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UNIT – III MARKETING MIX DECISIONS
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 tosere and, finally, (!) implement our segmentation by optimi"ing our products#serices for thatsegment and communicating that we hae made the choice to distinguish ourseles that way.
Segmenting
Segmenting is the process of diiding the market into segments based on customer
characteristics and needs.
$he main actiity segmenting consists of four sub actiities. $hese are%
1. determining who the actual and potential customers are
2. identifying segments
!. analy"ing the intensity of competitors in the market
&. selecting the attractie customer segments.
$he first, second and fourth steps are described as market segmentation. $he third step of
analy"ing the intensity of the competitors is added to the process of segmenting in this process
description. When different segments are identified, it is not necessary that these segments are
attractie to target. ' company is almost neer alone in a market competitors hae a great
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influence on the attractieness of entering a certain market. When there is a high intensity of
competitors, it is hard to obtain a profitable market share and a company may decide not to enter
a certain market. $he third step of segmenting is the first part of the topic of competitor analysis.
$he need for segmenting a market is based on the fact that no market is homogeneous. or one product the market can be diided in different customer groups. $he ariables used for this
segmenting in these groups are usually geographical, psychographical, behaioral and
demographic ariables. $his results in segments which are homogeneous within and
heterogeneous between each other. When these segments are known, it is important to decide on
which market to target. *ot eery market is an attractie market to enter. ' little filtering has
been done in this actiity, but there are more factors to take in account before targeting a certain
market segment. $his process is called targeting.
Targeting
'fter the most attractie segments are selected, a company should not directly start targeting all
these segments other important factors come into play in defining a target market. our sub
actiities form the basis for deciding on which segments will actually be targeted.
$he four sub actiities within targeting are%
1. defining the abilities of the company and resources needed to enter a market
2. analy"ing competitors on their resources and skills
!. considering the company+s abilities compared to the competitors abilities
&. deciding on the actual target markets.
$he first three sub actiities are described as the topic competitor analysis. $he last sub actiity
of deciding on the actual target market is an analysis of the companys abilities to those of its
competitors. $he results of this analysis leads to a list of segments which are most attractie to
target and hae a good chance of leading to a profitable market share.
-biously, targeting can only be done when segments hae been defined, as these segments
allow firms to analy"e the competitors in this market. When the process of targeting is ended, the
markets to target are selected, but the way to use marketing in these markets is not yet defined.
$o decide on the actual marketing strategy, knowledge of the differential adantages of each
segment is needed.
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Positioning
When the list of target markets is made, a company might want to start on deciding on a good
marketing mix directly. ut an important step before deeloping the marketing mix is deciding
on how to create an identity or image of the product in the mind of the customer. /ery segment
is different from the others, so different customers with different ideas of what they expect from
the product. 0n the process of positioning the company%
1. identifies the differential adantages in each segment
2. decides on a different positioning concept for each of these segments. $his process is
described at the topic positioning, here different concepts of positioning are gien.
$he processdata model shows the concepts resulting from the different actiities before and
within positioning. $he model shows how the predefined concepts are the basis for the positioning statement. $he analyses done of the market, competitors and abilities of the company
are necessary to create a good positioning statement. When the positioning statement is created,
one can start on creating the marketing mix.
INTRODUCTION TO PRODUCT MANAGEMENT%
roduct management is an organi"ational lifecycle function within a company dealing
with the planning or forecasting or marketing of a product or products at all stages of the product
lifecycle. roduct management (inbound focused) and product marketing (outbound focused)
are different yet complementary efforts with the obectie of maximi"ing sales reenues, market
share, and profit margins. $he role of product management spans many actiities from strategic
to tactical and aries based on the organi"ational structure of the company.
roduct management can be a function separate on its own and a member of marketing or
engineering. While inoled with the entire product lifecycle, product managements main focus
is on driing new product deelopment. 'ccording to the roduct 3eelopment and
4anagement 'ssociation (34'), superior and differentiated new products 5 ones that delier
uni6ue benefits and superior alue to the customer 5 is the number one drier of success and
product profitability. roduct management may be defined as the entrepreneurial management of
a piece of business (product, product line, serice, brand, segment etc.) as a 7irtual+ company,
with a goal of lingterm customer satisfaction and competitie adantage.
http://en.wikipedia.org/wiki/Positioning_(marketing)http://en.wikipedia.org/wiki/Positioning_(marketing)http://en.wikipedia.org/wiki/Positioning_(marketing)
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OBECTI!ES O" PRODUCT MANAGEMENT%
roducts are the basis of any organi"ation. Sales are reali"ed through sales of the products.
$hus the oerall success of the organi"ation depends upon the planning and deelopment of
products. roduct 4anagement is the holistic ob of product managers, including planning,
forecasting and marketing products or serices. roduct management is an organi"ational
function within a company dealing with the planning marketing of a product or products at all
stages of the product lifecycle. roduct 4anagement is also a collectie term used to describe the
broad sum of dierse actiities performed in the interest of deliering a particular product to
market.
1. $o design product strategies with respect to customer, industry and competition analysis.
2. $o spot marketing opportunities, and to see whether they are exploitable.
!. $o seek growth through new product deelopment.
&. $o plan strategies for each stage of product life cycle.
8. $o generate new product ideas, and deelop them further.
9. $o consolidate existing product profile and to do portfolio analysis.
:. $o improe and modify existing products and to introduce brand extensions and line
extensions.
;. $o identify the brand identity, build a brand image, position a brand, build a brand, to
deelop brand e6uity and measure it.
PRODUCT P#ANNING$
'ccording to W..
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'ccording to .
E%ements o& Prod'(t P%anning%
1. RESEARC) BE"ORE PRODUCTION% before taking a decision to produce a new
item, market research should be carriedout extensiely. $he company should decide the
characteristics of the product that can meet the re6uirement of the people.
2. POSSIBI#IT* O" PRODUCTION MET)OD% $he possibility of production method
which would be followed and is practicable to deelop a product exactly what the
consumer wants should be examined before taking a decision of producing a new
product.
!. MODI"ICATION IN EXISTING #INES% $he existing product lines should also be
examined whether they can be improed and to what extent to meet the new re6uirements
of the consumer or a new product is to be deeloped.
