valencia soap by white sight co

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WHITE SIDE COMPANY

INTRODUCTION

White side co. had been established in 2008 in Dubai by Mr.Usman Bashir a biuionaire in Dubai. Mr. Usman is basically an industrialist. In the year of 2008in the month of July, he felt a great need forgetter infrastructure of health soap for health purpose boom in his country. So he decided to launch VALENCIA SOAP.

In the start, it was a single person company but afterward general public from all over the world was invited for subscription. Many Pakistani now has a reasonable share in White side co.

In the earlier stages, it only worked in UAE states successfully, but as time passes, Mr.Usman with the consultation of his Directors of the company agreed that Pakistan is Worlds best place at that time for VALENCIA SOAP Boom.

So now VALENCIA SOAP is in Pakistan since Sep 2008. It is working in almost all the cities of Pakistan with best available packages and services.

COMPANY OBJECTIVES

TRUST OF THE CUSTOMER ON OWN SERVICES IS the pride of the VALENCIA SOAP. We always tried to arrange best possible services to our customer which any other company does not offer. We really value the customer. A right word is customer have the status of order perception is that we are contribution in the health progress of Pakistan. We will be all the time with Pakistan this process as our motto is “Sari Zindgi Sath Sath”

The mystery of soap making

I always wanted to be one of those Suzy homemakers that did a lot of Canning and jarring and making my own soap and candles! All that stuff sounded so great to me. I never tried because I thought it was too hard! As of late however at the ripe old age of 45 I have decided it's now or never so I am going on some exploits and I am taking you with me (if you want to come!)We are now entering the twilight zone of 'Country gal 101' Today’s lesson is Wonderful and healthy soap making made easy! There is

Suggestions & Feedback: [email protected] Valencia SOAP Health Comes first

mailto:Suggestions%20%26%20Feedback:%[email protected]

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a list of 'soap making' sites at the end visit them for soap making in different degrees of difficulty. I don't know about you but the easy way works for me! I think I might advance one day but not today! I am a beginner myself but soap making, like I said, has always interested me!

Add some Spice to your soap!

Ways to make your soap great!

As shown below there are many ways to make your soap uniquely yours!

Scented oils and healthy skin oils and butters herbs such as eucalyptus and



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Mint, Cinnamon, Aloe and Green tea just to name a few. You can scent with

Fragrance oils and molds them into anything you want with soap molds! You can

Even add sand or crunched up nuts to give the soap texture and 'scrub' qualities :)

((((TIP))))

Put them in the freezer for an hour and they will come out of the molds easier!

It works well to spray your mold with cooking spray! You can also add color to

Make the soap beautiful! This stuff makes GREAT gifts! People love it!

Unit Price Qty. Cost

COCONUT SOAP BASE, 1 LB BLOCK

[Remove] $5.49 $5.49

LIQUID SOAP SCENTS: GARDENIA, LIQUID SOAP SCENT

[Remove] $4.99 $4.99

LIQUID SOAP SCENTS: LAVENDER, LIQUID SOAP SCENT

[Remove] $4.99 $4.99

Subtotal: $15.47

Total: $15.47

Keep Shopping



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Related items:

LIQUID SOAP COLORS: BLUE, LIQUID SOAP COLOR

Price: $1.99

GLYCERIN SOAP BASE, 5 LB BLOCK

Price: $18.99

LIQUID SOAP COLORS: YELLOW, LIQUID SOAP COLOR

Price: $1.99

An Easy Soap recipe!

This should be a family affair! Get yo' Mama or Yo' Granny and get in that kitchen together! Nothing brings a family closer than making something together!

What you'll need:

Glycerin soap, clear or white (This only works with glycerin soap - transparent Neutrogena bars will work fine.)

Soap dye in colors or your choice

Soap or candy molds

Microwave safe liquid measuring cup

Spoon

Popsicle stick or coffee stirrer

Knife (adults only)

How to make it:

1. If using bars of soap, cut into three pieces. If using purchased glycerin blocks, cut off 2-3 pre-measured chunks.

2. Put glycerin soap into a measuring cup, microwave according to package directions (or 20 seconds), then in 10-second intervals until melted.



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3. If you want colors, this is the time to add the dye. Add a few drops and stir with a spoon. If you want the color darker, simply add more dye. If you want fragrance add fragrance oil. If you want a 'scrubbing side' to your soap add sand or crushed nuts. If you want healthy soap add aloe or olive oil now!

4. Slowly pour the liquid soap into the mold. Set aside to harden for 45 minutes to an hour. Some soap may harden sooner than others.

5. Rinse out measuring cup and repeat process for other colors.

6. After soap has cooled completely, pop them out of the molds. If you find this difficult, you can place the soap into the freezer for ten minutes and try again.

Tips:

For a tie dye effect, don't add dye until after you have poured white soap into the molds. Add random drops of dye into white soap in mold and swirl with a coffee stick or toothpick.

For multicolor layers, pour the first color in and allow it to cool enough to form a skin (about 5 minutes). Carefully and very slowly add the second color over that.

For pastel shades, add only a couple drops of dye. For more bold colors, add more drops.

Make your own colors by mixing the dyes, or create a tie dye effect by using two or more colors instead of just one.

Have fun with it! That’s what life is about discovering and inventing!

MARKET SEGMENTATION

INTRODUCTION: What we are seeing here is that within the some

general market there are groups or customers __marker segments __ with

different wants, buying preferences, of product-use behavior. In some

markets these differences are relatively minor, and the benefits sought by

consumers can be satisfied with a single marketing mix. In other markets,

some customers are unwilling to make the compromises necessitated by



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a single marketing mix. As a result, the segments must be targeted

individually with different marketing mixes. A specific market segment

(people or organizations) for which the seller designs a particular

marketing mix is a target market. Using the marketing mix, a firm

attempts to attractive position for offering in the minds of the target

market.

SEGMENTATION The variation in customers’ responses to a

marketing mix can be traced to differences in buying habits, in ways in

which the good or services is used, or in motives for buying. Customer

oriented marketers take these differences into considerations, but they

usually cannot afford to design a different marketing mix for every

customer. Consequently, most marketers operate between the extremes

of one marketing mix for all and a different one for each customer. To do

so involves market segmentation. A process of dividing the total market

for a good or service into several smaller, internally homogeneous groups.



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The essence of segmentation is that the members of each group are

similar with respect to the factors that influence demand. A major

element in a company’s success is the ability to segment its market

effectively. Segmentation, Targeting, and Positioning

Segmentation, targeting, and positioning together comprise a three stage process. We first (1) determine which kinds of customers exist, then (2) select which ones we are best off trying to serve and, finally, (3) implement our segmentation by optimizing our products/services for that segment and communicating that we have made the choice to distinguish ourselves that way.

Segmentation involves finding out what kinds of consumers with different needs exist. In the auto market, for example, some consumers demand speed and performance, while others are much more concerned about roominess and safety. In general, it holds true that “You can’t be all things to all people,” and experience has demonstrated that firms that specialize in meeting the needs of one group of consumers over another tend to be more profitable.

Generically, there are three approaches to marketing. In the undifferentiated strategy, all consumers are treated as the same, with firms not making any specific efforts to satisfy particular groups. This may work when the product is a standard one where one competitor really can’t offer much that another one can’t. Usually, this is the case only for commodities. In the concentrated strategy, one firm chooses to focus on one of several segments that exist while leaving other segments to competitors. For example, Southwest Airlines focuses on price sensitive consumers who will forego meals and assigned seating for low



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prices. In contrast, most airlines follow the differentiated strategy: They offer high priced tickets to those who are inflexible in that they cannot tell in advance when they need to fly and find it impractical to stay over a Saturday. These travelers—usually business travelers—pay high fares but can only fill the planes up partially. The same airlines then sell some of the remaining seats to more price sensitive customers who can buy two weeks in advance and stay over.

Note that segmentation calls for some tough choices. There may be a large number of variables that can be used to differentiate consumers of a given product category; yet, in practice, it becomes impossibly cumbersome to work with more than a few at a time. Thus, we need to determine which variables will be most useful in distinguishing different groups of consumers. We might thus decide, for example, that the variables that are most relevant in separating different kinds of soft drink consumers are (1) preference for taste vs. low calories, (2) preference for Cola vs. non-cola taste, (3) price sensitivity—willingness to pay for brand names; and (4) heavy vs. light consumers. We now put these variables together to arrive at various combinations. Several different kinds of variables can be used for segmentation.

Demographic variables essentially refer to personal statistics such as income, gender, education, location (rural vs. urban, East vs. West), ethnicity, and family size. Campbell’s soup, for instance, has found that Western U.S. consumers on the average prefer spicier soups—thus, you get a different product in the same cans at the East and West coasts. Facing flat sales of guns in the traditional male dominated market, a manufacturer came out with the Lady Remington, a more compact, handier gun more attractive to women. Taking this a step farther, it is also possible to segment on lifestyle and values.”

Some consumers want to be seen as similar to others, while a different segment wants to stand apart from the crowd.

Another basis for segmentation is behavior. Some consumers are “brand loyal”—i.e., they tend to stick with their preferred brands even when a competing one is on sale. Some consumers are “heavy” users while others are “light” users. For example, research conducted by the wine industry shows that some 80% of the product is consumed by 20% of the consumers—presumably a rather intoxicated group.

One can also segment on benefits sought, essentially bypassing demographic explanatory variables. Some consumers, for example, like scented soap (a segment likely to be attracted to brands such as Irish Spring), while others prefer the “clean” feeling of unscented soap (the “Ivory” segment). Some consumers use toothpaste



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primarily to promote oral health, while another segment is more interested in breathe freshening.

In the next step, we decide to target one or more segments. Our choice should generally depend on several factors. First, how well are existing segments served by other manufacturers? It will be more difficult to appeal to a segment that is already well served than to one whose needs are not currently being served well. Secondly, how large is the segment, and how can we expect it to grow? (Note that a downside to a large, rapidly growing segment is that it tends to attract competition). Thirdly, do we have strengths as a company that will help us appeal particularly to one group of consumers? Firms may already have an established reputation. While McDonald’s has a great reputation for fast, consistent quality, family friendly food, it would be difficult to convince consumers that McDonald’s now offers gourmet food. Thus, Mud’s would probably be better off targeting families in search of consistent quality food in nice, clean restaurants.

Positioning involves implementing our targeting. For example, Apple Computer has chosen to position itself as a maker of user-friendly computers. Thus, Apple has done a lot through its advertising to promote itself, through its unintimidating icons, as a computer for “non-geeks.” The Visual C software programming language, in contrast, is aimed a “techies.”

Michael Treaty and Fred Wiremen suggested in their 1993 book The Discipline of Market Leaders that most successful firms fall into one of three categories:

Operationally excellent firms, which maintain a strong competitive advantage by maintaining exceptional efficiency, thus enabling the



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firm to provide reliable service to the customer at a significantly lower cost than those of less well organized and well run competitors. The emphasis here is mostly on low cost, subject to reliable performance, and less value is put on customizing the offering for the specific customer. Wal-Mart is an example of this discipline. Elaborate logistical designs allow goods to be moved at the lowest cost, with extensive systems predicting when specific quantities of supplies will be needed.

Customer intimate firms, which excel in serving the specific needs of the individual customer well. There is less emphasis on efficiency, which is sacrificed for providing more precisely what is wanted by the customer. Reliability is also stressed. Nordstrom’s and IBM are examples of this discipline.

Technologically excellent firms, which produce the most advanced products currently available with the latest technology, constantly maintaining leadership in innovation. These firms, because they work with costly technologies that need constant refinement, cannot be as efficient as the operationally excellent firms and often cannot adapt their products as well to the needs of the individual customer. Intel is an example of this discipline.

Tracy and Wireman suggest that in addition to excelling on one of the three value dimensions, firms must meet acceptable levels on the other two. Wal-Mart, for example, does maintain some level of customer service. Nordstrom’s and Intel both must meet some standards of cost effectiveness. The emphasis, beyond meeting the minimum required level in the two other dimensions, is on the dimension of strength.Repositioning involves an attempt to change consumer perceptions of a brand, usually because the existing position that the brand holds has become less attractive. Sears, for example, attempted to reposition itself from a place that offered great sales but unattractive prices the rest of the time to a store that consistently offered “everyday low prices.” Repositioning in practice is very difficult to accomplish. A great deal of money is often needed for advertising and other promotional efforts, and in many cases, the repositioning fails.

To effectively attempt repositioning, it is important to understand how one’s brand and those of competitors are perceived. One approach to identifying consumer product perceptions is multidimensional scaling. Here, we identify how products are perceived on two or more “dimensions,” allowing us to plot brands against each other. It may then be possible to attempt to “move” one’s brand in a more desirable direction by selectively promoting certain points. There are two main approaches to multi-dimensional scaling. In the a priori approach, market researchers identify dimensions of interest and then ask consumers about their perceptions on each dimension for each brand. This is useful when



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(1) the market researcher knows which dimensions are of interest and (2) the customer’s perception on each dimension is relatively clear (as opposed to being “made up” on the spot to be able to give the researcher a desired answer). In the similarity rating approach, respondents are not asked about their perceptions of brands on any specific dimensions. Instead, subjects are asked to rate the extent of similarity of different pairs of products (e.g., How similar, on a scale of 1-7, is Snicker’s to Chitchat, and how similar is Tolerance to Three Musketeers?) Using a computer algorithm, the computer then identifies positions of each brand on a map of a given number of dimensions. The computer does not reveal what each dimension means—that must be left to human interpretation based on what the variations in each dimension appears to reveal. This second method is more useful when no specific product dimensions have been identified as being of particular interest or when it is not clear what the variables of difference are for the product category.

MARKETING SEGMENTATION: Dividing a market into distinct

groups of users with different needs, characteristic, or behavior who might

require separate products or marketing mixes.

Dividing a market into distinct group of buyers with different needs,

characteristics and behavior who might require separate product or

marketing mix. The company identifies different way to segment the

market and develops profiles of the resulting market segments.

MARKET TARGETING: The second step is market targeting –

evaluating each markets segment’s attractiveness and selecting one or

more of the market segments to enter.

The process of evaluating each market segment’s attractiveness

and selecting one or more segments to enter.



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MARKET POSITIONING: The third step is market positioning –

setting the competitive positioning for the product and creating a detailed



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marketing mix. Formulating competitive positioning for a product and a

detailed marketing mix

STEPS IN MARKET SEGMENTATION,

TARGETING AND POSITIONING


4. Select the target segments

6. Develop marketing mix for each target segment

3. Develop measures of segment attractiveness

5. Develop positioning for each target segment

2. Develop profiles of resulting segments

Market Targeting

Market Segmentation

Market Positioning


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BENEFITS OF MARKET SEGMENTATION

Market segmentation is customer-oriented, and thus it is consistent

with the marketing concept. In segmenting, we first identify the wanes of

customers within a submarket and then decide if it is practical to develop

a marketing mix to satisfy those wants.

By tailoring marketing programs to individual market segments, and

company can do a better marketing fob and make more efficient use of its

marketing resources. Market segmentation is customer-oriented, and thus

it is consistent with the marketing concept. In segmenting, we first

identify the wants of customers within a submarket and then decide if it is

practical to develop a marketing mix to satisfy those wants.

BENEFIT SEGMENTATION: Dividing the market into groups

according to the different benefits that consumers seed from the product.


1. Identify bases for segmenting the market


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o BENEFIT SOUGHT

o USER STATUS

o USAGE RATE

o LOYALTY STATUS

BENEFIT SOUGHT: A powerful form of segmentation is to group

buyers according to the different benefits that they seed from the

product. Benefit segmentation requires finding the major benefits

people look for in the product class, the kinds of people who look for each

benefit, and the major brands that deliver each befit.

USER STATUS: Markets can be segmented into groups of nonusers,

ex-users, potential users, first-time users, and regular users of a product.

A company’s market position also influences its focus. Market share

leaders focus on attracting potential users, whereas smaller firms focus on

attracting current users away from the market leader.

USAGE RATE: Markets can also be segmented into light, medium,

and heavy product users. Heavy users are often a small percentage of the

market but account for a high percentage of total consumption.

LOYALTY STATUS: A market can also be segmented by consumer

loyalty. Consumers can be loyal to brands (Tide), stores (Wal-Mart), and

companies (Ford). Buyers can be divided into groups according to their

degree of loyalty. Some consumers are completely loyal __ they buy one

brand all the time. Others are somewhat loyal __ they are loyal to two or

three brands of a given product or favor one brand while sometimes

buying others. Still other buyers show no loyalty to and brand. They either

want something different each time they buy or they buy whatever’s on

sale.



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BENEFITS SEGMENTATION OF HEALTH

SOAP MARKET

Benefits

Segments

Demographi

c

Behavio

r

Psychographic

s

Favore

d

Brands

Economy

(Low Price)

Women Heavy

Users

High Autonomy

(Value Oriented)

Brand on

Sale

Medicinal

(Decay

Prevention)

Large Family Smokers High Sociability,

Active

Crest

Cosmetics

(Bright

Face)

Teens, Young

Adults

Heavy

Users

Hypochondriacally

Conservatives

Alovera,

Aqua

fresh

Fragrance Children Spearmint

Lovers

High Self

Involvement,

Hedonistic

Pearl,

Aim

THE PROCESS, OF MARKET

SEGMENTATION



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Markets are sometimes segmented intuitively; that is, a marketer

relies on experience and judgment to make a decision about the

segments that exist in a market and how much potential each offers.

Others follow the lead of competitors or earlier market entrants.

1. IDENTIFY THE CURRENT AND POTENTIAL WANTS

THAT EXIST WITHIN A MARKET: The marketer carefully examines

the market to determine the specific needs being satisfied by current

offerings, the needs current offerings fail to adequately satisfy, and the

needs that may not yet be recognized. This step may involve interviewing

and/or observing consumers or firms to determine their behavior, levels of

satisfaction, and frustration.

2. IDENTIFY CHARACTERISTICS THAT DISTINGUISH

AMONG THE SEGMENTS: In this step the focus is on what prospects

who share a particular want have in common to distinguish them from

other segments in the market that have different wants. Among business

firms it could be a physical feature (like size or location). Among

consumers it might be an attitude or a behavior pattern. From the results

of this step, potential marketing mixes (including product ideas) for the

various segments can be geed. These alternatives can then be further

analyzed.

3. Determine the size of the segments and how well

they are being satisfied: The final step is to estimate how much

demand (or potential sales) each segment represents and the strength

of the competition. These forecasts will determine which segments are

worth pursuing. American Express launched an internet banking service

that allows customers to make deposits, purchase certificates of deposit,

and pay bills online. Despite the fact that online competition from



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conventional banks and other credit card companies is fierce, American

Express’ existing cardholders make up an attractive initial market

segment.

LEVELS OF MARKETING SEGMENTATION

Because buyers have unique needs and wants, each buyer is

potentially a separate market. Ideally, then, a seller might design a

separate marketing program for each buyer. However, although some

companies attempt to serve buyers individually, many others face larger

numbers of smaller buyers and do not find complete segmentation

worthwhile. Instead, they look for broader classes of buyers who differ in

their product needs or buying response. Thus, market segmentation can

be carried out at many different levels.

DIAGRAM OF COMPLETE SEGMENTATION



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MASS MARKETING: Companies have not always practiced target

marketing. In fact, for most of the twentieth century, major consumer

products companies held fast to mass marketing __ mass producing, mass

distributing, and mass promoting about the same product in about the

same way to all consumers. Henry Ford epitomized this marketing

strategy when he offered the Model T Ford to all buyers; they could have

the car “in any color as long as it is black”. Similarly, Coca Cola at one

time produced only one drink for the whole market, hoping it would

appeal to everyone.

The traditional argument for mass marketing is that it creates the

largest potential market, which leads to the lowest costs, which in turn

can translate into either lower prices or higher margins.

SEGMENT MARKETING: Isolating broad segments that make up a

market and adapting the marketing to match the needs of one or more

segments. A company that practices segment marketing recognizes

that buyers differ in their needs, perceptions, and buying behaviors.

Segment marketing offers several benefits over mass marketing.

The company can market more efficiently, targeting its products or

services, channels, and communications programs toward only consumers

that it can serve best. The company can also market more effectively by

fine-tuning its products, prices, and programs to the needs of carefully

defined segments. The company may face fewer compete- tours if fewer

competitors are focusing on this market segment.

NICHE MARKETING: Focusing on sub segments or niches with

distinctive traits that may seek a special combination of benefits.

Market segments are normally large identifiable groups within a market __

for example, luxury car buyers, performance car buyers, utility car



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buyers, and economy car buyers. Niche marketing or inching focuses on

subgroups within these segments. A niche is a more narrowly defined

group, usually identified by dividing a segment into sub segments or by

defining a group with a distinctive set of traits who may seek a special

combination of benefits.

Whereas segments are fairly large and normally attract several

competitors, niches are smaller and normally attract only one or a few

competitors.

MICROMARKETING: The practice of tailoring Products and

marketing programs to suit the tastes of specific individuals and Locations

__ includes local marketing and individual marketing.

Segment and niche marketers tailor their offers and marketing

programs to meet the needs of various market segments. At the same

time, however, they do not customize their offers to each individual

customer. Thus, segment marketing and niche marketing fall between the

extremes of mass marketing and micromarketing. Micromarketing is the

practice of tailoring products and marketing programs to suit the tastes of

specific individuals and location. Micromarketing includes Local mar-

keting and individual marketing.

LOCAL MARKETING: Tailoring brand and promotions to the needs

and wants of local customer groups. Local marketing involves tailoring

brands and promotions to the need and wants of local customer groups –

cities, neighborhoods, and even specific stores. Thus, retailers such as

Sears and Wal-Mart routinely customize each stores merchandise and

promotions to match its specific clientele, and Citibank provides different

mixes of banking services in its branches depending on neighborhood

demographics. Kraft helps supermarket chains identify the specific cheese

assortments and shelf positioning that will optimize cheese sales in low



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income, middle income, and high income stores, and in different ethnic

communities.

INDIVIDUAL MARKETING: Tailoring products and marketing

programs to the needs and preferences of individual customer __ also

labeled markets of one marketing, customized marketing.

BASES FOR SEGMENTING CONSUMER

MARKETINGThere is no single way to segment a market. A marketer has to try

different segmentation variables, alone and in combination, to find the

best way to view the market structure. Table outlines the major variables

that might be used in segmenting consumer markets. Here we look at the

major geographic, demographic, psychographic, and behavioral variables.

We will discuss four bases for segmenting consumer markets that are

used separately or in combination

o GEOGRAPHIC

o DEMOGRAPHIC

o PSYCHOGRAPHIC

o BEHAVIORAL

TABLE MAJOR SEGMENTATION VARIABLES FOR

CONSUMER MARKETS.

GEOGRAPHC

World North America, Western Europe, Middle East, Pacific Rim,



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region or

County

China, India, Canada, Mexico

Country

region

Pacific, Mountain, West North Central, Wet South Central,

East North Central, East South Central, South Atlantic, Middle

Atlantic, New England.

City or

metro

Under 5,000; 5,00 – 20,000; 20,000 – 50,000 – 100,000;

100,000 – 250,000; 250,000 – 500,000;

Size 500,000 – 1,000,000; 1,000,000 – 4,000,000; 4,000,000 or

over

Density Urban, suburban, rural

Climate Northern, Southern

DEMOGRAPHIC

Age Under 6, 6-11, 12 -19, 20-34, 35-49, 50-64, 65+

Gender Male, female

Family size 1-2, 3-4, 5+

Family life Young, single; young, married, no children; young, married

with children;

Cycle Older, married with children; older, married, no children

under 18; older, single; other

Income Under $ 10,000; $ 10,000-20,000; $20,000-$30,000; $30,000-

$50,000; $50,000-$100,000; $100,000 and over

Occupatio

n

Professional and technical; managers, officials, and proprietors; clerical,

sales; craftspeople; foremen; operatives; farmers; retired; students;

homemakers; unemployed

Education Grad school or less; some high school; high school graduate;

some college; college graduate

Religion Catholic, Protestant, Jewish, Muslim, Hindu, other

Race Asian, Hispanic, black, white

Nationality North American, South American, British, French, German,

Italian, Japanese

PSYCHOGRAPHIC



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Social

class

Lower lowers, upper lowers, working class, middle class,

upper middles, lower uppers, upper uppers

Lifestyle Achievers, strivers, strugglers

Personalit

y

Compulsive, gregarious, authoritarian, ambitious

BEHAVIOAL

Occasions Regular occasion, special occasion

Benefits Quality, service, economy, convenience, speed

User

status

Nonuser, ex-user, potential user, first-time user, regular user

Usage rate Light user, medium user, heavy user

Loyalty

status

None, medium, strong, absolute

Readiness Unaware, aware, Informed, interested, desirous, intending to

buy

Stage

Attitude

toward

Enthusiastic, positive, indifferent, negative, hostile

Product

GEOGRAPHIC SEGMENT: Dividing a market into different

geographical units such as nations, states, regions, counties, cities, or

neighborhoods.

Geographic segmentation calls for dividing the market into different

geographical units such as nations, regions, states, counties, cities, or

neighborhoods. A company may decide to operate in one or a few

geographical areas, or to operate in all area but pay attention to

geographical differences in needs and wants.



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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 nationally

DEMOGRAPHIC SEGMENTATION divides the market into groups

based on variables such as age, gender, family size, family life cycle,

income, occupation, education, religion, race, and nationality.

Demographic factors are the most popular bases for segmenting

customer groups largely because consumer needs, wants and usage rates

often vary closely with demographic variables. Also, demographic

variables are easier to measure than most other types of variables. Even

when market segments are first defined using other bases, such as

personality or behavior, their demographic characteristics must be known

in order to assess the size of the target market and to reach it efficiently.

AGE AND LIFE-CYCLE SEGMENTATION

o Dividing a market into different age and life-cycle groups

GENDER SEGMENTATION

o Dividing a market into different groups based on

INCOME SEGMENTATION

o Dividing a market into different income groups

PSYCHOGRAPHIC SEGMENTATION: Dividing a market into

different groups based on social class, lifestyle, or personality

characteristics.

Psychographic segmentation divides buyers into different groups

based on social class, lifestyle, or personality characteristics. People in the

same demographic group can have very different psychographic.



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Marketers also have used personality variables to segment markets,

giving their products personalities that correspond to consumer

personalities. Successful market segmentation strategies based on

personality have been used for products such as cosmetics, cigarettes,

insurance, and liquor.16

BEHAVIORAL SEGMENTATION: Dividing a market into groups

based on consumer knowledge, attitude, use, or response to a product.

Behavioral segmentation divides buyers into groups based on their

knowledge, attitudes, uses, or responses to a product. Many marketers

believe that behavior variables are the best starting point for building

market segments.

OCCASION SEGMENTATION: Dividing the market into groups

according to occasions when buyers get the idea to buy, actually make

their purchase, or use the purchased item.

SEGMENTING BUSINESS MARKETS

Even though the number of buyers in a business market may be relatively

few compared to a consumer market, segmentation remains important.

The reason is quite simple a highly focused marketing effort directed at

meeting the specific needs of a group of similar customers is both more

efficient and more likely to be successful.

SEGMENTATION BASES FOR BUSINESS MARKET

Segmentation Bases Possible Market Segments



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Customer Location

Region

Location

South East Asia, Central America,

Upper Midwest, Atlantic Seaboard

Single buying site, multiple buying

sites.

Customer Type

Industry

Size

Organization Structure

Purchase Criteria

Selected NAICS Codes

Sales Volume, Number of

Employees

Centralized or Decentralized,

Group or Individual Decision

Quality , Price, Durability, Lead

Time

Transaction Condition

Buying Situation

Usage Rate

Purchasing Procedure

Order Size

Service Requirements

Straight Rebury, Modified Rebury,

New Buy

Nonuser, Light Users, or High

Users

Small, Medium or Large

Light, Moderate or Heavy

CUSTOMER LOCATION: Business markets are frequently

segmented on a geographic basis. Some industries are geographically

concentrated. For example, businesses that process natural resources

locate close to the source to minimize shipping costs. Other industries are

geographically concentrated simply because newer firms either spun off

from of chose to locate near the industry pioneers.



| 27

Companies also segment international markets geographically. In

considering developing countries, for example, a firm might consider the

reliability of public utilities, the quality of the transportation system, and

the sophistication of the distribution structure in deciding where to

expand its operation.

CUSTOMER TYPECustomer Types includes the following:

o INDUSTRY

o SIZE

o ORGANIZATIONAL STRUCTURE

o PURCHASE CRITERIA

INDUSTRY: Any firm that sells to business customers in a variety of

industries may want to segment its market on the basis of industry. For

example, a company that sells small electric motors would have a broad

potential market among many different industries. However, this firm will

d better by segmenting its potential market by type of customer and then

specializing in order to more completely meet the needs of organizations

in a limited number of these segments.

