Unit 9- The Marketing Mix

PRODUCT

a bundle of tangible and intangible benefits that a buyer receives in exchange for money and other considerations eg. along with the product, they get prestige, status and image

- good or service that is characterized by tangible and intangible attributes- physical/virtual item capable of being delivered to a purchaser

SERVICE

actions/activities resulting in a MEASURABLE change of state for the purchaser caused by the provider

Goods-services Continuum- pure commodity, balanced, pure services

PURE COMMODITY- salt, sugar (raw material, basic resource)

BALANCED (equally weighted between goods/services)- fast food restaurants

PURE SERVICES- consulting (offers no tangible goods)

TOTAL PRODUCT CONCEPT

the package of benefits a buyer receives when they purchase a product; includes physical item as well as the package, brand name, label, service guarantee, warranty and image presented by the product

- conceptualization of a product that helps to identify its major benefits (core, actual, augmented)

CORE PRODUCT - Total product concept

- basic definition of a product

- fundamental benefits derived from using the product

eg. bike= travel

ACTUAL PRODUCT- Total product concept

-attributes that deliver the intended benefits

- features a customer takes into consideration when buying a product

- use branding, packaging, design.etc. to differentiate product

eg. diff types of packaging to make it more unique--> appearance of the bike

AUGMENTED PRODUCT- Toal product concept

- additional features/services that the buyer may not require

- create better customer experience

--> no longer touching product

eg. 10 year warranty, free delivery, assembling furniture

PRODUCT MIX

total range of products offered for sale by a company. It is the COMBINATION of product lines and product items that a firm tries ot market- each product in the mix appeals to a particular segment

PRODUCT ITEM

UNIQUE product offered for sale by an organization

UNIQUE SELLING POINT (USP)

primary benefit of a product or service, the one feature that distinguishes a product from competing products

PRODUCT LINE

- grouping of product items that share major features but may differ in terms of attributes such as size, function or style

- marketed under single brand name

- offered by the same company

PRODUCT LINE WIDTH

number of lines in the mix

PRODUCT LINE DEPTH

number of items in the line

Both form a firm's product mix

Width and depth of product mix depend on the firm's overall marketing strategy- idea is to balance risks and offset seasonal sales fluctuations

NONDURABLE GOOD

tangible good normally consumed in one or a few uses eg. toothpaste, coffee, milk and detergent

- replenished frequently

DURABLE GOOD

- tangible good that services many uses

- purchased infrequently eg. mobile phones, furniture

- last over an extended number of uses

INTANGIBLE ATTRIBUTES

Subjective; symbolic or subjective characteristics eg. stylish, reliable, comfortable

TANGIBLE ATTRIBUTES

Objective: physical characteristics that are discernible by the senses eg. colour, taste, smell, on packaging

2 Basic Ways- Product Classification

Classified according to the target market it is intended for

Classified according to durability and tangibility it offers

2 Groups on the basis of who buys them and why

1. Consumer Goods

2. Industrial (Business) Goods

Types of Products are determined by... (2)

1. Effort put into purchase

2. Frequency of Purchase

CONSUMER GOODS

- products and services purchased by consumers for their personal use or benefit

Classified into 4 Categories

4 Categories of Consumer Goods

1. Convenience Goods

2. Shopping Goods

3. Specialty Goods

4. Unsought Goods

CONVENIENCE GOODS- Consumer Goods

- goods purchased frequently with a minimum of effort and evaluation eg. bread, milk, cookies→

- focus on price and availability

- purchased frequently

- minimal shopping effort

- widely available

- inexpensive

Markets want to... Convenience Products (3)

marketing organization wants to inform consumer of merits of the product through marketing communications as well as package design and being readily available

- packaging

- price,

- availability

SHOPPING GOODS- Consumer Goods

- products or services that the consumer compares on the bases of quality, price, suitability and style before making a selection, usually at a higher price eg. major appliances, household furnishings→

- higher price

- purchased less frequently

- evaluation of alternatives (more time spent)

- comparison-shopping

- Personal selling at point of sale

Markets want to... Shopping Products

marketers have to make sure they have strong online presence, located near competitors where comparisons can easily be made, having a consistent and attractive image, effective communications so that awareness among consumers is high when their need for the product arises