&. E#IMINATION O" T)E PRODUCT% product planning also inoles the decision
regarding the elimination of the unprofitable product lines so that resources may be used
to some other product profitably.
8. IMPRO!EMENT IN T)E PRODUCT% roduct planning includes regarding the
improement of the existing product in terms of 6uality, packaging, etc, taking in iew of
the competitor+s strategies in the market.
PRODUCT%
'nything that can be offered to a market to satisfy a want or need.
"eat'res o& Prod'(t%
1. $angibility.
2. 0ntangible attributes
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!. 'ssociated attributes.
&. /xchange alue.
8. ?onsumer satisfaction%
#e+e%s o& Prod'(t
Core Bene&it $ rest @ sleep
Basi( $ bed, bathroom, towel
E-e(ted $ attributes like clean bed, fresh towel, working fan
A'gmented $ exceeds customer expectation remote control teleision,
Potentia% % benefits not only satisfy but also delight them
Prod'(t )ierar(./
Need "ami%/ A ?ore need that underlies the existence of a product family. /g. Security
Prod'(t "ami%/ A roduct classes that can satisfy a core need with reasonable effectieness.
/g. Saings @ 0ncome
Prod'(t C%ass A ' group of products within a product family recogni"ed as haing a certain
functional coherence. /g. financial instrument
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Prod'(t %ine A Broup of products within a product class that are closely related because they
perform a similar function, are sold to same customer group, are marketed through the same
channel. /g. life insurance
Prod'(t t/-e – group of items within a product line that share one of seeral possible
forms, of the product. /g. term life
Brand – $he name associated with one or more items in the product line that is used to
identify the source or character of the item. /g. rudential
Item – ' distinct unit within a brand or product line distinguishable by si"e, price,
appearance, or some other attribute. /g. rudential renewable term life insurance
Prod'(t C%assi&i(ations 0 Cons'mer Goods
12 Con+enien(e Prod'(ts
uy fre6uently @ immediately
Cow priced
4ass adertising
4any purchase locations
i.e ?andy, newspapers
32 S.o--ing Prod'(ts
uy less fre6uently
Digher price
ewer purchase locations
?omparison shop
i.e ?lothing, appliances
42 S-e(ia%t/ Prod'(ts
Special purchase efforts
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Digh price
Eni6ue characteristics
rand identification
ew purchase locations i.e can be anything
52 Unso'g.t Prod'(ts
*ew innoations
roducts consumers don+t want to think about these products
Fe6uire much adertising @ personal selling
i.e Cife insurance, blood donation
Ind'stria% Goods C%assi&i(ation$
12 Materia%s and -arts
a) farm products
b) natural products
c) 4anufactured material @ parts
d) ?ompound material
e) ?ompound parts
32 Ca-ita% items
a) installations
b) e6uipment
42 S'--%ies 6 7'siness ser+i(es
a) maintenance and repair serice
b) operating supplies
c) maintenance @ repair serices
d) usiness adisory serices
Brand
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rand is a name , term , sign, symbol or design or a combination of them intended to
identify the goods or serices of one seller or group of sellers and to differentiate from those of
competitors. 0n essence the brand identifies the seller or maker. rand is considered to be a
trademark or distinctie name identifying a product or manufacture. $he brand must be a bridge
between the customer and owner of the brand. oth functional and emotional satisfaction is
attainted through branding. ' brand has the power to create interest and command an immediate
second look. $he alue of a business is directly related to the strength of its brand . ' string
brand will eoke a number of images in the mind of the prospects.
' brand is essential a seller+s promise to delier a specific set of features benefits serices
consistently to the buyers. $he best brand coneys warranty of 6uality rands coney een more
meanings up to six leels.
'ttributes
enefits
roducer+s alues
?ulture
ersonality
Eser
enefits of branding
1. randing makes it causes for the seller to process orders and track down problem.
2. $he seller+s brand name and trademark proide legal protection of uni6ue product
features
!. randing gies the seller the opportunity to attract a loyal profitable set of customers.
rand loyalty gies some protection from competition
&. randing helps the seller segment markets
8. Strong brands help build the corporate image, making it easier to launch new brands andgain acceptance by distributers and consumers
Use o& a s'((ess&'% 7rand
With a successful brand, a company will usually hae%
1. 0mproed margins through higher reali"ations leading to higher profits
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2. Benerated better cash flows and improed management and productiity of assets
!. Feduced or een eliminated the need for regular infusion of fresh capital A inestment
needs can be met out of internal accruals and extensions of a successful brand can gie
the benefits of new benefits of new product launch at reduced cost.
&. ?reated an entry barrier for would be rials, who must now spend heaily to counter the
brand and
8. 0nsulated the brand from economic cycles, since a successful brand immediately reduces
the impact of prices alone on demand.
T.ere are (ertain 7asi( (ategories o& 7rand or (or-orate name$
1. 3escriptie name
2. 'ssociatie name
!. reestanding name
&. 'bstract name
8. ?oined name
BRAND STRATEG*
' company has fie choices with regards to brand strategy. $hey are
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12 #ine Etensions$
/xisting brand name extended to new si"es of flaors in the existing product category
like ?inthol =?ologne> , ?inthol 7Cime+. /xtension may lead to brand name losing in
specific meaning. Doweer there is a much higher chance of surial than brand new
products
32 Brand Etensions$
Where a company may use its existing brand name to launch new products in other
categories like the brand 7Fin+ being extended to both detergent powders, detergent cakes.
$he new product may disappoint buyers and damage their report for company+s other
products. $he brand name may be in appropriate to the new product. $he brand name
may also lose its special positioning in consumers+ mind though oer extension. rand
dilution occurs when consumers mind trough oer extension. rand dilution occurs when
consumers no longer associate a brand with a specific product ore highly similar products
42 M'%ti 7rands$
' company will often introduce additional brand in the same product category.
Sometimes the company is trying to establish different features or appeal to different
buying moties. ' multi branding strategy also enables the company to lock up more
distributors shelf space and to protect its maor brand by setting up flanker brand.
Dindustan leer limited produces three different brands of detergent powders. ?ompany
inherits different brand name in the process of ac6uiring competitors Smithkline beecham
consumer health care owns the ac6uired brand names like brook bond. Damam Gissan '
maor pitfall introducing multibrand entries is that each might obtain only a small market
share and none may be particularly profitable. $he company will hae dissipated its
resources oer seeral brands instead of building a few highly profitable brands
52 Ne8 Brands$
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*ew brands are created when company launches products in a new category it may find
that none of its current brand names are appropriate. Het the cost of establishing a new
brand name in the market place is costly.