SIZE: Business customer size can be estimated using such factors as

sales volume, number of employees, number of production facilities, and

number of sales offices. Many sellers divide their potential mar into large

and small accounts, using sep- aerate distribution channels to reach each

segment. The seller’s sales force may contact large-volume accounts

directly, but to reach the smaller accounts, the seller may use a

middleman or rely on the Internet or telemarketing.



| 28

ORGANIZATION STRUCTURE: Firms approach buying in

different ways. Some rely heavily on their purchasing departments to

control the inflow of information, reduce the number of potential

alternatives, and conduct negotiations. Selling to such companies would

require a strong personal selling effort directed specifically at purchasing

executives. It would also need excellent supporting materials if the

product exceeded the technical expertise of the purchasing managers.

Other buyers opt for greater involvement in the purchase process

by the people who will be directly affected by the purchase. These buyers

tend to include many people in their decisions, hold meetings over a long

period of time, and engage in a lot of internal communication.

PURCHASE CRITERIA: All buyers want good quality, low prices,

and on-time delivery. However, within a market there are groups for

which one of these or some other purchase criterion is particularly

significant.

TRANSACTION CONDITIONS: The circumstances of the

transaction can also be a basis for segmenting a market. Sellers may have

to modify their marketing efforts to deal with different buying situations,

usage rates, purchasing procedures, order sizes, or service requirements.

To illustrate, three o these transaction conditions are described below.

Transaction Conditions include the following:

o BUYING SITUATION

o USAGE RATES

o PURCHASE PROCEDURES

BUYING SITUATION: When United Airlines is faced with the decision

of whether or not to buy Boeing’s Sonic Cruiser, a plane that will hold 300



| 29

passengers and fly at near the speed of sound, it is making a new buy.

The decision is quite different from the modified rebury that occurs when

United purchases additional 737s, a plane it has flown successfully for

years. These buying situations, along with the straight rebury, are

sufficiently unique that a business seller might well segment its market

into these three buy-class categories.

USAGE RATE: Markets for most products can be divided among heavy

users, light users, and nonusers (prospects). Heavy users appear to be the

most attractive because of the volume they purchase, but they also

generate the most competition. As an alternative to pursuing heavy users,

some firms have found it profitable to avoid the competition by

concentrating on light users.

PURCHASE PROCEDURE: Products can be leased, financed, or

purchased outright. Rice can be simply stated, negotiated, or submitted in

a sealed bid. Consider how a bidding system affects a seller. Government

agencies often by on the basis of sealed bids; that is, each prospective

seller submits a confidential bid in response to a detailed description of

what the agency wants to buy. When the bids are opened, the agency is

typically bound by law to accept the lowest bid unless it is clearly

inappropriate.

Segmentation identifies the opportunities that exist in a market. The

next step is for a firm to decide which of those opportunities to target with

a marketing effort.

TARGET-MARKET STRATEGIES: After a company has

segmented a market, management must next select one or more

segments as its target markets.



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TARGET MARKET: A set of buyers sharing common needs or

characteristics that the company decides to serve

THE COMPANY CAN FOLLOW ONE OF THREE

STRATEGIES:

o UNDIFFERENTIATED MARKETING

o DIFFERENTIATED MARKETING

o CONCENTRATED MARKETING



| 31

UNDIFFERENTIATED MARKETING: A market-coverage

strategy in which a firm decides to ignore market segment differences

and go after the whole market with one offends. By adopting a market-

aggregation strategy-also known as a mass-market strategy or an

undifferentiated-market strategy__ a seller treats its total market as a

single segment. An, aggregate market’s members are considered to be

alike with respect to demand for the product.

DIFFERENTIATED MARKETING: A market-coverage strategy in

which a firm decides to target several market segments and designs

separate offers for each. Under a multiple-segment strategy, two or more

different groups of potential customers are identified as target markets. A

separate marketing mix is developed to reach each targeted segment. For

example, the maker of Bayer aspirin offers seven variations of its pain

relief product, each with its own marketing program. In a multiple

segment strategy.

A multiple-segment strategy normally results in a greater sales

volume than a single-segment strategy. It also is useful for a company

facing seasonal demand.

CONCENTRATED MARKETING: A market coverage strategy in

which a firm goes after a large share of one or if you submarket.

A single-segment strategy, also called a concentration strategy,

involves selecting one segment from within the total market as the target

market. One marketing mix is developed to reach this single segment. A

company may want to concentrate on a sin- glue market segment rather

than take on many competitors in the broader market.



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A. Undifferentiated Market

B. Differentiated Market

C. Concentrated Market

CHOOSING A MARKET-COVERAGE STRATEGY

Many factors need to be considered when choosing a market-coverage

strategy. Which strategy is best depends on company resources. When

the firm’s resources are limited, concentrated marketing makes the most

sense. The best strategy also depends on the degree of product

variability. Undifferentiated marketing is more suited for uniform products

such as grapefruit or steel. Products that can vary in design, such as

cameras and automobiles, are more suited to differentiation or con-


Market

Segment 1

Segment 2

Segment 3

Company Marketing Mix

Company Marketing Mix 1

Company Marketing Mix 2Company Marketing Mix 3

Company Marketing Mix

Segment 1

Segment 2

Segment 3


| 33

contraction. The Product’s lifecycles stage also must be considered. When

a firm introduces a new product, it is practical to launch only one version

and undifferentiated marketing or concentrated marketing makes the

most sense. In the mature stage of the product life cycle, however,

differentiated marketing begins to make more sense. Another factor is

market variability. If most buyers have the same tastes, buy the same

amounts, and react the same way to marketing efforts, under important.

When competitors use segmentation, undifferentiated marketing can be

suicidal. Conversely, when competitors use, undifferentiated marketing, a

firm can gain an advantage by using differentiated or concentrated

marketing.

POSITIONING: Having identified the potential segments and selected

one or more to target, the marketer must next decide what position to

pursue. A position is the way a firm’s producer, brand, or organization is

viewed relative to the competition by current and prospective customers.

To establish itself in a market that was dominated by firms appealing

primarily to the preferences of children, Wendy’s positioned its burgers as

”hot and juicy,” and therefore primarily for adults. If a position is how a

product is viewed, then positioning is a firm’s use of all the elements at its

disposal to create and maintain in the minds of a target market a

particular image relative to competing products.

THERE ARE THREE STEPS IN A POSITIONING

STRATEGY:

o SELECT THE POSITIONING CONCEPT

o DESIGN THE DIMENSION OR FEATURE THAT MOST EFFECTIVELY

CONVEYS THE POSITION



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o COORDINATE THE MARKETING MIX COMPONENTS TO CONVEY A

CONSISTENT POSITION

SELECT THE POSITIONING CONCEPT: To position a product

or an organization, a marketer needs to first determine what is important

to the target market. Marketers can then conduct positioning studies to

see how members target market view competing products or stores on

the important dimensions. The results of this research can be portrayed in

a perceptual map that locates the brand or organization relative to

alternatives on the dimensions of interest.

DESIGN THE DIMENSION OR FEATURE THAT MOST

EFFECTIVELY CONVEYS THE POSITION: A position can be

communicated with a brand name, a slogan, the appearance or other

features of the product, the place where it is sold, the appearance of

employees, and in many other ways. However, some features are more

effective than others. It is important to not overlook details. According to

a consultants chairs for customers are vital in upscale retail environments

because they signal that the seller”Cates”. Because the marketer has

limited resources, decisions have to be making on how best to convey the

desired positioning concept.

COORDINATE THE MARKETING MIX COMPONENTS

TO CONVEY A CONSISTENT POSITION: When though

one or two dimensions may be the primary position communicators, all

the elements of the marketing mix the product, price, promotion, and

distribution should complement the intended position. Many product

failures are the result of inconsistent positioning that confuses consumers.



| 35

WHAT IS PRODUCT DEVLOPEMENT AND

SERVICE?

PRODUCT: Anything that can be offered to a market for attention,

acquisition, use, or consumption that might satisfy a want or need.

SERVICE: Any activity or benefit that one party can offer to another

that is essentially intangible and does not result in the ownership of

anything.

THE PRODUCT SERVICE CONTINUUM: A company’s offer

to the marketplace often includes both tangible goods and services. Each

component can be a minor or a major part of the total offer. At one

extreme, the offer may consist of a pure tangible good, such as soap,

toothpaste, or salt __ no services accompany the product. At the other

extreme are pure services, for which the offer consists primarily of a

service. Examples include a doctor’s exam or financial services. Between

these two extremes, however, many goods and services combinations are

possible.

PRODUCT CLASSIFICATIONS

Products and services fall into two broad classes based on the types of

consumers that use them consumer and industrial products. Broadly



| 36

defined, products also include other marketable entities such as

organizations, persons, places and ideas.

o CONSUMER PRODUCTS

o INDUSTRIAL PRODUCTS

CONSUMER PRODUCTS

Product bought by final consumer for personal consumption.

CONVENIENCE PRODUCT: Consumer product that the

customer usually buys frequently, immediately, and with a minimum of

comparison and buying clot.

MARKETING CONSIDERATIONS FOR

CONSUMER PRODUCTS

Type of Consumer Product

Marketing

Consideratio

n

Convenience Shopping Specialty Unsought

Customer

Buying

Frequent

purchase,

Less

frequent

Strong

brand

Little

product

Behavior Little planning, Purchase, Preference Awareness,



| 37

little much and

Comparison or Planning

and

shopping

Loyalty,

special

Knowledge

(or if

Shopping

effort, low

Effort,

comparison

of

Purchase

effort, little

Aware, little

or even

Customer

involvement

Brands on

price,

Compariso

n of

brands,

Negative

interest)

Quality,

style

Low price

sensitivity

Price Low price Higher price High price Varies

Distribution Widespread Selective

distribution

Exclusive

distribution

Varies

Distribution, In fewer

butlers

In only one

or a few

Convenient

locations

Outlets per

market

Area

Promotion Mass

promotion by

Advertising

and

More

carefully

Aggressive

advertising

The producer Personal

selling by

Targeted

promotion

by

And

personal

selling

Both

producer

and

Both

producer

and

By producer

and

resellers resellers Resellers

Examples Toothpaste, Major

appliances,

Luxury

Goods such

Life

insurance,



| 38

as Red

Magazines,

laundry

Television,

furniture

Rolex

watches or

fine

Cross blood

donations

Detergent Clothing Crystal

SHOPPING PRODUCT: Consumer good that the customer, in

the process of selection and purchase, characteristically compares on

such bases as suitability, quality, price, and style.

SPECIALTY PRODUCT: Consumer product with unique

characteristics or brand identification for which a significant group of

buyers is willing to make a special purchase effort.

UNSOUGHT PRODUCT: Consumer product that the consumer

either does not know about or knows about but does not normally think

of buying.

INDUSTRIAL PRODUCT

Product bought by individuals and organizations for further

processing or for use in conducting a business.

Industrial products are those purchased for further processing or for

use in conducting a business. Thus, the distinction between a consumer



| 39

product and an industrial product is based on the purpose for which the

product is bought. If a consumer buys a lawn mower for use around home,

the lawn mower is a consumer product. If the same consumer buys the

same lawn mower for use in a landscaping business, the lawn mower in

an industrial product.

The three groups of industrial products and services include

materials and parts, capital items, and supplies and services. Materials

and parts include raw materials and manufactured materials and parts.

Raw materials consist of farm products (wheat, cotton, livestock, fruits,

vegetables) and natural products (fish, lumber, crude petroleum, iron

ore). Manufactured materials and parts consist of component materials

(iron, yarn, cement, wires) and component parts (small motors, tires,

castings). Most manufactured materials and parts are sold directly to

industrial users. Price and service are the major marketing factors;

branding and advertising tend to be less important.

MACHINES USED IN SOAP MANUFACTURINGThese are the machines which are used in product development of health

Soap. This machine is known as stamper-

mazzoni-duplo-pq.



| 40

This machine is known as Roll-mill-bulhre-

pq.

This machine is known as

plodder_mazzoni_dtm300_4024_pq.

This machine is known as atomizer_mazzoni_pq.

This machine is known

as cutter_mazzoni_tva_pq.



| 41

This machine is known as logoimj.

This machine is known as vacuum_pump_pq.



| 42



| 43



| 44



| 45



| 46

PERSONS, PLACES, AND IDEAS: In recent years marketers

have broadened the concept of a product beyond tangible products and

services, to include other marketable entities __ namely, organizations,

person’s places; and ideas.

Organizations often carry out activities to sell the organization itself.

Organization marketing consists of activities undertaken to create,

maintain, or change the attitudes and behavior of target consumers

toward an organization. Both profit and nonprofit organizations practice

organization marketing. Business firms sponsor public relations or

corporate advertising campaigns to polish their images. Nonprofit

organizations __ such as churches, colleges, charities, museums, and

performing arts groups’ __ market their organizations in order to raise

funds and tract members or patrons. Corporate image advertising is a

major tool company’s use to market themselves to various publics.

PERSON MARKETING: People can also be thought of as

products. Person marketing consists of activities undertaken to create,

maintain, or change attitudes or behavior toward particular people. All

kinds of people and organizations practice person marketing.

Presidents Reagan and Clinton skillfully marketed themselves, their

parties, and their platforms to get needed votes and program support.

Entertainers and sports figures such as Michael Jordan and Tiger

Woods use marketing to promote their careers and improve their

impact and incomes. Professionals such as doctors, lawyers,

accountants, and architects market themselves in order to build their

reputations and increase business. Business leaders use person

marketing as a strategic tool to develop their companies’ fortunes as

well as their won. Businesses, charities, sports marketing. Creating or



| 47

associating with well know personalities often helps these

organizations achieve their goals better.

SOCIAL MARKETING: The design, implementation, and

control of programs seeking to increase the acceptability of a social

idea, cause, or practice among a target group.

PACE MARKETING: Involves activities undertaken to create,

maintain, or change attitudes or behavior toward particular places.

Examples include business site marketing and tourism marketing.

Business site marketing involves developing, selling, or renting

business sites or for factories, stores, offices, warehouses, and

conventions. For example, most states operate industrial development

offices that try to sell companies on the advantages of locating new

plants in their states. Even entire nations __ such as Canada, Ireland,

Greece, Mexico, and Turkey __ gave marketed themselves as good

locations for business investment.

INDIVIDUAL PRODUCT

DECISIONS

PRODUCT QUALITY: The ability of a product to perform its

functions; it includes the product’s overall durability, reliability, precision,

case of operation and repair, and other valued attributes.



| 48

PRODUCT ATTRIBUTES: Developing a product or service

involves defining the benefits that it will offer. These benefits are

communicated and delivered by product attributes such as quality,

features, and design.

PRODUCT FEATURES: A product can be offered with varying

features. A “stripped down “model, one without any extras, is the starting

point. The company can create higher level models by adding more

features. Features are a competitive tool for differentiating the company’s

product from competitors’ products. Being the first producer to introduce

a needed and valued new feature is one of the most effective ways to

compete.

PRODUCT DESIGN: Another way to add customer value is

through distinctive product design. Some companies have reputations for

outstanding design, such as Black & Decker in cordless appliances and

tools, Steel case in office furniture and systems, Bose in audio equipment,

and Ciba Corning in medical equipment. Design cab be one of the most

powerful competitive weapons in a company’s marketing arsenal.

Demographics

Demographics are clearly tied to subculture and segmentation. Here, however, we shift our focus from analyzing specific subcultures to trying to understand the implications for an entire population of its makeup.

Some articles of possible interest:

Several issues are useful in the structure of a population. For example, in some rapidly growing countries, a large percentage of the population is concentrated among younger generations. In countries such as Korea, China, and Taiwan, this has helped stimulate economic growth, while in certain poorer countries; it puts pressures on society to accommodate an increasing number of people on a fixed amount of land. Other countries such as Japan and Germany, in contrast, experience problems with a "graying" society, where fewer non-retired people are around to support



| 49

an increasing number of aging seniors. Because Germany actually hovers around negative population growth, the German government has issued large financial incentives, in the forms of subsidies, for women who have children. In the United States, population growth occurs both through births and immigration. Since the number of births is not growing, problems occur for firms that are dependent on population growth (e.g., Gerber, a manufacturer of baby food).

Social class is a somewhat nebulous subject that involves stratifying people into groups with various amounts of prestige, power, and privilege. In part because of the pioneering influence in American history, status differentiations here are quite vague. We cannot, for example, associate social class with income, because a traditionally low status job as a plumber may today come with as much income as a traditionally more prestigious job as a school teacher. In certain other cultures, however, stratification is more clear-cut. Although the caste system in India is now illegal, it still maintains a tremendous influence on that society. While some mobility exists today, social class awareness is also somewhat greater in Britain, where social status is in part reinforced by the class connotations of the accent with which one speaks.

Textbooks speak of several indices that have been used to "compute" social class in the United States, weighing factors such as income, the nature of one’s employment, and level of education. Taken too literally, these indices are not very meaningful; more broadly speaking, they illustrate the reality that social status is a complex variable that is determined, not always with consensus among observers, by several

different variables.

BRANDING



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A name, term, sign, symbol, or design, or a combination of these

intended to identify the goods or services of one seller of group of sellers

and to differentiate them from those of competitors.

Perhaps the most distinctive skill of professional marketers is their

ability to create, maintain, Protect, and enhance brands of its products

and services. A brand is a name, term, sign, symbol, or design, or a

combination of these that identifies the maker or seller of a product or

service. Consumers view a brand as an important part of a product, and

branding can add value to a product. For example, most consumers would

perceive a bottle of White Linen perfume as a high quality, expensive

product. But the same perfume in an unmarked bottle would likely be

viewed as lower in quality, even if the fragrance were identical.

BRAND EQUITY: The value of a brand, based on the extent to

which it has 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.



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Brands vary in the amount of power and value they have in the

marketplace. A powerful brand has high brand equity. Brands have higher

brand equity to the extent that they have higher brand loyalty, name

awareness, perceived quality, strong brand associations, and other assets

such as patents, trademarks, and channel relationships.

BRAND NAME SELECTION: A good name can add greatly to a

product’s success. However, finding the best brand name is a difficult

task. It begins with a careful review of the product and its benefits, the

target market, and proposed marketing strategies.

Desirable qualities for a brand name include:

o IT SHOULD SUGGEST SOMETHING ABOUT THE PRODUCT’S BENEFITS

AND QUALITIES. EXAMPLES: DIE HARD, EASY OFF CRAFTSMAN

SUNKIST, SPIC AND SPAN, SNUGGLES MERRY MAIDS, NATIONSBANK.

o IT SHOULD BE EASY TO PRONOUNCE, RECOGNIZE, AND REMEMBER.

SHORT NAMES HELP.

PRIVATE BRAND (OR STORE BRAND): A brand created

and owned by a reseller of a product or service.

BRAND SPONSOR: A manufacturer has four sponsorship options.

The product may be launched as a manufacturer’s brand (or national

brand), as when Kellogg and IBM sell their output under their own

manufacturer’s brand names. Or the manufacturer may sell to resellers

who give it a private brand (also called a store brand or distributor brand).

Although most manufacturers create their own brand names, others



| 52

market licensed brands. Finally, two companies can join forces and co

brand a product.

MANUFACTURE’S BRANDS VERSUS PRIVATE

BRANDS: Manufactures’ brands have long dominated the retail

scene. In recent times, however, and increasing number of retailers

and wholesalers have created their own private brands.

LICENSING: Most manufacturers take years and spend millions to

create their own brand names. However, some companies’ license

names or symbol previously created by other manufacturers, names of

well known celebrities, characters from popular movies and books __

for a fee, any of these can provide an instant and proven brand name.

Apparel and accessories sellers pay large royalties to adorn their

products __ from blouses to ties, and linens to luggage __ with the

names or initials of fashion innovators such as Bill Blass, Calvin Klein,

Pierre Cardin, Gucci, and Houston. Sellers of children’s products attach

an almost endless list of character names to clothing, toys, school

supplies, linins, dolls, lunch boxes, cereals, and other items. The

character names range from classics such as Disney, Peanuts, Barbie,

and Dr. Seuss characters, to the Muppets, Garfield, and batman.

CO-BRANDING: Although companies have been co branding

products for many years, there has been a recent resurgence in co

branded products. Co branding occurs when two established brand

names of different companies are used on the same product. For

example, Pillsbury joined Nabisco to create Pillsbury Oreo Bars Baking

Mix. Ford and Eddie Bauer co branded a sport utility vehicle __ the Ford

Explorer, Eddie Bauer edition. Mattel teamed with coca Cola to market



| 53

Soda Fountain Sweetheart Barbie. Kellogg joined forces with Con Agra

to co brand Healthy Choice from Kellogg’s cereals. In most co branding

situations, one company licenses another company’s well known brand

to use in combination with its own.

BRAND STRATEGY: A company has four choices when it comes

to brand strategy (see Figure 8-4). It can introduce line extensions

(existing brand names extended to new forms, sizes, and flavors of an

existing product category), brand extensions (existing brand names

extended to new product categories), multi brands (new brand names

introduced in the same product category), or new brands (new brand

names in new product categories).

LINE EXTENSIONS: 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. Thus, DANONE recently introduced several line

extensions, including seven new yogurt flavors, a fat free yogurt, and a

large economy size yogurt. The vast majority of new product activity

consists of line extensions. Using a successful brand name to introduce

additional items I given product category under the same brand name,

such as new flavors, forms, colors, added ingredients, or package

sizes.

BRAND EXTENSION: Using a successful brand name to launch

a new or modified product in a new category.

A brand extension involves the use of a successful brand name to

launch new or motioned products in a new category. Fruit of the Loom

took advantage of its very high name recognition to launch new lines of



| 54

socks, men’s fashion underwear, women’s underwear, athletic apparel,

and even baby clothes. Honda uses its company name to cover different

products such as its automobiles, motorcycles, snow blowers, lawn

mowers, marine engines, and snowmobile. This allows Honda to advertise

that it can fit six Hondas in a two car garage.” Swiss Army Brand

Sunglasses, Disney cruise Lines, Snack well’s Snack bars, and Century 21

Home Improvements, Brinks home security systems __ all are brand

extensions.

MULTIBRANDS: Companies often introduce additional brands in

the same category. Thus, Procter & Gamble markets many different

brands in each of its product categories. Multi branding offers a way to

establish different features and appeal to different buying motives. It

also allows a company to lock up more reseller shelf space.

A major drawback of multi branding is that each brand might obtain only a

small market share, and none may be very profitable. The company may

end up spreading its resources over many brands instead of building a

few brands to a highly profitable level. These companies should reduce

the number of brands they sell in a given category and set up tighter

screening procedures for new brands.

NEW BRANDS: A company may create a new brand name when

it enters a new product category for which none of the company’s

current brand names are appropriate. For example, Japan’s Matsushita

uses separate names for its different families of products: Techniques,

Panasonic, National, and Quasar. Or, a company might believe that the

power of its existing brand name is waning and a new brand name is

needed. Finally, the company may obtain new brands in new

categories through acquisitions.

PACKAGING



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The activities of designing and producing the container or wrapper for a

product. Packaging involves designing and producing the container or

wrapper for a product. The package may include the product’s primary

container (the tube holding Colgate toothpaste); a secondary package

that is thrown away when the product is about to be used (the cardboard

box containing the tube of Colgate); and the shipping package necessary

to store, identify, and ship the product (a corrugated box carrying six

dozen tubes of Colgate toothpaste). Labeling, the printed information

appearing on or with the package, is also part of packaging.

LABELINGLabels my range from simple tags attached to products to complex

graphics that are part of the package. They perform several functions. At

the very least, the label identifies the product or brand, such as the name

Sunkist stamped on oranges. The label might also describe several things

about the product __ who made it where it was made, when it was mad,

its contents, how it is to be used, and how to use it safely. Finally, the

label might promote the product through attractive graphics.

PRODUCT LINE DECISIONSWe have looked at product strategy decisions such as branding,

packaging, labeling, and support services for individual products and

services. Bust product strategy also calls for building a product line. A

product line is a group of products that are closely related because they

function in a similar manner, are sold to the same customer groups are

marketed through the same types of outlets, or fall within given price

ranges.



| 56

The major product line decision involves product line length __ the

number of items in the product line. The line is too short if the manager

can increase profits by adding items; the line is too long if the manager

can increase profits by dropping items. Product line length is influenced

by company objectives and resources.

Product lines tend to lengthen over time. The sales force and

distributors may pressure the product manager for a more complete line

to satisfy their customers. Or, the manager may want to add items to the

product line to create growth in sales and profits. However, as the

manager adds items, several costs rise: design and engineering costs,

inventory cost, manufacturing changeover costs, transportation costs, and

promotional costs to introduce new items. Eventually top management

calls a halt to the mushrooming product line. Unnecessary or unprofitable

items will be pruned from the line in a major effort to increase overall

profitability. This pattern of uncontrolled product line growth followed by

heavy pruning is typical and may repeat itself many times.

PRODUCT LINE: A group of products that are closely related

because they function in a similar. Manner, are sold to the same customer

groups, are marketed through the same, types of outlets, or fall within

given price ranges.

PRODUCT MIX DECISIONSAn organization with several product lines has a product mix. A product

mix (or product assortment) consists of all the product lines and items

that a particular seller offers for sale. Avon’s product mix consists of four

major product lines: cosmetic, jewelry, fashions, and household items.

Each product line consists of several sub lines. For example, a cosmetic

breaks down into lipstick, eyeliner, powder, and so on. Each line and sub

line has many individual items. Altogether, Avon’s product mix includes



| 57

1,300 items. In contrast, a typical Kmart stocks 15,000 item, 3M markets

more than 60,000 products, and General Electric manufactures as many

as 250,000 items.

A company’s product mix has four important dimensions: width,

length, depth, and consistency. Product mix width refers to the number of

different product lines the company carries. For example, Procter &

Gamble markets a fairly wide product mix consisting of many product

lines, including paper, food, household cleaning, medicinal, cosmetics,

and personal care products. Product mix length refers to the total number

of items the company carries within its product lines. Procter & Gamble

typically carries many brands within each line. For example, it sells eleven

laundry detergents, eight hand soaps, six shampoos, and four

dishwashing detergents.

SERVICE MARKETING

NATURE AND CHARACTERISTICS OF A SERVICE: Activities such as renting a hotel room, depositing money in a bank,

traveling on an airplane, getting a haircut, having a car repaired, watching

a professional sport, seeing a movie, and getting advice from a lawyer all

involve buying a service.

FOUR SERVICE CHARACTERISTICS


IntangibilityServices cannot be seen, tasted, felt, heard or smelled before purchased

Perish ability

Services cannot be stored for later sale or use

VariabilityQuality of services depends on who provides them and when, where, and how

Inseparability

Services cannot be separated from their providers

Services


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SERVICE INTANGIBILITY: A major characteristic of services

__ they cannot be seen, tasted, felt, heard, or smelled before they are

bought.

SERVICE INSEPARABILITY: A major characteristic of

services __ they are produced and consumed at the same time and

cannot be separated from their providers, whether the providers are

people or machines.

SERVICE VARIABILITY: A major characteristic of services __

their quality may vary greatly, depending on who provides them and

when, where, and how.

SERVICE PERISHES ABILITY: A major characteristic of

services __ they cannot be stored for later sale or use.

MARKETING STRATEGIES FOR SERVICE

FIRMSJust like manufacturing businesses, good service firms use marketing to

position themselves strongly in chosen target markets. Southwest Airlines

positions itself as Just Plane Smart for commuter flyers __ as a no frills,

short haul airline charging very low fares. The Ritz Carlton Hotel positions



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itself as offering a memorable experience that enlivens the senses, instills

well being, and fulfills even the unexpressed wishes and needs of our

guests. “These and other service firms establish their positions through

traditional marketing mix activities.

SERVICE PROFIT CHAIN: The chain that links service firm

profits with employee and customer satisfaction.

Successful service companies focus their attention on both their

customers and their employees. They understand the service profit chain,

which links service firm profits with employee and customer satisfaction.

This chain consists of five links:

o INTERNAL SERVICE QUALITY: superior selection and

training, a quality work environment, and strong support for those

dealing with customers, which results in …

o SATISFIED AND PRODUCTIVE SERVICE

EMPLOYEES: more satisfied, loyal, and hard working employees,

which results in . . .

o GREATER SERVICE VALUE: more effective and efficient

customer value creation and service delivery, which results in . . .

o SATISFIED AND LOYAL CUSTOMERS: satisfied

customers who remain loyal, repeat purchase, and refer other

customers, which result in . . .

o HEALTHY SERVICE PROFITS AND GROWTH: superior service firm performance:

INTERNAL MARKETING: Marketing by a service firm to

train and effectively motivate its customer contact employees and all

the supporting service people to work as a team to provide customer

satisfaction.



