The Marketing Mix: Product, Place, Promotion, and Price

pricing products is a challeng

1. a B must determine its costs and required operating profit 2. a B must determine the demand for the product and the impact of price on the customer's decision to buy marketing managers must constantly plan,e xecute, and review pricing strategy

labeling

a B attaching printed words or graphics to its products to educate the customer -identify, describe, and/or inform the customer about the content, benefits, dangers, and proper use of the product -attempt to reduce the risk to the buyer and seller

product mix

a B's portfolio of product lines

trademark

a business owns a _______ when it registers its brand with the law -the law gives the business the exclusive right to use its trademark (ex. branded names protected by trademarks: Google, CoverGirl, Kia) branded symbol protected by ______ (ex. McDonald's golden arches)

product

a good or service -Bs rarely sell one product; they typically sell multiple products

product line

a group of similar products

brand

a name, term, symbol, design, or combination thereof that identifies a product or business

consumer

a person or household that buys a product for final consumption

cyclical product

a product is a _____ when the state of the economy affects the demand for the product (ex. cars, housing, designer clothes) if a product is cyclical, the state of the economy may directly or inversely affect the demand for th eproduct

guarantee

a promise, by the B to the customer, that the customer will be satisfied with the product - if the customer is not satisfied with the product, the customer has certain rights (ex. buying a TV that doesn't fit; return the TV for a refund (customer satisfaction guarantee) warranties and guarantees reduce the risk of purchasing the product (customer value is increased)

business

an organization that buys a product for resale or use in producing another product

wholesaler

an organization that buys products for resale to retailers -Bs that sell products to Bs for resale or B use -typically buy from producers and sell to retailers types: 1) merchant wholesalers 2) brokers and agents

retailer

an organization that sells products to the ultimate, final consumer of the product -some target markets based on product lines and brand (ex. Hyundai dealership buys cars from Hyundai for resale to consumers) -others target markets based on price (ex. Tiffany & Co sells very expensive jewelry) -others target markets based on product assortment and variety (ex. Target) -some target markets based on convenience (ex. soda sold through vending machine) often categorized as specialty stores, department stores, supermarkets, convenience stores, discount stores, deep discount stores, and non-store retailers

broker

brings the buyer and seller together, helping both the buyer and seller in negotiating the deal (ex. real estate broker helping the buyer and seller complete the transaction)

merchant wholesalers

buy and sell products (ex. the produce you buy at a local grocery store is not from the farmer but from a merchant wholesaler) -take ownership of the products and create value by providing warehousing, inventory, and transportation services

warranties

can be expressed or implied a seller's promise regarding the property's quantity and quality

specialty store

carries a limited product line (ex. Gap, Dick's Sporting Goods, Brooks Bros)

department store

carries several product lines (ex. Sears, Macy's, JCP)

supermarkets

carry numerous lines of food and household products (ex. Publix, Safeway, Giant)

marketing (distribution) channel

composed of the organizations that help the b make its product available for ultimate consumption -organizations that help the B promote, finance, and distribute its product -classified as either direct or indirect

fixed costs

costs that do not vary with the amount sold

perceived absolute value of the product

customers create a perception of a product's value based on perceived benefits from owning the product (customers then compare this perceived value with the products price) -if customers believe the price is greater than the value they will receive from the product, they do not buy the product. if customers believe the price is lwoer than th evalue they will receive from the produc,t they will consider buying the product

cyclicality

deals with the overall state of an economy -economies go through cycles -when economy is strong and growing, customers feel good and buy products more easily. price is important but not as important as when the ecnomy is not strong and not growing -in bad econ times, customers save and buy less. price becomes very important in their decision to buy or not to buy

seasonality

deals with the time of year a product is produced and sold

advertising

defined as any non-personal presentation of ideas about a product or product lien

packaging

designing and producing the container in which a product is sold or delivered -promotes and protects the product -create value by creating benefits such as convenience and storage (ex. Pringles)

brokers and agents

facilitate the buying and selling of products without taking ownership -are compensated with fees or commissions

perceived relative value of the product

given customers perceive a product has absolute value, customers then compare the benefits and costs of that product with the benefits and costs of alternative or competing products -customers then choose that alternative which provides them the best value -as competition adn substitutes enter into a customer's decision on what product to buy, value becomes relative