92 Co07rands$
' ?o brand is a combination of two or more well known brands in an offer like the
combination of S0 and B/ ?apital in the issue of S0 credit cards.
Brand Re-ositioning
Doweer well a brand is currently positioned, the company may hae to reposition it
later when facing new competitors or changing customer preferences. ?onsider :Ep,
which was one of seeral soft drinks bought primarily by older people who wanted a
bland, lemonflaored drink. Fesearch indicated that although a maority of softdrink
consumers preferred a cola, they did not prefer it all of the time, and many other consumers were
non cola drinkers.
Brand stret(.ing
rand stretching is applying an existing brand to a completely different business area or a
new product or serice such as ?adbury+s entry into cola market. $he risk attached to brand
stretching is that failure in the new field may affect the core product
Brand e:'it/$
rand e6uity is a set of assets and liabilities linked to a brand+s name and symbol that add
to subtract from the alue proided by a product or serice to ad firm and # or that firm+s
customers.
PACKAGING
Pa(;aging includes the actiities of designing and producing the container for a product.
$he container is called the package, and it might include up to three leels of material. -ld Spice
aftershae lotion is in a bottle (primary package) that is in a cardboard box (secondary package)
that is in a corrugated box (shipping package) containing six do"en boxes of -ld Spice.
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Reasons "or t.e de+e%o-ment o& -a(;aging$
Self-service: $he typical supermarket shopper passes by some !II items per minute.
Bien that 8! percent of all purchases are made on impulse, an effectie package
attracts attention, describes features, creates confidence, and makes a faorable
impression.
Consumer affluence: Fising consumer affluence means consumers are willing to pay a little
more for the conenience, appearance, dependability, and prestige of better
packages.
Company and brand image: ackages contribute to instant recognition of the company or brand.
?ampbell Soup estimates that the aerage shopper sees its red and white can :9 times a year, the
e6uialent of J29 million worth of adertising.
Innovation opportunity: 0nnoatie packaging can bring benefits to consumers and
profits to producers. $oothpaste pump dispensers, for example, hae captured 12
percent of the toothpaste market because they are more conenient and less
messy.
#ABE#ING
/ery physical product must carry a label, which may be a simple tag attached to the
product or an elaborately designed graphic that is part of the package. Cabels perform seeral
functions. irst, the label identifies the product or brand5for instance, the name Sunkist stamped
on oranges. $he label might also grade the product, the way canned peaches are grade labeled ',
, and ?. $he label might describe the product% who made it, where it was made, when it was
made, what it contains, how it is to be used, and how to use it safely. inally, the label might
promote the product through attractie graphics.
PRODUCT #I"E C*C#E
3escribes the stages a product goes through in the marketplace including introduction, growth,
maturity, and decline.
0. Introd'(tor/ Stage%
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3uring the market introductory stage, there may not be ready market for the product.
Sales are lowK the product undergoes teething troubles, profits seem a demand has to be created
and deeloped K customers hae to be prompted to try out the product. $his stage poses seeral
problems for the marketer. $he complexity of the problems and the duration of the stage depend
upon the nature of the product, its price, its technological newness and the consumer+s iew of
the product. the management can pursue one of the four strategies
12 Ra-id s;imming $
Caunching the new product at a high price and a high promotion leel. 0t will take adantage of
early entry and the realitie noelty of the product in the market introduction stage. $hose who
became aware of the product are eager to hae it and can pay the asking price and the firm faces
potential competition and wants to build brand preferences.
32Ra-id Penetration $ Caunching the product at a low price and spending heaily on
promotion. $his strategy make sense when the market is large, the market is unaware of the
product, most buyers are price sensitie, there is strong potential competition, and the unit
manufacturing costs fall with the company+s scale of production and accumulated manufacturing
experience.
4 S%o8 -enetration $ Caunching the product at a low price and low leel of promotion.
$his strategy make sense when the market is large, is highly aware of the product, is price
sensitie, and there is some potential competition. 'nother crucial area demanding attention at
this stage is market deelopment and promotion. 0n this stage, demand has to be created and
deeloped. $he firm has to inest heaily in promotion and isit for the reward
&. S%o8 S;imming % Caunching the new product at a high and low promotion. $his
strategy make sense when the market is limited in si"e. 4ost of the markets are aware of the
product, buyers are willing to pay a high price and potential competition is not imminent
'. C.ara(teristi(s
Cow sales olume
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Digh costs
*o or little direct competition
asic product configuration
. Strategies
3eelop primary demand by building awareness and educating consumers
Stimulate opinion leaders to buy the product
uild channels of distribution (selectie in the beginning)
$wo pricing strategies%
price skimming A introduce at high price
price penetration A introduce at low price
II Gro8t. Stage
3uring this stage, the demand for the product increase and the si"e of the market grows.
$here is a rapid increase in sales. /arly adopters like the product and additional consumers start
buying it. *ow competitors enter attacked by the opportunities. $hey introduce new product
features and expand distribution. rice remain where they are or fall slightly depending on how
fast demand increase. rofits increase during this stage as promotion cost are spread oer a large
olume and unit manufacturing costs fall faster than price decline owing to the producer learning
effect.
3uring this stage the firm uses seeral strategies to sustain rapid market growth as long as
possible.
0t improes product 6uality and adds new features and improed styling
0t adds new models and flanker, products i.e products of different si"e, flaours
0t enters new market segments
0t increases its distribution coerage
0t shifts from product awareness adertising to product preference adertising
0t lowers price to attract the next layer of price sensitie buyers.
'. C.ara(teristi(s
Sales olume increases significantly
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?osts per unit decrease
?ompetition increases
4ore product ariation
B2 Strategies
/ngage in product modification
uild selectie demandK stress differentiation
4oe toward intensie distribution
ractice more aggressie pricing
III Mat'rit/ Stage
0n the maturity stage the demand for the product reach a saturation point rice
competition become intense and pioneer tries to distinguish his brand by subtle company.
