults.

5. Competitor positioning – example: Pepsi challenge6. Product category positioning – Orbitz (an ordinary gum positioned as a gum that

helps prevent plaque and tartar)7. Combination

Steps in Positioning:

1. Identifying possible competitive advantages (through differentiation)2. Selecting the right competitive advantages (how many positions to promote and

which differences to promote) Should be important Distinctive Superior Communicable Preemptive Affordable Profitable

3. Communicating and delivering the chosen position (all elements of the marketing mix should support the chosen position, and they must deliver the position first before building the position)

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Session 4

Price – the amount of money charged for a product or service; it is the sum of the values that consumers exchange for the benefits of having or using the product or service.

Only price represents revenue in the marketing mix, all others represent cost.

Price is the most flexible element of the marketing mix.

Factors to consider when setting prices:2. Internal factors affecting pricing decisions:

a. Marketing Objectives – what is the market positioning strategy?1. Survival – the company may price a product lower in the hope of

increasing market demand. This is often done when the company is facing too much excess capacity, heavy competition, or changing consumer wants. Companies in this situation often give more importance to survival than profits. While this is only a short-term objective, the company must learn how to add value, or otherwise, it will face extinction.

2. Current profit maximization – they estimate what demand and costs will be at different prices and choose the price that will produce the maximum current profit, cash flow, or return on investment.

3. market-share leadership – the company with the largest market-share will enjoy the most economies of scale, have lowest cost, and highest long-term profit. To become market-share leaders, companies with this objective price their products as low as possible.

4. Product-quality leadership – charging a high price to cover R&D costs for developing high quality products.

b. Marketing mix strategy – Price decisions should be coordinated with product design, distribution and promotion decisions to form a consistent and effective marketing program. Some companies employ target costing, where the price is set first, followed by the product development, while others deemphasize price to create nonprice positions. The best strategy is not to charge the lowest price, but rather to differentiate the marketing offer to make it worth a higher price.

c. Costs – cost set the floor for the price that the company can charge for its product. A company wants to charge a price that both covers all its costs for producing, distributing and selling the product to deliver for itself a fair rate of return for its effort and risk.

d. Organizational considerations – different organizations set prices differently. In smaller companies, pricing is often set by top management. Larger organizations usually delegate the pricing strategy to marketing or sales departments, etc.

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3. External factors affecting pricing decisions:a. The market and demand – Pricing strategies can change according to the

nature of the market and demand.1. Pricing in different types of markets

1. Perfect competition – in a perfect competition, there are many buyers and sellers selling uniform commodities. A seller cannot charge more than the going price because buyers can obtain as much as they need on the going price. Neither is the seller willing to charge less because buyers are willing to buy the product at the going rate.

2. Monopolistic competition – in this market setup, there are many buyers and sellers trading over a range of prices rather than a single market price. The range is usually due to differentiation in product/service, as is the case with restaurants. Buyers usually see differences in products, and are willing to pay for them.

3. Oligopoly – in this setup, there are few sellers who are highly sensitive to each other’s pricing and marketing strategies.

4. Pure monopoly – there is only one seller and many buyers. Since the demand is inelastic, a monopoly can raise prices upto what the market will bear. A monopolist, however, will not necessarily charge a full price in order to avoid attracting competition, or in order to penetrate the market faster with a low price, or in order to avoid government intervention and regulation.

2. Consumer perception of price and value – pricing decisions must be buyer oriented. Effective buyer-oriented pricing involves understanding how much value consumers place on the benefits they receive from the product and setting a price that fits this value.

3. Price–demand relationship – the demand for a product must be considered in setting prices. Where adjustments in price are needed, the price elasticity must be carefully studied.

b. Competitors’ cost, prices and offers – competitors’ moves and pricing strategies affect the company’s pricing decisions.

c. Other external factors – economic conditions, the government and other social concerns must also be considered in setting prices.

General Pricing Approaches:1. Cost-based pricing

a. Cost-plus pricing – adding a standard mark-up to the cost of a product.b. Break-even analysis and target profit pricing – computing for the target

profit and break-even point first, and then setting the price that will meet the targets.

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2. Value-based Pricing – prices are set based on the product’s perceived value instead of the seller’s cost. Example would be parker pens.

3. Competition-based pricinga. Going-rate pricing – the firm bases its price largely on competitors’ prices,

with less attention paid to its own costs or to demand.b. Sealed-bid pricing – the firm wants to win a contract and wining the

contract requires pricing less than other firms. In this scenario, the company prices according to how it thinks the competitors will price their bids.

