Chapter 12: The 4PS- Marketing Management

Marketing channel

Also called " distribution channel", it is an organized network of agencies and institutions which, in combination, perform all the functions required to link producers with end customers to accomplish the marketing task. NOTE: The most effective distribution channel is the one that reduces the overall cost of the product, not the product cost at a single point in the channel. WITHOUT INTERMEDIARIES.......the end cost of these groceries increases drastically.

Shallow

While the air purifier line is shallow with only three different items.

Direct channels

are commonly used in B2B markets or in marketing services and sometimes used for consumer products.

Individual Brand

brand names that are newly created and generally not connected to names of existing brands offered by the company. Procter & Gamble= cheers, tide, ivory detergent

Indirect channels

Imply a larger number of intermediaries and are more commonly seen in consumer markets.

Status quo

In some industries the best pricing objective is status quo; the company sets a price at the same level as competitors in the same industry.

Competition

In some industries, companies make the pricing decision based on competitors' prices. This is a technique fraught with problems.

Decline

Industry sales fall to the point at which it is no longer in the company's best interest to continue to support the product. Companies will be forced out due to lack of demand.

Consumer Products Convenience product

Inexpensive product that a consumer purchases on a regular, routine basis without much thought or effort. toilet paper, gasoline or candy bar

Introduction

The industry contains few competitors and sales are just beginning to take hold. Though revenues may be positive, profit is usually negative for the industry as a whole and for a particular company, because companies are attempting to cover product development costs and expending a considerable amount of money on promotion

Promotional mix ---------Advertising

The most well-known promotional tool. The placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms or people to persuade members of a particular target market or audience about their products, services, organizations, or ideas.

Services

Are not tangible—pedicures, personal training and lawn mowing are examples

Special Considerations in Managing Services Service end of the continuum

(manicures, legal services, carpet cleaning) have special marketing considerations since they all include the performance of activities that require the presence of both a service provider and a customer.

Pull promotional strategy Companies attempt to influence customers to ask for a branded product at their favorite retailer.

Companies attempt to influence customers to ask for a branded product at their favorite retailer. Example: An Ad intended to motivate the consumer to buy the cereal at the local grocery

Broad

Comprised of more product categories that are often less closely related. ex: Procter & Gamble -----air fresheners (e.g., Febreze brand) and laundry and fabric care (e.g., Tide and Ivory brands) to pet nutrition.

Pricing objectives

Consist of profit maximization, sales maximization, and status quo.

Specialty product

Consumers spend both time and effort to purchase . Consumers may believe a particular brand is the best because it has unique and desirable characteristics, and they will not willingly accept a substitute. Include Tiffany & Co. jewelry, Porsche automobiles and Four Seasons Hotels.

Product lines also vary in depth: Deep

Defined by the number of closely related product variations that exist within a single product line EX: The refrigerator line is deep, comprised of 60 different product items

Developing and Managing Products Product mix

Describes the overall group of products that a business offers and consists of a combination of product items, product categories, and product lines.

Product .

Describes the physical goods, services, and ideas

Objectives

Differing pricing objectives influence price setting. For example, a business may set a low market entry price to quickly gain sales and increase market share because its objective is growth.

Promotional mix------Sales promotion

Goal: Is to act as a temporary incentive for the customer to buy now. The media and non-media marketing pressure applied for a predetermined, limited period of time at the level of consumer, retailer, or wholesaler in order to stimulate trial, increase consumer demand or improve product availability.

Trade Name

Identifies the company

Price elasticity of demand

Is a measure of the relationship between a percentage change in the market price of a product and a consequential percentage change in the quantity demanded of a product. NOTE: A 1 percent increase in the price causes a 3 percent decrease in the quantity demanded, -- - Customers are MORE sensitive to price increases when the price elasticity of demand coefficient has an absolute value of greater than one. On the other hand, customers are LESS sensitive to price increases when the price elasticity of demand coefficient has an absolute value of less than one.

Selective distribution

It is best employed for highly shopped brands. In this case, the consumer compares brands and stores before purchasing. The consumer will exert some level of time and effort and typically has a known set of brands that are acceptable for purchase.

Ideas

Products that can be marketed to specific groups of customers. "Don't Drink and Drive," "Say No to Drugs"

Branding

Represents the totality of that which an organization delivers to its customers. Which identifies one seller's good or service as distinct from those of other sellers."