4aturity diides into ! phases%
0. Browth hase
00. Stable hase
000. 3ecaying 4aturity
Mar;et Modi&i(ation
$he company might try to expand the market for its mature brand by working with the two
factors that makeup sales olume.
Lolume M *umber of brand users N usage rate per user
$he company can try to expand the number of brand users in three ways
0. ?onert non users
00. /nter new market segments
000. Win competitors customers
'. C.ara(teristi(s
Sales growth slows then leels off
rofits decline for the industry
4arginal competitors leae marketplace
. Strategies
Feuenate product A change packaging, new
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models, line extensions
Stimulate usage rate
4aintain brand loyalty through reminder promotions
?ontinue aggressie pricing
?ontinue intensie distribution
I! De(%ine Stage $
0n this stage, sales begin to fall. $he demand for the product shrinks probably due to new and
functionally adanced products becoming aailable in the market# market being more saturated
to the product. 0n any case, price and margins get depressed% total sales and profits diminish .
irms do perceie the impounding total decline and prepare for the gradual phasing out of the
product. Successful firms 6uite often keep new products ready in the 6ueue to fill the acuum
created by the decline of existing products
A2 C.ara(teristi(s
Strong downward shift in sales
rofits stay low and continue to decline
-nly a few strong competitors remain
ack to basic product configurations
B2 Strategies
3istribution reduced to fewer outlets
romotional support reduced
rices lowered
Ese haresting strategy
roduct life cycles ary in length
roduct life cycles are getting shorter
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#i&e C/(%e #engt.
ecause of
technology and
globali"ation
the introduction stage is getting ery short
some cycles more 6uickly to maturity, then hae many product modifications so the
decline stage drags on and on
ashions currently popular products that tend to follow recurring life cycles
ads(' fashion that is taken up with great enthusiasm for a brief period of timeK a cra"e )
ashions with abbreiated life cycles only popular with certain groups
4usic
ast food
?hildren+s toys
=adult toys
Prod'(t #i&e C/(%e Considerations in Mar;eting Strateg/
Enderstand that profits hae a predictable pattern
in the early stages, focus is on product information
in the later stages, focus is on brand promotion
use market segmentation in maturity stage to maintain strong core customer basis
NE< PRODUCT DE!E#OPMENT AND MANAGEMENT%
*ew product deelopment (*3) is the term used to describe the complete process of
bringing a new product or serice to market. $here are two parallel paths inoled in the *3
process% one inoles the idea generation, product design and detail engineeringK the other
inoles market research and marketing analysis. ?ompanies typically see new product
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deelopment as the first stage in generating and commerciali"ing new products within the oerall
strategic process of product life cycle management used to maintain or grow their market share.
$he process# Steps %
Stage 1 Idea Generation is often called the Ofu""y front endO of the *3 process
0deas for new products can be obtained from basic research using a SW-$ analysis
(Strengths, Weaknesses, -pportunities @ $hreats), 4arket and consumer trends,
companys F@3 department, competitors, focus groups, employees, salespeople,
corporate spies, trade shows, or /thnographic discoery methods (searching for user
patterns and habits) may also be used to get an insight into new product lines or product
features.
Cots of ideas are being generated about the new product. -ut of these ideas many ideas
are being implemented. $he ideas use to generate in many forms and their generating
places are also arious. 4any reasons are responsible for generation of an idea.
0dea Beneration or rainstorming of new product, serice, or store concepts idea
generation techni6ues can begin when you hae done your --F$E*0$H '*'CHS0S
to support your ideas in the 0dea Screening hase (shown in the next deelopment step).
Stage 32 Idea S(reening
$his process inoles shifting through the ideas generated aboe and selecting ones which are
feasible and workable to deelop. ursing non feasible ideas can clearly be costly for the
company. $he obect is to eliminate unsound concepts prior to deoting resources to them. $he
screeners should ask seeral 6uestions%
Will the customer in the target market benefit from the productP
What is the si"e and growth forecasts of the market segment#target marketP
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What is the current or expected competitie pressure for the product ideaP
What are the industry sales and market trends the product idea is based onP
0s it technically feasible to manufacture the productP
Will the product be profitable when manufactured and deliered to the customer at the target
priceP
Stage 42 Con(e-t De+e%o-ment and Testing
$he organi"ation may hae come across what they beliee to be a feasible idea, howeer, the
idea needs to be taken to the target audience. What do they think about the ideaP Will it be
practical and feasibleP Will it offer the benefit that the organi"ation hopes it willP or hae they
oerlooked certain issuesP *ote the idea and concept is taken to the target audience not a
working prototype at this stage. 3eelop the marketing and engineering details like
0nestigate intellectual property issues and search patent data bases
Who is the target market and who is the decision maker in the purchasing processP
What product features must the product incorporateP
What benefits will the product proideP
Dow will consumers react to the productP
Dow will the product be produced most cost effectielyP
roe feasibility through irtual computer aided rendering, and rapid prototyping
What will it cost to produce itP
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$esting the ?oncept by asking a sample of prospectie customers what they think of the idea.
Esually ia ?hoice 4odeling.
Stage 52 B'siness Ana%/sis
$he company has a great idea, the marketing strategy seems feasible, but will the product be
financially worth while in the long runP $he business analysis stage looks more deeply into the
cashflow the product could generate, what the cost will be, how much market shares the product
may achiee and the expected life of the product.
o /stimate likely selling price based upon competition and customer feedback
o /stimate profitability and breakeen point
Stage 9 2 Mar;eting Strateg/
' proposed marketing strategy will be written laying out the marketing mix strategy of the
product, the segmentation, targeting and positioning strategy sales and profits that are expected.
Stage =$ Prod'(t De+e%o-ment
inally it is at this stage that a prototype is finally produced. $he prototype will clearly run
through all the desired tests, and be presented to the target audience to see if changes need to be
made.
Stage >$ Test Mar;eting
$est marketing means testing the product within a specific area. $he product will be launched
within a particular region so the marketing mix strategy can be monitored and if needed, be
modified before national launch.