New Product Pricing Strategies:

For imitative products, price positioning can be adjusted as follows:Price

Higher Lower

QualityHigher Premium strategy Good-value strategy

Lower Overcharging strategy

Economy strategy

For new products, the following strategies may be employed:

Market Skimming pricing – setting 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.

Requisites for market skimming pricing:1. The quality and image must support the higher price, and enough buyers must

want the product at that price.2. The cost of producing a smaller volume is not that high that it cancels the

advantage of charging more.3. Barriers to entry should be high enough to disallow competitors to undercut the

price.

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.

Requisites for Market Penetration Pricing:1. The market must be highly price sensitive.2. Production and distribution costs must fall as sales volume increases.3. The low price must keep competition out.

Product-mix Pricing Strategies

Product line pricing Setting price steps between product line items- if the price difference between a more advanced model and a

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less advanced model is small, the buyer will usually take the more expensive one. If the price difference, however, is big, the buyer will usually buy the less advanced model

Optional product pricing Pricing optional or accessory products sold with the main product- stripping the product with options, and charging additional for each additional option availed.

Captive product pricing Pricing products that must be used with the main product- razor blades

By-product pricing Pricing low-value by-products to get rid of them- selling by-products give additional revenues to the company, which allows the main product to be sold at a more competitive price.

Product bundle pricing Pricing bundles of products sold together- happy meals

Price-Adjustment Strategies

Discount and allowance pricing

Reducing prices to reward customer responses such as paying early or promoting the product- cash discounts- quantity discounts- functional discounts- seasonal discounts- allowances

Segmented pricing Adjusting prices to allow for differences in customers, products, or locations- customer segment pricing – student vs adult rate in museums- product-form pricing – different forms of the same product are priced differently, but not according to differences in their costs.- location pricing – different locations are priced differently, even though the cost of offering each location is the same. Example, theater front seats vs back seats.- time pricing – prices vary by the season, month, day and hour. “peak vs off-peak”

Psychological pricing Adjusting prices for psychological effect300 vs 299.95

Promotional pricing Temporarily reducing prices to increase short-run sales- loss leaders to increase the probability of the buyer to buy other products

Value pricing Adjusting prices to offer the right combination of quality and service at a fair price- giving the same quality for less, like mcdonald’s value meals

Geographical pricing Adjusting prices to account for the geographic location of

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customersInternational pricing Adjusting prices for international markets

Session 5

Placement – distribution

Marketing channel/distribution channel – sets of interdependent organizations involved in the process of making a product or service available for use or consumption.

Reason for the use of distribution channels: Producers prefer producing few types of goods in large quantities, while consumers prefer assortments in small quantities. Distribution channels help match supply and demand.

Key functions of distribution channels: Information – gathering and distributing marketing research and intelligence

information about actors and forces in the marketing environment needed for planning and aiding exchange.

Promotion – developing and spreading of persuasive communication about an offer.

Contact – finding and communicating with prospective buyers. Matching – shaping and fitting the offer to the buyer’s needs, including such

activities as manufacturing, grading, assembling and packaging. Negotiation – reaching an agreement on price and other terms of the offer so that

ownership or possession can be transferred. Ordering – backward communication of intention to buy by the marketing

channel members to the manufacturer Financing – acquisition and allocation of funds required to finance inventories at

different levels of the marketing channel. Risk-taking – assuming the risk of carrying out the channel work Physical distribution – transporting and storing of goods

Retailing – all activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use.

Retailing1. Store Retailing classifications:

a. Amount of Servicei. Self-service – locate-compare-select

ii. Limited service – more sales assistantsiii. Full service – salespeople assist customers in every phase of the

shopping processb. Product Line

i. Specialty stores – narrow product line with deep assortment with that line (sporting goods store)

ii. Department stores – wide variety of product lines with each line managed by a separate department

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iii. Supermarket – large, low cost, low margin, high volume, self service stores that carry a wide variety of food, laundry and household products.

iv. Convenience store – small stores that carry a limited line of high turnover convenience goods.

v. Superstore/combination store/hypermarket1. superstore – generally twice the size of regular

supermarkets with large assortment of routinely purchased food and nonfood items.

2. combination stores – food and drug store combination3. hypermarkets – huge stores that combine supermarket,

discount and warehouse retailing; carries food, appliances, furniture, clothing and many other products

vi. Service business – hotels, airlines, banks, hospitals, etc.c. Relative Prices

i. Discount stores – retail institution that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume.(Regularly sells national brands at lower prices, not inferior goods)

ii. Off-price retailers – retailers that buy at less than regular wholesale prices and charge consumers less than retail. They tend to carry a changing and unstable collection of higher quality merchandise, often leftover goods, overruns, and irregulars obtaine at reduced prices from manufacturers or other retailers.

