CHAPTER 11: Marketing

• Creating and Pricing Products• Identifying Target Market• Creating New Products• Product Differentiation• Pricing Strategy

Good Marketing is No Accident

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Starbucks plans to ensure its marketing successes in countries around the world.

What is Marketing?

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Marketing is an organizational function and a set of processes for creating, communicating, and delivering value

to customers and for managing customer relationships in ways that benefit the

organization and its stakeholders.

What is Marketing Management?

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Marketing management is theart and science

of choosing target markets and getting, keeping, and growing

customers throughcreating, delivering, and communicating

superior customer value.

What is Marketed?

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GoodsGoods

ServicesServices

Events & ExperiencesEvents & Experiences

PersonsPersons

Places & PropertiesPlaces & Properties

OrganizationsOrganizations

InformationInformation

IdeasIdeas

Key Customer Markets

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Consumer Markets

Business Markets

Global Markets

Nonprofit/ Government Markets

Definitions

Consumer Buying BehaviorBuying behavior of individuals and households that buy products for personal consumption.

Consumer MarketAll individuals/households who buy products for personal consumption.

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Factors Influencing Consumer Behavior

Target MarketFocuses all marketing decisions on the

specific group of people you want to reach.

Undifferentiated Targeting

Concentrated Targeting

Multi-Segment Targeting

 Market is as one group with no individual segments.Eg: Newspaper

Select a particular market niche/small on which marketing effort is targeted.Eg: AirAsia focuses on low fare.

Need to focus on two or more well defined market segments and want to develop different strategies.Eg:

Differentiated Targeting

Market coverage strategy to several market segments & divide into different groups. Eg: Shoes(Size,Colors, Design)

Segmentation Variables

Dividing the total market into smaller parts.

Market is heterogeneous/dissimilar.

By segmentation, heterogeneous market is converted into homogeneous components.

Basis for segmentation

Geographic Basis.

Demographic Basis.

Psychographic Basis.

DEMOGRAPHIC

GEOGRAPHIC

PSYCHOGRAPHIC

• Age and life cycle• Gender• Income and occupation• Generation (Baby boomer, • Gen X, Gen Y)• Education

• Activities• Interest• Opinions• Attitudes• Values

• Region : continent, country, state, or neighborhood• Size of metropolitan area• Population Density• Climate

• Product/Service • Price • Promotion • Place • People • Politics • Public Relations 

• Probe • Partition • Prioritize • Position • Profit • Plan • Performance • Positive

Implementation

15 P’s of Marketing Mix

Product

Product: “what to make, how to package it, what brand name to use, and what image to project”

EXAMPLE: Pink Gildan t-shirt, Made in China, tie-dye swirl print

Price

Price: “reflects what customers are willing & able to pay”

EXAMPLE: UnderArmor hoods are $50 – customers are willing to pay more for this high quality product

Place

Place: “how/where a product will be distributed”

EXAMPLE: Florida Oranges arrive via delivery truck and are displayed at Harris Teeter for sale.

Promotion

Promotion: “deals with how potential customers will be told about the new product”

EXAMPLE: Keebler cookies are on sale with coupon “buy TWO packages & save $1.00”

People

The right people to support the company’s products and/or service.

EXAMPLE: Excellent customer service personnel who can provide support with clearly known expectations, such as hours of operation and average response time, is key to maintaining a high level of customer satisfaction. 

Process

Solid procedures and policies that are in place.

EXAMPLE:

Customers want to understand more than just your product; they also want to focus on the shape and form your business will take.

Physical Evidence

The way your product, service, and everything about your company, appears from the outside.

EXAMPLE:  size, shape, color, material, UPC bar code, and label of the packaging.  This should be customer tested and updated when needed.

Classification of Consumer Products

Consumer Products

Convenience Products

Shopping Products

SpecialtyProducts

UnsoughtProducts

Convenience:

Inexpensive, little shopping effort, regularly buy products, no prior planning. Eg: coke, mineral water, chicken

Shopping:

Homogeneous prod is familiar where customers look for lower price brand.

Heterogeneous prod different where customers have trouble comparing the products

Specialty:

Status-conscious advertising, expensive products.

Unsought:

Customers not having intention of buying unless marketer do aggressive marketing. Eg: Insurance

Market Targeting

Product Differentiation

To differentiate the product from other products on the basis of features.

Product differentiation is used to avoid competition.The objective of differentiation is to develop a position that potential customers see as unique The objective of differentiation is to develop a position that potential customers see as unique

Marketing Concept

The marketing concept:“states that to make a profit a business must focus all efforts on satisfying the needs & wants

of the customer”

Cost-Based PricingProductProduct

CostCost

PricePrice

ValueValue

CustomersCustomers

Break-Even Analysis and Target Profit

Pricing• BE= Fixed Costs/Contribution (SP-VC)• Example - Meal - SP = $20, VC = $8• Fixed costs are $2400 a day• BE=$2400/$12 = 200• Need to sell 200 meals @ $20 to break-even• VC = 40%, contribution = 60%• BE = $2400/.6 = $4000

Value-Based PricingCustomerCustomer

ValueValue

PricePrice

CostCost

ProductProduct

New Product Pricing

1. Market-skimming pricing

Setting a high price for a new product to skim maximum

revenues layer by layer from the segments willing to pay the high price: the company makes fewer but more profitable sales

The conditions:

1. A sufficient number of buyers have a high current demand;

2. The unit costs of producing a small volume are not so high that they cancel

the advantage of charging what the traffic will bear;

3. The high initial price does not attract more competitors to market;

4. The high price communicates the image of a superior product.

2. Market-penetration pricing

New Product Pricing

Setting a low price for a new product in order to attract a large number of buyers and a large market share.

The conditions:

1. The market is highly price sensitive and a low price stimulates market growth;

2. Production and distribution costs fall with accumulated

production experience;

3. A low price discourages actual and potential competition.