Stage ?$ Commer(ia%i@ation
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0f the test marketing stage has been successful then the product will go for national launch. $here
are certain factors that need to be taken into consideration before a product is launched
nationally. $hese are timing, how the product will be launched, where the product will be
launched, will there be a national roll out or will it be region by regionP
Ne8 Prod'(t Pri(ing
o 0mpact of new product on the entire product portfolio
o Lalue 'nalysis (internal @ external)
o ?ompetition and alternatie competitie technologies
o 3iffering alue segments (price, alue, and need)
o roduct ?osts (fixed @ ariable)
o orecast of unit olumes, reenue, and profit
Integrated Mar;eting (omm'ni(ation$
0ntegrated 4arketing ?ommunications (04?) is the coordination and integration of all
marketing communication tools, aenues, functions and sources within a company into a
seamless program that maximi"es the impact on consumers and other end users at a minimal cost
Mar;eting Comm'ni(ation O7e(ti+es$
Q ehaiour 4odificationQ 4odify behaiour @ $houghts
Q Feinforce existing behaiour $o strengthen by adding extra support or
material.
Q $o 0nform
Q $o persuade $o influence or gain oer by argument, adice.
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Q $o remind
Q Specific -becties
Q Shift the demand
Q $o change the pattern of demand
"a(tors determining mar;eting Comm'ni(ation Mi$
Q $ype of product
Q *ature of market
Q Stage in roduct Cife cycle
Q udget aailability
Q ?ompany policies
Q $ype of roduct 4arket
Q uyer Feadiness
C)ANNE# MANAGEMENT
'ccording to hilip Gotler, = /ery producer seeks to link together the set of marketing
intermediaries that best fulfill the firm+s obecties. $his set of marketing intermediaries is called
the marketing channel (also called as trade channel or channel of distribution.)
' system of marketing institutions that promotes the physical flow of goods and serices, along
with ownership title, from producers to consumer or business userK also called a distribution
channel
or marketers the distribution decision is primarily concerned with the supply chain+s frontend
or channels of distribution that are designed to moe the product (goods or serices) from the
hands of the company to the hands of the customers
C.ara(teristi(s o& Distri7'tion (.anne%$
1) Foute or pathway%
2) low%
!) ?omposition%
&) unctions%
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8) Femuneration%
9) $ime Etility%
:) ?onenience Lalue%
;) ossession Lalue%
R) 4arketing tools%
1I) Supplydemand Cinkage%
C.anne% "'n(tions%
1) 0nformation roider
2) rice stability.
!) romotion
&) inancing
8) $itle
9) Delp in roduction unction
:) 4atching demand and supply.
?ontractual% inding out buyers and sellers.
4erchandising% roducing goods that will satisfy market re6uirements.
ricing% rocess of attaching alue to the product in monetary terms.
ropaganda% Sales promotion actiities.
hysical 3istribution% 3istribution actiities.
$ermination% Settlement of contract, i.e., paying the alue and receiing the goods.
;) ricing
R) Standardi"ing $ransactions.
1I) 4atching uyers and Sellers.
Con(e-ts o& C.anne% Management%
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Distribution Channel Strategy:
i) Channel objective
ii) Activity Finalization.
iii) Organizing the activities.
iv) Developing policy guidelines.
Designing channel structure
Establishing the channel
otivating channel !e!bers
"esolving con#icts a!ong channel !e!bers
E$%paste phase
E$%ante phase
1. $he /x 'nte phase% $he ex ante phase inoles all the actiities that are associated with the
design and establishment of the distribution channel actually starts functioning.
i) 3esigning channel structure.
ii) /stablishing the channel.
a) 'ppointing processing /ntities.
b) 0nfrastructure 3eelopment.
c ) 4iscellaneous unctions.
2. $he /xpaste hase%
While these actiities are ust preparatory actiities, the main task of a channel manager
starts only after the channel is set up and starts functioning. 0t comprises following two set of
actiities%
i) 4otiating ?hannel 4embers%
ii) Fesoling ?onflicts among ?hannel 4embers.
T.e Ro%e o& Mar;eting C.anne%s in Mar;eting Strateg/
?hannels proide the means by which the firm moes the goods and serices it produces to
ultimate users
acilitate the exchange process by cutting the number of contacts necessary
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'dust for discrepancies in the market+s assortment of goods and serices ia
sorting
Standardi"e exchange transactions
acilitate searches by both buyers and sellers
"a(tors In&%'en(ing C.anne% De(isions
12 Re%ating to Prod'(t C.ara(teristi(s
• erishability
• 0ndustrial # consumer products
• Enit alues
• Style obsolescence
• Weight @ technicality
• Standardi"ed roducts
• urchase re6uency
• *ewness @ 4arket 'cceptance
• Seasonally
• roduct readth
II Re%ating to Com-an/ C.ara(teristi(s
• inancial Strength
• 4arketing olicies
• Si"e of the company
• ast ?hannel /xperience
• roduct 4ix
• Feputation
III "a(tors re%ating to Mar;et or (ons'mer C.ara(teristi(s
• ?onsumer uying habits
• Cocation of the market
• *umber of customer
• Si"e of orders
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I! "a(tors re%ating to midd%eman (onsideration
• Sales olume potential
• 'ailability of middleman
• 4iddlemen+s 'ttitude
• Serice proided by middlemen
• ?ost of channel
! "a(tors re%ating to en+ironmenta% (.ara(teristi(s
• /conomic conditions
• Cegal restriction
• ?ompetitors channel
• iscal structure
C.anne%s Using Mar;eting Intermediaries
Wholesaler # Stockiest# 3istributor
Fetailer
Sole Selling 'gent
? @ 'gents
Semi Wholesaler
Lalue added resellers
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T/-es o& Mar;eting C.anne%s
)/7ridM'%tiD'a% Distri7'tion$ *etwork that moes products to a firm+s target market
through more than one marketing channel
Re+erse C.anne%s$ ?hannels designed to return goods to their producers
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Determining Distri7'tion Intensit/
*umber of intermediaries through which a manufacturer distributes its goods
Intensi+e distri7'tion$ channel policy in which a manufacturer of a conenience product
attempts to saturate the market
Se%e(ti+e distri7'tion$ channel policy in which a firm chooses only a limited number of
retailers to handle its product line
E(%'si+e distri7'tion$ channel policy in which a firm grants exclusie rights to a single
wholesaler or retailer to sell its products in a particular geographic area
C.anne% Management
$he administration of existing channels to secure the cooperation of channel members in
achieing the firm+s distribution obecties. /mergence of distribution channel could be
attributed to the need for facilitating exchanges by speeding up the time consuming matching
process between buyers and sellers.