1. Factory outlets- off-price retailers owned by manufacturers, normally carrying the manufacturer’s surplus, discontinued, or irregular goods.

2. Independent off-price retailers – off-price retailers run by entrepreneurs, or divisions of larger retail corporations.

3. Warehouse clubs – off-rpcie retailer that sells a limited selection of brand-name grocery items applicances, clothing and a hodgepodge of other goods at deep discounts to members who pay annual membership fees.

iii. Catalog showroom – wide selection of high-markup, fast-moving, brand name goods at discount prices

d. Control of Outletsi. Corporate chain – two or more outlets that are commonly owned

and controlled, have central buying and merchandising, and sell similar lines of merchandise

ii. Voluntary chain and retailer cooperative – independent retailers that band together

iii. Franchise organization – a contractual association between a manufacturer, wholesaler or service organization and independent business people who buy the right to own or operate one or more units in the franchise system.

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iv. Merchandising conglomerate – corporations that combine different retailing forms under central ownership and share some distribution and management functions.

e. Type of Store Clusteri. Central business district

ii. Shopping center – a group of retail businesses planned, developed, owned and managed as a unit.

2. Non-store Retailinga. Direct marketing – marketing through various advertising media that

interact directly with consumers, generally calling for the consumer to make a direct response.

b. Direct selling – selling door-to-door or office-to-officec. Automatic vending – selling through vending machines

Wholesaling – includes all activities involved in selling goods and services to those buying for resale or business use.

Wholesalers perform the following functions better than manufacturers: Selling and promoting – the wholesaler has more contacts and is often more

trusted by the buyer than manufacturers. Buying and assortment building – wholesalers can select items and build

assortments needed by their customers, reducing the work on the part of consumers.

Bulk-breaking – wholesalers save their customers money by buying in carload lots and breaking bulk.

Warehousing – wholesalers hold inventories, reducing supplier inventory costs and risks of suppliers and customers.

Transportation – wholesalers hold inventories, thereby reducing the inventory costs and risks of suppliers and customers.

Financing. Wholesalers finance their customers by giving credit, and they finance their suppliers by ordering early and paying bills on time.

Risk-bearing – wholesalers absorb risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence.

Market information – wholesalers give information to suppliers and customers about competitors, new products, and price developments.

Management services and advice – wholesalers often help retailers train their salesclerks, improve store layouts and displays, and setup accounting and inventory control systems.

Types of wholesalers1. Merchant wholesalers – independent businesses that take title to the merchandise

they handle.a. Full service – provides full set of services such as carrying stock, using a

sales force, offering credit, making deliveries and providing management assistance.

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i. Wholesale merchantsii. Industrial distributor

b. Limited service2. Brokers’ and agents

a. Broker – brings buyers and sellers together and assists in negotiation; does not take title to goods.

b. Agent – represents buyers or sellers on a relatively permanent basis; does not take title to goods.

3. Manufacturer’s sales branches and offices – wholesaling by sellers or buyers themselves rather than through independent wholesalers

Promotional Mix: Advertising Sales Promotion Public Relations Personal Selling

Advertising – any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.

Major Decisions in Advertising1. Setting objectives

a. Advertising objective – a specific communication task to be accomplished with a specific target audience during a specific period of time. It can be:

i. To inform – Informative advertising is used heavily when introducing a new product category. The objective is to build primary demand.

ii. To persuade – Persuasive advertising becomes more important as copetition increases. The objective is to build selective demand.

iii. To remind – Reminder advertising keeps consumers thinking about the product.

2. Setting the advertising budget – the company wants to spend the amount that needed to achieve the sales goal. There are five factors that should be considered in setting the advertising budget:

a. Stage in the product life cycle – new products require large advertising budget to build awareness and gain consumer trial.

b. Market share – high-market-share brands usually need more advertising spending as a percent of sales than low-share brands. Building the market or taking share from competitors requires larger advertising spending than simply maintaining current share.

c. Competition and clutter – a brand must advertise more heavily to be heard above the noise in the market

d. Advertising frequency – when repetitions are needed to present the brand’s message to consumers, the advertising budget must be larger.

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e. Product differentiation – a brand that closely resembles other brands in its product class requires heavy advertising to set it apart. When the product differs greatly from competitors, advertising can be used to point out the differences to consumers.