- effective messaging

eg. high speed internet + its benefits

SPECIALTY GOODS- Consumer Goods

- goods that consumers will make an effort to find and purchase because the goods possess some unique or important characteristic- consumer has already decided what time to buy; it is simply a matter of making the shopping excursion to buy it→

- expensive

- purchased rarely

- limited sellers

- deliberately sought out

- brand comparison is rare

eg. cars, luxury goods

Markets want to... Specialty Products

marketing considerations are image and reputation resulting from communications, product quality and the availability of goods in the appropriate stores- usually a high price is also a consideration eg. Coach handbag

- quality, brand status

UNSOUGHT GOODS- Consumer Products

- unknown to customer

- not of interest to customer

- delay of benefits

eg. fire extinguishers

Marketers want to... Unsought Products

- heavy advertising (awareness, create value, counter negative attitudes--> highlight benefits)

INDUSTRIAL (BUSINESS) GOODS

- products and services purchased by businesses, industries, institutions and governments that are used directly or indirectly in the production of another good or service that is resold, in turn, to another user

3 Categories

3 Categories of Industrial Goods

1. Capital Items

2. Parts and Materials

3. Supplies and Services

CAPITAL ITEMS- Industrial Goods

- expensive goods with a long life span that are used directly in the production of another good or service- but whether an item has a direct or indirect role in teh production process determines which of two types of capital item it is

2 Types

2 Types of Capital Items

1. Installations

2. Accessory Equipment

INSTALLATIONS- Capital Items

- major capital items used directly in the production of another product eg. buildings, production line equipment

Characterized by high price, long life, reliance on strong personal swelling programs to gain customer acceptance, technical sales and support service, and direct channels of distribution

ACCESSORY EQUIPMENT- Capital Items

- items such as computers and power tools that facilitate an organization's operations

Role is indirect, typically goods are less expensive than installations and are characterized by their reasonably long life, the significance of price negotiation in the marketing process and the unique features of the product that appeal to rational buying motives

PARTS AND MATERIALS- Industrial Goods

- less expensive goods that directly enter a manufacturer's production process

3 Categories

3 Categories of Parts and Materials

1. Raw Materials

2. Processed Materials

3. Component Parts

RAW MATERIALS- Parts and Materials

- farm goods and other materials derived directly from natural resources eg. crude oil, lumber

PROCESSED MATERIALS- Parts and Materials

- materials used in the production of another product but that are not readily identifiable with the product- original material is further processed or used in the manufacturing process of another good so that it changes them

COMPONENT PARTS- Parts and Materials

- goods that are used in teh production of another product but do not change form as a result of the manufacturing process- price negotiation and continuity of supply are important considerations in teh purchase of component parts

SUPPLIES- Industrial Goods

- standardized products that are routinely purchased with minimum of effort

- 3 categories

3 Categories of Supplies

1. Maintenance eg. paint

2. Repair eg. bearings and gears

3. Operating Supplies eg. paper and stationary, writing supplies

Buyers of such items look for quality at a good price

PRICE- MARKETING MIX

- money or other something of value exchanged for the ownership or use of a product

- 4 major approaches

4 Major Approaches in Price

1. Demand Oriented

2. Competition Oriented

3. Cost-oriented

4. Profit oriented

DEMAND ORIENTED- Major Approach in Price

- reflect customer demand

- demand increases, price increases

- Penetration Pricing

- Skimming

- Prestige Pricing

- Odd-even Pricing

4 Types of Demand Oriented Price Strategies

- Penetration Pricing

- Skimming

- Prestige Pricing

- Odd-even Pricing

PENETRATION PRICING + CONS- Demand Oriented

- set a low price on a new product to appeal to the mass market then increase the price over time

- generates interest

- attracts customers from competitors

*often with release of new product

CONS- may not retain customers esp as price increases

eg. subscription services

SKIMMING + CONS- Demand Oriented

- set the highest initial price that consumers desiring the product are willing to pay, lower the price once demand of these consumers are satisfied

- generates revenue early (initial launch)

- creates perception of high quality

CONS- can encourage entry of competitors

eg. new models overrided by newer model

PRESTIGE PRICING + CONS- Demand Oriented

- product price is set high and remains high

- effective for products intended to be status symbols

- high profits

CONS- potential for limited customer base

- SOUND REPUTATION is needed

eg. luxury products

Prestige Pricing: Neuromarketing- PLASSMAN ET AL 2008

- fMRI scan of brain activity as participants consumed wine

When consuming higher price win, there were...