C.anne% Management De(isions
12 Se%e(ting C.anne% Mem7ers
3uring the selection process, producers should determine what characteristics distinguish the
better intermediaries. $hey will want to ealuate number of years in business, other lines carried,
growth and profit record, solency, cooperatieness, and reputation. 0f the intermediaries are
sales agents, producers will want to ealuate the
number and character of other lines carried and the si"e and 6uality of the sales force.
32 Training C.anne% Mem7ers
?ompanies need to plan and implement careful training programs for their distributors
and dealers because the intermediaries will be iewed as the company by end
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users. 4icrosoft, for example, re6uires thirdparty serice engineers who work with its software
applications to complete a number of courses and take certification exams. $hose who pass are
formally recogni"ed as 4icrosoft ?ertified rofessionals, and they can use this designation to
promote business.
42 Moti+ating C.anne% Mem7ers
$he most successful firms iew their channel members in the same way they iew their end
users. $his means determining their intermediaries+ needs and then tailoring the channel
positioning to proide superior alue to these intermediaries. $o improe
intermediaries+ performance, the company should proide training, market research,
and other capabilitybuilding programs. 'nd the company must constantly reinforce
that its intermediaries are partners in the oint effort to satisfy customers.
52 E+a%'ating C.anne% Mem7ers
roducers must periodically ealuate intermediaries+ performance against such standards as
sales6uota attainment, aerage inentory leels, customer deliery time,
treatment of damaged and lost goods, and cooperation in promotional and training
programs. ' producer will occasionally discoer that it is paying too much to particular
intermediaries for what they are actually doing
92 Modi&/ing C.anne% Arrangements
?hannel arrangements must be reiewed periodically and modified when distribution
is not working as planned, consumer buying patterns change, the market expands,
new competition arises, innoatie distribution channels emerge, or the product
moes into later stages in the product life cycle.
C)ANNE# CON"#ICT
)ori@onta% Con&%i(t
4ost often, hori"ontal conflict causes sparks between different types of marketing intermediaries
that handle similar products. Sometimes results from disagreements among channel members at
the same leel.
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!erti(a% Con&%i(t
?hannel members at different leels find many reasons for disputes
/xample% when retailers deelop priate brands to compete with producers+ brands or when
producers establish their own retail outlets or WWW Sites.
M'%ti(.anne% (on&%i(t
/xists when the manufacture has established two or more channels that sell to the same market
Ca'ses o& (.anne% (on&%i(t
• Boals incompatibility
• Enclear roles @ rights
Managing C.anne% (on&%i(t
• Super ordinate goals
• /xchange persons
•
?ooptation• 4ediation
• 3iplomacy
!erti(a% Mar;eting S/stems
Lertical marketing system (L4S)% planned channel system designed to improe distribution
efficiency and cost effectieness by integrating arious functions throughout the distribution
chain
T/-es o& !MS
Administered mar;eting s/stem$ L4S that achiees channel coordination when a dominant
channel member exercises its power
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Cor-orate mar;eting s/stem$ a L4S in which a single owner operates at each stage in its
marketing channel
Contra(t'a% mar;eting s/stem$ L4S that coordinates channel actiities through formal
agreements among channel members like%
WholesalerSponsored Loluntary ?hains
Fetail ?ooperaties
ranchises
)ori@onta% Mar;eting S/stems
$wo or more unrelated companies put together resources or programs to exploit an emerging
marketing opportunity
M'%ti(.anne% Mar;eting S/stem
-ccurs when a single firm uses two or more marketing channels to reach one or more customer
segmentations.
Integrated Mar;eting (omm'ni(ation
0s the coordination and integration of all marketing communication tools, aenues, functions and
sources within a company into a seamless program that maximi"es the impact on consumers and
other end users at a minimal cost
Mar;eting Comm'ni(ation O7e(ti+es
ehaiour 4odification
• 4odify behaiour @ $houghts
• Feinforce existing behaiour
$o 0nform
$o persuade
$o remind
Specific -becties
• Shift the demand
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• $o change the pattern of demand
"a(tors determining mar;eting Comm'ni(ation Mi
• $ype of product
• *ature of market
• Stage in roduct Cife cycle
• udget aailability
• ?ompany policies
• $ype of roduct 4arket
• uyer Feadiness
PROMOTION$
= 0t compasses all the tools in the marketing mix whose maor role is persuasie
communications> hilip Gotler.
E%ements o& Mar;eting Comm'ni(ation Mi
'dertisement
ublicity
ersonal Selling
Sales romotion
ublic Felations
Promotion Met.ods
*onpersonal communication paid for by a clearly identified sponsor promoting ideas,
organi"ations, or products
4ost familiar outlets are broadcast ($L, radio) and print (newspapers, maga"ines) media Doweer, there are many other adertising ehicles, from billboards to $Shirts and, more
recently, the 0nternet
AD!ERTISING$
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'ccording to 'merican 4arketing 'ssociation, ='dertising is any paid form of non
personal presentation of ideas, goods or serices by an identified sponsor>.
"eat'res o& Ad+ertising$
(i) 0t is 4ass?ommunication rocess.
(ii) 0t is 0nformatie in 'ction.
(iii) 0t is a ersuasie 'ct.
(i) 0t is a ?ompetitie 'ct.
() 0t is a aidor.
(i) 0t has an 0dentified Sponsor.
(ii) 0t is *onpersonal resentation.
P'r-ose O7e(ti+es o& Ad+ertising$
(i) $o increase 3emand.
(ii) $o sell a new product and to build
(iii) $o educate the masses.
(i) $o build rand reference.
() $o build Boodwill.
(i) $o attract and to help 4iddlemen.
(ii) $o support Salesmen.
(iii) $o remind the customers of the roduct and company.
(ix) $o inform about changes in marketing 4ix.
(x) $o *eutrali"e.
(xi) $o enter in *ew Beographical 'rea.