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INTERACTIVE MARKETING: Marketing by a service firm

that recognizes that perceived service quality depends heavily on the

quality of buyer seller interaction.

MANAGING SERVICE DIFFERENTIATION: In these days

of intense price competition, service marketers often complain about the

difficulty of differentiating their services from those of competitors. To the

extent that customers view the services of different providers as similar,

they care less about the provider than the price.

The solution to price competition is to develop a differentiated

offer, delivery, and image. The offer can include innovative features that

set one company’s offer apart from competitor’s offers. For example,

airlines have introduced innovations such as in flight movies, advance

seating, air to ground telephone service, and frequent flyer award

programs to differentiate their offers. British Airways even offers

international travelers a sleeping compartment, hot showers, and cooked

to order bread fasts.

MANAGING SERVICE QUALITY: One of the major ways a

service firm can differentiate it is by delivering consistently higher quality

than its competitors do. Like manufacturers before them, many service

industries have now joined the total quality movement. Customer

retention is perhaps the best measure of quality __ a service firm’s ability

to hang onto its customers depends on how consistently it delivers value

to them.

Like product marketers, service providers need to identify the

expectations of target customers concerning service quality.



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Unfortunately service quality is harder to define and judge than is product

quality. For instance, it is harder to get agreement on the quality of a

haircut than on the quality of a hair dryer. Moreover, although greater

service quality results in greater customer satisfaction, it also results in

higher costs. Still, investments I service usually pay off through increased

customer retention and sales.

MANAGING SERVICE PRODUCTIVITY: With their costs

rising rapidly, service firms are under great pressure to increase service

productivity. They can do so in several ways. The service providers can

train current employees better or hire new ones who will work harder or

more skillfully.

Or the service providers can increase the quantity of their service by

giving up some quality. Doctors working for health maintenance

organizations (HMOs) have moved toward handling more patients and

giving less time to each. The provider can “industrialize the service” by

adding equipment and standardizing production, as in Mc Donald’s

assembly line approach to fast food retailing.

BRANDS



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The word brand is comprehensive; it encompasses other narrower terms.

A brand is a name and /or mark interned to identify the product of one

seller or group of sellers and to differentiate the product from competing

products. Brand is also used, not really correctly, to refer to a specific

product, as in “sales of the brand.

A brand name consists of words, letters, and /or numbers that can

be vocalized. A brand mark is the part of the brand that appears in the

form of a symbol, design, or distinctive color or lettering. A brand mark is

recognized by side but cannot be expressed when a person pronounces

the brand name. Crest, FUBU, and Bearing Point (formerly KPMG

Consulting) are brand names. Brand marks are the distinctively lined

globe of AT&T and the Nike swoosh. Green Giant (canned and frozen

vegetable products) and Arm & Hammer (baking soda) are both brand

names and brand marks. Sometimes the term logo (short for logotype) is



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used interchangeably with brand mark or even brand name, especially if

the name is written a distinctive, stylized fashion.

REASONS FOR BRANDING: For consumers, brands make it

easy to identify goods or services. They aid shoppers in moving quickly

through a supermarket, discount outlet, or other retail store an in making

purchase decisions. Brands also help assure consumers that they will get

consistent quality when they reorder.

REASONS FOR NOT BRANDING: Two responsibilities come

with brand ownership:

(1) Promoting the brand and

(2) Maintaining a consistent quality of output. Many firms do not brand

their products because they are unable or unwilling to assume these

responsibilities.

Some items remain unbranded because they cannot be physically

differentiated from other firms’ products. Clothespins, nails, and raw

materials (goal, cotton, and wheat) are examples of goods for which

product differentiation, including branding, is generally unknown. The

perishable nature of products such as fresh fruits and vegetables works

against branding. However, well known brands such as Dole pineapples

and Chiquita bananas demonstrate that even agricultural products can be

branded successfully.

BRANDING STRATEGIES



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Both producers and middlemen face strategic decisions regarding

the branding of their goods or services.

o PRODUCERS STRATEGIES

o MIDDLEMAN STRATEGIES

PRODUCERS’ STRATEGIES: Producers must decide whether

to brand their products and whether to sell any or all of their output under

middlemen’s brands.

MARKETING ENTIRE OUTPUT UNDER

PRODUCER’S OWN BRANDS: That rely strictly on their

own brands usually are very large, well financed, and well managed.

Maytag and IBM, for example, have broad product lines, well

established distribution systems, and large shares of the market. The

reasons why a pro ulcer relies strictly on its own brands were covered

in the earlier section on the importance of branding to the seller.

BRANDING OF FABRICATING MATERIALS AND

PARTS: Some producers use a strategy of branding fabricating

materials and parts (manufactured goods that become part of another

product following subsequent manufacturing).17 This strategy is used in

marketing Dan River cottons, Carillon fabrics, and many automotive

Parts such as spark plugs, batteries, and roll filters. Dupont has

consistently and successfully used this strategy, notably with its Lycra

spandex fiber and Stain master stain repellant for carpets.



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This strategy is most likely to be effective when the particular type

of fabricating parts or materials has two characteristics:

The product is also a consumer good that is bought for replacement

purposes – Champion spark plugs and Delco batteries, for example.

The item is a key part of the finished product – an integral part of an

automobile, for instance. Johnson Controls and General Motors are trying

to build recognition for, respectively, the Home Link control pad and the

On Star navigation system. Other manufacturers are likely to follow suit,

considering that 44% of consumers said they will take branded auto parts

into account when choosing the next brand and model of car they will

buy.

MARKETING UNDER MIDDLEMEN’S BRAND: A

widespread strategy among manufacturers is to sell part or all of their

output to middlemen for branding by these customers. Firms such as

Borden, Feebler, and Reynolds Metals have their own well known

brands, and they also produce goods for branding by middlemen.

This approach allows a manufacturer to “hedge its bets”. A

company employing this strategy hopes its own brands will appeal to

some loyal customers, whereas middlemen’s brands are of interest to

other, perhaps more cost conscious shoppers. Moreover, for a

manufacturer, the output produced for middlemen’s brands ordinarily

represents additional sales. This strategy also helps a manufacturer fully

utilize its plant capacity.

MIDDLEMEN’S STRATEGIES: The question of whether to

brand must also be answered by middlemen.



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CARRY ONLY PRODUCERS’ BRANDS: Most retailers

and wholesalers follow this policy. Why? They do not have the other

resources to promote a brand and maintain its quality.

CARRY BOTH PRODUCERS’ AND

MIDDLEMEN’S BRANDS: Many large retailers and some

large wholesalers stock popular producers’ brands and also have their

own labels. Sears, for instance, offers an assortment of manufacturers’

brands such as Healthier children’s clothing and Firestone tires as well

as its own brands such as Kenmore appliances and Craftsman tools.

STRATEGIES COMMON TO

PRODUCERS AND MIDDLEMENProducers and middlemen alike must choose strategies with respect to

branding their product mixes, branding for market saturation, and joint

branding activity with another company.

BRANDING WITHIN A PRODUCT MIX: At least three

different strategies are used by firms that sell more than one product:

1. A SEPARATE NAME FOR EACH PRODUCT: This

strategy is employed by Lever Brothers and Procter & Gamble,

Citigroup, the largest financial services firm in the U.S., still

emphasizes some of its individual brands while also using the “Citi”

part of its corporate identity in other brand names.



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2. THE COMPANY NAME COMBINED WITH A

PRODUCT NAME: Examples include Johnson’s Pledge and

Johnson’s Glow-Coat, and Kellogg’s Rice Kris pies and Kellogg’s Corn

Pops.

3. THE COMPANY NAME ALONE: Today few companies

rely exclusively on this policy. However, it is followed for the most

part by Heinz and Libby in the food field as well as by General

Electric in various industries.

BRANDING FOR MARKET SATURATION: With increasing

frequency, firms are employing a multiple brand strategy to increase their

total sales in a market. They have more than one brand of essentially the

same product, aimed either at the same target market or at distinct

target markets. Suppose, for example, that a company has built one type

of sales appeal around a given brand. To reach other segments of the

market, the company may use other appeals with other brands.

CO BRANDING: More and more often, two separate companies or

two divisions within the same company agree to place both of their

respective brands on a particular product or enterprise. This arrangement

is termed as co branding, or dual branding.

SPACKAGING AND LABELING



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Even after a product is developed and branded, strategies must still be

devised for other product related aspects of the marketing mix. One such

product feature, and a critical one for some products, is packaging.

Closely related to packaging, labeling is another aspect of a product that

requires managerial attention.

PURPOSES AND IMPORTANCE OF PACKAGING: Packaging consists of all the activities of designing and producing the

container or wrapper for a product. Packaging is intended to serve several

vital purposes:

1. PROTECT THE PRODUCT ON ITS WAY TO THE

CONSUMER: A packaging protects a product during shipment.

Furthermore, it can prevent tampering with products, notably

medications and food products, in the warehouse or the retail store.

The design and size of a package can also help deter shoplifting.

That’s why small items, such as compact discs, come in larger than

needed packages.

2. PROTECT THE PRODUCT AFTER IT IS

PURCHASED: Compared with bulk items, packaged goods

generally re more convenient, cleaner, and less susceptible to

losses from evaporation, spilling, and spoilage. Also, “childproof”

closures thwart children from opening containers f medications and

other potentially harmful products.

3. HELP GAIN ACCEPTANCE OF THE PRODUCT

FROM MIDDLEMEN: A product must be packaged to meet

the needs of wholesaling and retailing middlemen. For instance, a

package’s size and shape must be suitable for displaying and

stacking the product in the store. And odd shaped package might



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attract shoppers’ attention, but if it doesn’t stack well, the retailer is

unlikely to purchase the product.

4. HELP PERSUADE CONSUMERS TO BUY THE

PRODUCT: Packaging can assist in getting a product noticed by

consumers. Here’s why that is important: “the average shopper

spends 20 minutes in the store, viewing 20 products a second”. At

the point of purchase, such as supermarket aisle, the package can

serve as a “silent sales person”. In the case of middlemen’s brands,

which typically are not advertised heavily, packaging must serve as

the means of communicating with shoppers.

PACKAGING STRATEGIES: In managing the packaging of a

product, executive must make the following strategic decisions:

o PACKAGING THE PRODUCT LINE

o MULTIPLE PACKAGING

o CHANGING THE PACKAGE

PACKAGING THSE PRODUCT LINE: A company must

decide whether to develop a family resemblance when packaging related

products. Family packaging uses either highly similar packages for all

products or packages with common and clearly noticeable features.

MULTIPLE PACKAGING: For many years there has been a trend

toward multiple packaging, the practice of placing several units of the

same product in one container. Dehydrated soups, motor oil, beer, golf

balls, building hardware, candy bars, towels, and countless other products

are packaged in multiple units. Test after test has proved that multiple

packaging increases total sales of a product.



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CHANGING THE PACKAGE: When detected, a company needs

to correct a poor feature in an existing package, of course. Unless a

problem was spotted, firms stayed with a package design for many years.

Now, for competitive reasons, packaging strategies and tactics are

reviewed annually along with the rest of the marketing mix.

Firms need to monitor and consider continuing developments, such

as new packaging materials, uncommon shapes, innovative closures, and

other new features. All are intended to provide benefits to middlemen and

consumers and as a result, are selling points for marketers.

CRITICISMS OF PACKAGINGPackaging is the public eye today, largely because of environmental

issues. Specific concerns are:

PACKAGING THAT DEPLETES NATURAL

RESOURCES: This problem is magnified by firms that prefer larger

than necessary containers. This criticism has been parallel addressed

through the use of recycled materials in packaging. A point in favor of

packaging is that it minimizes spoilage, thereby reducing a different type

of resource waste.

FORMS OF PACKAGING THAT ARE HEALTH

HAZARDS: Government regulations banned several suspect

packaging materials, notably aerosol cans that used chlorofluorocarbons

as propellants. Just as important, a growing number of companies are

switching from aerosol to pump dispensers.



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DISPOSAL OF USED PACKAGES: Consumers’ desire for

convenience in the form of throwaway containers conflicts with their

stated desire for a clean environment. Some discarded packages wind up

as litter, others add to solid waste in landfills. This problem can be eased

by using biodegradable materials in packaging.

EXPENSIVE PACKAGING: Even in seemingly simple packaging,

such as for soft drinks, as much as one half the production cost is for the

container. Still, effective packaging reduces transportation costs and

spoilage losses.

LABELINGA label is the part of a product that carries information about the product

and the seller. A label may be part of a package, or it may be a tag

attached to the producer. Obviously there is a close relationship among

labeling, packaging, and branding.

TYPES OF LABELING: There are three primary kinds of labeling:

1. A BRAND LABEL IS simply the brand alone applied to the

product or package. Some oranges are stamped Sunkist or Blue

Goose, and some clothes carry the brand label Sundries.

2. A DESCRIPTIVE LABEL gives objective information about

the product’s use, construction, care, performance and other

pertinent features. On a descriptive label for a can of corn, there will

be statements concerning the type of corn style, can size, number

of servings, other ingredients, and nutritional contents.



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3. A GRADE LABEL identifies the product’s judged quality with

a letter, number, or word. Canned purchased are grade labeled A, B,

C, and D and corn and wheat are grade labeled 1 and 2.

DESIGN, COLOR AND QUALITYA well rounded program for product planning and development will

include strategies and policies on several additional product features.

DESIGN: One way to satisfy customers and gain a differential

advantage is through product design, which refers to the arrangement of

elements that collectively form a good or service. Good design can

improve the marketability of a product by making it easier to operate,

upgrading its quality, improving its appearance, and reducing productions

costs. For instance, computer programmers are supposed to assure that

any new software is very user friendly.

According to and IBM executive, design is a strategic marketing tool.

Design is receiving more and more attention for several reasons:

o Rapidly advancing technologies are generating not only new

products that need attractive, yet functional designs, but also new

materials that can enhance design capabilities.

o A growing number of firms have turned to low prices as a

competitive tool. In burn, designers have been asked to rework

some of their companies’ products and lower the costs of making

them as one way of maintaining profit margins.

o A distinctive design may be the only feature that significantly

differentiates a product. Perhaps with that in mind, Samsung



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appears to be paying particular attention to product design__ with

excellent results. No corporation won more Industrial Design

Excellence Awards over a five year period that Samsung. Its winners

range from a DVD player that is less than 1 inch thick to the Smart

Cooker, cooking pad with a sensor that measures cholesterol and

other attributes of foods so a chef or homemaker can adjust recipes

as desired.

COLOR: Like design, product color often is determining factor in a

customer’s acceptance or rejection of a product, whether it is a dress, a

table, or an automobile. In fact, color is so important that the U.S.

Supreme Court confirmed in 1995 that the color of a product or its

packaging can be registered as part of a trademark under the Lanham

Act. Color by itself can qualify for trade mark status when, according to

the Court’s ruling, it identifies and distinguishes a particular brand, and

thus indicates its source. The case under review involved greenish gold

dry cleaning press pads manufactured by the Qualities Company. Other

distinctive colors that help identify specific brands are Owens-Corning’s

pink insulation and Kodak’s gold color film boxes.

QUALITY: There’s no agreement on a definition of product quality,

even though it is universally recognized as significant. One professional

society defines product quality as the set of features and characteristics

of a good or service that determines its ability to satisfy needs. Despite

what appears to be a straightforward definition, consumers frequently

disagree on what constitutes quality in a product whether it be a cut of

meat or a performance by a rock musician. Personal tastes are deeply

involved; what you like, another person may dislike. It is important to

recognize, therefore, that quality like beauty is to a large extent in the

eyes of the beholder.



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PRICEPrice is the amount of money and other items with utility needed to

acquire a product. Recall that utility is an attribute with the potential to

satisfy wants.

DEFINITION: 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.

In socially undesirable situation, there are prices called blackmail, ransom,

and bribery. Here are prices under various names and the products with

which they are associated in normal situation.

PRICE IS WHAT

YOU PAY ……

FOR WHAT YOU GET

Tuition Education

Interest Use of money

Rent Use of living quarters or a piece

of equipment for a period of

time

Fare Taxi ride or airline flight

Fee Services of a physician or

lawyer

Retainer Lawyer’s or consultant’s

services over a period of time

Toll Long distance phone call



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Salary Services of an executive

Wage Services of a blue-collar worker

Commission Sales person’s services

Dues Membership in a union or a

club

IMPORTANCE OF PRICEPrice is significant in our economy, in the consumer’s mind, and in an

individual firm. Let’s consider each situation:

1. In the Economy

2. In the Customer’s Mind

3. In the Individual Firms

IN THE ECONOMY: A product’s price influences wages, rent,

interest, and profits. Price is a basic regulator of the economic system

because it influences the allocation of the factors of production: labor,

land, and capital. High wages attract labor; high interest rates attract

capital, and so on. As an allocate of resources, price determines what will

be produces (supply) and who will get the goods and services produced

(demand).

IN THE CUSTOMER’S MIND: Some prospective customers are

interested primarily in low prices, whereas another segment is more

concerned with other factors, such as service, quality, value, and brand

image. It’s safe to say that few, if any customers are attentive to price

alone or are entirely oblivious to price. One study identified four distinct

segments of shoppers: Brand royals (relatively uninterested in price),

System beaters (prefer certain brands but to buy them at reduced prices),



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Deal shoppers (driven by low prices), and Uninvolved (seemingly not

motivated by either brand preferences or low prices).

Another consideration is that some consumers’ perceptions of

product quality vary directly with price. Typically, the higher the price, the

better the quality is perceived to be. In the words of an engineering

consultant, “many consultants have told me that when they raised their

prices, their sales went up.”

IN THE INDIVIDUAL FIRM: A products’ price is a major

determinant of the market demand for it. Through prices, money comes

into an organization. Thus price affects a firm’s competitive position,

revenues, and net profits. According to a McKinsey consultant, “Pricing is

extremely important because small changes in price can translate into

huge improvements in profitability.” In fact, in a study of 1000 companies,

the McKinsey firm found that a 1% increase in price would improve profits

by 7% assuming no change in sales volume.

Prices are important to a company most of the time, but not always.

Several factors can limit how much effect pricing has on a company’s

marketing program. Differentiated product features, a favorite brand, high

quality, convenience, or some combination of these and other factors may

be more important to consumers than price.

PRICING OBJECTIVESEvery marketing activity, including pricing, should be directed toward a

goal. Thus management should decide on its pricing objective before

determining the prices itself. Yet, as logical as this may sound, few firms

consciously established pricing objectives.



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To be useful, the pricing objective management selects must be

compatible with the overall goals set be the firm and the goals for its

marketing program. Let’s assume that a company’s goal is to increase

return on investment from its present level of 15% to 20% within three

years. It follows that the primary pricing goal during this period should be

to achieve some stated percentage return on investment. It would be

questionable, in this case, to adopt a primary pricing goal of maintaining

the company’s market share or of stabilizing prices.

WE WILL DISCUSS THE FOLLOWING PRICING

OBJECTIVES:

PROFIT ORIENTED

o To achieve a target return

o To maximize profit

SALES ORIENTED

o To increase sales volume

o To maintain or increase market share

STATUS QUO-ORIENTED

o To stabilize prices

o To meet competition

Recognize that all these objectives can be sought and hopefully

attained, through pricing that is coordinated with other marketing

activities such as product design and distribution channels. And all these

objectives are ultimately aimed at satisfactory performance over the long

run. For a business, that requires ample profit.



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PROFIT ORIENTED GOALSProfit goals may be set for the short or long term. A company may select

one to two profit-oriented goals for its pricing policy.

ACHIEVE A TARGET RETURN: A firm may price its products

to achieve a target return, a specified percentage return on its sales or on

its investment. Many retailers and wholesalers use a target return on

sales as a pricing objective for short periods such as a year or a fashion

season. They add an amount to the cost of the product, called a markup,

to cover anticipated operating expenses and provide a desired profit for

the period. Safeway or Kroger’s, for example, may price to earn a net

profit of 1% on a store’s sales. A chain of men’s clothing stores may have

a target profit of 6% of sales, and price its products accordingly.

MAXIMIZING PROFITS: The pricing objectives of making as

much money as possible are probably followed more than any other goal.

The trouble with this goal is that to some people, profit maximization has

ugly connotations, suggesting profiteering, high prices, and monopoly.

Where prices are unduly high and entry into the field is severely limited,

public criticism can be expected. If market conditions and public opinion

do not bring about reasonable prices, government may intervene.

A profit maximization goal is likely to be far more beneficial to a company

if it is pursued over the long term. To do this, however, firm may have to

accept modest profits or even losses over the short term.

EXAMPLE: A company entering a new geographic market or

introducing a new product frequently does best by initially setting low

prices to build a large clients. Repeat purchases from this large group of



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custo9mers may allow the firm to maximize these profits over the long

term.

SALES ORIENTED GOALSIn some companies, managements’ pricing is focused on sales volume.

The pricing goal may be to increase sales volume or to maintain or

increase the firm’s market share.

INCREASE SALES VOLUME: This pricing goal of increasing

sales volume is typically adopted to achieve rapid growth or to discourage

other firms from entering a market. The goal is usually stated as a

percentage increase in sales volume over some period, say, one year or

three years.

Occasionally companies are willing to incur a loss in the short run to

expand sales volume or meet sales objectives. Clothing stores run end of

season sales, and auto dealers offer rebates and below market loan rates

on new cars. Many vacation sports, such as golf courses and resorts,

reduce during off seasons to increase sales volume.

MAINTAIN OR INCREASE MARKET SHARE: In some

companies both large and small, the pricing objective is to maintain or

increase market share. Why is market share protected or pursued so

vigorously. In growing fields, such as computers and other technology

based products, companies want large shares in order to gain added and

to consumers.

Most industries today are not growing much if at all, and have

excess production capacity. Many firms need added sales to utilize their

production capacity more fully and in turn, gain economies of scale and

better profits. Because the size of the “Pie” isn’t growing in most cases,



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businesses that need added volume have to graph a bigger “slice of the

pie” that is greater market. The U.S. auto and retail grocery industries

illustrate this situation.

STATUS QUO GOALSTwo closely related goals – stabilizing prices and meeting competition –

are the least aggressive of all pricing goals. They are intended simply to

maintain the firm’s current situation that is, the status quo. With either of

these goals a firm seeks to avoid price competition.

STABILIZING PRICING: Price stabilization often is the goal in

industries where:

o The product is highly standardized such as steel or bulk chemicals

and

o One large firm, such as Phelps Dodge in the copper industry,

historically has acted as a leader in setting prices.

Smaller firms in these industries tend to “follow the leader” when

setting their prices. What is the reason for such pricing behavior? A price

cut by any one harm is likely to be matched by all other firms in order to

remain competitive, therefore, no individual firm gains, but all may suffer

smaller profits. Conversely, a price boost is unlikely to be matched. But

the price boosting firm faces a differential disadvantage, because other

elements of a standardized product such as gasoline are perceived to be

fairly similar.

MEETING COMPETITION: Firms that adopt status quo pricing

goals to avoid price competition are not necessarily passive in their

marketing. Quite the contrary! Typically these companies compete



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aggressively using other marketing mix elements product, distribution,

and especially promotion.

FACTORS TO CONSIDER WHEN SETTING

PRICESA company’s pricing decisions are affected both by internal

company factors and external environmental factors. (Explain in Figure)

INTERNAL FACTORS AFFECTING PRICING

DECISIONSInternal factors affecting pricing include the company’s marketing

objectives, marketing mix strategy, costs, and organization.

MARKETING OBJECTIVES: Before setting price, the company

must decide on its strategy for the product. If the company has selected

its target market and positioning carefully, then its marketing mix

strategy, including price, will be fairly straightforward.

At the same time, the company may seek additional objectives. The

clearer a firm is about its objectives, the easier it is to set price. Examples


Internal Factors Marketing

objectives Marketing mix

strategy Costs Organizational

considerations

Pricing Decision

External Factors Nature of the market

and demand Competition Other environmental

factors (economy, resellers, government)


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of common objectives are survival, current profit maximization, market

share leadership, etc.

MARKETING MIX STRATEGY: Price is only one of the

marketing mix tools that a company uses to achieve its marketing

objectives. Price decisions must be coordinated with product design,

distribution, and promotion decisions to form a consistent and effective

marketing program. Decisions made for other marketing mix variable may

affect pricing decisions. For example, producers using many resellers who

are expected to support and promote their products may have to build

larger reseller margins into their prices. The decision to position the

product on high performance quality will mean that the seller must charge

a higher price to cover higher costs.

Companies often position their products on price and then base

other marketing mix decisions on the prices they want to charge. Here,

price is a crucial product positioning factor that defines the products

market, competition, and design. Many firms support such price

positioning strategies with a technique called target costing, a potent

strategic weapon. Target costing reverses the usual process of first

designing a view product, determining its cost, and then asking “Can we

sell it for that?” instead, it starts with and ideal selling price, then targets

costs that will ensure that the price is met.

COSTS: Costs set the floor for the price that the company can charge

for its product. The company wants to charge a price that both covers all

its costs for producing, distributing, and selling the product, and delivers a

fair rate of return for its effort and risk. A company’s costs may be an

important element in its pricing strategy. Many companies work to

become the “low cost producers” in their industries. Companies with

lower costs can set lower prices that result in greater sales and profits.



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TYPES OF COSTSThere are three types to costs these are discussed below:

Fixed Costs

Variable Costs

Total Costs

FIXED COSTS: Costs that do not vary with production or sale's

level.

VARIABLE COSTS: Costs that vary directly with the level of

production.

TOTAL COSTS: The sum of the fixed and variable costs for any

given level of production.

COSTS AT DIFFERENT LEVELS OF PRODUCTION: To

price wisely, management needs to know how its costs vary with different

levels of production. For example, suppose Texas Instruments has built a

plant to produce 1,000 calculators per day.

EXTERNAL FACTORS AFFECTING PRICE

DECISIONSExternal factors that affect pricing decisions include the nature of the

market and demand, competition, and other environmental elements.

o THE MARKET AND DEMAND

o COMPETITORS COSTS, PRICES AND OFFERS



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o OTHER EXTERNAL FACTORS

THE MARKET AND DEMANDWhereas costs set the lower limit of prices, the market and demand set

the upper limit. Both consumer and industrial buyers balance the price of

a product or service against the benefits of owning it. Thus, before setting

prices, the marketer must understand the relationship between price and

demand for its product. In this section, we explain how the price demand

relationship varies for different types of markets and how buyer

perceptions of price affect the pricing decision. We then discuss methods

for measuring the price demand relationships.

PURE COMPETITION: A market in which many buyers and sellers

trade in a uniform commodity no single buyer or seller has much effect on

the going market price.

MONOPOLISTIC COMPETITION: A market in which many

buyers and sellers trade over a range of prices rather than a single

market price.

OLIGOPOLISTIC COMPETITION: A market in which there are

a few sellers all of whom are highly sensitive to each other’s pricing and

marketing strategies.

PURE MONOPOLY: A market in which there is a single seller it

may be a government monopoly, a private regulated monopoly, or a

private non regulated monopoly.



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CONSUMER PERCEPTION OF PRICE AND VALUE: In

the end, the consumer will decide whether a products price is right.

Pricing decisions, like other marketing mix something of value to get

something of value. 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.

ANALYZING THE PRICE DEMAND RELATIONSHIP: Each price the company might charge will lead to a different level of

demand. This relationship can be show the demand curve.

DEMAND CURVE: A curve that shows the number of units the

market will buy in a given time period, at different prices that might be

charged.

In the case of prestige goods, the demand curve sometimes slopes

upward. For example, one perfume company found that by raising its

price, it sold more perfume rather that less. Consumers thought the

higher price meant a better or more desirable perfume. However if the

company charges too high a price, the level of demand will be lower.

PRICE ELASTICITY OF DEMAND: A measure of the

sensitivity of demand to changes in price. Marketers also need to know

price elasticity __ how responsive demand will be to a change in price.

Consider the two demand curves in Figure 10-4A, a price increase from P 1

to P2 leads to a relatively small drop in demand from Q’1 to Q’2 . In Figure

10-4B, however, the same price increase leads to a large drop in demand

from Q’1 to Q’2 . If demand hardly changes with a small change in price, we

say the demand is inelastic. If demand given by the following formula.



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Price Elasticity of Demand =%Change in Quantity Demanded

%Change in Price

COMPETITORS’ COSTS, PRICES, AND

OFFERS

Another external factor affecting the company’s pricing decisions is

competitors’ costs and prices and possible competitor reactions to the

company’s won pricing moves. A consumer who is considering the

purchase Canon camera will evaluate Canon’s price and value against the

prices and value of comparable products made by Nikon, Minolta, pen tax,

and others. In addition, the company’s pricing strategy may affect the

nature of the competition it faces. If Canon follows a high price, high

margin strategy, it may attract competition. A low price, low margin

strategy, however, may stop competitors or drive them out of the market.