- higher ratings of enjoyment

- greater activity in regions of brain associated with pleasure

*price is capable of changing people's association with pleasure

ODD-EVEN PRICING + CONS- Demand Oriented

- sets prices a few dollars or cents under a target price

- creates a illusin of a bargain

CONS- product may be perceived as being of lower quality

- pricing can be seen as manipulative

COMPETITION ORIENTED- Major Approach in Price

- adjust in relation to competitors

- P increase= luxury, better

- P decrease than comp= bargain, appeal to price conscious shoppers

- below-market pricing

- loss leader pricing

2 Components of Competition Oriented Price Strategies

1. Below market pricing

2. Loss leader pricing

BELOW-MARKET PRICING + CONS- Competition Oriented

- setting a price lower than that of competitors

- attracts price-conscious shoppers

- allows for larger sales volumes

CONS- product may be perceived as being of lower quality

LOSS LEADER PRICING + CONS- Competition Oriented

- product is sold at a price that is not profitable in hopes that customers will buy additional regularly priced products

- common for new businesses

- helps to build a customer base

CONS- can attract CHERRY PICKING buyers --> loss in profit

eg . black friday sales

CHERRY PICKING BUYERS

- ppl who spend time looking for loss-leader pricing

COST-ORIENTED- Major Approach in Price

- offset production costs--> not about earning profit

PROFIT ORIENTED- Major Approach in Price

- make maximum profits ON A SINGLE GOOD

PLACE- MARKETING MIX

The means by which the product will be distributed at a time and location convenient to the consumer.

RETAILING

sale of product from a point of purchase directly to a customer who intends to use that product

RETAILING UTILITY + 4 components

- usefulness or value provided by a retailer

1. Place

2. Posession

3. Form

4. Time

PLACE- Retailing Utility (3)

- making products easily accessible to potential customers

includes..

- convenient store locations

- discoverability online

- numerous purchasing locations

POSESSION- Retailing Utility (2)

- increasing ease of ownership

includes...

- payment plants

- numerous payment options eg, buy now, pay later

FORM- Retailing Utility (2)

- degree to which product design meets customer needs

includes...

- customized products

- producer alterations

- wider selection eg. 15 colours

TIME- Retailing Utility (4)

- making products available when customers need them

includes...

- extended hours

- 24/7 availability

- fast delivery

- seasonal items year round

RETAILER CLASSIFICATION (3)

- categorizing retailers on the basis of ownership

1. Independent retailer

2. Corporate chain

3. Contractual System/Franchises

INDEPENDENT RETAILER

- owned by individual, family, partnership

- owners responsible for decision making

- 1-3 locations

- higher prices to offset spending costs, the more you buy, the less you pay per product [for retailers]

CORPORATE CHAIN

- multiple outlets under common ownership

- largely centralized control

- lower prices

- larger inventory

eg. Walmart

CONTRACTUAL SYSTEM/FRANCHISES

- agreement between an individual and business to operate an outlet

- greater independence**

eg. Tim Hortons, Subway

PROMOTION- Marketing Mix

- communication or activity intended to persuade target market of the merits of a given product

- intended to generate interest, encourage sales, improves brand image

ADVERTISING + CONS

- paid form of media used to communicate to consumers about a product/brand

- includes; billboards, print ads, tv commercials, radio commericals, online advertisements

- goal is to encourage purchasing

- control over advertising

CONS- can be seen as a nuisance

Shock Appeals in Advertising + cons

- more effective than sex appeal**

- words/images/actions intended to deliberately startle and offend

- may contain controversial, disturbing, provocative

- intended to capture attention

CONS- may have a negative impact on brand image

DAHL ET AL 2003

- role of shock appeals in the promotion of health behaviours eg. nonprofits, charities

- write down descpritions of posters you remember seeing (RECALL)

- identify which poster captured your attention the most (ATTENTION)- if several, rank them

- indicate which posters you saw from a list of options (RECOGNITION)

--> shock appeal led to greatest attention, recall, recognition

SEXUAL APPEALS IN ADVERTISING

•words, images, and/or actions intended to deliver a message designed to evoke sexual thoughts, feelings, and/or arousal in a target audience

