Chapter 11 - Creating products and pricing strategies to meet customers needs

Marketing and the Marketing Concept

• Marketing: Identifying customer needs and providing goods/services that meet those needs.

• Marketing Concept:

  • Focuses on customer needs and wants.

  • Integrates all business activities to meet those needs.

Value and Satisfaction

• Value:Benefits received relative to sacrifices made.

• Satisfaction : Meeting expectations and building lasting buyer-seller relationships.

Relationship Marketing and Customer Lifetime Value

• Customer Relationship Management (CRM): Using customer information to create marketing strategies that develop and sustain desirable customer relationships.

• Customer Lifetime Value: A combination of:

  • Purchase frequency

  • Average value of purchases

  • Brand-switching patterns

  • Considered over the entire span of the customer's relationship with the company.

Creating a Marketing Strategy

• Focuses on key concepts:

  • Environmental scanning (PESTLE - Political, Economical, Social, Technological, Legal, Environmental)

  • Competitive advantage

  • Segmenting the market

  • Defining the target market

  • Objectives

  • Development of the marketing mix (4 Ps)

Competitive Advantage

• A business's differential advantage.

• Unique features perceived by the target market as significant and superior to competitors.

• Different bases:

  • Cost

  • Product differentiation

  • Service differentiation

  • Niche

Market Segment vs. Target Market

• Segmentation: Identifies distinct consumer groups.

• Targeting: Selects the best segments to pursue based on strategy; target markets are selected clusters from broader segmentation.

The Marketing Mix

• Every target market requires a unique marketing mix.

• Consists of 4, 5, 6, or 7 Ps.

• Each element should be individually managed.

Marketing Mix Elements:

• Product:

  • Branding (including brand name)

  • Packaging

  • Colors

  • Warranty

  • Accessories

  • Service program

• Pricing:

  • Based on product demand and production cost.

  • Consider the product type (luxury vs. staple).

  • Introductory price to attract customers.

  • Combination strategy: start high, then lower.

• Place (Distribution):

  • Creating the channel from producer to consumer.

  • Elements:

    • Physical location

    • Inventory systems

    • Number of stores

    • Luxury vs. staple products considerations

• Promotion:

  • Ways to convince customers to purchase:

    • Personal selling

    • Traditional advertising

    • Public relations

    • Sales promotion

    • Social media

    • E-commerce

Market Segmentation

• Subdividing the market into smaller segments because you cannot target the entire market.

Bases of Market Segmentation

• Demographic: Age, education, gender, income, race, social class, household size.

• Geographic: Regional location, population density, city/county size, climate.

• Psychographic: Lifestyle, personality, interests, values, attitudes.

• Benefit: Benefits provided by the good or service.

• Volume: Amount of use (light vs. heavy).

What is a Product?

• Features:

  • Service after sale

  • Image of retail store

  • Type of material

  • Warranty

  • Attachments

  • Size

  • Shape

  • Smell

  • Color

  • Image of brand

  • Packaging

  • Instructions

Classification of Consumer Products (by Effort Expended)

• Unsought Products: Life insurance, burial plots, time-share condos (no effort to some/considerable effort)

• Convenience Products: Soft drinks, bread, milk, coffee (very little effort)

• Shopping Products: Automobiles, homes, vacations (considerable effort)

• Specialty Products: Expensive jewelry, gourmet restaurants, limited-production automobiles (maximum effort)

Classification of Business Products

• Installations

• Accessories

• Component parts and materials

• Raw materials

• Supplies

• Services

The Product Life Cycle (PLC)

• Stages:

  • Development

  • Introduction

  • Growth

  • Maturity

  • Decline

• Graph:

  • Sales and profits over time for each stage.

PLC as a Management Tool

• Introduction:

  • Product: Establish competitive product advantage

  • Distribution: Establish distribution network

  • Promotion: Build brand awareness

  • Pricing: Set introductory price (skimming or penetration pricing)

• Growth:

  • Product: Maintain product quality

  • Distribution: Solidify distribution relationships

  • Promotion: Provide information, sales promotions

  • Pricing: Maintain prices

• Maturity:

  • Product: Modify product

  • Distribution: Provide additional incentives to ensure support

  • Promotion: Reposition product

  • Pricing: Reduce prices to meet competition

• Decline:

  • Product: Maintain product

  • Distribution: Eliminate trade allowances

  • Promotion: Eliminate most advertising and sales promotions

  • Pricing: Maintain prices

Pricing Strategies

• Strategies:

  • Price skimming

  • Penetration pricing

  • Leader pricing

  • Pricing of services

  • Bundling

  • Odd-even pricing

  • Prestige pricing