Labeling

Require more detailed and specific information about a product's ingredients and promotional claims.

Promotional mix-------- Personal selling

Selling that involves a face-to-face interaction with the customer.

Channel relationships

Separate entities that each have their own objectives and strategies. Companies recognize the cost savings associated with minimizing channel conflict. Inspiring producers, wholesalers and retailers to join in cooperative strategic alliances designed to smooth relationships and improve the flow of distribution channels.

Heterogeneity

The service quality perceived by the salon customer will depend on the unique circumstances of the actual service encounter, including such variables as the personality and skills of the stylist, the temperature of the salon, the cleanliness. Note: standardization is really important

Brand name

The spoken part of the brand.

Brand mark .

The symbol or design associated with the brand.

FACTORS THAT DETERMINE PRICE Demand

These companies often earn much higher profit margins on certain products and lower profit margins on others. -elasticity demand has to do with this

Generic product

To not brand the product at all, instead of a brand name, only the product category name.

Sales maximization

A business that pursues a growth strategy is concerned with maximizing sales through pricing. This company will set a its products' prices at a BELOW market point selling more items at lower prices.

FACT ABOUT PRICING

A marketing manager has the least control over pricing. Executive level management is typically involved in the pricing decision, along with accounting, finance and production management.

Social network

A network of social interactions and personal relationships. It has introduced a powerful exchange of information about products and businesses that develops between customers.

Integrated marketing communications

A planning process designed to assure that all brand contacts received by a customer of a product, service or organization are relevant to that person and consistent over time. EXAMPLE: The "X" airline uses television, radio and other to show how they customers will pay for things like checked bags, flight changes and snacks and drinks.

Marketplace dynamics

A product's price can change over time meaning that a product's price can change as it moves through this life cycle.

Pricing Strategy

A product's selling price is an indicator of how the customer values the product in the marketplace. Generally= A customer will be willing to pay a price for a product that is less than or equal to the perceived value of that product. Rarely= A customer will pay more for a product than he or she perceives it is worth at the particular time and place. example= run out of gas and decide to put gas on an expensive gas stations since is the only one.

Inseparability

A service is both produced and consumed at the same time usually requires the presence of both the service provider and the recipient of the service, the customer. ex: individual service provider performs the service at the time and in the manner that the customer expects.

Channel structure

A strategic choice by a business; a producer selects the channel of distribution that helps to best accomplish its marketing objectives: DIRECT OR INDIRECT CHANNELS.

Marketing mix/ 4PS

Areas under the control of the marketing manager or 4Ps, which includes: product, promotion, price and place.

Types of Branding Manufacturer's brand

Brands are owned and controlled by a producer. these brands are found in multiple retail locations and have consistent images.

Importance of New Products

Businesses introduce new products to increase sales, market share and presence in the marketplace.

Product Life Cycle

Can be viewed as four stages: introduction, growth, maturity and decline.

Product categories

Categories of the product: --- Whirlpool example -refrigerators, cooking, dishwasher and cleaning, filters and accessories

Product class

Class of the product(i.e., a store can specialize in selling electronics, clothing, furniture) Example: Whirlpool -----major home appliances

New product development process

Commonly known process used when companies develop new products, and includes the following steps: idea generation, screening, concept testing, business analysis, product development, test marketing, and commercialization. Depicted as a funnel-shaped model since the rule of thumb is that nine out of 10 new product ideas fail so innovation & improvement should be present.

Shopping products

Consumers will spend some effort to compare brands and invest some time to investigate product features and price points. Hair salons, furniture and jewelry

Intermediaries

Create time, place and possession utility. Retailers and wholesalers also reduce the number of contacts necessary for a transaction to take place.

Growth

Customer demand increases, sometimes quite dramatically so competitors enter the market in large numbers. Customer demand is strong although marketing organizations must continue to expend large sums of money developing marketing strategy. While still profitable overall, companies begin to make adjustments to the marketing mix, usually reducing prices to remain competitive. The result is declining profits.

Business Products

Installations, accessory equipment, raw materials, component parts, process materials, maintenance, repair and operating (MRO) supplies and business services.