OTHER EXTERNAL FACTORSWhen setting prices, the company also must consider other factors in its

external environment. Economic conditions can have a strong impact on

the firm’s pricing strategies. Economic factors such as boom or recession,

inflation, and interest rates affect pricing decision because they affect

both the costs of producing a product and consumer perceptions of the

product’s price and value. The company must also consider what impact

its prices will have on other parties in its environment. How will resellers

react to various prices? The company should set prices that give resellers

a fair profit, encourage their support, and help them to sell the product

effectively. The government is another important external influence on

pricing decisions. Finally, social concerns may have to be taken into

account. In setting prices, a company’s short term sales, market share,



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and profit goals may have to be tempered by broader societal

considerations.

COST-PLUS PRICINGWe are now at the point in price determination to talk about setting a

specific selling price. Most companies establish their prices based on:

o TOTAL COST PLUS A DESIRED PROFIT,

o MARGINAL ANALYSIS __A CONSIDERATION OF BOTH MARKET DEMAND

AND SUPPLY; AND/OR

o COMPETITIVE MARKET CONDITIONS.

According to a survey that examined the approaches used to price

new products, 9% of companies “guesstimate” what the base price for a

new product should be, whereas 37% match what competitors charge for

similar offering. One half the responding firms charge what the market

will bear, if conditions allow. The most common approach, used by 52%

of the companies, is to choose a price that is intended to cover costs and

provide a fair profit. Because the total is more than 100%, evidently

most firms use more than one approach. That’s true, according to a

survey by the Professional Pricing Society, which found that the majority

of companies use a combination of methods to set price.22

PRICES BASED ON MARGINAL COSTS ONLY: Another

approach to cost plus pricing is to set prices based on marginal costs only,

not total costs. Under marginal cost pricing, this firm could accept and

order for one more unit 80 or above, instead of the total unit cost of 120.

the revenue from a until sold at 80 would cover its variable costs.



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However, if the firm can sell for a price above 80 say 85 or 90 the balance

contributes to the payment of fixed costs.

PRICING BY MIDDLEMEN: At first glance, cost plus pricing

appears to be widely used by retailing and wholesaling middlemen. A

retailer, for example, pays a given amount to buy products and have

them delivered to the store. Then the merchant adds an amount called a

markup, to the acquisition. This markup is estimated to be sufficient to

cover the stores expenses and provide a reasonable profit. Thus a

building materials outlet may buy a power drill for 30 including freight,

and price the item at 50. The 50 price reflects a markup of 40% based on

the selling price, or 66% based on the merchandise cost. Of course, in

setting prices, middlemen also should take into account the expectations.

EVALUATION OF COST-PLUS PRICING: A firm should be

market oriented and cater to consumers wants, so why are we

considering cost plus pricing. Simply, cost plus pricing must be

understood because it is straightforward, easy to explain and as a result

used by numerous firms. In fact, although not commonplace among

traditional middlemen, a recent study found that cost plus is the most

common pricing method among e-commerce companies.

The traditional perspective has been that costs should be a

determinant of prices, but not the only one. Costs are a floor for a

company’s price. If goods are priced below this floor for a long time, the

firm will be forced out of business.

BREAK-EVEN ANALYSIS



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One way to consider both market demand and costs in price

determination is using break even analysis to calculate break even points.

A breakeven point is that quantity of output at which total revenue equals

total costs, assuming a certain selling price. There is a different break

even pint for every selling price. Sales exceeding the breakeven point

result in a profit on each additional unit. The more sales are above the

breakeven point, the larger will be the total and unit profits. Salas below

the breakeven point result in a loss to the seller.

FORMULA OF DETERMINING THE BREAK EVEN

POINT

Breakeven point in units = Total fixed costs

Unit contribution to overhead

MARKET ENTRY STRATEGIES IN preparing to enter the market whit a new product, management must

decide whether to adopt a skimming or a penetration pricing strategy.

o Market Skimming Pricing

o Market Penetration Pricing

MARKET SKIMMING PRICING: Setting a relatively high initial

price for a new product is referred to as market skimming pricing.

Ordinarily the price is high in relation to the target market’s range of

expected prices. That is, the price is set at the highest possible level that



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the most interested consumers will pay for the new product. For example,

started with a relatively high price for Noisome, a wrinkle a wrinkle

fighting facial cream.

Market skimming pricing is suitable under the following conditions.

The new product has distinctive features strongly desired by

consumers.

Demand is fairly inelastic, most likely the case in the early stages of a

product’s life cycle. Under this condition, lower prices are unlikely to

produce greater total revenues.

The new product is protected from competition through one or more

entry barriers such as a patent.

MARKET PENETRATION PRICING: In market penetration

pricing, a relatively low initial price is established for a new product. The

price is low in to the target market’s range of expected prices. The

primary aim of this strategy is to penetrate the mass market immediately

and, in so doing, generate substantial sales volume and a large market

share. At the same time, starting with a low price is intended to

discourage other firms from introducing competing products. When it

launched the Spin Brush, a battery powered tooth brush, Procter &

Gamble chose penetration pricing for these reasons. However, P&G’s

entry was so successful that despite the low price, directly competing

products such as Gillette’s Oral-B Cross Action Power have been

introduced.12

Market penetration pricing makes the most sense under the following

conditions:

A large market exists for the product.



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Demand is highly elastic, typically in the later stages of the life cycle

for a product category.

Substantial reductions in unit costs can be achieved through

operations. In other words, economies of scale are possible,

Fierce competition already exists in the market for this product or can

be expected soon after the products introduced.

DISCOUNTS AND ALLOWANCESDiscounts and allowances result in a deduction from the base (or list)

price. The dedication may be in the form of a reduced price or some other

concession, such as free merchandise or advertising allowances.

Discounts and allowances are common in business dealing.

o Quantity Discounts

o Trade Discounts

o Cash Discounts

o Other Discounts and Allowances

QUANTITY DISCOUNTS: Quantity discounts are deductions

from a seller’s list price intended to encourage customers to buy in larger

amounts or to buy most of what they need from the seller offering the

deduction. Discounts are based on the size of the purchase, either in

dollars or in units.

Quantity discounts can help a producer achieve real economies in

production as well as in selling. On the one hand, large orders (motivated

by a non cumulative discount) can result in lower production and

transportation costs. On the other hand, frequent orders from a single

customer motivated by a cu8mulative by a discount can enable the



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producer to make much more effective use of production capacity. Thus

the producer might benefit even though individual orders are small and

do not generate savings in marketing costs.

TRADE DISCOUNTS: Trade discounts, sometimes called

functional discounts, are reductions from the list price offered to buyers in

payment for marketing functions the buyers will perform. Sorting,

promoting, and selling the product are examples of these functions. A

manufacturer may quote a retail price of $400 with trade discounts of

40% and 10% The retailer pays the wholesaler $240 ($400 less 40%), and

the wholesaler pays the manufacturer $216 ($240 less 10%). The

wholesaler is given the 40% and 10% discounts. The wholesaler is

expected to keep the 10% to cover costs of wholesaling functions and on

the 40% discount to retailers. Sometimes, however4, wholesalers keep

more than the 10% __ and it’s not illegal for them to do so.

CASH DISCOUNTS: A cash discount is a deduction granted to

buyers for paying, their bills within a specified time. The discount is

computed on the net amount due after first deducting trade and quantity

discounts from the base price.

o THE PERCENTAGE DISCOUNT.

o THE PERIOD DURING WHICH THE DISCOUNT MAY BE TAKEN.

o THE TIME WHEN THE BILL BECOMES.

There are almost as many different cash discounts as there are

industries. For example, in women’s fashions, large discounts and short

payment periods have been common; thus a cash discount of 5/5, n/15

would not be surprising. Such differences persist not so much for business

reasons but because of tradition in various industries.



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Most buyers are eager to pay bills in time to earn cash discounts. The

discount in a 2/10, n/30 situation may not seem like very much. But this

2% is earned just for paying 20 days in advance of the date the entire bill

is due. If buyers fail to take the cash discount in a 2/10, n/30 situation,

they are, in effect, borrowing money at a 36% annual rate of interest.

Here’s how we arrived at that rate: In a 360 business year, there are 18

periods of 20 days. Paying 2% for one of these 20days periods is

equivalent to paying 36% for an entire year.

OTHER DISCOUNTS AND ALLOWANCES: To stimulate

sales, some sellers offer rebates to prospective customers. A rebate is a

discount on a product that a customer obtains by submitting a form or

certificate provide by the seller. There are two kinds of rebates:

1. A coupon, which is a small printed certificate that the customer

presents when purchasing the product in order to obtain a discount

equal to the value shown on the certificate.

2. A mail in rebate, in which the customer fills out a short form,

encloses proof of the purchase, and sends the paperwork to a

specified address. If all goes well, a rebate check arrives in the mail

a short while later. Marketers favor mail ins not only because they

stimulate sales and can be offered for quite short periods, but

redemption.

A manufacturer of goods su8ch as air conditioners or toys purchased

on a seasonal basis may consider granting a seasonal discount. This

discount of, say, 5% 10%, or 20% is given to a customer who places an

order during the slack season. Off season orders enable manufacturers to

better use their production facilities and/or avoid inventory carrying cost.



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Many services firms also offer seasonal discount. For example, Club Med

and other vacation resorts lower their prices during the off season.

SPECIAL PRICING STRATEGIES AND

SITUATIONS

1. ONE PRICE AND FLEXIBLE PRICE STRATEGIES

2. PRICE LINING

3. ODD PRICING

4. LEADER PRICING AND UNFAIR PRACTICES ACTS

5. HIGH LOW PRICING AND EVERYDAY LOW PRICING

6. RESALE PRICE MAINTENANCE

7. REACTIVE AND PROACTIVE CHANGES

ONE PRICE AND FLEXIBLE PRICE STRATEGIES: Early

in its pricing deliberations, management should decide whether to adopt a

one price or a flexible price strategy. Under a one price strategy, a seller

charges the same price to all similar customers who buy identical

quantities of a product, under a flexible price strategy, also called variable

price strategy similar customers may pay different prices when buying

identical quantities of a product. Although you may think otherwise, this

practice is normally legal.

A variable price strategy abounds in buying situations involving

trading. With flexible pricing, buyer seller bargaining often determines the

final price. Both factors, trade ins and bargaining, are common automobile

retailing. Thus, even though window sticker prices may suggest a one



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price may suggest a one price policy, variable pricing has been the norm

in selling cars.

PRICE LINING: Price lining involves selecting a limited number of

prices at which a business will sell related products. It is used extensively

by retailers of apparel. The Athletic Store, for instance, sell several styles

of shoes at $29.88 a pair, another group at $59.95, and a third

assortment at $79.99.

For the consumer, the main benefits of price lining are that it

simplifies buying decision. For the retailer, price lining helps in planning

purchases. The buyer for the athletic Store can go to market looking for

shoes that can be sold at one of its three price points.

Rising costs can put a real squeeze on price lines. That’s because a

company hesitates to change its price line every time its costs go up. But

if costs rise and prices are not increased accordingly, profit margins shrink

and the retailer may be forced to seek products with lower costs.

ODD PRICING: Earlier, we briefly discussed pricing strategies that

might be called psychological pricing: Pricing above competitive levels,

raising an unsuitably low price to increase sale, and price lining. All these

strategies are intended to convey desirable images about products.

Odd pricing, another psychological strategy, is commonly used in

retailing. Odd pricing sets prices at uneven (or odd) amounts, such as 49

cents or $19.95, rather than at even amounts. Autos are priced at

$13.995 rather than $14,000, and houses sell for $119,500 instead of

$12,000. Odd pricing is often avoided in prestige stores or on higher

priced items. Expensive men’s suits, for example, are priced at $750, not

$749.95.



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LEADER PRICING AND UNFAIR PRACTICES ACTS: Many firms, primarily retailers, temporarily cut prices on a few items to

attract customer. This strategy is called leader pricing. The items on

which prices are cut are termed leaders; if the leader is priced below the

store’s cost, it’s a loss leader.

Leaders should be well known, heavily advertised products that are

purchase that are purchased frequently. For example, for a while,

Amzon.com cut the base price of currently popular books by 50%. As

stated in one article, “Amazon may be able to treat bestselling books as

loss leaders that attract customer’s into9 its online store where they can

be tempted by other merchandise that isn’t priced so cheaply.”29 But, to

improve profit margins, Amazon and other bookseller eventually scaled

back the discounts on best sellers.

More than 20 states have unfair practices acts, sometimes called

unfair sales acts, to regulate leader pricing. Typically, these laws prohibit

a or wholesaler from selling an item below invoice cost plus some

stipulated amount. Varying from to state “cost plus is usually defied as

either a markup of several percent of the firm’s cost of doing business.

HIGH LOW PRICING AND EVERYDAY LOW

PRICING: Many retailers, especially supermarkets and department

stores that want to engage in price competition rely on high low pricing.

This strategy entails alternating between regular (high) and “sale” (low)

prices on the most visible products offered by a retail firm. Frequent price

reductions are combined with aggressive promotion to convey an image

of very low prices. By starting with relatively high prices, retailers can

boost their profits through sales to the segment of shoppers that really

wants the product and is not very price sensitive.



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Given the need to change prices frequently, high low pricing can be

costly. It also may cause some consumers to not purchase products at

regular prices, but always wait for reduced prices. Further, some

consumer advocates have criticized high low pricing, asserting that it

misleads shoppers. The concern is that most transactions are made at

decreased prices, which means that the so-called low prices are normal

rather than real bargains.

RESALE PRICE MAINTENANCE: Some manufacturers want to

control the prices at which middlemen resell their products this is termed

resale price maintenance. Manufacturers seek to do this to protect the

brand’s image. Publicly, they state that their control of prices and

avoidance of discounted prices provides middlemen with ample profit

margins. In turn, consumers should be able to expect sales help and other

services when they buy the manufacturers products from middlemen.

Critics, however, claim that control over prices leads to inflated prices and

excessive profits.

Other manufacturer tries even harder to control their products retail

prices. Such effort is worthwhile only for a producer selling to relatively

few retailers that want very much to carry the product. A manufacturer

may even threaten to stop shipment of products to retailers that price

products substantially below suggested list prices.

REACTIVE AND PROACTIVE CHANGES: After an initial

price is set, a number of situations may prompt a firm to change its price.

As costs increase, for instance, management may decide that raising

price is preferable to maintaining price and either cutting quality or

promoting the product aggressively. According to a pricing consultant,



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“Small companies are more reluctant to raise prices than their large

counterparts. “40 “Obviously, it’s wise to raise prices gradually and with

little fanfare. The “art” of raising pricing is discussed further in the nearby

You Make the Decision box.

Any firm can safely assume that its competitors will change their

prices__ sooner or later. Consequently, every firm should have guidelines

on how it will react. If a competitor boosts price, a short delay in reacting

probably will not be pillions, however, if a competing firm reduces price, a

prompt response normally is required to avoid losing customers.

In the short term, consumers benefit from price wars through

sharply lower prices. But over the longer term the net effects on

consumers are not clear cut. Ultimately, a smaller number of competing

firms might translate to fewer product choices and/or higher prices for

consumers

GENERAL PRICING APPROACHESThe price the company charges will be somewhere between one that is

too low to produce a profit and one that is too high to produce any

demand. Figure 10-5 summarizes the major considerations in setting

price. Product costs set a floor to the price; consumer perceptions of the

product’s value set the ceiling. The company must consider competitors’

prices and other external and intern factors to find the best price between

these two extremes.

Companies set prices by selecting a general pricing approach that

includes one or more of these here sets of factors. We will examine the

following approaches: the cost based approach (cost plus pricing,

breakeven analysis, and target profit Pricing); the buyer based approach

(value based pricing); and the competition based approach (going rate

and sealed bid pricing.)



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COST BASED PRICING

COST PLUS PRICING: The simplest pricing method is cost plus

pricing __ adding a standard markup to the cost of the product.

Construction companies, for example, submit fob bids by estimating the

total project cost and adding a standard markup for profit. Lawyers,

accountants, and other professionals typically price by adding a standard

markup to their costs. Some sellers tell their customers they will charge

cost plus a specified markup; for example, aerospace companies price this

way to government.

Variable $10

Fixed cost $300,000

Expected unit sales $50,000

Then the manufacturer’s cost per toaster is given by:

Unit cost = Variable Cost + Fixed Costs = $10 + $3000,000 = $16

Unit Sales 50,000

Now suppose the manufacturer wants to earn a 20 percent markup

on sales. The manufacturer’s markup price is given by:9

Markup Price = Unit Cost = Cost =$20

(1 _ Desired Return on Sales) 1 _ 0.2

BREAKEVEN ANALYSIS AND TARGET PROFIT

PRICING: Setting price to break even on the costs of making and

marketing a product; or setting price to make a target profit is called

breakeven pricing.



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Another cost oriented pricing approach is breakeven pricing, or a

variation called target profit pricing. The firm tries to determine the price

at which it will break even or make the target profit it is seeking. Such

pricing is used by General Motors, which prices its automobiles to achieve

a 15 to 20 percent profit on its investment. This pricing method is also

used by public utilities, which are constrained to make a fair return on

their investment.

Breakeven Volume = Fixed Cost_____

Price – Variable Cost

= $300,000___

$20 - $10

= $30,000

VALUE BASED PRICING: Setting price based on buyers’

perceptions of value rather than on the seller’s cost.

An increasing number of companies are basing their prices on the

products perceived value. Value based pricing uses buyer’s perceptions of

value, not the sellers cost, as the key to pricing. Value based pricing

means that the marketer cannot be sign a product and marketing

program and then set the price. Price is considered along with the other

marketing mix variables before the marketing program is set.

COMPETITION BASED PRICING



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Consumers will base their judgments of a products value on the prices

that competitors charge for similar products. Here, we discuss two forms

of competition based pricing.

GOING RATE PRICING: Setting price based largely on following

competitor’s prices rather than on company costs or demand.

In Going Rate Pricing, the firm bases its price largely on competitors

prices with less attention paid to its own costs or to demand. The firm

might charge the same, more, or less than its major competitors. In

oligopolistic industries that sell a commodity such as steel, paper, or

fertilizer, firms normally charge the same price.

SEALE BID PRICING: Setting price based on how the firm thinks

competitors will price rather than on its own costs or demand used when

a company bids for jobs.

Competition based pricing is also used when firms bid for jobs.

Using sealed bid pricing a firm bases its price on how it thinks competitors

will price rather than on its own costs or on the demand. The firm wants

to win a contract, and winning the contract requires pricing lower than

other firms.

PRODUCT MIX PRICING

STRATEGIES



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The strategy for setting a products price often has to be changed when

the product is part of a product mix. In this case, the firm looks for a set of

prices that maximizes the profits on the total product mix. Pricing is

difficult because the various products have related demand and costs and

face different degrees of competition. We now take a closer look at five

product mix pricing situations summarized in table.

STRATEGY DESCRIPTION

Product line pricing Setting price steps between

product line items

Optional product

pricing

Pricing optional or accessory

products sold with the main

product

Captive product

pricing

Pricing products that must be

used with the main product

By product pricing Pricing low value by products

to get rid of them

Product bundle pricing Pricing bundles of products

sold together

PRODUCT LINE PRICING: Setting the price steps between

various products in a product line based on cost differences between the

products, customers evaluations of different features, and competitors

prices.

OPTIONAL PRODUCT PRICING: The pricing of optional or

accessory products along with a main product.



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CAPTIVE PRODUCT PRICING: Setting a price for products

that must be used along with main products, such as blades for a razor

and film for a camera.

BY PRODUCT PRICING: Setting a price for by products in order

to make the main products price more competitive.

PRODUCT BUNDLE PRICING: Combining several products

and offering the bundle at a reduced price.

RETAILINGAll activities involved in selling goods or services directly to final

consumer for their personal non business use.

RETAILER: Business whose sales come primarily from retailing

STORE RETAILING: Retail stores come in all shapes and sizes and

new retail style keeps emerging. Retail store can be classified in term of

several characteristics including the amount of services they offer, the

breadth and depth of their product lines and the relative prices they

change

AMOUNT OF SERVICE: Different products require different

amount of services and customer services preferences vary. Retailer may

offer one of three levels of services—self-services, limited services and full

services.



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PRODUCT LINE: Retailers also can be classified by the length and

breadth of their product assortment. Some retailers, such as specialty

stores, carry narrow product lines with deep assortment within those

lines. Today, specialty stores are flourishing The increasing use of market

segmentation, market retailing, and product specialization has resulted in

a greater need for stores that focus on specific products and segments.

SPECIALTY STORES: A retail store that carries a narrow product

line with a deep assortment within that line.

DEPARTMENT STORES: A retail organization that carries a wide

variety of product lines –typically clothing, home furnishing and house

hold goods, each line is operated as separate department managed by

specialist buyers or merchandisers.

SUPERMARKET: Large, low- cost, low- margin, high-volume, self-

service store that carries a wide variety of food, laundry and house hold

product.

CONVENIENCE STORE: A small store located near a residential

area, that is open hours seven days a week and carries a limited lines of

high- turnover convenience goods.

SPECIALTY: Carry narrow product line within deep assortment within

that line; apparel stores, sporting-goods store, furniture stores, florists,

and bookstores. Specialty stores can be sub classified by the degree of

narrowness in their product line. A clothing store would be a single line



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store; a men’s clothing store would be a limited-line store; and a men’s

custom-shirt store would be a super specialty store.

EXAMPLE: Athlete foot (sport shoes only); tail men(tail men’s

clothing); the limited(women’s clothing); the body shop(cosmetics and

bath supplies)

DEPARTMENT STORE: Carry several product lines- typically

clothing, home furnishing, and house hold goods- with each line is

operated as separate department managed by specialist buyers or

merchandise.

EXAMPLE: Sears, Sakes Fifth Avenue, Marshall Fields, etc

SUPERMARKETS: Relatively large, low-cost, low-margin, high-

volume, self-service operations designed to serve the consumer total

needs for food, laundry, and household maintenance products.

EXAMPLE: Safeway, Kroger, A and P, Publics

CONVENIENCE STORES: Relatively large, low cost, low margin,

high-volume, self-service operation designed to serve the consumer total

need for food, laundry, and household maintenance product.

SUPER STORES: Larger stores that aim at meeting consumer total

need for routinely purchase food and nonfood item. They include super-

centers, combined super markets and discount stores, which feature cross

merchandising. They also include so- called “category killer” that carry a

very deep assortment of particular line. Another superstores variation

hyper markets, huge stores that combine supermarket, discount, and



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warehouse retailing to sell routinely purchase goods as well as furniture,

large and small appliances, clothing and many other item

EXAMPLE: Super centers: Wal-Mart super centers, and super Kmart

Center;

DISCOUNT STORES: Sell standard merchandise at low prices by

accepting lower margins and selling higher volumes. A true discount store

regularly sells it merchandise at lower prices, offering most national

brands, not inferior goods. Discount retailer include both general

merchandise and specially and specially merchandise stores

EXAMPLE: General discount store: Wal-Mart, K mart

OFF PRICE RETAILERS: Sell a changing and un- stable

collection of higher quality of merchandise, often leftover goods,

overruns, and irregular retain at reduced prices from manufacturers or

other retailers. They buy at less than regular wholesale prices and charge

consumer less than retail.

THEY INCLUDE THREE MAIN TYPES:

INDEPENDENCE OFF PRICE RETAILERS: Owned

and run either by entrepreneurs or by division by large retail

corporations.

EXAMPLE: T. J. Max, Filenes Basement, Lehman’s, and Hit or Miss



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FACTORY OUTLET: Owned and operate by manufacturers

and normally carry the manufacturer surplus, discontinued, or

irregular goods. Such outlets increasingly group together in factory

outlet malls, where dozens of outlet stores offer prices as much as

50 percent below retail on a broad range of items.

EXAMPLE: Mikes, Dexter, Ralph Lauren and Liz Claiborne

WAREHOUSE CLUBS: Sell a limited selection of brand name

grocery items, appliances, clothing, and hodgepodge of other goods at

deep discount to members who pay $25 to $50 annual membership fee.

They serve small businesses and other club me3mbers out of huge, low-

overhead, warehouse like facilities and offer few frills or services

EXAMPLE: Wall-Mart-owned Sam’s Club, Max Club, Price-Costco,

CATALOG SHOWROOMS: Sell a broad selection of high –

markup, fast- moving, brand name goods at discount prices. These

include jewelry, power tools, cameras, luggage, small appliances, toys,

and sporting goods. Customers order his goods from the catalog in the

showroom, and then pick them up from a merchandise pick- up area in

the store.

SUPERSTORE: A store almost twice the of a regular supermarket

that carries a large assortment of routinely purchased food and nonfood

items and offers service such as dry cleaning, post offices, photo finishing,

check cashing, bill paying, lunch counters, car care, and pet care.



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EXAMPLE: Safeway’s Pak `N Pay and Path mark Super centers

CATEGORY KILLER: Giant specialty store that carries a very deep

assortment of a particular line and is staffed by knowledgeable

employees.

CORPORATE CHAIN STORE: Two or mare outlet that

commonly owned and controlled, employ central buying and

merchandising, and sell similar lines of merchandise. Corporate chains

appear in all types of retailing, but they are strongest in department

store, variety store, food stores, drugstore, shoe store, and women

clothing store.

EXAMPLE: Tower Records, Fauve, Pottery Barn

VOLUNTARY CHAIN: Wholesaler-sponsored groups of

independent retailers engaged in bulk buying and common

merchandising.

EXAMPLE: Independent grocer alliance, Sentry Hardware, Western

Auto, True Value

RETAILER COOPERATIVES: Groups of independent retailers

who set up a central buying organization and conduct joint promotion

efforts.

EXAMPLE: Associate Grocer, ACE



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FRANCHISE ORGANIZATION: Contractual association

between a (franchiser manufacturer, wholesaler, or service organization )

and franchisees. Franchise organizations are based on some unique

product, service, or method of doing business, or on a trade name or

patent, or on good will that the franchiser has developed.

EXAMPLE: McDonald’s, subway, Pizza Hut, Jiffy Lube,

NON STORE RETAILING Although most goods and services are sold through stores, non-store

retailing has been growing much faster than has store retailing.

Traditional store retailers are facing increasing competition from non-

store retailers who sell through catalogs, direct mail, telephone, home

television shopping shows, online computer shopping services, home and

office parties, and other direct retailing approaches. Non- store retailing

now accounts for more than 14 percent of all consumer purchase, and it

may account for a third of all sales by the year 2000. Non-store retailing

includes direct marketing, direct selling, and automatic vending.

DIRECT MARKETING: “Direct communication with carefully

targeted individual consumer to obtain an immediate response”

Mass marketing and advertising typically reach an unspecified

number of people, most of who are not in market of product or will not

buy it until some future date. Direct marketing is used to obtain

immediate order from targeted customer. Although direct marketing

initially consisted mostly of direct mail and mail order catalogs, it has



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taken on several additional forms in recent years, including telemarketing,

and online and internet shopping.

DIRECT SELLING: “Selling door to door, office to office, or at

home sale parties “

Door to door retailing which started centuries ago roving peddlers,

has grown into a huge industry. The pioneers in door to door selling are

the Fuller Brush company, vacuum cleaner companies such as Electrolux,

and bookselling co0panies such as World Book and South western.

AUTOMATIC VENDING: “Selling through vending machines”

Automatic vending is not new—in 215B.C. Egyptians could buy

sacrificial water from coin operated dispenser. But this method of selling

soared after Second World War. There are about 4.5 million vending

machines in America—one machine for every 55 people. Today’s

automatic vending using space age and computer technology to sell a

wide variety of convenience and impulse goods beverages, candy,

newspapers, foods and snacks, hosiery , cosmetic, paperback books, T-

shirts, insurance policies, pizza, CD’S and videocassettes, and shoeshine

and finishing warms. Vending machines are very popular in Japan, where

they dispense everything from $100 Armani ties, boxer shorts, beer, and

sausage3s to pearls, stuffed animals, and $8 health drink.

RETAIL MARKETING DECISIONSRetailers are searching for new marketing strategies to attract and hold

customers in the past, retailers attract customer with unique products,

more or better services than their competitors offered, or credit cards.



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Today, nationals brand manufacturers, in their drive of volume, have

placed tier branded goods everywhere. Thus, store offer more similar

assortment national brands are found not only departmental store, but

also in mass merchandise and off price discount store. As a result stores

are looking more and more alike; they have become “commoditized.” In

any city a shopper can find many stores but few assortments.