3. Advertising strategy – has two major elements:a. Creating advertising message

i. Message strategy – the first step is to plan a message strategy. It should be plain, straightforward outlines of benefits and positioning points that the advertiser wants to stress. These strategy statements must be turned into advertisements that will persuade consumers to buy or believe something. Next, the advertiser must develop a compelling creative concept or “big idea” that will bring the message strategy to life in a distinctive and memorable way. The creative concept may emerge as a visualization, a phrase, or a combination of the two. The creative concept will guide the choice of specific appeals to be used in an advertising campaign. Advertising appeals should be meaningful(should point out benefits that make the product mor desirable to consumers), believable (consumers should believe that the product will deliver the benefits promised) and distinctive (should tell how the product is better than competing brands).

ii. Message execution – conversion of the big idea into actual ad execution that will capture the target market’s attention and interest. It may be any of the following:

1. Slice of life – typical people using the product in a normal setting.

2. Lifestyle – shows how a product fits in with a particular lifestyle (anlene high calcium ten thousand steps)

3. Fantasy – creating a fantasy about a product or its use (coke commercial with angel)

4. Mood or image – builds a mood around the product such as beauty, love or serenity

5. Musical – one or more people or cartoon characters singing a song about the product

6. Personality symbol – creation of a character that represents the product (yosi kadiri)

7. Technical expertise – showing the technical expertise of the company in making the product (Welch grape juice)

8. Scientific evidence – survey or scientific evidence that the brand is better or better liked (pepsi challenge)

9. Testimonial evidence – highly believable endorsers (pamet doctors)

b. Selecting the advertising mediai. Deciding on the reach, frequency and impact

1. Reach – the percentage of people in the target market exposed to an ad campaign during a given period.

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2. Frequency – the number of times the average person in the target market is exposed to an advertising message during a given period.

3. media impact – the qualitative value of a message exposure through a given medium.

ii. Choosing among media types – deciding whether tv, newspapers, direct mail, radio, magazines, outdoor, etc., followed by selection of the right media vehicle with the most affordable cost per thousand, and verification of the right audience quality, best audience attention and the most believable editorial quality.

iii. Deciding on the media timing – seasonality of ads; deciding for continuity vs pulsing.

4. Advertising evaluationa. Measuring the communication effect – also called copy testing – tells

whether the ad is communicating well. There are three methods of advertising pretesting: Direct rating (advertiser exposes a consumer panel to alternative ads and asks them to rate the ads), portfolio tests (consumers view or listen to a portfolio of advertisements, taking as much time as they need. Then they are asked to recall the ads and their content), and laboratory tests (use equipments to measure physiological reactions of consumers to an ad, like dilating pupils, heart rate, blood pressure, etc.)

b. Measuring the sales effect – One way to measure sales effect of advertising is to compare past sales with past advertising expenditures. Another way is thorugh experiments (three different areas, three different spend levels in advertising, then compare the results).

Sales Promotional Objectives and ToolsSales Promotion – short-term incentives to encourage purchase or sales of a product or service. It offers a reason to buy “now”. Give examples – coupons, rebates, price-off, premiums, contests (consumer promotions), and buying allowances, free goods, merchandise allowances, cooperative advertising, push money, dealer sales contests (trade promotions), and bonuses, contests, and sales rallies (sales force promotion).Setting Sales-Promotion ObjectivesConsumer Promotions

- to increase short term sales- to help build long-term market share- to facilitate trial- lure away customers from competitors- to get consumers to load up on mature products- to reward loyal customers

Trade Promotions- getting retailers to carry new items and more inventory- getting the retailers to advertise the product and give it more shelf space- getting the retailers to buy ahead

Sales Force Promotions- getting more sales force support for current or new products

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- getting salespeople to sign up new accounts

General objectives of Sales Promotions:1. To help reinforce the product’s position and build long-term customer

relationships with consumers.2. To help build brand equity (instead of build short term sales)

Selecting Sales-Promotions Tools

Consumer Promotion Toos: Samples – are offers of a trial amount of a product. Coupons – certificates that give buyers a saving when they purchase a specified

product. Cash refund offers – offers to refund part of the purchase price of a product to

consumers who send a proof of purchase to the manufacturer. Price packs or cents-off deals – reduced prices that are marked by the producer

directly on the label or package. Premiums – goods offered at a low cost or free as an incentive to buy a product

(bundling) Advertising specialties – useful articles imprinted with an advertiser’s name,

given as gifts to consumers. (bags, pens, promo items) Patronage records – cash or other awards for the regular use of a certain

company’s products or services (frequent flyer programs). Point-of-purchase promotions – displays and demonstrations that take place at the

point of purchase or sale. Contests, sweepstakes, games – promotional events that give consumers the

chance to win something – such as cash, trips, or goods – by luck or through extra effort.