(xii) $o do /ntire Selling
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Blobal adertising
Basis o& Target Gro'-s
?onsumer 'dertising
0ndustrial 'dertising
$rade 'dertising
rofessional 'dertising
Basis o& demand in&%'en(e %e+e%
rimary 3emand
Selectie 3emand
Instit'tiona% or Prod'(t Ad+ertising
roduct 'dertising
0nformatie roduct 'dertising
persuasie roduct 'dertising
Femainderoriented 'dertising
0nstitutional 'dertising
Criteria "or se%e(ting ad+ertising Media
• ?ommunication /ffectieness
• Beographic Selectiity
• 'udience Selectiity
• lexibility
• 0mpact
• restige
• 4essage life
• ?oerage
• ?ost
• re6uency
• Cead times
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Ad+antages o& ad+ertising
12 To Man'&a(t'rers
• 0ncreased sales
• Steady demand
• Cower ?osts
• Breater dealer interest
• uick $urnoer and smaller inentories
• Supplementing salesmanship
• /ncouragement to better performance
• ?reation of goodwill
32 Ad+antages to Cons'mers
• acility of urchasing
• 0mproement in uality
• /limination of unnecessary intermediaries
• ?onsumer+s surplus
• /ducation of consumers
42 Ad+antages to Midd%eman$
• Buarantees uick sales
•'cts as a salesman
• 0t makes possible retail price maintenance
52Ad+antages to t.e so(iet/
• /ncouragement to Fesearch
• Sustaining the press
& ?hange in motiation
Disad+antages
• 4ultiplication of needs
• 4isrepresentation of acts
• ?onsumer+s deficit
• 0ncreased cost
• Wastage of national resources
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• arriers to entry
• roduct proliferation
• 3eferred reenue expenditure
• 4anagerial difficulties
SA#ES PROMOTION
' sponsorfunded, demandstimulating actiity designed to supplement adertising and
facilitate personal selling
re6uently consists of a temporary incentie to encourage a sale or purchase
0ncluded are a wide spectrum of actiities, such as eent sponsorships, fre6uency
programs, contests, trade shows, instore displays, rebates, samples, premiums, discounts,
and coupons
4arketing actiities , other than personal selling , adertising and publicity that stimulate
consumer purchasing and dealer effectieness such as display shows and exhibitions,
demonstration and arious nonrecurrent selling efforts not in the ordinary routine>
C.ara(teristi(s o& sa%es Promotion
• Sales romotion does not include personal selling , adertising and publicity
•
'ctiities are not regular • 4akes adertisement @ ersonal Selling more effectie
• 0t encourages dealers, distributors and consumers.
Met.ods too%s o& Sa%es Promotion
12 Cons'mer Promotion
• ree Samples
• ?oupons
• 4oney Fefund offer
• $emporary price Feduction# price -ff
• ?ontests#sweepstakes
• onus offer
• 3raw
• 'fter Sales serice
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• - material
• /xchange -ffer
• roduct placements#tieins
32 Midd%eman Promotion
• uying allowance 3iscount
• uyback allowance
• 3isplay @ 'dertising allowances
• 3ealer A listed romotions
• ush 4oney
• Sales ?ontest
• ree Bifts
• 'dertising materials
• ?redit acility
42 Sa%es "or(e Promotions
• onus to Sales orce
• Sales force ?ontest
•Sales 4eetings
Ad+antages o& Sa%es Promotion$
• 0ntroduction of new brands
• 3uring inflationary stage, to increase sales
• or stimulating demand
Disad+antages
• ?reates feeling that it is intended to sell substandard product
• 3iscounts are artificial as price is inflated
• 'ctiities are shortlied and so the result is also shortlies
• rand image may be affected
• /ffectie actiities easily copied by competitors
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PERSONA# SE##ING
ersonal selling inoles the twoway flow of communication between a buyer and seller, often
in a facetoface encounter, designed to influence a person+s or group+s purchase decision.
Ad+antages o& Persona% Se%%ing
• roides a detailed explanation or demonstration
• of product
• 4essage can be aried to fit the needs of each
• prospectie customer
• ?an be directed to specific 6ualified prospects
• 0nstant feedback
• ersonal persuasion can be used
• =' good salesman can get you to buy ice in winter>
C.ara(teristi(s o& Persona% Se%%ing
Pro
1. Flexibility
'dapt to situations
/ngage in dialog
2. Builds Relationsips
Cong term
'ssure buyers receie appropriate serices
Soles customer+s problems
Con ?an not reach mass audience
/xpensie per contact
*umerous calls needed to generate sale
Cabor intensie
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PUB#IC RE#ATIONS
ublic Felations inoles a ariety of programs designed to promote or protect a company+s
image or its indiidual products. F can take many forms, including newspapers, annual reports,
lobbying, and support of charitable or ciic eents
"'n(tions o& PR
• romoting goodwill
• romoting product, serice, corporate image
• ?orporate communications
• Cobbying
• ?ounteracting negatie publicity
Maor De(isions in PR
• /stablishing the marketing -becties
uild 'wareness
uild ?redibility
Stimulate sales force and dealers
uild a core consumer base
Dold down promotion ?ost
uild oneone relationship with customers
0nfluence the influential
• ?hoosing 4essages and ehicles
• 0mplementing the plan
• /aluating Fesults
Ad+antages o& PR
Lery credible and inexpensie
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F can hold down promotion costs
Disad+antages o& PR
3ifficult to 6uantify F benefits
Cack of control
73eft+ management re6uired
P'7%i( Re%ations
publications (annual reports, brochures, *ews latterT)
/ents (?onference, exhibitions, 'nniersariesT)
news (press releases)
Speeches
Serice actiities
On%ine P'7%i( Re%ation
Lideoconferencing
Satellite 4edia tour
Lideo new release
Streaming ideo of lie eents
Website
P'7%i(it/
o is a special form of F that inoles news stories about an organi"ation or its
products
o Cike adertising, it consists of an impersonal message that reaches a mass audience
o ut% lacement is not paid for, the organi"ation that is the subect of the publicity has
little or no control oer it, it appears as news and therefore has greater credibility than
adertising
o -rgani"ations should try to proide the material for good publicity
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PRICE
$he sum or amount of money at which a thing is alued, or the alue which a seller sets on his
goods in marketK that for which something is bought or sold, or offered for sale
O7e(ti+es o& Pri(ing
$o maximi"e the profits
?ompetitie Situation
?apturing the 4arket
Congrun Welfare of the irm
rice Stability
'chieing a $argetFeturn
'bility to ay
4argin of profit to 4iddlemen.
Fesource mobili"ation.