Service differentiation among retailers has also eroded. Many

department stores have trimmed their services, whereas discount has

increased theirs. Customers have become smarter and more price

sensitive. They see no reason to pay more for identical brands, especially

when service differences are shrinking. Because bank credit cards are

now accepted at most stores, consumer no longer needs credit from

particular store. For all these reasons, many retailers today are re-thinking

their market strategies.

TARGET MARKETING AND POSITIONING

DECISION: Retailer must first define their target markets and then

decide how they will position themselves in these markets. Should the

store focus on up-scale, mid-scale, or down-scale shoppers? Do target

shoppers want variety, depth of assortment, convenience, or low price?

Until they define and profile their markets, retailers cannot make

consistent decision about product assortment, services, pricing,

advertising, store décor, or any of other decision that mist support their

positions.

PRODUCT ASSORTMENT AND SERVICE DECISION: Retailers must decide on three major product variables product

assortment services mix, and store atmosphere.

The retailer product assortment should match target shoppers

expectations. The retailers must determine both the product assortment

width and its depth. Thus, restaurant can offer a narrow and deep



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assortment, a narrow and deep assortment, a wide a shallow assortment,

or a wide and deep assortment. Another product assortment element is

quality of the goods. The customer is interested not only in the range of

choice but also in the quality of product available.

PROMOTION DECISION: Retailers use the normal promotion

tools—advertising, personal selling, sales promotion, and public relation—

to reach consumers. They advertise in news papers, magazines, radio,

and television. Advertising may be supported by a news paper insert and

direct mail pieces. Personal selling require careful; training of sale people

in how to greet customers, meet their need, and handle their complaints.

Sales promotion include in- store demonstrations, displays, contests, and

visiting celebrities. Public relations activities, such as press conferences

and speeches, store openings, special events, newsletters, magazines,

and public service activities, are always available to retailers.

PLACE DECISION: Retailers often cite three critical factors in

retailing success: location, location, and location! A retailer’s location is

key to its ability to attract customers. The costs of building or leasing

facilities have a major impact on retailer’s profits. Thus, site- location

decision s are among the most important the retailer makes. Small

retailers may have to settle for whatever locations they can find or afford.

Large retailers usually employ specialists who select location using

advance methods. Two of the savviest location experts in recent year

have been the off- price retailer T.J. Max and toy- store giant Toy’s” Us.

Both put the majority of their location in rapidly growing areas where the

population closely matches their customer base. The undisputed winner in

the “place race” has been Wal-Mart, whose strategy of being the first

mass merchandiser to locate in small and rural markets has been one of

the key factors in its phenomenal success.



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SOPPING CENTER: “A group of retailer businesses planned,

developed, owned, and managed as a unit”

A regional shopping center, the largest and most dramatic shopping

center, contain from 40 to over 200 stores. It us like a covered mini-

downtown and attract customers from a wide area. Large regional malls

often have several department stores and a wide variety of specialty

stores on several shopping levels. A community shopping center contains

15 and 40 retail stores. It normally contains a branch of a department

store or variety store, a supermarket, specialty stores, professional

offices, and sometimes a bank. Most shopping centers are neighborhood

shopping centers or strip malls that generally contain “between” 5 to 15

stores. They are close and convenient for customer. They usually contain

a super market, perhaps a discount store, and several services stores –

dry cleaner, self services laundry, drugstore video-rental outlet, barber or

beauty shop, hardware stores.

CHANNEL OF DISTRIBUTION“A distribution channel consists of the set of people and firms involved in

the transfer of title to a product as the product moves from producer to

ultimate consumer or user.”

Basic principles of relationship between dealer and

caterpillar

o DEALER PROFITABILITY

o EXTRAORDINARY DEALER SUPPORT

o COMMUNICATION

o DEALER PERFORMANCE

o PERSONAL RELATIONSHIPS



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DISTRIBUTION CHANNEL

FUNCTIONS A distribution channel moves goods from producer to consumers.

Members of a marketing channel perform many key functions some are

given below.

INFORMATION: Gathering and distributing marketing research and

intelligence information about factors and forces in marketing

environment needed for planning and aiding exchange.

PROMOTION: Developing and spreading persuasive communication

about an offer.

CONTACT: Finding and communicating with prospective buyers.

MATCHING: Shaping and fitting the offer to the buyer’s needs

including activities such 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.

PHYSICAL DISTRIBUTION: Transporting and storing goods.

FINANCING: Acquiring and using funds to cover the costs of the

channel work.

RISK TAKING: Assuming the risks of carrying out the channel work.



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CHANNEL LEVELS “A layer of intermediaries that performs some work in bringing the

product and its ownership closer to the final buyer”.

o Direct marketing channel

o Indirect marketing channel

DIRECT MARKETING CHANNEL

“A marketing channel that has no intermediary levels”

INDIRECT MARKETING CHANNEL: “A marketing channel

containing one or more intermediary levels”

SELECTING THE TYPE OF

CHANNEL

Firms may rely on existing channels or they may devise new channels to

better serve the existing customers and to reach new prospects. The most

common channels for consumer goods, business goods, and services are

given below.

DISTRIBUTION OF CONSUMER GOODS: Five channels

are widely used in marketing tangible product ultimate consumer.



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1. PRODUCER—CONSUMER: The shortest, simplest distribution

channel for consumer goods involves no middlemen. The producer

may sell door to door or by mail.

2. PRODUCER—RETAILER—CONSUMER: In this many large

retailers buy directly from manufacturer and agricultural producer.

3. PRODUCER—WHOLESALER—RETAILER—CONSUMER:

If there is any traditional channel for consumer goods, this is it.

Small retailers and manufacturers by the thousands find this

channel the only economically feasible choice.

4. PRODUCER—AGENT—RETAILER—CONSUMER: Instead

of using wholesalers, many producers prefer to rely on agent

middlemen to reach the retail market.

5. PRODUCER—AGENT—WHOLESALER—RETAILER—

CONSUMER: To reach the small retailers, producers often use

agent as a middlemen, who in turn call on wholesalers

DISTRIBUTION OF BUSINESS GOODS: A variety of

channels available to reach organizations that incorporate the products

into their manufacturing process or use them in their operations.

1. PRODUCER—USER: this direct channel account for greater

dollar volume of business products than any other distribution

structure.

2. PRODUCER—INDUSTRIAL DISTRIBUTOR—USER:

producers of operating supplies and small accessory equipment

frequently industrial distribution to reach their markets.

3. PRODUCER—INDUSTRIAL DISTRIBUTOR—RESELLER—

USER: this channel has been common for computer products and

related high-tech item. Distributor, which usually are large, national



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companies, buy varies products from manufacturers and than

handle them with related products for resale. Resellers, which are

usually smaller, local firms, work closely with the end user to meet

the buyers’ needs.

4. PRODUCER—AGENT—USER: firms without their own

sale departments find this channel desirable. Also a company that

wants to introduce a new product or enter a new market may prefer

to use agents rather than its own sales force.

5. PRODUCER—AGENT—INDUSTRIAL DISTRIBUTOR—

USER: this channel is similar to the preceding one. It is use when,

some reasons, it is not feasible to sell through agents directly to the

business user.

DISTRIBUTION OF SERVICES: The intangible service creates

special distribution problems and requirements. There are only two

common channels for services.

1. PRODUCER—CONSUMER: because a service is intangible,

the production process and/or sales activity often require

personal contact between a producer and customer. Thus a

direct channel is used.

2. PRODUCER—AGENT—CONSUMER: although direct

distribution often is required or necessary for the performance of

a service, producer-consumer contact may not be required for

distribution activities. Agents frequently assist a services

producer with transfer of ownership. Many services notably

travel, lodging, advertising media, entertainment, and insurance,

are sold through agents.

MULTIPLE DISTRIBUTION CHANNELS: Many, perhaps

most, producer are not connect with only one distribution channel.

Instead, for reason such as reaching two or more target markets or



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avoiding total dependence on a single arrangement, they employ multiple

distribution channels.

Use of multiple channels occurs in several distinct situations. A

manufacturer is likely to use multiple channels to reach different types of

markets when selling.

The same product to both consumer and business markets

UNRELATED PRODUCT: Many channels are also used to reach

different segments within a same market.

Size of the buyers varies greatly. Geographical concentration differs

across parts of the market.

CONVENTIONAL DISTRIBUTION CHANNEL: “A channel

consisting of one or more independent producers, wholesalers, and

retailers, each a separate business seeking to maximize its own profit

even at the expense of profits for the system as a whole”

VERTICAL MARKETING SYSTEM (VMS) “A distribution channel structure in which producers, wholesalers, and

retailers act as a unified system”

TYPESo CORPORATE VMS

o CONTRACTUAL VMS

o ADMINISTERED VMS



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CORPORATE VMS: “A vertical marketing system that combines

successive stages of production and distribution under single ownership-

channel leadership is established through common ownership”

CONTRACTUAL VMS: “A vertical marketing system in which

independent firms at different level of production and distribution join

together through contracts to obtain more economies or sales impact

than they could achieve alone”

o Wholesaler sponsored voluntary chain

o Retailer cooperatives

o Franchise organization

WHOLESALER SPONSORED VOLUNTARY CHAIN:

“Contractual vertical marketing system in which wholesalers organize a

voluntary chain of independent retailers to help them compete with large

corporate chain organization”

RETAILER COOPERATIVE: “Contractual vertical marketing

system in which retailers organize a new, jointly owned business to carry

on wholesaling and possibly production”

FRANCHISE ORGANIZATION: “A contractual marketing

system in which a channel members, called a franchiser, links several

stages in the production and distribution process”

ADMINISTERED VMS: “A vertical marketing system that

coordinates successive stages of production and distribution, not through

common ownership or contractual ties, but through the size and power of

one of the party”



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HORIZONTAL MARKETING SYSTEM “A channel arrangement in which two or more companies at one level

join together to follow a new marketing opportunity”

HYBRID MARKETING CHANNELS

“Multi channel distribution system in which a single firm sets up

two or more customer segments”

FACTORS AFFECTING CHOICE OF CHANNELS:

o MARKET CONSIDERATIONS

o PRODUCT CONSIDERATIONS

o MIDDLEMEN CONSIDERATIONS

o COMPANY CONSIDERATIONS

MARKET CONSIDERATIONS

A logical starting point is to consider the target market, its needs,

structure, and buying behavior.

TYPES OF MARKET Because ultimate consumers behave differently than business user,

they are reached through different distribution channel. Retailer, by

definition, serve ultimate consumer, so they are not in channels for

business goods.

1. NUMBER OF POTENTIAL CUSTOMER: A manufacturer

with few potential customers may use its own sales force to sell

directly to ultimate consumers or business users. Conversely, a

manufacturer with many prospects would likely use middlemen.



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2. GEOGRAPHICAL CONCENTRATION OF THE MARKET:

When most of a firm’s prospective customers are concentrated in a

few geographical areas, direct sale is practical. When customers are

geographical dispersed, direct sale is likely to be impractical

because of high travel costs.

3. ORDER SIZE: When either order size or total business volume is

large, direct distribution is economical. Thus a food products

manufacturer would sell directly to large supermarket chains.

PRODUCT CONSIDERATIONS: Although there are numerous

product-related factors to consider, we will highlight three.

1. UNIT VALUE: The price attached to each unit of a product affects

the amount of funds available for distribution.

2. PERISH ABILITY: Some goods, including many agricultural,

physically deteriorate fairly quickly. Other goods, such as clothing,

perish in a fashion sense. Perishable products require direct or very

short channels.

3. TECHNICAL NATURE: A highly technical business product is

often distributed directly to business users. This product sales force

must provide considerable presale and post sale service,

wholesalers normally cannot do this.

MIDDLEMEN CONSIDERATIONS: Here we begin to see that

a company may not be able to arrange exactly the channels it desires.

1. SERVICES PROVIDED BY MIDDLEMEN: Each producer

should select middlemen offering those marketing services that the

producer either unable to provide or cannot economically perform.



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2. AVAILABILITY OF DESIRED MIDDLEMEN: The middlemen

preferred by a producer may not be available. They may carry

competing products and, as a result, not want to add another line.

3. PRODUCER’S AND MIDDLEMAN’S POLICIES: When

middlemen are unwilling to join a channel because they consider a

producer’s policies to be unacceptable.

COMPANY CONSIDERATIONS: Before choosing a distributing

channel for a product, a company should consider its own situation.

1. DESIRE FOR CHANNEL CONTROL: Some producers

establish direct channels because they want to control their

product’s distribution, even through a direct arrangement may be

more costly than an indirect one. By controlling the channel,

producers can achieve more aggressive promotion, assure the

freshness of merchandise stocks, and set their products’ retail

prices.

2. SERVICES PROVIDED BY SELLER: Some producers make

decisions about their channels based on the distribution functions

desired by middlemen.

3. ABILITY OF MANAGEMENT: The marketing experience and

managerial capabilities of a producer influence decisions about

which channel to use. Many companies lacking marketing know how

turn the distribution job over to middlemen.

4. FINANCIAL RESOURCES: A business with adequate finances

can establish its own sales force, grant credit to its customers,

and/or store its own products. A financially weak firm uses

middlemen to provide these services.



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IDENTIFY MAJOR ALTERNATIVESWhen the company has defined its channel objectives, it should next

identify its major channel alternatives in terms of types of intermediaries,

number of intermediaries, and the responsibilities of each channel

member.

TYPES OF INTERMEDIARIES: A firm should identify the types

of channel members available to carry out its major channel work. For

example, suppose a manufacturer of test equipment has developed an

audio devise that detects poor mechanical connections in machines with

moving parts. Company executives think this product would have a

market in all industries in which electric, combustion, or steam engines

are made or used. This market includes industries such as aviation,

automobile, railroad, food canning, construction, and oil. The company’s

current sales force is small, and the problem is how best to reach these

different industries. The following channel alternatives might emerge from

management discussion.

1. COMPANY SALES FORCE: Expand the company’s direct sales

force. Assign salespeople to territories and have them contact all

prospects in the area or develop separate company sales forces for

different industries.

2. MANUFACTURER’S AGENCY: Hire manufacturer’s agents—

independent firms whose sales forces handle related products from



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many companies—in different regions or industries to sell the new

test equipment.

3. INDUSTRIAL DISTRIBUTORS: find distributors in the

different regions or industries who will buy and sell the new line.

Give them exclusive distribution, good margins, product training,

and promotional support.

Sometimes a company must develop a channel other than the one it

prefers because of the difficulty or cost of using the preferred channel.

Still, the decision may turn out extremely well.

NUMBER OF MARKETING INTERMEDIARIES

Company must also determine the number of channel members to

use at each level. Three strategies are available: intensive distribution,

exclusive distribution, and selective distribution.

INTENSIVE DISTRIBUTION: “Stocking the product in as many

outlets as possible”

Producers of convenience products and common raw materials

typically seek intensive distribution. These goods must be available where

and when consumers want them. For example, toothpaste, candy, and

other similar items are sold in millions of outlets to provide maximum

brand exposure and consumer convenience.

EXCLUSIVE DISTRIBUTION: “Giving a limited number of

dealers the exclusive right to distribute the company’s products in their

products. Some producers purposely limit the number of intermediaries

handling their products. Exclusive distribution is often found in the

distribution of new automobiles and prestige women’s clothing.



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SELECTIVE DISTRIBUTION

“The use of more than one, but fewer than all, of the intermediaries

who are willing to carry the company’s products”

Selective distribution lies between the exclusive and intensive

distribution. Most television, furniture, and small appliance brands are

distributed in this manner.

RESPONSIBILITIES OF CHANNEL MEMBERS: The

producer and intermediaries need to agree on the terms and

responsibilities of each channel member. They should agree on price

policies, conditions of sale, territorial rights, and specific services to be

performed by each party. The producer should establish a list price and a

fair set of discounts for intermediaries. It must be define each channel

member’s territory, and it should be careful about where it places new

resellers. Mutual services and duties need to be spelled out carefully,

especially in franchise and exclusive distribution channels.

EVALUATING THE MAJOR ALTERNATIVES: Suppose a

company has identified several channel alternatives and wants to select

the one that will best satisfy its long-run objectives. Each alternative

should be evaluated against economic, control, and adaptive criteria.

Using economic criteria, a company compares the likely profitability

of different channel alternatives. It estimates the sales that each channel

produces and the costs of selling different volumes through each channel.

The company must also consider control issues. Using

intermediaries usually means giving them some control over the

marketing of the product, and some intermediaries take more control



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than others other things being equal, the company prefers to keep as

much control as possible.

Finally, the company must apply adaptive criteria. Channels often

involve long-term commitment to other firms, making it hard to adapt the

channel to the changing marketing environment. The company wants to

keep the channel as flexible as possible. Thus, to be considered, a

channel involving long-term commitment should be greatly superior on

economic and control grounds.

DESIGNING INTERNATIONAL DISTRIBUTION

CHANNELS: International marketers face many additional

complexities in designing their channels. Each country has its own unique

distribution system that has evolved over time and changes very slowly.

These channels vary widely from country to country. Thus, global

marketers must usually adapt their channel strategies to the existing

structures within each country. In some markets, the distribution system

is complex and hard to penetrate, consisting of many intermediaries and

large numbers of layers.

CHANNEL MANAGEMENT DECISIONS: Once the company

has reviewed its channel alternatives and decided on the best channel

design, it must implement and manage the chosen channel. Channel

management calls for selecting and motivating individual channel

members and evaluating their performance over time.

SELECTING CHANNEL MEMBERS: Producers vary in their

ability to attract qualified marketing intermediaries. Some producers have

no trouble singing up channel members. For example, Toyota had no



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trouble attracting new dealers for its Lexus line. In fact, it had to turn

down many would-be resellers. In some cases, the promise of exclusive or

selective distribution for a desirable product will draw plenty of applicants.

When selecting intermediaries, the company will want to evaluate

each channel member’s years in business, other lines carried, growth and

profit record, cooperativeness, and reputation. If the intermediaries are

sales agents, the company will want to evaluate the number and

character of other lines carried, and the size and quality of the sales force.

If the intermediary is a retail store that wants exclusive or selective

distribution, the company will want to evaluate the store’s customers,

location, and future growth potential.

MOTIVATING CHANNEL MEMBERS: Once selected,

channel members must be continuously motivated to do their best; the

company must sell not only through the intermediaries, but to them. Most

producers see the problem as finding ways to gain intermediary

cooperation. They use the carrot-and-stick approach: at times they offer

positive motivators such as higher margins, special deals, premiums,

cooperative advertising allowances, display allowances, and sales

contests. At other times they use negative motivators, such as

threatening to reduce margins, to slow down delivery, or to end the

relationship altogether. A producer using this approach usually has not

done a good job of studying the needs, problems, strengths, weaknesses

of its distributors.

More advanced companies try to forge long-term partnerships with

their distributors. This involves building a planned, professionally

managed, vertical marketing system that meets the needs of both the

manufacturer and the distributors.



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EVALUATING CHANNEL MEMBERS: The producer must

regularly check the channel member’s performance against standards

such as sales quotas, average inventory levels, customer delivery time,

treatment of damaged and lost goods, cooperation in company promotion

and training programs, and services to the customer. The company should

recognize and reward intermediaries who are performing well. Those who

are performing poorly should be assisted or, as a last resort, replaced.

PHYSICAL DISTRIBUTION AND LOGISTICS

MANAGEMENT: In today’s global marketplace, selling a product is

sometimes easier then getting it to customers. Companies must1 decide

on the best way to store, handle, and move their product and services so

that they are available to customers in the right assortments, at the right

time, and in the right place. Logistics effectiveness has a major impact on

both customer satisfaction and company costs. A poor distribution system

can destroy an otherwise good marketing effort.

PHYSICAL DISTRIBUTION: “The task involved in planning,

implementing, and controlling the physical flow of materials, final goods,

and related information from point of origin to point of consumption to

meet consumer requirements at a profit”

WHOLESALING“All activities involved in selling goods and services to those buying for

resale or business use.”



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A retailer bakery is engaged in wholesaling when it sells

pastry to the local hotel. We call wholesalers those firms engaged

primarily in wholesaling activities.

WHOLESALER: “A firm engaged primarily in wholesaling activity”

Wholesalers buy mostly from producers and sell mostly to retailers,

industrial consumer, and other wholesalers. But why are wholesalers used

at all? For example, why would a producer use wholesaler rather than

selling directly to retailers or consumer? Quite simply, wholesalers are

often better at performing one or more of the following

CHANNEL FUNCTIONS

1. SELLING AND PROMOTING: Wholesalers’ sales forces help

manufacturers reach many small customers at low cost. The

wholesaler has more contact and is often more trusted by the buyer

than the distant manufacturer.

2. BUYING AND ASSORTMENT BUILDING: Wholesaler can

select items and build assortment needed by their customers,

thereby saving the consumers much work.

3. BULK BREAKING: Wholesalers save their customers money by

buying in carload lots and breaking bulk.

4. WAREHOUSING: Wholesaler hold inventories, thereby reducing

the inventory costs and risks of suppliers and customers.

5. TRANSPORTATION: Wholesaler can provide quicker delivery to

buyers because they are closer than the producers.

6. FINANCING: Wholesaler finance their customer by giving credit,

and they finance their suppliers by ordering early and paying bills

on time.

7. RISK BEARING: Wholesaler absorb risk by taking title and

bearing the cost of theft, damage, spoilage, and obsolescence.



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8. MARKET INFORMATION: Wholesaler gives information to

suppliers and customers about competitors, new producers, and

price development.

9. MANAGEMENT SERVICES AND ADVICE: Wholesaler often

help retailers train their sales clerks, improve store layouts and

displays, and set up accounting and inventory control systems.

TYPES OF WHOLESALINGWholesalers fall into three groups.

1. Merchant wholesalers

2. Brokers

3. Agent

4. Manufacturers’ sales branches and offices

MERCHANT WHOLESALER

“Independently owned business that takes title to the merchandise

it handles”

Merchant wholesalers are the largest single group of wholesalers,

accounting roughly 50 percent of all wholesaling.

MERCHANT WHOLESALERS ARE BROADLY TWO

TYPES:

o FULL SERVICES WHOLESALERS

o LIMITED SERVICES WHOLESALER

FULL SERVICE WHOLESALER: Full service wholesaler provide full

set of services



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LIMITED SERVICES WHOLESALER: Limited service wholesaler

offer few services to their suppliers and customers. The several different

types of limited services wholesalers perform varied specialized functions

in distribution channel.

BROKER: “wholesalers who does not take title to goods and whose

function is it bring buyers and sellers together and assist negotiation”

AGENT: “Wholesalers who represents buyers or sellers on a relatively

permanent basis, performs only a few functions, and does not take title to

goods.”

BROKER AND AGENT DIFFER FROM MERCHANT

WHOLESALER IN TWO WAYS: They do not take title to goods, and

they perform only a few functions. Like merchant wholesalers, they

generally specialize by product line or customer type. A broker brings

buyers and sellers together and assists in negotiation. Agents represent

buyers or sellers on a more permanent basis. Manufacturers’ agents are

the most common type of agent wholesaler. Together, broker and agents

account for 11 of the total wholesale volume.

MANUFACTURERS’ SALES BRANCHES AND

OFFICES: “Wholesaling by sellers or buyers themselves rather than

through independent wholesalers”

The third major type of wholesaling is that done in manufacturers’

sales branches and offices by sellers or buyers themselves rather than

through independent wholesalers. Manufacturers’ offices and sales

branches account for about 31 percent of all wholesale volume.



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MERCHANT WHOLESALERS: Independently owned business

that take title to the merchandise they handle. In different trades they are

called jabbers, distributors, or mill supply houses. Include full services

wholesalers and limited services wholesaler.

FULL SERVICES WHOLESALER: Provide a full line of

services: carrying stock, maintaining a sale force, offering credit, making

deliveries, and providing management assistance.

THERE ARE TWO TYPES:

1. WHOLESALE MERCHANTS

Sell primarily to retailers and provide a full range of services. General

merchandise wholesalers carry several merchandise lines, whereas

general lines wholesaler carry one or two lines in greater depth. Specialty

wholesalers specialize in carrying only part of line.

2. INDUSTRIAL DISTRIBUTORS

Sell to manufacturer rather than to retailers. Provide several services.

Such as carrying stock, offering credit, and providing delivery. May carry a

broad range of merchandise, a general line, or a specialty line.

LIMITED SERVICES WHOLESALERS

Offer fewer services than full services wholesalers. Limited services

wholesalers are of several types.

o CASH AND CARRY WHOLESALERS

Carry a limited line of fast moving goods and sell to smart retailer

for cash. Normally do not deliver. Example: A small fish store retailer may



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drive to cash-and- carry fish wholesaler, buy fish for cash, and bring the

merchandise back to the store.

o TRUCK WHOLESALER

Perform primarily a selling and delivering function. Carry a limited

line of semi perishable merchandise, which they sell for cash as they

make their round to super markets, small groceries, hospital, restaurant,

factory cafeteria, and hotels

o DROP SHIPPERS

Do not carry inventory or handle the product. On receiving an order,

they select a manufacturer, who ships the merchandise directly to the

customer. The drop shipper assumes title and risk from the time the order

is accepted to its delivery to the customer. They operate in bulk industrial.

o RACK JOBBERS

Serve grocery and drug retailers, mostly in non food items. They

sent delivery trucks to stores, where the delivery people set up toys,

paper backs, hard ware items, health and beauty aids, or other items.

They price the goods, keep them fresh, set up point of purchase displays,

and keep inventory records. Rack jobbers retain title to goods and bill the

retailers only for the goods sold to the consumers.

o PRODUCERS’ COOPERATIVES

Owned by farmer members and assemble farm produce to sell in

local market. The co-op’s profits are distributive to members at the end of

the year. They often attempt to improve product quality and promote a

co-op brand name, such as Sun Maid raisins, Sunkist oranges, or Diamond

walnuts.

o MAIL ORDER WHOLESALERS



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Send catalogs to retail, industrial, and institutional customers

featuring jewelry, cosmetics, specialty food, and other small items.

Maintain no outside sales force. Main customers are businesses in small

outlying area. Orders are filled and sent by mail, truck, or other

transportation.

BROKERS AND AGENTSDo no take the title to goods. Main function is to facilitate buying

and selling, for which they earn commission on the selling price.

BROKERS: Chief function is bringing buyers and sellers together and

assisting in negotiation. They are paid by the party who hired them, and

do not carry inventory, get involved in financing, or assume risk.

EXAMPLES: food brokers, real estate brokers, insurance brokers, and

security brokers.

AGENTS: Represents either buyers or sellers on a more permanent

basis than brokers do.

THERE ARE SEVERAL TYPES:

o MANUFACTURERS’ AGENTS: Represent two or more

manufacturers of complementary lines. A formal written agreement

with each manufacturer covering price, territories, order- handling,



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delivery services and warranties, and commission rates. Often used

in such lines as apparel, furniture and electrical goods. Most

manufacturers’ agents are small businesses with only a few skilled

sales people as employees. They are hired by small manufacturers

who cannot afford their own field forces, and by large

manufacturers who use agents to open new territories or to cover

territories that cannot support full time sales people.

o SELLING AGENTS: Have contractual authority to sell a

manufacturer’s entire output. The manufacturer either is not

interested in selling function or feels unqualified. The selling agent

serves as a sales department and has significant influence over

prices, terms and condition of sales. Found in product area such as

textile, industrial machinery, and equipment, coal and cook,

chemicals and metals.

o PURCHASING AGENTS: Generally have long term relation

with buyers and make purchases for them, often receiving,

inspecting, warehousing, and shipping the merchandise to the

buyers

o COMMISSION AGENTS: Take physical possession of the

product and negotiate sales. Normally, they are not employed on

long term basis. Used most often in agricultural marketing by

farmers who do not want to sell their own output and don’t belong

to producer’s cooperatives. The commission merchant takes a

truckload of commodities to a central market, sells it for the best

price, deducts a commission and expenses, and remits the balance

to the producer.



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MANUFACTURERS’ AND RETAILERS BRANCHES

AND OFFICES: Wholesaling operations conduct by the sellers or

buyers themselves rather than through independent wholesalers.

Separate branches and offices can be dedicated to either sales or

purchasing.

SALES BRANCHES AND OFFICES: Set up by manufacturers

to improve inventory control, selling, and promotion. Sales branches carry

inventory and are found in industries such as lumber and automotive

equipment and parts. Sales offices do not carry inventory and are most

prominent in dry- goods and notions industries.

PURCHASING OFFICES: Perform a role similar to that of brokers

or agents but are part of the buyer’s organization. Many retailers sat up

purchasing offices in major market centers such as New York and Chicago.

