Chapter 15 - Managing the Marketing Mix

Value

Good quality at a fair price

Total Product Offer (Value Package)

Everything that customers evaluate when deciding whether to buy something

Potential Components of a Total Product Offer

• Price

  • Store Surroundings

  • Guarantee

• Brand Name

  • Service

  • Speed of Delivery

• Package

  • Buyer’s Past Experience

  • Reputation of Producer

• Convenience

  • Internet Access

  • Image Created by Advertising

Product Line

A group of products that are physically similar or are intended for a similar market

Product Mix

The combination of product lines offered by an organization

Product Differentiation

The creation of real or perceived product differences

Packaging Must Perform the Functions:

• Attract the buyer’s attention

• Protect the goods inside, stand up under handling, be tamperproof, and deter theft

• Be easy to open and use

• Describe and give information about the contents

• Explain the benefits of the good inside

• Provide information on warranties, warnings, and other customer matters

• Give some indication of price, value, and uses

Universal Product Code (UPCs)

Helps store control inventory

• Combines bar codes and a preset number to give the retailer information about the product’s price, size, colour, and other attributes

• Radio frequency identification (RFID) chips are used for tracking products

  • Sends signals when attached to a product to let the company know where the product is at all times

  • Carry more information compared to bar codes

Brand

A name, symbol, and/or design that identifies the products of one seller or group of sellers and distinguishes them from the products of competitors

Brand Equity

The value of the brand name and associated symbols

Brand Loyalty

The degree to which customers are satisfied, enjoy the brand, and are committed to further purchases

Brand Manager

The person in the company who has direct responsibility for one brand or one product line

Popular Objectives When Setting Pricing Strategies

1. Achieving a target return on investment (ROI) or profit

2. Building traffic

3. Achieving greater market share

4. Creating an image

5. Furthering social objectives

Three Major Approaches to Pricing Strategy

• Cost-based pricing

• Demand-based pricing

  • Target costing

• Competition-based pricing: based on what all the other competitors are doing

  • Price leadership

Target Costing

Designing a product so that it satisfies customers and meets the profit margins desired by the firm

Price Leadership

One or more dominant firms set the pricing practices that all competitors in an industry then follow

Break-Even Analysis

The process used to determine profitability at various levels of sales

Break-Even Point (BEP)

Total Fixed Cost (FC)/(Price of One Unit (P) - Variable Cost (VC) of One Unit

Total Fixed Costs

All expenses that remain the same no matter how many products are made or sold

Variable Costs

Costs that change according to the level of production

Skimming Price Strategy

A strategy in which a new product is priced high to make optimum profit while there’s little competition

Penetration Price Strategy

A strategy in which the product is priced low to attract many customers and discourage competitors

Everyday Low Pricing (EDLP)

Setting prices lower than competitors and then not having any special sales

High-Low Pricing Strategy

Set prices that are higher than EDLP stores but offer many special sales where the prices are lower than competitors

Psychological Pricing

Pricing goods and services at price points that make the product appear less expensive than it is

Demand-Oriented Pricing

Marketers price based on customer demand rather than cost

• Eg. low ticket costs for children or senior discount days

Category Killer

Sells a huge variety of one type of product to dominate that category of goods

• Eg. Indigo, Best Buy, Sleep Country, Staples

Convenience Store

Sells food and other often-needed items at convenient locations; may stay open all night

• Eg. Circle K, 7-Eleven

Department Store

Sells a wide variety of products in separate departments

• Eg. Hudson’s Bay, Holt Renfrew, Simons

Discount Store

Sells many different products at prices generally below those of department stores

• Eg. Dollarama, Great Canadian Dollar Store

Outlet Store

Sells general merchandise directly from the manufacturer at a discount; items may be discontinued or have flaws

• Eg. Marshalls, Winners, HomeSense

Supercentre

Sells food and general merchandise at discount prices; no membership required

• Eg. Real Canadian Superstore, Walmart Supercentre

Supermarket

Sells mostly food with other non-food products such as detergent and paper products

• Eg. Loblaws, Metro, Sobeys

Warehouse Club

Sells food and general merchandise in facilities that are usually larger than supermarkets and offers discount prices; membership

• Eg. Costco, Wholesale Club

Intensive Distribution

Distribution that puts products into as many retail outlets as possible

Selective Distribution

Distribution that sends products to only a preferred group of retailers in an area

Exclusive Distribution

Distribution that sends products only to one retail outlet in a given geographic area

Online Retailing

Selling products to ultimate consumers online

Social Commerce

Using social media and user contributions to assist in the online buying and selling of products and services

Telemarketing

The sale of products by telephone

Direct Selling

Selling to consumers in their homes or where they work

Multilevel Marketing (MLM)

Uses independent contractors as salespeople

• Make commissions on their own sales

• They create commission for those who recruit them (upliners) and they can recruit others to receive commissions from (downliners)

• Low cost of entry to start in MLM

Supply Chain and Channel of Distribution

Suppliers’ Plants → Manufacturers → Wholesalers → Retailers → Consumers

• Channel of Distribution starts with manufacturers

• Supply chain is longer because it includes links from suppliers to provide raw materials

Promotion Mix

Combination of promotional tools an organization uses

• Advertising

• Personal selling

• Direct marketing

• Sales promotion

• Public relations

Integrated Marketing Communication (IMC)

Technique that combines all of the promotional tools into one comprehensive and unified promotional strategy

Advertising

Paid, non-person communication through various media by organizations and individuals who are in some way identified in the advertising message

Personal Selling

Face-to-face presentation and promotion of products

Steps in B2C Process

Approach, ask questions, make presentation, close sale, follow up

Public Relations (PR)

Function that evaluates public attitudes, changes policies and procedures in response to the public’s requests and executes a program of action and information to earn public understand and acceptance

Publicity

Any information about an individual, product, or organization that is distributed to the public through the media and that is not paid for or controlled by the seller

Sales Promotion

Promotional tool that stimulates consumer purchasing and dealer intest by means of short-term activities

Direct Marketing

Any activity that directly links manufacturers or intermediaries with the ultimate customer

Word-of-Mouth Promotion

Promotional tool that involves people telling other people about products they have purchased or services they have used

Viral Marketing

Any strategy that encourages people to pass on a marketing message to others, creating exponential growth in the message’s influence as the message reaches thousands to millions of potential customers

Blog

An online diary that looks like a web page but is easier to create and update by posting text, photos, or links to other sites

Podcasting

A means of distributing multimedia digital files on the Internet for downloading to a portable media player

Mobile Marketing

• Most marketers make sure their media is viewable on mobile devices

• Key to success is keeping the message brief

• Marketers can use texts, send news, or alerts