Chapter 15

Managing the Marketing Mix: Product, Price, Place, and Promotion

Learning Objectives

  • Concept of Total Product Offer: Understand and explain the total product offer, also referred to as a value package, and summarize the functions of packaging.
  • Product Life Cycle (PLC): Describe the stages of the product life cycle: introduction, growth, maturity, and decline.
  • Pricing Objectives and Strategies: Identify various pricing objectives and strategies while explaining the increasing importance of non-pricing strategies in marketing.
  • Marketing Channels and Retailing: Explain marketing channels and their significance, specifically focusing on the role of retailing.
  • Promotion: Define promotion and list the five traditional tools that comprise the promotion mix.

Product Development

  • Significance: Product development is a crucial aspect for any modern business globally. It encompasses more than just the introduction of goods and services, implying a comprehensive approach.
  • Market Competition: Insufficient attention to product development may lead to Canadian businesses losing market share to foreign competitors.
  • Quality and Pricing: Businesses must focus on designing and marketing superior products that offer good quality at fair prices to maintain competitiveness.

Value Proposition

  • Definition of Value: Value refers to the perception of good quality relative to a fair price. Consumers assess the value by comparing benefits to costs:
    Value = Benefits - Cost

Developing a Total Product Offer

  • Total Product Offer: Comprises all elements customers consider when deciding to purchase (also known as the value package). The components include:
    • Price
    • Brand Name
    • Store Surroundings
    • Service
    • Speed of Delivery
    • Package
    • Convenience
    • Image
    • Producer's Reputation
    • Past Experiences
    • Advertising Influence

Product Lines and Product Mix

  • Product Line: A collection of products that are physically similar or designed for similar markets and face similar competition.
  • Product Differentiation: The process of creating perceived or actual differences among products in the same category to enhance market competitiveness.

Product Differentiation Explained

  • The differentiation strategy aims for consumers to perceive a superiority of one product over another, though actual quality may be similar. Examples include the rivalry between GM and Ford in the early automotive industry.

Impact of Packaging

  • Packaging Function: Used to enhance and transform basic products, packaging can also attract retailers and create a more appealing presentation for consumers.

Branding Fundamentals

  • Elements of a Good Brand Name:
    • Reflects benefits of the product
    • Easy to pronounce, recognize, and remember
    • Distinctive from other brands
    • Translates effectively across cultures
    • Legally protectable
  • Brand Equity: Comprises factors such as awareness, loyalty, perceived quality, images, and associated emotions, influencing consumer attachment to a brand.
  • Brand Loyalty: The extent to which customers are satisfied and committed to continuing purchases from a brand.

Branding Categories

  • National Brand: Brands recognized and marketed nationwide, such as Kraft Foods.
  • Private Brand: Brands that don’t display the manufacturer’s name but instead bear the distributor's name, like Kenmore for Sears.
  • Generic Name: Refers to unbranded products that are not heavily marketed or advertised, sold at lower prices, e.g., acetylsalicylic acid.

Product Life Cycle (PLC)

  • Stages:
    1. Introduction: Initial launch of the product into the market.
    2. Growth: Rapid increase in sales as the product gains acceptance.
    3. Maturity: Sales peak and stabilize; market saturation likely leads to increased competition.
    4. Decline: Sales decrease due to market saturation or consumer preferences shifting.
  • Individual Product Paths: Not all products follow the classic PLC; some brands may remain in the introduction stage indefinitely, while others like ketchup can achieve a classic status.

Marketing Strategies Based on PLC Stages

  • Adaptation: Different stages require tailored marketing strategies. For instance, at maturity, marketing may focus on revitalizing brand image to stimulate growth again.
  • Marketing Objectives at Different Stages:
    • Introduction: Gain awareness
    • Growth: Stress differentiation to build brand loyalty
    • Maturity: Harvest or manage declining profit while defending market share
    • Decline: Consider option for deletion or rejuvenation strategies.

Competitive Pricing Strategies

  • Importance of Pricing: Pricing is a critical aspect of the marketing mix, essential for managing consumer perception and competition.
  • Difficulties: Managers find pricing a challenging element to control due to its significant effect on consumer evaluation of products.

Pricing Objectives and Strategies

  • Goals of Pricing: Primarily aimed at increasing sales and profits through effective strategies such as:
    • Achieving target profit
    • Gaining market share
    • Creating a desirable brand image
    • Building customer traffic.

Pricing Determination Methods

  • Cost-Based Pricing: Determines price based on desired profit margins against production costs.
  • Value-Based Pricing: Establishes price based on perceived value to consumers instead of strictly on cost.
  • Competition-Based Pricing: Sets price based on competitor strategies.
  • Break-Even Analysis: The analysis point where total revenues equal total costs; profit is generated on sales exceeding this threshold.