INTEGRATED MARKETING

COMMUNICATIONS

THE ROLE OF PROMOTION IN MARKETING

A feature of a free-market system is the right to use communication as a

tool of influence as well as information. Let’s examine how promotion

works from an economic perspective and from marketing perspective.

PROMOTION AND IMPERFECT COMPETATION: The American

marketplace operates under conditions of imperfect competition,



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characterized by incomplete market information, product differentiation,

and emotional buying behavior. As a result, companies use promotion to

provide information for the decision maker’s buying-decision process, to

assist in differentiating their products, and to persuade potential buyers.

In economic terms, the role of promotion is to change the location

and shape of the demand (revenue) curve for a company’s product.

Through promotion a company strives to increase its product’s sale

volume at any given price; that is, the firm seeks to shift its demand curve

to the right. Simply stated, promotion is intended to make a product more

attractive to prospective buyers. A firm also hopes that promotion will

affect the demand elasticity for its product’s intent is to make demand

more in elastic when price increases and more elastic when price

decreases. In other words, management wants promotion to increase the

attractiveness of product so the quantity demanded will decline very little

if price goes up (inelastic demand), and sales will increase considerably if

price goes down (elastic demand).

PROMOTION AND MARKETING: From a marketing perspective

promotion is intended to further if no further the objectives of an

organization. It makes use of various tools of perform three essential

promotional roles-informing, persuading, and reminding targets

audiences. The relative importance of these roles depends on the

circumstances faced by the firm. Let’s consider each of them separately.

The most useful product will be a failure if no one knows it exists, so

the first task of promotion is to inform. Beyond simply being aware of a

product of brand, customers must understand what benefits it’s provided,

how it works, and how to get it. These are just a few examples of

information promotion provides channel members and consumers. In the

electronic appliance industry, for example, palm uses advertising to

educate the market about the operation and features of each new

generation of handhelds. In other instance, when a small Canadian firm



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was faced with consumers who couldn’t understand its toy called x- zoylo

a gyroscopic cylinder that can be thrown 100 yards, the inventor informed

retailers and consumers about it with demonstrations at fairs, in company

packing lots, and on school playing fields.

Another purpose of promotion is persuasion. Intense completion

among firms puts tremendous pressure on the promotional programs of

sellers. In an economy with an abundant supply of products, consumers

have many alternatives ways of satisfying even basic physiological needs.

As a result, persuasive promotion is essential .Campbell soup company

has been marketing condensed soup for over 100 years, and accounts for

80 % of all soup sales in the U.S .it is one of the most recognized some

Campbell’s soup in the pantry. Yet the firm spends over $100 million a

year advertising soup. Why? partly because it regularly introduces new

flavors but, more important, because its primary products are condensed

soups that require some minimal preparation .and as one industry analyst

quipped,” if you’re under 70 year old, you buy ready-to serve soup”. Thus,

Campbell’s, faced with intense competition from alternative easier-to-

prepare foods, uses promotion to persuade soup buyers.

Consumers also must be reminded about a product’s availability and

its potential to satisfy. Sellers bombard the marketplace with thousands of

messages everyday in hopes of attracting new consumers and

establishing markets for new products. Given the intense competition for

consumers’ attention even an established firm must constantly remind

people about its brand to retain a place in their minds. It is unlikely that a

day goes by, for example, in which you don’t see some form of promotion

for coca-cola. In fact the company spends over $200 million a year in the

U.S just advertising coca-cola and diet cola soft drinks. Because there is

little new to inform consumers about coke, much of this promotion is

intended simply to off-set competitor’s marketing activity by keeping its

brand in front of the consumers.



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Recognizing that it is both important and varied, we define promotion

as all person al and impersonal efforts by seller or the seller’s

representative to inform, persuade or remind a target audience.

PROMOTION METHODS: Promotion, to whomever it is directed, is

an attempt to influence. There are four forms of promotion which are

given as under:

o PERSONAL SELLING

o ADVERTISING

o SALES PROMOTION



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o PUBLIC RELATIONS

PERSONAL SELLING: Personal selling is the direct presentation of a

product to prospective customer by representative of the organization

selling it. Personal selling takes place face-t-face or over the phone, and it

may be directed to a business person or a final consumer. We list it first

because, across all organizations, more money is spent on personal

selling than on any other form of promotion.

ADVERTISING: Advertising is non-personal communication paid for by

a clearly identified sponsor promoting ideas, organizations, or products.

The most familiar outlets for ads are Broadcast (TV and radio) and print



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(Newspaper and magazines) media. However; there are many other

advertising vehicles, from Billboards to T-Shirts and, more recently, the

internet.

SALES PROMOTION: Sales promotion is sponsor-funded, demand-

stimulating activity designed to supplement advertising and facilitate

personal selling. It frequently consists of a temporary incentive to

encourage a sale or purchase. Many sale promotions are directed at

consumers the premiums offered by fast-food outlets in conjunction with

popular movies are examples. The majority, however, designed to

encourage the company’s sales force or other members of a distribution

channel to sell products more aggressively. When sales promotion is

directed to the members of distribution channel, it is called trade

promotion. Included in sales promotion are wide spectrum of activities,

such as event sponsorships, frequency programs, contests trade shows,

in-store displays, samples, premiums, discounts, and coupons.

PUBLIC RELATIONS: A public relations encompasses a wide variety

of communication efforts to contribute to generally favorable attitudes

and opinions toward an organization and its products. Unlike most

advertising and personal selling, it does not include a specific sale

message. The targets may be customers, stockholders, a government

agency; or a special-interest group. Public relations can take many forms,

including newsletters, annual reports, lobbying and support of charitable

or civic events. The Fuji and Goodyear blimps and the Oscar Mayer

Wiener-mobiles are familiar examples of public relation devices.

INTEGRATED MARKETING COMMUNICATIONS



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Marketers have a variety of promotional tools at their disposal. To make

effective use of them, a company’s personal selling, advertising, and

other promotional activities should form a coordinated promotional

program within its total marketing plan. However, these activities are

fragmented in many firms, with potentially damaging consequences. For

example, advertising directors and sales-force managers may come into

conflict over resources, or the sales may not be adequately informed

about the details of a particular sales promotion were part of an

integrated marketing communication (IMC)

Efforts, a strategic business process used to plan, develop, execute, and

evaluate coordinated communication with an organization’s public.

IMC begins with strategic planning effort designed to coordinate

promotion with product planning, pricing and distribution, the other

marketing-mix elements. Promotion is influenced, for instance, b how

distinctive a product is and whether planned price is is above or below the

competition. A manufacturer or middleman must also consider its

promotional links with other firms in distribution channel

o While the marketing mix refers to promotions, today we refer to IMC



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o It is broader than promotions and includes advertising, promotions,

publicity, personal selling and direct marketing

o IMC refers to a co-coordinated communications program that is

customer-focused and internally consistent

CUSTOMER FOCUS

o talking in “Consumer speak”

o Using communication channels that your target

segment refers to

CONSISTENCY refers to all aspects of your IMC strategy (channel,

message) being consistent with one another

AN AUDIENCE PRERSPECTIVE: An IMC approach adopts the

position that a customer or prospect is exposed to many bits and pieces

of information about a company or brand. Certainly some of these are

designed and presented by the marketers, but many, possibly the

majority, come from other sources. These sources can include personal

experiences, the opinions of friends, and comparisons made by

competitors in their advertising the basis of all this information, an

individual makes an evaluation and forms a judgment. With so little

control over the information an audience use, or how the information is

used, a marketer’s promotional efforts must be highly coordinated and

complementary to have an impact .That means anticipating the

opportunities when the target audience will be exposed to information

about the company or brand, and effectively communicating the

appropriate message in those “windows of opportunity.” Usually this

involves utilizing several promotional methods, and requires a high

degree of coordination.



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IMC STRATEGY: The use of an IMC approach to promotion is reflected

in how managers think about the information needs of the message

recipients. Organizations that have adopted an IMC philosophy tend to

share several characteristics, notably:

o An awareness of the target audience’s information sources, as well

as their media habits and preferences.

o An understanding of what the audience knows and believes that

relates to the desired response.

o The use of a mix of promotional tools, each with specific objectives

but all linked to a common overall goal.

o A promotional effort in which personal selling, advertising, sales

promotion, and public relations are coordinated in order to

communicate a consistent message.

o A carefully timed, continuous flow of information adapted to the

audience’s information needs.

The different IMC elements are

o ADVERTISING

o SALES PROMOTION

o DIRECT MARKETING

o PERSONAL SELLING

o PUBLICITY

ELEMENTS OF THE IMC MIX



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The type of IMC strategy selected usually depends on

o TYPE OF PRODUCT MARKET

o CHANNEL OBJECTIVES

o BUYER READINESS STAGE

o PLC

o FOCUS

o COST

IMPLEMENTING IMC: By definition IMC embraces entire promotional

program, in developing integrated communications, a company

coordinated its advertising, personal selling, sales promotion, public

relations, and direct marketing to accomplish specific objectives. To be



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successful the promotion required the coordinated efforts of dozens of

internal and external departments and functions.

An IMC program may incorporate several different promotional

campaigns, with some even running concurrently. Depending on

objectives and available funds, a firm may undertake simultaneous local,

regional, national, and international programs. Moreover, a firm may have

one campaign aimed at consumers, and another at wholesalers and

retailers.

EVALUATING IMC: The last step in is IMC programs is evaluation. A

program can be evaluated in a number of ways. One is to examine how it

is implemented. For example, if the promotion by a large manufacturer of

consumer goods is being carried out in a manner consistent with the

notion of IMC, we would expect to find:

o An advertising program consisting of series of related, well-timed,

carefully placed ads that reinforce personal selling and sales

promotion efforts.

o A personal selling effort that is coordinated with the advertising

program. The firm’s sales force would fully informed about the

advertising portion of the campaign-the theme, media used, and the

schedule for the appearance of ads. The sales people would be able

to explain and demonstrate the product benefits stressed in ads,

and be prepared to transmit the promotional message and

supporting material to middlemen so they can take part in

campaign.

o Sales promotional devices, such as point-of-purchase display

materials that are coordinated with other aspects of the program.

Incentives for middleman would be clearly communicated and

understood. Retailers would be briefed about consumer promotions

and adequate inventories would be in place.



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o Public relations efforts scheduled to consider with the other mix

components and emphasizing the same theme.

More rigorous evaluation examines the results of the program. The

outcome of each promotional component is compared with the

objectives set for it to determine if the effort was successful. Listed

below are some typical promotion objectives and some common

measures associated with each of them.

AWARENESS OF A COMPANY OR BRAND: Competitive brand

position studies, focus groups with distributors at trade shows, and

website “hits”.

INTEREST IN PRODUCT OR BRAND: Number of broachers or

other company publications distributed attendance at company-sponsored

seminars, and website traffic on specific pages.

ACTIONS: Usage of sales support tools by distributors and retailers,

responses to direct mail, customer inquires or store visits and sales.

To be meaningful, most of these measures need to be taken before

and after the promotional effort, with the difference between the two

measures indicating its effect.

BARRIERS TO IMC: Despite its intuitive attractiveness, an IMC

approach to promotion is not universally supported. In some organizations

the promotional functions are in different departments. For examples the

sales-force may be in a unit apart from where advertising decisions are

made. As a result, there is lack of internal communication and

coordination. In other companies there is a belief that promotion is such

an imprecise activity that efforts to carefully designed objectives and



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coordinate efforts would be unproductive. In still other firms there is

history of relying on a particular form of promotion and a resistance to

consider alternatives.

Fully utilizing and IMC approach would likely require a firm to make

several changes. One involves restructuring internal communication to

ensure that all relevant parties involved in promotion are working

together. Some firms have approached this by creating a marketing

communications (or Marcum) manger who oversees the planning and

coordination of promotional efforts. A second change entails conducting

research to gather the necessary information about the target audience.

Firms extensive customer database for this purpose, but they are costly to

create and expensive to maintain. Finally, and most important, top

management must support the effort to integrate promotion. Strong

leadership is essential in order to gain communication from the entire

organization.

Next we will examine how communication, the core of promotion,

actually works. Then we will move to the key managerial issues in a

promotion program.

THE COMMUNICATION PROCESS & PROMOTION



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Communication is the verbal or non-verbal transmission of information

between someone wanting to express an idea someone else expected or

expecting to get the idea. Because promotion is a form of communication,

much can be learned about structuring effective promotion by examining

the communication process.

Fundamentally, communication requires only four elements:

o A MESSAGE

o A SOURCE O THE MESSAGE

o A COMMUNICATION CHANNEL

o RECEIVER



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In practice, however, important additional components come to play.

What does a communication process tell us about promotion? First, the

act of encoding reminds us that message can take many forms. Messages

can be physical (a sample, a premium) or symbolic (verbal, visual) and

there are myriad of options within each of these categories. For example,

the form of the verbal message can be factual, humorous, or even

threatening.

Second, the number of channels or methods of transmitting a message

are limited only by the imagination and creativity of the sender. Consider

that promotional messages are transmitted by the voice of a sales person,

the air waves of radio, the, mail, the side of a bus, a website on the

internet, and the lead into a feature in a movie theater. Each channel has

its own characteristics in terms of audience reach, flexibility, permanence,

credibility and cost. In selecting a channel, marketer must have clearly

defined objectives and familiarity with the features of the many

alternatives. For example, how would you promote organic foods &

beverages? Africa, a small firm competing with food marketing giants,



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faces two problems. First, is has to get notice by consumers. Because

competitors have millions more to spend on communications it is easy for

the firm’s messages to be overlooked. Second, Africa has to educate

consumers about the benefits of its products because most have little

more than a general awareness of what organic means. To gain attention

and provide information, the firm has created organic gardens “on 20 foot

flatted trucks that visits school, corporate campuses, fairs and various

retail sites to explain the concept and handover samples. In a year the

trucks have made it possible for the firm to put samples in the hands of

the million consumers.

Third, how the messages decoded or interpreted depends on its form

(encoding & transmission) and the capability and interest of the recipient.

In designing and sending messages, marketers must be sensitive to the

audience. What is there vocabulary and level of verbal sophistication?

What are other messages have they received? What experiences have

they had? What will get and hold their attention?

Finally, every promotion should have a measure able objective. The

response and feedback provided by the recipients can used to determine

if the objective is accomplished. Feedback may be collected in many

forms-changes in sales, recall of advertising messages, more favorable

attitudes, and increased awareness of a product or an organization-

depending on the objective of the promotion. For some promotional

activities the objective may be modest-For example, an increase in the

audience’s awareness of a brand. For others, such as direct mail

solicitation, the objective would be particular level of sales. Without

objective, there is no way of evaluating the effectiveness of a message.



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DETERMINING THE PROMOTIONAL MIX



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A promotion mix is an organization’s combination personal selling,

advertising, sales promotion, and public relation. An effective promotional

mix is a critical part of virtually all marketing strategies. Product

differentiation, positioning, trading up and trading down, and branding all

require effective promotion. Designing an effective promotional mix

involves a number of strategic decisions about five factors:

o TARGET AUDIENCE

o OBJECTIVE OF THE PROMOTION EFFORT

o NATURE OF THE PRODUCT

o STAGE IN THE PRODUCTS LIFE CYCLE

o AMOUNT OF MONEY AVAILABLE FOR PROMOTION

TARGET AUDIENCE: As it is true most areas of marketing, decisions

on the promotional mix will be greatly influenced by the target audience.

The target may be final consumers, who could be further defined as

existing customers or new prospects. Some marketers direct much of



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their efforts at decisions makers rather than the actual purchasers. In

some cases the target consists of middleman in order to gain their

support in distributing a product, or in case of a company about to make a

stock offering, the investment community. Final consumers and

middleman sometimes buy the same product, but require different

promotion.



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PUSH VS. PULL STRATEGY



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“A PROMOTION PROGRAM AIMED

PRIMARILY AT MIDDLEMAN IS

CALLED A PUSH STRATEGY, AND A

PROMOTION PROGRAM DIRECTED

PRIMARILY AT END-USER IS CALLED

A PULL STRATEGY”.

Push through communications target channel intermediaries to

motivate them to become more aggressive in customer

communications. The overall objective is to increase reseller

support and market coverage.

o Brands that may be undifferentiated in the marketplace

or in categories where consumer brand preferences are

difficult to generate and sustain.

o Where the distributor plays an important role by

providing information or some expertise.



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Pull through communications are used to target final consumers and

to create consumer demand (pull). The objective is to move goods

and services forward in the distribution channel by pre-selling final

consumers.

o Brands that are strongly differentiated or in categories

where final consumer preference can be generated and

sustained.

PUSH THROUGH COMMUNICATIONS

o Trade promotions and allowances

o Sales force

o Publicity

PULL THROUGH COMMUNICATIONS

o Advertising

o Consumer sales promotions

o Direct marketing

o Publicity

PROMOTION OBJECTIVE: A target audiences can be in any one of

six stages of buying readiness. The stages-awareness, knowledge, liking,

preferences, conviction, and purchase- are called the hierarchy of effects

because they represents stages a buyer goes through in moving toward a

purchase, with each also describing a possible goal effect of promotion.

The objective of promotion is to get the prospect to the final, or purchase

stage, but in most cases that is not possible until the person has moved

through the earlier stage. Thus, a promotion effort may have what

appears to be a modest but essential objective, such as creating

knowledge, about a product advantages.



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PRE PURCHASE

o Advertising, sales promotion

PURCHASE

o Personal selling, sales promotion

POST PURCHASE

o Personal selling, advertising

AWARENES: At the awareness stage the seller’s task is to let buyers

know that the product or brand exists. Here the objective is to build

familiarity with the product the brand name. The government has recently

endorsed the health claim that soy protein helps reduce the risk heart

diseases. However, few consumers know what food product contains soy.

To increase awareness, Archer Daniel Midland Company, the world’s

leading processor of soy, has form an alliance with food makers to label

products that contains soy proteins. The logo, similar to the one use to

indicate the presence of NutraSweet in a product, is employed to make

consumers aware of the presence of soy as an ingredient. In this situation

the marketer must focus promotion to:

o EFFECTIVELY REACH CUSTOMERS

o TELL THE MARKET WHO THEY ARE AND WHAT THEY HAVE TO

OFFER.

KNOWLEDGE: Knowledge goes beyond awareness to learning about

products features. The concept of fractional aircraft ownership unfamiliar

to many potential buyers, so Net jets, one of the firms in the industry has

developed a buyer guide booklet to explain it. Because the booklet is



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more extensive than an advertisement, a prospect can gain a

considerable amount of knowledge and have many basic questions

answered.

LIKING: Liking refers to how the market feels about the product

promotion can be used to move knowledgeable audience from being

indifferent to liking a brand. A common technique is to associate the item

with an attractive symbol or person. The sporting goods company, Adidas,

has partnering relationship with the athletic programs of seven

universities including Arizona State, north western, university of

Tennessee, and the University of Notre Dame, as well as the new York

Yankees major league baseball team. By providing uniforms and

equipment to the players and coaches that include its company’s logo,

Adidas hopes to create a favorable impression on the fans of these teams.

PRODUCT LIFE CYCLE: All products and services have certain

life cycles. The life cycle refers to the period from the product’s first

launch into the market until its final withdrawal and it is split up in phases.

During this period significant changes are made in the way that the

product is behaving into the market i.e. its reflection in respect of sales to

the company that introduced it into the market. Since an increase in

profits is the major goal of a company that introduces a product into a

market, the product’s life cycle management is very important. Some

companies use strategic planning and others follow the basic rules of the

different life cycle phase that are analyzed later.

The understanding of a product’s life cycle, can help a company to

understand and realize when it is time to introduce and withdraw a

product from a market, its position in the market compared to

competitors, and the product’s success or failure.



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For a company to fully understand the above and successfully manage a

product’s lifecycle, needs to develop strategies and methodologies, some

of which are discussed later on.

PART 1: PRODUCT LIFE CYCLE MODEL DESCRIPTION: The

product’s life cycle - period usually consists of five major steps or phases:

Product development, Product introduction, Product growth, Product

maturity and finally Product decline. These phases exist and are

applicable to all products or services from a certain make of automobile to

a multimillion-dollar lithography tool to a one-cent capacitor. These

phases can be split up into smaller ones depending on the product and

must be considered when a new product is to be introduced into a market

since they dictate the product’s sales performance.

1. PRODUCT DEVELOPMENT PHASE: Product development

phase begins when a company finds and develops a new product

idea. This involves translating various pieces of information and

incorporating them into a new product.



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2. INTRODUCTION PHASE: The introduction phase of a product

includes the product launch with its requirements to getting it

launch in such a way so that it will have maximum impact at the

moment of sale.

3. GROWTH PHASE: The growth phase offers the satisfaction of

seeing the product take-off in the marketplace. This is the

appropriate timing to focus on increasing the market share. If the

product has been introduced first into the market, (introduction into

a “virgin”1market or into an existing market) then it is in a position

to gain market share relatively easily.

4. MATURITY PHASE: When the market becomes saturated with

variations of the basic product, and all competitors are represented

in terms of an alternative product, the maturity phase arrives. In

this phase market share growth is at the expense of someone else’s

business, rather than the growth of the market itself. This period is

the period of the highest returns from the product. A company that

has achieved its market share goal enjoys the most profitable

period, while a company that falls behind its market share goal,

must reconsider its marketing positioning into the marketplace.

During this period new brands are introduced even when they

compete with the company’s existing product and model changes

are more frequent (product, brand, Model). This is the time to

extend the product’s life.

5. DECLINE PHASE: The decision for withdrawing a product seems

to be a complex task and there a lot of issues to be resolved before

with decide to move it out of the market. Dilemmas such as

maintenance, spare part availability, service competitions reaction

in filling the market gap are some issues that increase the



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complexity of the decision process to withdraw a product from the

market.

PART 2: ANALYSIS OF PRODUCT LIFE CYCLE MODEL: There

are some major product life cycle management techniques that can be

used to optimize a product’s revenues in respect to its position into a

market and its life cycle.

These techniques are mainly marketing or management strategies that

are used by most companies worldwide and include the know-how of

product upgrade, replacement and termination. To comprehend these

strategies one must first make a theoretical analysis of the model of

product life cycle.

In the mid 70’s the model of product life cycle described in “Part 1”, was

under heavy criticism by numerous authors. The reasons behind this

criticism are described below:

a. The shift changes in the demand of a product along a period of time

makes the distinction of the product life cycle phase very difficult, the

duration of those almost impossible to predict and the level of sales of the

product somewhat in the realm of the imagination.

b. There are many products that do not follow the usual shape of the

product life cycle graph.

c. The product life cycle does not entirely depend on time as shown in fig.

1. It also depends on other parameters such as management policy,

company strategic decisions and market trends. These parameters are

difficult to be pinpointed and so are not included in the product life cycle

as described in “Part 1”.The model of product life cycle also depends on

the particular product. There would-be different models and so different

marketing approaches. There are basically three different types of

products: a product class (such as a car), a product form (such as a

station wagon, coupe, family car etc of a particular industry) and a

product brand of that particular industry (such as Ford Escort). The life



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cycle of the product class reflects changes in market trend and lasts

longer than the life cycle of the product form or brand. In the other hand

the life cycle of a product form or brand reflects the competitiveness of a

company (i.e. sales, profits) and therefore follows more closely the

product life cycle model.

Nevertheless, a product manager must know how to recognize which

phase of its lifecycle is a product, regardless of the problems in the model

discussed above. To do that a good method is the one, suggested by

Donald Clifford in 1965, which follows.

• Collection of information about the product’s behavior over at least a

period of

3 – 5 years (information will include price, units sold, profit margins,

return of investment – ROI, market share and value).

• Analysis of competitor short-term strategies (analysis of new products

emerging into the market and competitor announced plans about

production increase, plant upgrade and product promotion).

• Analysis of number of competitors in respect of market share.

• Collection of information of the life cycle of similar products that will

help to estimate the life cycle of a new product.

• Estimation of sales volume for 3 – 5 years from product launch.

• Estimation of the total costs compared to the total sales for 3 – 5 years

after product launch (development, production, promotion costs). The

estimate should be in the range of 4:1 in the beginning to 7:1 at the stage

where the product reaches maturity.

Strategies that must be applied as soon as the phase of product life cycle

is recognized

PART 3: PRODUCT LIFE CYCLE TECHNIQUE EXAMPLE:

PRODUCT



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CANNIBALISM: Product cannibalization occurs when a company

decides to replace an existing product and introduce a new one in its

place, regardless of its position in the market

(I.e. the product’s life cycle phase does not come into account). This is

due to newly introduced technologies and it is most common in high tech

companies. As all things in life there is negative and positive

cannibalization.

In the normal case of cannibalization, an improved version of a product

replaces an existing product as the existing product reaches its sales peak

in the market. The new product is sold at a high price to sustain the sales,

as the old product approaches the end of its life cycle. Nevertheless there

are times that companies have introduced a new version of a product,

when the existing product is only start to grow. In this way the companies

sustain peak sales all the time and do not wait for the existing product to

enter its maturity phase. The trick in cannibalization is to know when and

why to implement it, since bad, late or early cannibalization can lead to

bad results for accompany sales.

1. UNFAVORABLE CANNIBALIZATION: Cannibalization should

be approached cautiously when there are hints that it may have an

unfavorable economic effect to the company, such as lower sales and

profits, higher technical skills and great retooling. The causes of such

economic problems are given bellow.

• The new product contributes less to profit than the old one: When the

new product is sold at a lower price, with a resulting lower profit than the

old one, then it does not sufficiently increase the company’s market share

or market size.

• The economics of the new product might not be favorable: Technology

changes can force a product to be cannibalized by a completely new one.

But in some cases the loss of profits due to the cannibalization is too

great. For example a company that produced ready business forms in



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paper was forced to change into electronic forms for use in personal

computers. Although the resulting software was a success and yield great

profits, the sales of the paper forms declined so fast that the combined

profit from both products, compared to the profits if the company did not

cannibalize the original product showed a great loss in profits.

• The new product requires significant retooling: When a new product

requires a different manufacturing process, profit is lower due to the

investment in that process and due to the write-offs linked to retooling the

old manufacturing process.

• The new product has greater risks: The new product may be profitable

but it may have greater risks than the old one. A company cannot

cannibalize its market share using a failed or failing product. This can

happen in high-tech companies that do not understand enough of a new

technology so that to turn it into a successful and working product. As a

result an unreliable product emerges and replaces a reliable one, that can

increase service costs and as a result decrease expected profits.

2. OFFENSIVE CANNIBALIZATION STRATEGIES:

Cannibalization favors the attacker and always hurts the market leader.

For companies that are trying to gain market share or establish them into

a market, cannibalization is the way to do it5. Also cannibalization is a

good way to defend market share or size. A usual practice is the market

leader to wait and do not cannibalize a product unless it has to. It is

thought that a company should acquire and develop a new technology

that will produce a newer and better product than an existing one and

then wait. Then as competitor’s surface and attack market share,

cannibalization of a product is ripe. Then and only then quick introduction

of a new product into the market will deter competition, increase profits

and keep market share.



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But this strategy does not always work since delays will allow the

competition to grab a substantial piece of the market before the market

leader can react.

3. DEFENSIVE CANNIBALIZATION STRATEGIES: Controlled

cannibalization can be a good way to repel attackers as deforesting can

repel fire. A market leader has many defensive cannibalization strategies

that are discussed bellow.

• Cannibalize before competitors do: Cannibalization of a company’s

product(s) before a competitor does, is a defensive strategy to keep the

competitor of being successful. Timing is the key in this strategy. Do it too

soon and profits will drop, do it to late and market share is gone.

• Introduction of cannibalization as a means of keeping technology edge

over competition: A good strategy is for a company that is the market

leader, to cannibalize its products as competitors start to catch up in

terms of technology advancements. (For example “Intel Corporation”

cannibalized its 8088processor in favor of the 80286 after 2 ½ years, the

80286 in favor of the 386after 3 years, the 386 in favor of the 486 after 4

years, the 486 in favor with the Pentium after another 4 ½ and so on). So

the market leader dictates the pace and length of a product’s life cycle.

(In the case on Intel the replacement of 486 to Pentium took so long

because competitors had not been able to catch up).

• Management of cannibalization rate through pricing: When

cannibalization of a product is decided, the rate at which this will happen

depends on pricing.

The price of the new product should be at a level that encourages a

particular mix of sales of the old and new product. If the price of the new

product is lower than the price of the old then cannibalization rate slows

down. If the opposite happens then the cannibalization rate is increased.

Higher prices in new products can reflect their superiority over the old

ones.



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• Minimization of cannibalization by introducing of the new product to

certain market segments: Some market segments are less vulnerable to

cannibalization to others. This is because there is more or less to lose or

gain for each of them. By choosing the right segments to perform the

cannibalizations of a product a company can gain benefits without loses

and acquire experience on product behavior.