Trade Promotion Tools: Contests Premiums Displays/point-of-purchase promotions Straight discount – straight reduction in price on purchases during a stated period

of time. Allowances – promotional money paid by manufacturers to retailers in returnd for

an agreement to feature the manufacturer’s products in some way.

Business Promotion Tools: Conventions Trade shows Sales contest – contest for salespeople

Public RelationsPublic relations – building good relationships with the company’s various publics by obtaining favorable publicity, building up a good “corporate image,” and handling or

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heading off unfavorable rumors, stories, and events. Major PR tools include press relations, product publicity, corporate communications, lobbying, and counseling.

Functions of public relations: Press relations or press agentry – creating or placing newsworthy information in

the media to attract attention to a person, product or service. Product publicity – publicizing specific products Public affairs – building and maintaining national or local community relations Lobbying – building and maintaining relations with legislators and government

officials to influence legislation and regulation. Investor relations – maintaining relationships with shareholders and others in the

financial community. Development – public relations with donors or members of nonprofit

organizations to gain financial or volunteer support.

Public relations tools: News Speeches Special events – news conferences, press tours, grand openings, and fireworks

displays Written materials – annual reports, brochures, articles, and company newsletters

and magazines Audiovisual materials – films, slide-and-sound programs, video and audio

cassettes Corporate identity materials – logos, stationery brochures, signs, business forms,

business cards, buildings, uniforms, company cars and trucks Public service activities – fund-raising, etc.

PR decisions: Setting objectives (what do you want to achieve) Choosing public relations messages and vehicles (what vehicle do you want to use

to create news that will achieve your objectives?) Implementing the public relations plan (taking the matter out to the media) Evaluating the public relations results (measuring the number of exposures in the

media, change in product awareness, knowledge, and attitude)

Personal SellingPersonal selling – personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships; it is the interpersonal arm of promotional mix.

Salesperson – an individual representing a company to customers by performing one or more of the following activities: prospecting, communicating, selling, servicing, information gathering, and relationship building.

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*Personal selling is the interpersonal arm of promotional mix because it involves a two way personal communication between salespeople and individual customers whether face to face, by telephone, through video or web conferences, etc.

*Sales force roles may vary. Companies with business customers have sales forces that directly deal with clients. On the other hand, consumer product companies’ sales force usually deal with distributors and retailers, who deal with the customers directly.

*The sales force of a company perform a critical link between the company and its customers. They represent the company to customers, and they represent the customers to the company by relaying what the customers prefer.

Sales force management – the analysis, planning, implementation and control of sales force activities. It includes designing sales force strategy and structure and recruiting, selecting, training, compensating, supervising, and evaluating the firm’s salespeople.

Designing Sales Force Strategy and Structure

Sales force structure1. Territorial sales force structure – a sales force organization that assigns each

salesperson to an exclusive geographic territory in which that salesperson sells the company’s full line.

2. Product sales force structure – a sales force organization under which salespeople specialize in selling only a portion of the company’s product or lines.

3. Customer sales force structure – a sales force organization under which salespeople specialize in selling only to certain customers or industries.

4. Complex sales force structure – a combination of two or more sales force structure. This is often employed by companies who have a wide variety of products selling to many types of consumers over a broad geographic area.

Sales force size Workload approach – 1000 type a accounts x 36 calls a year plus 2000 type B

account x 12 calls a year = 36,000 + 24,000 calls. Total is 60,000 calls. If an average salesman makes 1000 calls a year, then 60 salespeople are needed.

Recruitment must be careful in order to ensure that the right sales people are selected.

Training must be given to salespeople in the beginning and throughout the salesperson’s career. Training must include the following:

Knowing about customers (and how to build relationships with them), its types, buying motives and buying habits

Knowing the company’s goals and objectives Knowing the company’s chief products and markets Knowing competitors’ strategies

The personal selling process:

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1. Prospecting and qualifying – the step in the selling process in which the salesperson identifies qualified potential customers.

2. Preapproach – the step in the selling process in which the salesperson learns as much as possible about a prospective consumer before making a sales call.

3. Approach – the step in the selling process in which the salesperson meets the customer for the first time.

4. Presentation and demonstration – the step in which the salesperson tells the “product story” to the buyer, highlighting the customer benefits.

5. Handling objections – the step in the selling process in which the salesperson seeks out, clarifies, and overcomes customer objections to buying.

6. Closing – the step in the selling process in which the salesperson asks the customer for an order.

7. Follow-up – the last step in which the salesperson follows up after the sale to ensure customer satisfaction and repeat business.