Decoding the meaning

Installations: major equipment or processes that are complex and expensive (e.g., telecommunications system for Toyota's headquarters). Accessory equipment: less expensive, less complex equipment purchased more frequently (e.g., copiers, computer printers). Raw materials: the most basic materials used by producers (e.g., iron ore mined and used in the production of steel) Component parts: products purchased in finished form from other suppliers (e.g., tires, sound systems) Process materials: products used in production that become part of the finished product (e.g., sheet metal or plastic used in the car body) MRO supplies: products used in production that do not become part of the finished product (e.g., light bulbs in the manufacturing plant, computer paper) Business services: processes required in running the business that are often outsourced to other businesses (e.g., payroll, cleaning services

Exclusive distribution

It is reserved for specialty products that require extended problem solving to purchase. In this situation, a producer selects a single retail outlet in a given geographic market to allow the producer the highest level of distribution control: t heightens its appeal and contributes to its brand equity.

Intensive distribution

It is the most commonly used for low-priced convenience products that are routinely purchased by customers. Customers will not exert much effort to find these products so the products must be readily available at any distribution point where the customer would expect to purchase it.

Brand Categories Family Brand

Marketing practice involving the use of a single brand name for the sale of two or more related products.

Pricing objectives-----------------------------Profit Maximization

Maximize the profit and it requires the company's products to be desirable enough to command an ABOVE market price Sell fewer items and still remain profitable. example: A high-end jewelry store, for example, sells fewer pieces of jewelry than a popular-priced store, but makes a sizeable profit on each piece it sells.

Promotional mix

Optimize the impact of a limited promotional budget.

Packaging

Part of the product visible to the customer at the time of purchase. include not only protection of the product during shipping, handling, storage, and use, but also promotion of the product

Supply chain management

Planning and management of all activities involved in sourcing, conversion and all logistics management activities. Supply and demand management within and across companies= logistics

AIDA

Process of influencing potential customers and is the role of promotion. Awareness Interest Desire Action

Product mix is typically viewed as either being narrow or broad. Narrow

Since it contains only five product categories

Perishability

Since the service involves the performance of an activity, once the time period is over, the window of opportunity to perform the service closes.

Push promotional strategies

Spending promotional dollars on sales calls to the wholesaler or retailer or by offering them quantity discounts. Push products down the distribution channel to the end consumer.

Physical goods

Tanglible - computers, cars, and soft drinks are examples.

Private label brand

The brand is owned or controlled by an intermediary, such as a distributor or retailer. Usually less expensive than competing manufacturers' brands but also offers higher profit margins to the retailer. example: Tienda Levi's or Tommy

Brand elements

The brand name, logo, slogan, jingle, and packaging style are all examples of brand elements. ,

Promotion

The communications arm of marketing. It is a way that a business informs, persuades, and reminds the target market about its products, brands, company, or people.

FACTORS THAT DETERMINE PRICE Cost structure

The cost of producing a product has little relationship to its value in the marketplace BUT the cost of producing the product has a significant impact on how much profit a company can earn at a given price point.

Product items

The different items available for each product line Refrigerator (different brands, styles, height, model)

Product lines

The different lines of products for a company (i.e., Dishwashing----- blender, plates glasses

Value

What the customer is willing to give up to get the desired benefits. For example, a high-priced designer fragrance (e.g., Calvin Klein's Obsession) is able to command a higher selling price because of the image Calvin Klein has crafted based on its product (e.g., well-known designer brand), distribution (e.g., sold only in high-end department and specialty stores) and its promotion (e.g., advertised based on its ability to attract the opposite sex) strategies. The cost to Calvin Klein to produce this fragrance is greater than the cost to produce one fragrance at a drug store. NOTE: The marketplace determines what the customer is willing to pay.

Cannibalization

When a business experiences an unintended reduction in sales in of one product due to its introduction of another similar product.

Promotional mix-------Public relations (PR)

communication management that seeks to make use of publicity and other non-paid forms of promotion and information to influence the feelings, opinions or beliefs about the company, or prospects or other stakeholders.

Maturity Early maturity/Late maturity

lIndustry sales remain high but growth in industry sales slows. Industry profits have already begun to decline. Companies continue to make adjustments to the product mix with product improvements, extensions and adaptations. At the midpoint of the maturity phase, industry sales peak and begin to decline. This decline is fueled by competitors that are no longer profitable so they drop out of the market. Customer demand is fully saturated and new competitors are no longer interested in entering the market. This phase can remain profitable for strong companies and can draw out for many years. .

Characteristics of Services Intangibility

means that a service cannot be held, touched, examined or taken home.

FACT

publicity IS NOT advertising.