PART 4: PRODUCT LIFE CYCLE IN RESPECT TO THE

TECHNOLOGY

LIFE CYCLE: As a new technology matures so is the product or service

that uses this technology.

The change that occurs during a technology life cycle has a unique

reflection on the customers and so on the product life cycle.

In the early days of a new technology, early adopters and technology

enthusiasts drive a market since they demand just technology. This drive

and demand is translated as the introduction phase of a new product by

many companies. As technologies grow sold, customers become more

conservative and demand quick solutions and convenience. In this case a

product usually enters in the realm of its growth and as time passes its

maturity.



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PART 5: USE OF PRODUCT MANAGEMENT FOR

SUCCESSFUL

PRODUCT LIFE CYCLE: Product management is a middle level

management function that can be used to manage a products life cycle

and enables a company to take all the decisions needed during each

phase of a product’s life cycle. The moment of introduction and of

withdrawal of a product is defined by the use of product management by

a Product Manager.

A Product Manager exists for three basic reasons. For starters he manages

the revenue, profits, forecasting, marketing and developing activities

related to a product during its life cycle. Secondly, since to win a market

requires deep understanding of the customer, he identifies unfulfilled

customer needs and so he makes the decision for the development of

certain products that match the customers and so the markets needs.

Finally he provides directions to internal organization of the company



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since he can be the eyes and ears of the products path during its life

cycle.

To improve a product success during each of its phase of its life cycle

(development -introduction – growth – maturity – decline), a product

manager must uphold the following three fundamentals.

•Understand how product management works: When responsible for a

given new product, a product manager is required to know about the

product, the market, the customers and the competitors, so that he can

give directions that will lead to a successful product. He must be capable

of managing the manufacturing line as well as the marketing of the

product. When the product manager has no specific authority over those

that are involved in a new product, he needs to gather the resources

required for the organization to meet product goals. He needs to know

where to look and how to get the necessary expertise for the success of

the product.

•Maintain a product / market balance: The product manager as the person

that will make a new product to work, needs to understand and have a

strong grasp of the needs of the customer / market and therefore make

the right decisions on market introduction, product life cycle and product

cannibalization. To achieve the above he must balance the needs of the

customers with the company’s capabilities. Also he needs to balance

product goals with company objectives. The way a product’s success is

measured depends on where the product is in its life cycle. So the product

manager must understand the strategic company direction and translate

that into product strategy and product life cycle position.

•Consider product management as a discipline: Managing a product must

note taken as a part time job or function. It requires continuous

monitoring and review. Having said that, it is not clear why many

companies do not consider product management as a discipline. The

answer lies in the fact that product management is not taught as

engineering or accounting i.e. does not have formalized training.



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UNDERSTANDING AND DEVELOPING A

PROMOTION BUDGET

Marketing is often listed as a single line item on a business expense

account. This may infer that expenses for marketing are straight forward

and easy to categorize. To the contrary, marketing is one of the most

misunderstood and complicated areas of planning and running a business.

Marketing is often referred to as a “necessary evil” for a business. Without

it, sales will likely struggle and with it can come significant costs.

Sometimes marketing expenditures are needed just to insure product

awareness and to stay even with the competition rather than greatly

expanding sales.

Marketing experts often prefer to consider expenses for marketing as

investments rather than expenses because successful marketing efforts

will increase sales.

Marketing may be defined as the act of selling, purchasing or sending

goods into a market. Marketing is often thought of as any or all of the

functions involved in transferring title and moving goods from producer to

consumer including buying selling, storing, transporting, standardizing,

financing, risk bearing and supplying market information. The

American Marketing Association’s official definition of marketing provides

a good working definition of the term.

“MARKETING IS THE PROCESS

OF PLANNING AND EXECUTING



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THE CONCEPTION, PRICING,

PROMOTION AND DISTRIBUTION

OF IDEAS, GOODS, AND

SERVICES TO CREATE

EXCHANGES THAT SATISFY

INDIVIDUAL ORGANIZATIONAL

OBJECTIVES.”

Simplistically, marketing can be thought of planning and executing a set

of objectives related to bringing buyers and sellers together so that a sale

can take place. Marketing a product takes planning to be successful. The

marketing plan is a process that identifies the steps necessary to

implement a successful marketing strategy. Promotion, on the other hand,

may be considered activities that are specifically aimed at advancing,

increasing and boosting awareness, interest or sales.

Because marketing can be such a complex issue in the management of a

business, it should not be dealt with lightly. Infect, a thorough

understanding of marketing and promotion options should be one of the

first steps in the evaluation of a new business or enterprise. Once this

understanding is gained, promotion options should be narrowed to those

best suited for a particular project. Then, a promotional campaign should

be planned.



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While a marketing budget is a listing of all the expenses planned for

marketing, a promotional budget is the part of the overall marketing

efforts devoted specifically to promotion. Because marketing is more than

advertising, a marketing budget should include expenses for marketing

personnel, marketing training, marketing consultants, market research,

market development and promotion. A promotion budget should include

those expenses for promotional activities such as advertisements,

brochures, direct mailings, samples, trades shows, displays and

sponsorships.

A promotional budget can be prepared by allocating a certain amount of

expected sales to promotion activities or by planning certain promotion

activities and allocating expenses for them. A promotion budget should be

developed at the beginning of the year. For the existing business, a good

place to start is using the past year’s expenses. There are no rules but

remember to be realistic: it must be affordable!

USEFUL TIP: Allocate your budget wisely; money spent on a bad

promotion is worse than spending no money on promotion. You must also

be able to justify this cost in your business plan.

DECIDE ON SUITABLE TIME SPAN: A decision must be reached

on the time scale of the Promotion campaign. This will depend on the

objectives of the campaign, the medium used and the allocated budget.

The timing of the campaign is also important e.g. advertising fireworks in

January!

DECIDE ON MESSAGE: What to say? How to say it? Where to say it?

The message and the medium used to convey that message will be

affected by the type of product/service, the cost, legislation, what the

competition is doing etc. Most importantly, it will be affected by the

desired response from the consumer and the stage in the buying process

that needs to be influenced.



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The “AIDAS” model can illustrate this buying process:

o ATTENTION

o INTEREST

o DESIRE

o ACTION

o SATISFACTION

Ideally the message should get the attention of the consumer and take

them through the stages until a purchase is made and satisfaction

reached. In practice few messages take a consumer through the whole

process, but are pitched at a certain level that meets the promotion

objective. For example, if the promotion objective was to create



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awareness for the product, the promotion message should be designed to

get the attention of the consumer and so on.

The message content should include a unique selling proposition (USP),

i.e. a benefit, motivation, identification etc. that appeals to the audience.

This appeal could be: -

RATIONAL - appeals to audience's self interest. Show that product

produces claimed benefits such as quality, economy, value, e.g. car ads.

EMOTIONAL - stir up a positive/negative emotion that will motivate

purchase, e.g. Andre puppies.

MORAL - directed to the audience's sense of what is right, e.g. support

for social causes.

The message format should be strong in order to catch the attention of

the audience. The message format depends on the promotional medium

used. For printed ads, careful decision for headline illustration, color etc.

For personal selling, decision as to choice of words, portfolio, dress, body

language.

DECIDE ON PROMOTION MIX: Each promotional element has a

different communication capacity is effective at different stages in the

buying process and we have a different level of control over each one.

Therefore the decision for choice of promotion mix will depend upon:

o TARGET AUDIENCE

o OBJECTIVES

o TIMING

o STAGE OF PRODUCT LIFE CYCLE



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o COMPLEXITY OF PRODUCT

o COMPETITION

o LEGAL RESTRAINTS

o MONETARY RESTRAINTS ETC.

1. ADVERTISING: Effective medium for creating awareness and

interest. Low control over response Suggestion: Most newspapers and

magazines have media packs giving details of readership figures, how

much it costs to advertise and so on. Why not ring or write and ask for

one of these packs: they are free!

TV - reach large number of buyers, allows for repeated message,

combines aural and visual message BUT very expensive, unselective, non-

personal.

Radio - quick production, good for certain targets as more localized and

segmented stations, BUT can be expensive, 16 listens for 80% retention,

sound only.

INTERNET & E-MAIL – the fastest growing medium for ‘business to

business’ advertising. Cheap targeted and effective some organizations

only have an electronic presence. I.e. they are only contactable via the

internet/E-mail.

NEWSPAPER - regular communication, detailed message possible,

reader identification BUT can be expensive, little color production, not

always targeted.



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LOCAL PAPERS - geographical targeting, relatively cheap BUT smaller

audience (may not be a problem), some papers are free - can't be sure of

readership levels. Some days are better for advertising certain products.

JOURNALS/MAGAZINES - good for targeting, good for detailed

message relatively cheap BUT lacks urgency of newspaper, monthly

magazines means long wait for repeat ads.

DIRECTORIES - can be localized e.g. Thompson’s, relatively cheap,

BUT problems with timing ads for future editions, depends on trade as to

whether it is appropriate.

CINEMA - can be good for targeting local market, cheap BUT low

audiences.

HOARDINGS/POSTERS - good for simple message, posters cheap,

used to support other media BUT low audience, hoardings can be

expensive and sometimes no control over site. If using posters, make sure

you put them in locations where your potential customers will see them.

LEAFLETS - can be good for targeting, detailed message, use of color,

cheap BUT high wastage (e.g. pick up and dump).

CARDS IN NEWSAGENTS/SUPERMARKETS - very cheap BUT

low audiences, not detailed.

DESIGNING AN ADVERTISEMENT: Always bear in mind that the

audience and what response you hope to achieve from them. To write a

successful ad: Make the headline for your ad interesting and eye-catching

Decide on the message of the ad and keep it simple; too many messages

will confuse Read through your local paper and see what ads catch your

attention Work out what it is about them that is interesting Use as few

words as possible in the ad: 3 sentences maximum Focus the ad on



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unique benefit or offer Make it sound believable Show it to people whose

opinions you value to get feedback.

2. SALES PROMOTION: Effective medium for creating desire and

decision to purchase. Higher control than with advertising Sales Promotion

is often used to create a quick response by buyer. SP is good for gaining

attention, providing information and usually contains an inducement to

buy now. The effects of SP however, are usually short-term sales rather

than long term growth. Examples: BOGOF, money -off coupons,

competitions, free samples, gifts.

3. PUBLICITY/PR: Effective medium for creating awareness, interest

and credibility. Little control, Publicity can be highly credible if it is well

thought out and it is extremely cheap. A feature in a paper, magazine

sometimes seem more credible to readers than ads BUT it is restricted by

editorial decisions by the media source used.

USEFUL TIP: think of some way in which your business is unique and

try writing to the editor of a local newspaper to see if they would be

willing to write an article about it. There's no harm in trying.

4. PERSONAL SELLING: Effective medium for influencing all stages

of the decision making process, especially the decision to buy. High level

of control. Good for small businesses with local markets complex products

and services.

Useful Tips: Always try and leave the potential customer with something

to remind them of your company and product e.g. business card or leaflet.

5. DIRECT MAIL & E-MAIL: Effective for creating awareness and

interest for markets where the target audience is easily defined. Little

control except the E-mail, Mailing info directly to target customers telling

them about your company and what you have to offer. Relatively cheap



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BUT dependent on very accurate forecast of target market and low

response; 2% response rate if you are lucky. Secrets to success send to

the right people and make them an offer that is hard to refuse. Control is

far greater and targeted using the Internet and E-mail.

6. DIRECT RESPONSE: Used to encourage purchase now! Includes

buying off of the TV, adverts in magazines that ask you to phone up to

place your order e.g. thimble collections in the Sunday Times supplement.

7. WORD OF MOUTH: Effective medium for creating interest and

desire for your product or service and it is extremely cheap. To get people

to tell others about you, you must:

Give excellent service and produce good quality pay attention to pack

aging give customers something to pass on to friends such as business

cards give customers incentive to bring new customers e.g. special

discounts become part of local community activities team up with other

local businesses and pass customers between you

MEASURE AND ANALYSE RESULTS: It is important to measure in

some way the effectiveness of your promotion campaign. This should be

done against your objective. If for example, main objective was to create

100 enquiries or (giving consideration to the effect of the other 3 P’s to

achieve 20 sales, you can measure whether or not this objective was

achieved. If the objective was to create awareness, this is more difficult to

measure. It may involve further research and actually asking people

whether they have heard of your product or service. Measuring and

analyzing the outcome of the promotion campaign will help in the

development of future campaigns. It may be that you need to change the

medium used or the time - span etc, of the next promotion campaign.



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PERSONAL SELLING & SALES

MANAGEMENT

PERSONAL SELLING: PERSONAL:

(ONE (TO ONE/ONE-TO-SMALL GROUP) COMMUNICATION OF

INFORMATION DESIGNED TO PERSUADE SOMEONE TO BUY

IN MANY COMPANIES, PERSONAL SELLING IS THE LARGEST SINGLE

OPERATING EXPENSE-- OFTEN 8 TO 15% OF SALES.

WHEN PERSONAL SELLING WORKS BEST:

THE MARKET IS CONCENTRATED.

THE PRODUCT HAS A HIGH UNIT VALUE, IS TECHNICAL IN NATURE,

AND REQUIRES A DEMONSTRATION.

THE PRODUCT CAN BE TAILORED TO AN INDIVIDUAL CUSTOMER’S

NEED.

THE SALE INVOLVES A TRADE-IN.

THE PRODUCT IS IN THE INTRODUCTORY STAGE OF THE PRODUCT

LIFE CYCLE.

THE ORGANIZATION DOESN’T HAVE ENOUGH MONEY FOR

ADEQUATE AD CAMPAIGN



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STRENGTHS AND WEAKNESSES OF PERSONAL

SELLING

STRENGTHS:

o IT CAN BE ADAPTED FOR INDIVIDUAL CUSTOMERS.

o IT CAN BE FOCUSED ON PROSPECTIVE CUSTOMERS.

o IT RESULTS IN THE ACTUAL SALE, WHILE MOST OTHER FORMS OF

PROMOTION ARE USED IN MOVING THE CUSTOMER CLOSER TO

THE SALE.

WEAKNESSES:

o IT IS COSTLY TO DEVELOP AND OPERATE A SALES FORCE.

o IT MAY BE DIFFICULT TO ATTRACT HIGH-CALIBER PEOPLE.

KINDS OF PERSONAL SELLING: There are two kinds of personal

selling which are given as follows:

THE CUSTOMERS COME TO THE SALESPEOPLE

o MOSTLY INVOLVES RETAIL-STORE SELLING.

o MOST SALESPEOPLE FALL INTO THIS CATEGORY.

THE SALESPEOPLE GO TO THE CUSTOMERS.

o USUALLY REPRESENT PRODUCERS OR WHOLESALING MIDDLEMEN

AND SELL TO BUSINESS USERS.

o SOME OUTSIDE SELLING IS RELYING MORE ON TELEMARKETING.

“CUSTOMERS COME TO



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THE SALES PEOPLE

SALES FORCE GOES TO

THE CUSTOMERS”

INSIDE SELLING:

o ACROSS-THE-COUNTER

o PHONE-IN ORDERS

o PRIMARILY

o RETAIL STORE SELLING

o IN-PERSON

o SALES CALLS

o INSIDE SALES PEOPLE

o CONTACT BY MAIL

o TELEMARKETING

PRIMARILY PRODUCERS AND

WHOLESALING



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MIDDLEMEN SELLING TO BUSINESS

USERS, BUT ALSO

SOME: PRODUCERS HOUSEHOLD

CONSUMERS RETAILERS HOUSEHOL

D CONSUMERS

NOT-FOR-PROFIT BUSINESS USERS

ORGANIZATIONS HOUSEHOLD

CONSUMERS

KINDS OF SELLING

JOBS IN PERSONAL SELLING:

PROFESSIONAL SALESPERSON ENGAGES IN A TOTAL

SELLING JOB.

o MANAGE THEIR TIME, TERRITORIES AND CUSTOMERS.

o WORK CLOSELY WITH CUSTOMERS TO SUPPORT AND TRAIN.

WIDE VARIETY OF SALES JOBS:

o DRIVER-SALESPERSON

o INSIDE ORDER TAKERS (E.G. RETAIL CLERK)

o OUTSIDE ORDER TAKER (BUSINESS DEVELOPMENT)



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o MISSIONARY SALES (SALES SUPPORT)

o SALES ENGINEER

o CONSULTATIVE SALES PERSON

RANGE OF JOBS AND TASKS:

o EXECUTE MARKETING STRATEGIES-- RELATIONSHIPS.

o REPRESENT THEIR COMPANY.

o WORK WITH LITTLE OR NO SUPERVISION.

o OFTEN TRAVEL TO MEET CUSTOMERS

CHANGING PATTERNS IN SALES

The nature of the selling job is changing, reflecting changing market

situations

SELLING CENTERS: To match the expertise of the buying center in

business marketers, an increasing number of firms on the selling side

have adopted the organizational concept of a selling center. A selling

center is a group of people representing a sales department as well as

other functional areas in the firm such as finance, production, and

research and development brought together to meet the needs of a

particular customer. This is sometimes called sales team or team selling.

SYSTEMS SELLING: The concept of system selling means selling a

total package of related goods and services-a system-to-solve a

customer’s problem. The idea is that system will satisfy the buyer’s needs

more effectively than selling individual products separately.



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GLOBAL SALES TEAMS: As companies expand their operating to

far-flung corners of the globe, they expect their suppliers to do the same.

Having products readily available, understanding local conditions, and

proving quick service are essential to maintaining global customers. To

service their largest and most profitable global customers, sellers are

forming global sales teams.

RELATIONSHIP SELLING: Developing a mutually beneficial

relationship with selected customers over time is relationship selling. It

may be an extension of team selling, or it may be developed by individual

sales reps in their dealing with customers. In relationship selling, a seller

discontinues the usual practice of concentrating on maximizing the

number and size of individual transitions. I instead, the seller attempts to

develop a deeper, longer-lasting relationship built on trust with key

customers-usually larger accounts.

o HIGH LEVELS OF TRUST ARE IMPORTANT

o BUYER MUST DEMONSTRATE TRUST IN THE SALESPERSON AS WELL

AS THE SELLING ORGANIZATION

o TRUSTED SALESPEOPLE CAN RETAIN THE BUYER’S COMMITMENT

EVEN IN THE FACE OF POLICIES THAT MAY NOT BE CONSIDERED

SATISFACTORY

o SALES PEOPLE HAVE A MAJOR ROLE IN THE MANAGEMENT OF

CUSTOMER RELATIONSHIPS

TELEMARKETING: Is the innovative use of telecommunication

equipment and systems as part of the “going to the customer” category

of personal selling. Under certain conditions, telemarketing is attractive to

both buyers and seller. Buyers pacing routine reorders or new orders for

standardized products by telephone use less of their time than with in-

person sales calls. Many sellers find that telemarketing increases selling

efficiency. With the high costs of keeping sales people on the road,



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telemarketing reduces the time spend on routine order taking. Redirecting

routine reorders to telemarketing allows the field sales force to devote

more time to create selling, major account selling, and other more

profitable selling activities.

Here are some examples of selling activities that lend themselves

nicely to a telemarketing program.

o SEEKING LEADS TO NEW ACCOUNTS AND IDENTIFYING POTENTIALLY

GOOD CUSTOMERS SALES REPS CAN FOLLOW UP WITH IN-PERSON

CALLS.

o PROCESSING ORDERS FOR STANDARDIZED PRODUCTS.

o DEALING WITH SMALL-ORDER CUSTOMERS, ESPECIALLY WHERE THE

SELLER WOULD LOSE MONEY IF FIELD SALES CALLS WERE USED.

o IMPROVING RELATIONS WITH MIDDLEMAN. MANUFACTURES USE

TELEMARKETING TO ANSWER DEALERS’ QUESTIONS ABOUT

INVENTORY MANAGEMENT, SERVICE AND REPLACEMENT PARTS.

THIS GIVES THE DEALERS AN IMMEDIATE SOURCE FOR ASSISTANCE,

SAVING THEM THE TIME AND EFFORT OF TRYING TO TRACK DOWN A

SALES PERSON.

INTERNET SELLING: Most sales efforts over internet would not be

considered personal, and therefore would not be part of a discussion

about personal selling.

SALES FORCE AUTOMATION (SFA): In recent years

organizations have equipped their sales people with an increasing array of

electronic tools. Pagers, Laptops computers, fax machines, and cellular

phones allow sales people access to internet, e-mail, and various

company data-bases. They also allow sales people to electronically

communicate with their mangers, marketers and others in their

organization by providing such things as market intelligence, calls reports,



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credit applications, and customer questions. Today organizations are

moving beyond using these tools only for communication to integrating

with software that allows as sales person to create customized reports for

customers, develop proposals with prices, discounts, delivery dates, and

other information critical to making a sale, estimate costs for particular

orders, and develop forecasts for customers and territories. This capability

of using electronic function is known as sales force automation (SFA).

SFA has potential to create better-informed sales people who

can more effectively respond to the needs of customers. According to a

sales corning with SFA “They (sales people) become the real managers of

their own business and their own territories”.

Automating a sales force is an expensive proposition that is

likely to require frequent upgrades as new, more sophisticated tools

become available. The experience of firms indicated that implementing

SFA involves several challenges.

o IDENTIFYING WHICH PARTS OF THE SALES PROCESS CAN BENEFIT

THE MOST FROM AUTOMATION.

o DESIGNING A USER FRIENDLY SYSTEM.

o GAINING THE COOPERATION OF THE SALES FORCE THEY

INCORPORATE THE TECHNOLOGY IN THEIR JOBS.

Experience with automation has been mixed as firms sort out what

works and what doesn’t. Typical problems include unrealistic

expectations by managements because of the large investments

required, attempting to implement too much at once instead of

phasing in a program, and resistance by sales people. However, on

the basis of a recent survey in which 835 of the responding

companies indicated plans to upgrade their systems, it is safe to say



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the sales role of the future will include a significant electronic

component.

THE PERSONAL SELLING PROCESS

STEP 1: PROSPECTING AND QUALIFYING

o IDENTIFY POTENTIAL CUSTOMERS.

o QUALIFYING INVOLVES DETERMINING WHETHER PROSPECTS

HAVE THE WILLINGNESS, PURCHASING POWER, AND

AUTHORITY TO BUY.

STEP 2: PREAPPROACH TO INDIVIDUAL PROSPECTS

o SALESPEOPLE MUST LEARN HOW BUYING DECISIONS ARE

MADE.

o SALESPEOPLE SHOULD ALSO TRY TO FIND OUT A PROSPECT’S

PERSONAL HABITS AND PREFERENCES

STEP 3: PRESENTING THE SALES MESSAGE: AIDA

o ATTRACT THE PROSPECT’S ATTENTION.

o HOLD THE PROSPECT’S INTEREST.

o BUILD A DESIRE FOR THE PRODUCT.

o STIMULATE THE ACTION OF CLOSING THE SALE.

STEP 4: MEET OBJECTIONS AND CLOSE THE SALE

o OBJECTIONS HELP CLARIFY CUSTOMER’S CONCERNS.

STEP 5: POSTSALE SERVICES

o DEAL WITH COGNITIVE DISSONANCE.



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o ENSURE EVERYTHING HAPPENED AS IT SHOULD (DELIVERY)

SALES FORCE MANAGEMENT

Effective sales force management starts with a qualified sales

manager.

The tasks that take up the bulk of sales executives’ time include:

o RECRUITMENT AND SELECTION (MATCH CANDIDATES WITH

YOUR NEEDS)

o ASSIMILATION AND TRAINING

o MOTIVATION

o COMPENSATION

o SUPERVISION

o PERFORMANCE EVALUATION

THE SALES MANAGEMENT PROCESS

COMPENSATION



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STRAIGHT SALARY

o WORKS WELL FOR NEW PEOPLE, NEW TERRITORIES.

o GOOD WHERE LENGTHY NEGOTIATIONS TYPICAL.

STRAIGHT COMMISSION

o STRONG INCENTIVE, DIRECT REWARD FOR EFFORT.

o CAN BE HARD TO CONTROL SALESPEOPLE.

A COMBINATION PLAN

o MOST FIRMS DO THIS.

o BEST OF BOTH WORLDS.

PERFORMANCE EVALUATION

Both quantitative and qualitative factors should serve as bases for

performance evaluation.

o QUANTITATIVE BASES ARE SPECIFIC AND OBJECTIVE.

o QUALITATIVE FACTORS ARE LIMITED BY THE SUBJECTIVE

JUDGMENT OF THE EVALUATORS.

Either inputs (or effort) and outputs (or results) should be used.

QUANTITATIVE BASES: Sales performance should be evaluated in

terms of inputs (efforts) and outputs (results). Together, inputs such as

number of sales per day or direct selling expenses, and puts such as sales

volume or gross margin, provide a measure of selling effectiveness.

Useful quantitative input measures include:

o CALL RATE- NUMBER OF CALLS PER DAY OR WEEK



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o NUMBER OF FORMAL PROPOSALS PRESENTED.

o NO SELLING ACTIVITIES- NUMBER OF PROMOTION DISPLAYS SET UP

OR TRAINING SESSIONS HELD WITH DISTRIBUTORS OR DEALERS.

Some quantitative output measures useful as evaluation criteria are:

o SALES VOLUME BY A PRODUCT, CUSTOMER GROUP, AND

TERRITORY.

o SALES VOLUME AS A PERCENTAGE OF QUOTA OR TERRITORY.

o GROSS MARGIN BY PRODUCT LINE, CUSTOMER GROUP, AND

TERRITORY.

o ORDERS-NUMBER AND AVERAGE DOLLAR AMOUNT

o CLOSING RATE-NUMBER OF EXISTING ACCOUNTS RETAINED AND

NUMBER OF NEW ACCOUNTS OPENED.

QUALITATIVE BASIS: In some respect, performance evaluation

would be much easier if it could be based only on quantitative criteria.

The standards would be absolute, and the positive and negative

deviations from the standard could be measured precisely. Quantitative

measures would also minimize the subjectively and personal bias of the

evaluations. However, many qualitative factors must be considered

because they influence a sales person’s performance. Some commonly

used factors are:

o KNOWLEDGE OF PRODUCTS, COMPANY POLICIES, AND

COMPETITORS.

o TIME MANAGEMENT AND PREPARATION FOR SALES CALLS.

o QUALITY OF REPORTS



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o CUSTOMER RELATION

o PERSONAL APPEARANCE

A successful evaluation program will appraise a sales person on all

factors that can be related to performance. Otherwise management

may be misled. A high gaily call rate may look good, but it tells us

nothing about how many orders are being written up. A high closing

rate may be camouflaging a low average order size or a high sale

volume on low-profit items.

ADVERTISING

NATURE AND SCOPE OF ADVERTISING

ADVERTISING is a form of communication that typically attempts to

persuade potential customers to purchase or to consume more of a

particular brand of product or service. Many advertisements are designed

to generate increased consumption of those products and services

through the creation and reinforcement of "brand image" and "brand

loyalty". For these purposes, advertisements sometimes embed their

persuasive message with factual information. Every major medium is used

to deliver these messages, including television, radio, cinema, magazines,

newspapers, video games, the Internet and billboards. Advertising is often

placed by an advertising agency on behalf of a company or other

organization.

Advertisements are seen on the seats of shopping carts, on the walls of

an airport walkway, on the sides of buses. And are heard in telephone

hold messages and in-store public address systems. Advertisements are



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often placed anywhere an audience can easily or frequently access visual,

audio and printed information.

Organizations that frequently spend large sums of money on advertising

that sells what is not, strictly speaking, a product or service include

political parties, interest groups, religious organizations, and military

recruiters. Non-profit organizations are not typical advertising clients, and

may rely on free modes of persuasion, such as public service

announcements.

Advertising spending has increased dramatically in recent years. In 2006,

spending on advertising has been estimated at $155 billion in the United

States and $385 billion worldwide and the latter to exceed $500 billion by

2010.

While advertising can be seen as necessary for economic growth, it is not

without social costs. Unsolicited Commercial Email and other forms of

spam have become so prevalent as to have become a major nuisance to

users of these services, as well as being a financial burden on internet

service providers. Advertising is increasingly invading public spaces, such

as schools, which some critics argue is a form of child exploitation.

All advertisements (ads, for short) have four features:

A verbal and /or visual no personal message.

An identified sponsor.

Delivery through one or more media.

Payment by the sponsor to the medium carrying the message.

Advertising in one form or another is used by the most organizations.



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ADVERTISING AS A PERCENTAGE OF SALES: The

amount of advertising that businesses do seems daunting. For example,

Proctor & Gamble spends more than $4.5 billion a year worldwide.