•may be explicit or subtle

•may be related or unrelated to product

•appear to attract consumer attention

CONS

•appear to distract from processing of advertised message

META ANALYSIS: WIRTZ ET AL 2017- 3 Findings

- over 17K participants from 78 studies

-sexual appeals had no significant effect on:

1. brand recognition

2. brand recall

3. intention to puchase

*sexual appeal results in more negative attitudes toward a brand

BRANDING STRATEGIES (2)

1. Defining the Brand

2. Decisions are made about design of package

BRAND

- name, term, symbol or design or some combination of these, that identifies a good or service from another company's product

Key Components of a Brand (4)

BRAND NAME

BRANDMARK/LOGO

TRADEMARKS

PATENT

BRAND NAME

- part of a brand that can be vocalized

BRANDMARK/LOGO

- part of a brand identified by a symbol or design

TRADEMARKS

- part of a brand granted legal protection so that only the owner can use it eg. Nike's swoosh

PATENT

- provision that gives a manufacturer the sole right to develop and market a new product, process or material

NATIONAL BRANDS

- national brand organization has two branding options: an individual brand strategy or a family brand strategy

INDIVIDUAL BRAND STRATEGY

- identification of each product in a company's product mix with its own name eg. Procter and Gamble names include Crest and Oreo

MULTIBRAND STRATEGY

- use of a different brand name for each item a company offers in the same product category eg. Nestle and Aero, KitKat, Coffee Crisp

FAMILY BRAND

- use of the same brand name for a group of related products- usually steeped in radiation and quickly come to mind because they have been on teh market for a long time

Eg. Old Spice Body Wash, Old Spice Body Spray

PROS of Family Brand (2)

1. Promotional expenditures for one product will benefit the rest of the family by creatin an awareness of the brand name

2. Consumers and distributors accept new products more readily because the products capitalize on teh success and reputation of the existing family products→ HALO EFFECT

CONS of Family Brand (1)

- failure or poor quality of a new product could tarnish the image of a family of products

COBRANDING

- occurs when company uses the equity in another brand name to help market its own brand name product or service (two brand names on a product); also applies to two organizations sharing common facilities for marketing purposes eg. 2 restaurants in one location, Chocolate Chip Cookie Dough Ale

PRIVATE LABEL BRAND/STORE BRAND

- brand produced to the specifications of the distributor, usually by national brand manufacturers that make similar products under their own brand names- also called a store brand

Eg. Company= Costco, Brand name= Kirkland Signature

Originally conceived as a means by which retailer could provide the price-conscious consumer with a product of reasonable quality as an alternative to national brands

Prices for private label brands can be significantly lower than national brands yet yield better profit margins for the market

THREE AND OUT APPROACH

- either you are among the top 3 brands in a given category or you're out

GENERIC BRAND

- product without a brand name or identifying features- less expensive than private label or national brands, packaging is kept simple; minimum colour used and label text simply identifies the contents

**Both private and generic brands intensify competition→ makes it more difficult for national brand to compete for space on shelf

LICENSED BRAND

- occurs when a brand name or trademark is used by a licensee, legally allows another firm to use a brand name or trademark with average royalty rate

CULT BRAND

- brand that captures the imagination of a small gorup of devotees who then spread the word, make converts and help turn a fringe product into a mainstream name- not fads but start out smal and build a steady following

Many decide to stay small, seeing that it is key to their success eg. Vans

Others opt for growth and eventually become leading national brands eg. Apple

**Cult brands dare to be different, they sell lifestyles and marketers behind them are willing to take big risks; they understand the potential pay off

BRAND EVANGELISTS

- everyday people to actively promote their favourite brand

SALES PROMOTION

- activity that provides special incentives to bring about immediate action from consumers, distributors, and an organization's sales force

Advertising tells us why we should buy a product, whereas sales promotion offers incentives to encourage consumers to purchase a product

2 Main Types

2 Principal Types of Sales Promotion

1. Consumer Promotion

2. Trade Promotion

TRADE PROMOTION

- help PUSH a product through the channel by offering channel members incentives to perform marketing functions on behalf of the product

CONSUMER PROMOTION/SALES PROMOTION + CONS

- activity promoting extra brand sales by offering the consumer an incentive over and above the product's inherent benefits

- help PULL a product through the channel

- communication tool that provides short-term incentives to generate interest in a product

- includes: coupons, contest, rebates

- encourages immediate purchase

CONS- may result in lower revenue--> reducing price of it

Objectives (3)