Pricing Using Breakeven Analysis

  • Fixed Costs: Expenses remaining constant regardless of production quantity.
  • Variable Costs: Expenses that fluctuate according to production levels.

Retailer Pricing Strategies

  • Every Day Low Pricing (EDLP): A common approach employed by retailers like Home Depot and Walmart, focusing on consistently low prices.
  • High-Low Pricing Strategy: Used by department stores, this strategy sets higher regular prices while offering frequent special sales to attract customers.

Market Forces and Pricing

  • Demand-Oriented Pricing: This approach prices products based on consumer demand rather than merely cost considerations, recognizing that different consumers may be willing to pay different prices.

Non-price Competition

  • Attention to non-price factors in marketing is becoming increasingly important. Marketers emphasize product attributes that improve the customer experience, such as:
    • Comfort
    • Style
    • Convenience
    • Durability

Channels of Distribution

  • Definition: Channels of distribution consist of intermediaries such as agents, brokers, wholesalers, and retailers that assist in the transfer and storage of goods from producers to consumers.
  • Types of Intermediaries: Agents and brokers connect buyers and sellers but do not hold ownership of the goods being exchanged.

Efficiency of Intermediaries

  • Despite some manufacturers distributing directly to consumers, marketing intermediaries streamline processes such as selling, transporting, and advertising, often at a lower cost and faster pace than manufacturers could achieve alone.

Categories of Distribution Channels

  • Direct Channel: Used by small businesses like craftspeople and farmers.
  • Common Consumer Goods: Includes common retail practices for products like groceries and household items.
  • Industrial Goods: Specific channels are established for items like industrial products and supplies.

Retail Distribution Strategies

  • Intensive Distribution: Ensures products are available in all possible retail locations.
  • Selective Distribution: Involves choosing certain retailers to enhance product quality and selling environment.
  • Exclusive Distribution: Grants a single retail outlet in an area exclusive selling rights, fostering loyalty and inventory assurance.

Non-store Retailing

  • Categories: Includes electronic retailing, telemarketing, and direct selling.
  • Electronic Retailing: Gaining prominence as a significant platform for sales transactions.
  • Direct Selling: Focuses on reaching consumers in their own environments, frequently paired with social selling events.

Choosing Distribution Mode

  • Supply Chain: Encompasses a longer process including suppliers of raw materials, unlike a channel of distribution which begins with manufacturers, illustrating the comprehensive nature of distribution logistics.

Promotional Mix Defined

  • Promotion: Encompasses all techniques employed to motivate customers to purchase products, integrating various marketing channels.

Advertising in Promotion

  • Definition: Paid, non-personal communication vehicles utilized by organizations. It can be segmented into:
    • Product Advertising
    • Online Advertising
    • Comparison Advertising
  • Global Advertising: Involves creating promotional strategies that can be applied internationally, with a current trend towards regional differentiation.

Personal Selling as Promotion

  • Definition: Involves individual presentations and sales processes aimed at consumers.
  • B2C Sales Process: Key steps include approach, needs assessment, trial close, and follow-up.

Public Relations and Marketing

  • Public Relations (PR): The management function that assesses public attitudes and implements programs to communicate and cultivate relationships with the public.
  • Publicity: Involves distributing information about a company or product to the media.

Sales Promotion Techniques

  • Sales Promotion: Short-term activities aimed to stimulate interest in products among consumers and retailers, complementing other promotional efforts.

Technology in Promotion

  • Impact of technology on gathering consumer data and tailoring marketing efforts accordingly. Companies analyze purchasing behavior to create targeted communications.

Direct Marketing Overview

  • Direct Marketing: Constitutes direct interaction between manufacturers and consumers, employing direct calls to action.
  • Challenges: Requires robust databases and is facing privacy concerns affecting consumer responses.

Word of Mouth Promotion

  • Definition: Refers to informal conversations about products among consumers; has become an influential promotional strategy, especially online.
  • Viral Marketing: Strategies that encourage sharing of marketing messages to achieve extensive outreach and influence.

Additional Promotional Tools

  • Modern promotional tools include social networking, blogging, and mobile marketing for increased engagement with consumers.

Push and Pull Strategies in Marketing

  • Push Strategy: Involves utilizing marketing tools to encourage retailers to stock products, creating availability for consumers.
  • Pull Strategy: Focuses on enticing consumers to seek products, which leads stores to order from wholesalers and producers to meet demand.