However, it’s important to put the expenditure in context. When you

consider that Proctor & Gamble has 250 brands that it sells in more than

140 countries and that those brands are targeted at more than 5 billion

consumers, the amount to get its message out (less than $1 per prospect

per year) seems more reasonable.

ADVERTISING COST VERSES PERSONAL SELLING

COST: We do know it far surpasses advertising expenditures. Only a

few manufacturing industries, such as drugs, toiletries, cleaning products,

tobacco and beverage spend more on advertising than on personal

selling. Advertising runs 1% to 3% of net sales in many firms, where as

the expenses of recruiting and operating a sales force are typically 8% to

15% of sales.

Personal selling for wholesalers, however, may run 10 to 15 times more

than their expenditures for advertising.

Q: How can I advertise on a low budget and get a great response? Where

should I advertise to take my business to another level?

A: Paid ad placements are vital marketing sources for some businesses.

When customers refer to a directory or advertising section, they've

already qualified themselves as someone who needs what you and your

competition are selling. Whether you're paying for a display in the phone

book, newspaper or church directory, you need your dollars

to work effectively in steering people's attention over to your message.

Here's how.



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IDENTIFY WHICH ADVERTISING TOOL IS BEST FOR YOUR

TYPE OF BUSINESS: For example, classified ads fuel some

businesses while others use flier distribution effectively. For restaurants,

local newspaper ads are effective because most restaurant patrons live

within a three- to five-mile radius. Local storefront shops find success with

coupon advertising in community mail packs or on the back of

supermarket receipts. Scanning a stack of my own grocery receipts

reveals ads from such neighborhood regulars as a car wash, a dry cleaner,

an auto repair center, a dentist and a storage facility.

TYPES OF ADVERTISING

ADVERTISING CAN BE CLASSIFIED ACCORDING TO:

THE TARGET AUDIENCE, EITHER CONSUMER OF BUSINESSES.

THE OBJECTIVE SOUGHT THE STIMULATION OF PRIMARY OR

SELECTIVE DEMAND.

WHAT’S BEING ADVERTISED, A PRODUCT VERSUS AN INSTITUTION.

THE TARGET: CONSUMER OR BUSINESS: An ad is

directed at consumers or businesses; thus it is either business to

consumer advertising or business-to-business advertising. Retailers by

definition sell only to consumers; therefore, they are the only type of

business not faced with this decision.

On the other hand, many manufacturers and distributors must divide their

advertising between business customers and consumers.



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THE TYPE OF DEMAND: PRIMARY OR SELECTIVE: Primary demand advertising is designed to stimulate the demand for a

generic category of a product such as coffee, electricity pr garments ado

from cotton.

In contrast, selective demand advertising is intended to stimulate demand

for individual brand such as Folgers coffee, American Electric Power

electricity and Liz Claiborne sportswear.

Primary demand advertising is used in either two situations:

FIRST is when the product is in the introductory stage of its life cycle.

This is called pioneering advertising. The main objective of pioneering

advertising is to inform, rather than persuade, the target market.

SECOND use of primary demand advertising occurs thought out the

product life cycle and therefore this considered demand sustaining

advertising, trade associations trying to stimulate or sustain demand for

their industry’s product usually do it.

Selective demand advertising is essentially competitive advertising. Its

pits of brand against the rest of the market. Its emphasizes a brand's

special features and benefits--its differential advantage.

A special case selective demand advertising that makes reference to new

or more competitors is comparison advertising. In this kind of advertising,

the advertiser either directly, by naming the rival brand, or indirectly,

through inferences, claims some point of superiority over the rival.

The message: product or industrial

All selective advertising may be classified as product or institutional.

Product advertising focuses on a particular product or bandits is

subdivided in to two parts;



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DIRECT action advertising seeks a quick response

INDIRECT action adverting is designed to stimulate demand over a

longer period of time. It is intended to inform or remind consumers that

the product exists and to point out its benefits.

Industrial advertising presents information about the advertiser's business

or tries to create a favorable attitude--that is, build goodwill--towards the

organization. Both objectives are to create a particular image for a

company.

The source: commercial or social

The focus here is on commercial messages but the most valued form of

endorsement in noncommercial. In fact, the very reason that it does not

conform to the definition in what makes it so prized.

DEVELOPING AN ADVERTISING

CAMPAIGNAn advertising campaign consists of all the tasks involved in transforming

a theme into a coordinated advertising program to accomplish a special

goal for a product or brand. Typically a campaign involves several

different advertising messages.

An advertising campaign is a series of advertisement messages that

share a single idea and theme which make up an integrated marketing

communication (IMC). Advertising campaigns appear in different media

across a specific time frame.

The critical part of making an advertising campaign is determining a

campaign theme, as it sets the tone for the individual advertisements and

other forms of marketing communications that will be used. The campaign



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theme is the central message that will be communicated in the

promotional activities. The campaign themes are usually developed with

the intention of being used for a substantial period but many of them are

short lived due to factors such as being ineffective or market conditions

and/or competition in the marketplace and marketing mix.

An advertising campaign is planned within the framework of the overall

strategic marketing plan and as part of a broader promotional program.

The framework is established when management:

o IDENTIFIES THE TARGET AUDIENCE.

o ESTABLISHES THE OVERALL PROMOTIONAL GOALS.

o SETS THE TOTAL PROMOTIONAL BUDGET.

o DETERMINES THE OVERALL PROMOTIONAL THEME.

DEFINING OBJECTIVES: The purpose of advertising is to sell

something-- ad good, service, idea, person or place--either now or later.

This goal is reached by setting specific objectives that are reflected in

individual ads incorporated into an advertising campaign.

Typically advertising objectives are to:

o SUPPORT PERSONAL SELLING

o IMPROVE DEALER RELATIONS

o INTRODUCE A NEW PRODUCT

o EXPAND THE USE OF A PRODUCT

o COUNTERACT SUBSTITUTION

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among the various activities comprising the overall promotional program.

In the case of particular brand, a firm may wish to have several ads, as

well as sales promotion and public relations activities, directed at different

target audiences all at the same time.

One method that firms use to extend their budgets is cooperative

advertising, which is a joint effort by two or more firms intended to benefit

each of the participants. There are two types of cooperative ads;

VERTICAL

HORIZONTAL

VERTICAL cooperative advertising involves firms on different levels of

distribution. Another type of vertical cooperative is an advertising

allowance, or cash discount offered by the manufacture we to retailer, to

encourage the retailer to advertise or permanently display a product.

HORIZONTAL cooperative advertising so joint advertising in which two

or more firms on the same level of distribution, such as a group of

retailers, share the costs.

CREATING A MESSAGEWhatever the advertising campaign, to be successful the individual ads

must get and hold the attention of the intended audience and influence

that audience in the desired way. Attention can be achieved in May ways;

o TELEVISION

o RADIO

o PRINT AD

The message has two elements: the appeal and the execution;



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The appeal in an ad is the reason or justification for believing or behaving.

It is the benefit that the individual will receive as a result of accepting the

message.

The execution is combining in a convincing, compatible way the feature or

device that gets attention with the appeal.

SELECTING MEDIABefore selection of the advertising media in which to place the ads in

actually these decisions are usually made simultaneously. Both the

message and the choice of media are determined by the nature of the

appeal and the intended target audience.

Advertisers need to make decisions at each of three successive levels in

selecting the specific advertising medium to use:

WHAT TYPE(S) WILL BE USED--

WHICH CATEGORY OF THE SELECTED MEDIUM WILL BE USED?

WHICH SPECIFIC MEDIA VEHICLES WILL BE USED?

Here are suing general factors that will influence media choice:

o OBJECTIVE OF THE AD

o AUDIENCE COVERAGE

o REQUIREMENTS OF THE MESSAGE

o TIME AND LOCATION OF THE BUYING DECISION

o MEDIA COST

CHARACTERISTICS OF MAJOR MEDIA



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TELEVISION: Televise ads are also expensive to produce. Television

can appear to be a relatively expensive medium, but it had the potential

to provide a large audience. For example, a single 30-second span on the

2002 Super Bowl telecast cost $2.2 million to reach an audience of 138

million viewers. It’s not unusual for a firm to spend $500,000 to create a

30--second commercial.

As a result, fewer ads are being made and they are being kept on the air

longer. Advertisers are also using place-based television to reach

attractive target audience-- young professionals, teenagers, working

women-- who have become less accessible through traditional media.

DIRECT MAIL: Over 60 billion pieces of direct mail advertising are

distributed in the U.S. each year. It can be send in the traditional fashion,

using the Postal service or an overnight delivery, or electronically by fax

or e-mail. Direct mail has the potential of being the most personal

selective of all media. Direct mail is pure advertising. Direct mail response

rate of 1% to 2 % is often viewed successfully.

NEWSPAPERS: Newspapers can be used to reach an entire city, where

regional editions are offered, selected areas. Cost per thousand is

relatively low. The life of newspaper is very short. Especially hard hit is

classified advertising, which accounts for about 40% of newspaper ad

revenue.

Will These Newspaper Advertising Secrets

Work For YOUR Business? Yes! These simple and effective newspaper advertising secrets and

techniques revealed in this course will work for any business, whether

you are selling products, services or both.



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IT DOESN'T MATTER WHAT LINE OF BUSINESS YOU'RE IN

--

PLUMBING

RETAIL

HAIRDRESSING

MANUFACTURING

CLEANING

SELLING FURNITURE

ANTIQUES

TV & VIDEO

LEISURE

LANDSCAPE GARDENING

BUILDERS

RESTAURANTS

PHOTOGRAPHERS

COMPUTERS

CAR-HIRE

PRINTING

and almost every other business you can think of...



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...I guarantee it will work for you -- even if you have never put

together a newspaper ad in your life.

RADIO: Radio has enjoyed a rebirth as an advertising and cultural

medium, with the number of stations increasing at a steady rate. Today

there are over 11,000 stations in the U.S. (60% of the FM). Radio is a low-

cost per thousand mediums because of its broad reach. Radio commercial

can be produced in less than a week, at a cost far between televisions.

Yellow Pages: A printed directory of local business names and phone

numbers organized by type of product, the yellow pages have been

around since the late 1700s. Today there are over 6,000 in the U.S., with

large metropolitan areas commonly having four or five competing

directories. The yellow pages are a source of information with which most

consumers are familiar.

MAGAZINES: Magazines are medium to use when high-quality printing

and color are desired in an ads Magazines can reach a national market at

a relatively low cost per reader. The number of different magazines in the

U.S. has increased from just over 14,000 in 1993 to nearly 18,000 today.



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OUT OF HOME ADVERTISING: This advertising increasing at about

10% a year, amounting to over $5 billion today. At one time category was

obtained by billboards and was called outdoor advertising. One is the

computing painting technology that makes it possible to create high-

quality visual reproductions. Low cost per thousand is the chief advantage

of the out of door media, although prices bray by the volume of traffic

passing a site. Billboards can provide intense market coverage within an

area.

INTERACTION MEDIA: Interactivity refers to a feature that permits

the advertising message recipient to respond immediately using the same

medium. Now, "Internet appliance" is available. Once the connection is

established, the recipient controls the flow of information, selecting with

mouse clicks the pages to examine and how long to certain connected.

Internet is so particularly popular with companies selling products that

involve extensive decision-making. Media decision makers abroad are

faced with different conditions that require local knowledge.

EVALUATING THE ADVERTISING EFFORTTop executives want proof that advertising is worthwhile. They want to

know whether dollars spent on advertising are producing as many sales

as could be reaped from the same dollars spent on other marketing

activities.

DIFFICULTY OF EVALUATION: It is hard to measure the sales

effectiveness of advertising. By the very nature of the marketing mix, all

elements--including advertising--are so intertwined that it is nearly

impossible to measure the effect of any one by itself. Factors that create

difficulty are as follows;

DIFFERENT OBJECTIVES



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EFFECTS OVERTIME

MEASUREMENT PROBLEMS

METHOD USED TO MEASURE

EFFECTIVENESS

Ad effectiveness measures are either direct or indirect;

DIRECTS TESTS while compiles the responses to an ad or a campaign,

can be used only with a few types of ad. Tabulating the number of

redemptions of a reduces-price coupon incorporated in ads

INDIRECT TESTS of effectiveness or measures of something other

than actual behavior. One of the most frequently used measures is

advertising recall. Recall tests are based on the premise that an ad can

have an effect only if it is perceived and remembered.

THREE COMMON RECALL TESTS ARE:

o Recognition

o Aided recall

o Unaided recall

ORGANIZING FOR ADVERTISINGThere are three ways a firm can manage its advertising:

o DEVELOP AN INTERNAL ADVERTISING DEPARTMENT.

o USE AN OUTSIDE ADVERTISING AGENCY.



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o USE A COMBINATION OF AN INTERNAL DEPARTMENT AND AN

OUTSIDE ADVERTISING AGENCY.

INTERNAL DEPARTMENTS

All these advertising tasks, an internal department can perform some of

them, or just overall direction. If the company has adopted the marketing

concept, the advertising department head will report to organization's top

marketing executive.

ADVERTISING AGENCIES: An advertising agency is an independent

company that provides specialized advertising services. Many large

agencies have expended the services they offer to include sales

promotion, public relations and even broader marketing assistance. As a

result, they are frequently called upon to assist to strategic planning,

marketing research, new product development, package design and

selection of product names.

INSIDE DEPARTMENT AND OUTSIDE AGENCY: Many firms

have their own advertising department and also use an advertising

agency. The internal department acts as a liaison with the agency, giving

the company greater control over this major expenditure. The advertising

department approves the agency's plans and ads, is responsible for

preparing and administering the advertising budget and coordinates

advertising with personal selling. It may also handle direct marketing,

dealer displays and other promotional activities if theory is not handled by

the agency.



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SALES PROMOTIONSales promotion is one the most commonly used terms in the marketing

vocabulary. It defines as

"Demand stimulating devices designed to supplement advertising

and facilitate personal selling”. Examples are coupons, premiums, in

score displays, scholarships, tradeshows, samples, in store demonstration

and contests.

SALES PROMOTION is one of the four aspects of promotional mix. (The

other three parts of the promotional mix are advertising, personal selling, and

publicity/public relations.) Media and non-media marketing communication

are employed for a pre-determined, limited time to increase consumer

demand, stimulate market demand or improve product availability.

Examples include:

CONTESTS

POINT OF PURCHASE DISPLAYS

REBATES

FREE TRAVEL, SUCH AS FREE FLIGHTS

Sales promotions can be directed at the customer, sales staff, or distribution

channel members (such as retailers). Sales promotions targeted at the

consumer are called consumer sales promotions.

Sales promotions targeted at retailers and wholesale are called trade

sales promotions. Some sale promotions, particularly ones with unusual

methods, are considered gimmick by many.

Producers and middlemen conduct sales promotion. The target for

producers' sales promotions may be a middleman, end users--households

or business users--or the producers' own sales forces. Middlemen direct



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sales promotion at their sales people or prospects further down the

channel of distribution.

NATURE AND SCOPE: Sales promotion is distinct from the

advertising or personal selling, but these three forms of promotion are

often used together in an integrated fashion.

THERE ARE TWO CATEGORIES OF SALES PROMOTION:

TRADE PROMOTION

CONSUMER PROMOTION

TRADE PROMOTION directed to the members of the distribution

channel.

CONSUMER PROMOTIONS aimed at consumers.

The magnitude of the sales promotion activities is mind-boggling.

Several factors in the marketing environment contribute to the popularity

of sales promotion:

o SHORT TERM RESULTS

o COMPETITIVE PRESSURE

o BUYERS EXPECTATIONS

o LOW QUALITY OF RETAIL SELLING

One problem management faces is that many sales promotion techniques

are short run, tactical actions.

Sales promotion describes promotional methods using special short-term

techniques to persuade members of a target market to respond or



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undertake certain activity. As a reward, marketers offer something of

value to those responding generally in the form of lower cost of ownership

for a purchased product (e.g., lower purchase price, money back) or the

inclusion of additional value-added material (e.g., something more for the

same price).

Sales promotions are often confused with advertising. For instance, a

television advertisement mentioning a contest awarding winners with a

free trip to a Caribbean island may give the contest the appearance of

advertising. While the delivery of the marketer’s message through

television media is certainly labeled as advertising, what is contained in

the message, namely the contest, is considered a sales promotion. The

factors that distinguish between the two promotional approaches are:

whether the promotion involves a short-term value proposition (e.g.,

the contest is only offered for a limited period of time), and

The customer must perform some activity in order to be eligible to

receive the value proposition (e.g., customer must enter contest).

The inclusion of a timing constraint and an activity requirement are

hallmarks of sales promotion.

DETERMINING OBJECTIVES AND

STRATEGIES

Three broad objectives of sales promotion as follows;

o STIMULATING BUSINESS USER OR HOUSEHOLD DEMAND FOR A

PRODUCT.

o IMPROVING THE MARKETING PERFORMANCE OF MIDDLEMEN AND



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SALES PEOPLE.

o SUPPLEMENTING ADVERTISING AND FACILITATING PERSONAL

SELLING.

A single sales promotion technique may accomplish one or two-- but

probably not all--of these objectives.

DETERMINING BUDGETS: Sales promotion budget should be

established as a specific part of the budget for the total promotional mix.

Within the concept of developing an integrated marketing

communications strategy, the amount budgeted for sales promotion

should be determined by the task or objective method. This forces

management to identify specific objectives and the sales promotion

techniques that will be used to accomplish them.

DIRECTING THE SALES PROMOTION EFFORT: Many

marketers plan and implement their sales promotion efforts internally.

Others rely on the specialized agencies. Sales promotion falls into two

primary categories.

FIRST category is called promotional service agencies. They specialize in

executing sales promotion programs such as sampling and composing.

SECOND type of organization, called promotional marketing agency,

provides management advice and static planning of sales promotion as

well as execution of the resulting program.



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Selecting the Appropriate Techniques

A key step in sales promotion management is deciding which device will

help the organization reach its promotional goals.

Factors that influence the choice of promotional devices include:

o NATURE OF THE TARGET AUDIENCE

o NATURE OF THE PRODUCT

o COST OF THE DEVICE

o CURRENT ECONOMIC CONDITIONS

Common sales promotion techniques are divides into three categories

based on the target audience:

o Business users or households

o Middlemen and their sales forces

o Producers’ own sales forces

Several of techniques are described below:

o Sampling composing

o Sponsorships and events marketing

o Trade shows

o Product placements



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PUBLIC RELATIONSPublic relations is a management tool designed to favorably influence

attitudes toward an organization, its products and it’s polices. It is an

often overlooked form of promotion.

There are several reasons for managements' lack of attention to public

relations:

o ORGANIZATIONAL STRUCTURE

o INADEQUATE STRUCTURE

o UNRECOGNIZED BENEFITS

PUBLIC RELATIONS (PR) is the practice of managing the flow of

information between an organization and its public.1 Public Relations,

usually shortened to its acronym "PR", aims to gain an organization or

individual positive exposure to their key stakeholders, while downplaying

any negative exposure and dealing with complaints skillfully. Common

activities include speaking at conferences, winning industry awards,

working with the press and employee communications.

NATURE AND SCOPE: Public relations activities typically are

designed to build or maintain a favorable image for an organization with

its various publics-- customers, prospects, stockholders, employees, labor

unions, the local community and the government.

We are aware that this description is quite similar to our definition of

institutional advertising. They can be achieved in many ways such like

supporting charitable projects, participating in community service events;

sponsoring nonprofessional athletics teams, funding the arts and tours.



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Publicity as a Form of Public Relations

PUBLICITY is a communications about an organization, its products, or

policies through the media not paid for by the organization. Publicity

usually takes the form of a news story appearing in the media or an

endorsement provided by an individual, either informally or in a speech or

interview. This is a good publicity.

There is also, of course bad publicity--a negative story about a firm or its

product appearing the media.

There are three means for gaining good publicity:

o PREPARE AND DISTRIBUTE A STORY (CALLED A NEWS RELEASE) TO

THE MEDIA.

o PERSONAL COMMUNICATION WITH A GROUP

o ONE ON ONE PERSONAL COMMUNICATION OFTEN CALLED

LOBBYING.

It is the deliberate attempt to manage the public's perception of a subject.

The subjects of publicity include people (for example, politicians and

performing artists), goods and services, organizations of all kinds, and

works of art or entertainment.

From a marketing perspective, publicity is one component of promotion. The

other elements of the promotional mix are advertising, sales promotion, and

personal selling. Promotion is one component of marketing.

But the publicist cannot wait around for the news to present opportunities.

They must also try to create their own news.

EXAMPLES OF THIS INCLUDE:




http://en.wikipedia.org/wiki/Sales

http://en.wikipedia.org/wiki/Sales_promotion

http://en.wikipedia.org/wiki/Advertising


http://en.wikipedia.org/wiki/Marketing

http://en.wikipedia.org/wiki/Product_(business)

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CONTEST

ART EXHIBITIONS

EVENT SPONSORSHIP

ARRANGE A SPEECH OR TALK

MAKE AN ANALYSIS OR PREDICTION

CONDUCT A POLL OR SURVEY

ISSUE A REPORT

TAKE A STAND ON A CONTROVERSIAL SUBJECT

ARRANGE FOR A TESTIMONIAL

ANNOUNCE AN APPOINTMENT

INVENT THEN PRESENT AN AWARD

STAGE A DEBATE

ORGANIZE A TOUR OF YOUR BUSINESS OR PROJECTS

ISSUE A COMMENDATION

The advantages of publicity are low cost, and credibility (particularly if

the publicity is aired in between news stories like on evening TV news

casts). New technologies such as weblogs, web cameras, web affiliates,

and convergence (phone-camera posting of pictures and videos to

websites) are changing the cost-structure. The disadvantages are lack of

control over how your releases will be used, and frustration over the low

percentage of releases that are taken up by the media.

Publicity draws on several key themes including birth, love, and death.

These are of particular interest because they are themes in human lives

which feature heavily throughout life. In television serials several couples

have emerged during crucial ratings and important publicity times, as a

way to make constant headlines. Also known as a publicity stunt, the

pairings may or may not be truthful.

The main goal of a public relations department is to enhance a company’s

reputation. Staff that work in public relations, or as it is commonly known,



http://en.wikipedia.org/wiki/Publicity_stunt

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PR, are skilled publicists. They are able to present a company or individual

to the world in the best light. The role of a public relations department can

be seen as a reputation protector.

The business world of today is extremely competitive. Companies need to

have an edge that makes them stand out from the crowd, something that

makes them more appealing and interesting to both the public and the

media. The public are the buyers of the product and the media are

responsible for selling it.

Public relations provide a service for the company by helping to give the

public and the media a better understanding of how the company works.

Within a company, public relations can also come under the title of public

information or customer relations. These departments assist customers if

they have any problems with the company. They are usually the most

helpful departments, as they exist to show the company at their best.

PR also helps the company to achieve its full potential. They provide

feedback to the company from the public. This usually takes the form of

research regarding what areas the public is most happy and unhappy

with.

People often have the perception of public relations as a group of people

who spin everything. Spin can mean to turn around a bad situation to the

company’s advantage. It is true that part of the purpose of public relations

is to show the company in a positive light no matter what. There are

certain PR experts that a company can turn to for this particular skill.

The public often think of PR as a glamorous job. Public relations people

seem to have been tarred with the image of constant partying and

networking to find new contacts. The reality is usually long hours and hard

work for anyone involved in public relations.



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There are certain skills necessary to work in the world of PR. These

include a very high level of communication skills, written and verbal. The

PR person must also be very adept at multitasking and time management. He

or she may also have some form of media background or training in order

to understand how the media and advertising work. Organizational and

planning skills are also important in public relations.

The PR worker must also be able to cope very well under pressure. He or

she must have the ability to cope with a barrage of questions from the

media and the public. If a company comes under critical attack, it is the

PR department who must take control of the situation. They must

effectively answer the criticism and turn it around in order to protect the

company’s reputation.

A public relations worker usually has some form of relevant college

qualification. Competition for jobs in PR is fierce. A talented public

relations person has the opportunity to work up from a junior account

executive to an account director in around five years. This is not a nine to

five job; the hours are long and can be stressful. However, for successful

PR workers, the pay is good and the perks may be even better.

PUBLICISTS: A publicist is a person whose job is to generate and

manage publicity for a product, public figure, especially a celebrity, or for a

work such as a book or movie. Publicists usually work at large companies

handling multiple clients.

An organization’s reputation, profitability, and even its continued

existence can depend on the degree to which its targeted �publics�

support its goals and policies. Public relations specialists—also referred to

as communications specialists and media specialists, among other titles—



http://en.wikipedia.org/wiki/Consumer

http://en.wikipedia.org/wiki/Film

http://en.wikipedia.org/wiki/Book

http://en.wikipedia.org/wiki/Celebrity

http://en.wikipedia.org/wiki/Employment

http://en.wikipedia.org/wiki/Publicist

http://www.wisegeek.com/what-is-an-account-executive.htm

http://www.wisegeek.com/what-is-an-account-executive.htm

http://www.wisegeek.com/what-is-time-management.htm

http://www.wisegeek.com/what-is-multitasking.htm

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serve as advocates for businesses, nonprofit associations, universities,

hospitals, and other organizations, and build and maintain positive

relationships with the public. As managers recognize the importance of

good public relations to the success of their organizations, they

increasingly rely on public relations specialists for advice on the strategy

and policy of such programs.

Public relations specialists handle organizational functions such as media,

community, consumer, industry, and governmental relations; political

campaigns; interest-group representation; conflict mediation; and

employee and investor relations. They do more than �tell the

organization’s story.� They must understand the attitudes and concerns

of community, consumer, employee, and public interest groups and

establish and maintain cooperative relationships with them and with

representatives from print and broadcast journalism.

Public relations specialists draft press releases and contact people in the

media who might print or broadcast their material. Many radio or

television special reports, newspaper stories, and magazine articles start

at the desks of public relations specialists. Sometimes the subject is an

organization and its policies toward its employees or its role in the

community. Often the subject is a public issue, such as health, energy, or

the environment, and what an organization does to advance that issue.

Public relations specialists also arrange and conduct programs to keep up

contact between organization representatives and the public. For

example, they set up speaking engagements and often prepare speeches

for company officials. These media specialists represent employers at

community projects; make film, slide, or other visual presentations at

meetings and school assemblies; and plan conventions. In addition, they

are responsible for preparing annual reports and writing proposals for

various projects.



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In government, public relations specialists—who may be called press

secretaries, information officers, public affairs specialists, or

communication specialists—keep the public informed about the activities

of agencies and officials. For example, public affairs specialists in the U.S.

Department of State keep the public informed of travel advisories and of

U.S. positions on foreign issues. A press secretary for a member of

Congress keeps constituents aware of the representative’s

accomplishments.

In large organizations, the key public relations executive, who often is a

vice president, may develop overall plans and policies with other

executives. In addition, public relations departments employ public

relations specialists to write, research, prepare materials, maintain

contacts, and respond to inquiries.

People who handle publicity for an individual or who direct public relations

for a small organization may deal with all aspects of the job. They contact

people, plan and research, and prepare materials for distribution. They

also may handle advertising or sales promotion work to support marketing

efforts.

WORK ENVIRONMENT: Public relations specialists work in busy

offices. The pressures of deadlines and tight work schedules can be

stressful.

Some public relations specialists work a standard 35- to 40-hour week,

but unpaid overtime is common and work schedules can be irregular and

frequently interrupted. Occasionally, they must be at the job or on call

around the clock, especially if there is an emergency or crisis. Schedules

often have to be rearranged so that workers can meet deadlines, deliver

speeches, attend meetings and community activities, and travel.



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EFFECTIVENESS OF PUBLICITY

The theory any press is good press has been coined to describe situations

where bad behavior by people involved with an organization or brand has

actually resulted in positive results, due to the fame and press coverage

accrued by such events.

One example would be the Australian Tourism Board's "So where the Bloody

Hell is you?" Advertising Campaign that was initially banned in the UK, but

the amount of publicity this generated resulted in the official website for the

campaign being swamped with requests to see the banned ads

The popular sitcom, Married... with Children, achieved skyrocketing ratings

after moralist Terry Ricotta attempted to have it removed from the air.

BENEFITS OF PUBLICITY ARE AS FOLLOWS:

o Lower cost

o Increased attention

o More information

o Timeliness

o Publicity has limitations:

o Loss of control over the message

o Limited exposure

o Publicity is not free



http://en.wikipedia.org/wiki/Terry_Rakolta

http://en.wikipedia.org/wiki/Married..._with_Children

http://www.wherethebloodyhellareyou.com/

http://en.wikipedia.org/wiki/United_Kingdom

http://en.wikipedia.org/w/index.php?title=So_where_the_Bloody_Hell_are_you%3F&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=So_where_the_Bloody_Hell_are_you%3F&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Any_press_is_good_press&action=edit&redlink=1

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