"a(tors A&&e(ting t.e Pri(ing De(isions%
12 Interna% &a(tors$
(a) -rgani"ational actors% pricing decisions occur on two leels in the organi"ation. -erall
rice strategy is with the top executies. $hey determine the basic ranges that the product falls
into in terms of market segments.
$he actual mechanics of pricing are dealt with at lower leels in the firm and focus on
indiidual product strategies.
(b) 4arketing 4ix% 4arketing experts iew prices as only one of the many important elements
of the marketing mix. ' shift in any one of the elements has an immediate effect on the other
three production, romotion and distribution.
(c) roduct 3ifferentiation% $he price of the product also depends upon the characteristics of the
product. 0n order to attract the customers, differentiation
Pri(ing Pro(ess
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1. Set ricing -becties
2. 'naly"e demand
!. /stimating ?ost
&. 'naly"ing ?ompetitor+s ?osts, rices and -ffers
8. Select pricing 4ethod
9. Selecting the final price
I Pri(ing O7e(ti+es
Q rofit obecties e.g.
A $argeted profit return
Q Lolume obecties e.g.
A 3ollar or unit sales growth
A 4arket share growth
Q -ther obecties e.g.
A 4atch competitors+ price
A *onprice competition
II Demand Ana%/sis
• 4easure the impact of price change on total reenue
• redicts unit sales olume and total reenue for arious price leels
• 3ifferent customers hae different price sensitiities and needs
Pri(e Sensiti+it/
Q Eni6ueLalue /ffect
Q Substitute Aawareness effect
Q 3ifficult?omparison /ffect
Q $otal/xpenditure /ffect
Q /ndenefit /ffect
Q Shared?ost /ffect
Q Sunk0nestment /ffect
Q rice6uality /ffect
Q 0nentory /ffect
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Estimating Demand C'r+e
• Statistical analy"ing past prices, 6uantities sold etc.
• ?onduct price experiments
• 'sk buyer to state how many units they would buy at different proposed prices.
Pri(e E%asti(it/ o& Demand
4arketers need to know how responsie or elastic, demand would be to a change in price.
III Estimating Cost
• 3emand sets a ceiling on the price the company can charge for its product.
• ?ost set the floor.
• $he company wants to change a price that coers its costs of producing, distribution and
selling the product, including a fair return for its effort and risk.
T/-es o& (osts and %e+e%s o& -rod'(tion
ixed ?ost
Lariable ?ost
$otal cost3ecline in the aerage cost with accumulated production experience is called the experience
cure or learning cure.
'ccumulated roduction
Di&&erentiated Mar;eting O&&ers
• $oday+s companies try to adapt their offers and terms to different buyers.
• $hus, a manufacturer will negotiate different terms with different retail chains, meaning
the costs and profits will differ with each chain.
• $o estimate the real profitability of dealing with
• different retailers, the manufacturer needs to use actiitybased cost ('?) accounting
• instead of standard cost accounting
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Target Costing
• ?ost can also change as a result of a concentrated effort by the company+s designers,
engineers, and purchasing agents to reduce them.
• 4any
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• Per(ei+ed0 +a%'e Pri(ing% is an open line pricing techni6ue where respondents
estimate the price of a new product compared to those who are already in the
market.
• !a%'e Pri(ing% -ccurs when prices are set on the basis of fair alue for both the
serice proider and the consumer.
• Going0Rate Pri(ing$ /stablishing the price for a product or serice based on
prealent market prices. (steel or meat ).
• Sea%ed – Bid Pri(ing% rice 6uotes solicited by goernmental and other public
agencies to ensure obectie consideration of competitie bids.
Se%e(ting t.e &ina% -ri(e
Q sychological ricing
Q $he influence of other 4arketingmix /lements
Q ?ompany pricing policies
Q 0mpact of rice on other parties
Q 'dapting the price
Q Beographical ricing (arter, ?ompensation deal, uyback arrangement, -ffset).
Q rice discounts @ allowances
Q ?ash 3iscounts
Q uantity 3iscounts
Q unctional 3iscounts# trade discounts.
Q Seasonal 3iscounts price reduction to buyers who buy merchandise.
Q 'llowances # $radein allowances. (turning in an old item when buying a
new one
Q romotional ricing
Q CossCeader ricing
Q Specialeent ricing
Q ?ash Febates
Q Cowinterest financing
Q Conger ayment terms
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Q Warranties @ Serice ?ontracts
Q 3iscriminatory ricing
Q ?ustomersegment pricing 4useums often charge a lower admission fee
to students and senior students.
Q roduct A form pricing % 3ifferent ersions of the product are priced
differently but not proportionately to their respectie costs.
Q 0mage pricing% Some companies price the same product at two different
leels based on image differences.
Q Cocation pricing
Q $ime ricing% aried by season, day, or hour.
roduct4ix ricing
Q roductCine ricing ?ompanies normally deelop product lines rather than single
products and introduce price steps. Fs.2II, &II, and 9II.
Q -ptionalfeature ricing A 4any companies optional products ,features.
Q ?aptieproduct ricing Some products re6uire the use of ancillary or captie products.
4anufacturers of ra"ors, digital phones and cameras often price them low and set high
markups on ra"or blades and film, respectiely.
Q $wopart ricing Serice firms often engage in twopart pricing, consisting of fixed fee
plus a ariable usage fee. 'musement parks charge an admission fee plus fees for rides
oer a certain minimum.
Q yproduct ricing 'ny income earned on the byproducts will make it easier for the
company to charge a lower price on its main product if competition forces it to do so.
Q roduct undling ricing is a marketing strategy that inoles offering seeral products
for sale as one combined product. $his strategy is ery common in the software business
(for example% bundle a word processor, a spreadsheet, and a database into a single office
suite )
0nitiating @ Fesponding to rice ?hanges%
Q 0nitiating rice ?uts
/xcess plant capacity
3eclining market Share
8/9/2019 Marketing Mix Decisions 2 Unit
49/49
3ominating the market
Fesults in arious traps like low6uality,
ragile market%
' low price buys market share but not market loyalty. and shallowpocket traps
Q 0nitiating price increases
A ?ost inflation
A -er demand
Q Feactions to price ?hanges
Q ?ustomers+ reactions
Q ?ompetitors
3istribution # 4arketing ?hannels%
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