distribution

how and when a B delivers its product to its customer -critical factor in creating customer value and a sale (ex. buying a soda from the vending machine; a lot of what you purchased was the use of the vending machine or the means of distribution) distribution is more than the physical means used to deliver a product -distribution is about distribution (marketing) channels

total costs

ideally, Bs can allocate fixed costs to products - when B can allocate fixed costs to products, the B is able to price on the ________ (variable costs plus fixed costs) of the product

non-cyclical product

if the state of the ecnomy does not affect the demand for the product (ex. food and prescription drugs)

publicity

information that creates an image fo a B and its products

marketing intermediaries

members of the marketing channel

marginal revenue

price per sale

counter-cyclical products

product for which good times hurt the demand for products and bad times help the demand for products

capital items

products businesses buy that have a life longer than one year and are used in acquiring, manufacturing, and selling of products and services ex. buildings, equipment, and intangible assets such as patents

supplies and services

products businesses buy to operate the business that are not classified as materials and parts or capital items - supplies and services typically have short lives ex. office supplies, repair and maintenance items, air travel

materials and parts

products businesses resell or use to create other products ex. clothing sold by a department store, manufacture automobiles, and wheat used to produce bread ex. Target inventory composed of materials and parts

unsought products

products consumers do not initially or readily recognize they need or want -consumers buy unsought products only after they are shown a need or want exists ex. insurance, medical procedures, and legal services

busienss products

products sold to businesses -typically categorized by the product's purpose 1) materials and parts 2) capital items 3) supplies and services

seasonal products

products that are affected by the seasons of the year (ex. bathing suits, snow mobiles, lawn mowers)

non-seasonal products

products that are not affected by seasonality (ex. medical services, computers, cell phones) -seasonality affects price b/c it affects demand

consumer products

products that are sold to consumers -typically categorized by how consumers perceive and purchase such products common way to classify consumer products is: 1) convenience products 2) shopping products 3) specialty products 4) unsought products

shopping products

products that consumers buy carefully and less frequently - usually cost more and are consumed less frequently (ex. furniture, clothes, and airfare, iPHONE)

specialty products

products that consumers buy carefully and less frequently -cost more and are consumed less frequently ex. automobiles, jewelry, computers, Hyundai's Kia

convenience products

products that consumers buy frequently, instinctually, with minimum thought - usually have low price and are consumed in large quantities (ex. gasoline, detergent, fast food)

support services

relate to the at-sale or post-sale services that a seller promises the buyer (ex. training and repair) -reduce the buyer's risk and thus create customer value

product features

relate to the physical and mental attributes that provide customers satisfaction when they use the product

branding

relates to a B's attempt to differentiate its product from the product of competitors with a brand -branding ideal creates value by reducing customer uncertainty and risk associated with their buying decision

product quality

relates to a product's lack of defects - deliver the desired value by predictably satisfying the need or want of the customer (ex. durability of clothing, comfort of furniture, patient's response to medical treatment) Duracell battery b/c it's dependable

convenience stores

relatively small retailers, located in easily accessible places, which sell a limited number of products used in everyday life (ex. 7-Eleven, Sheetz, Circle K)

agent

represents either a buyer or a seller (ex. agent for a professional baseball player negotiates the contract on behalf of the baseball player)

non-store retailers

retailers that have limited or no physical presence -use distribution channels such as vending machines, kiosks, home shopping networks, and the Internet (ex. buying an cell phone APP)

discount stores

sell numerous product lines of household products to price-consciuos customers) (ex. Target, Walmart, Kmart)

deep discount stores

sell product lines at very low prices (ex. Costco, Sam's Club, BJ's)

sales promotions

techniques used to encourage the customer to buy the product in the short-term -Bs use sales promotions to create an immediate sale (ex. coupons, refunds and rebates, free samples, production demonstrations, ins-store displays, and event sponsorships

direct marketing

techniques used to get customers to purchase products from their home, office, or other non-retail settings

contribution margin

the amount the B earns from each sale after paying its variable costs price per sale (marginal revenue) less the marginal or variable costs produces the contribution margin -Bs that price products on the margin require a higher contribution margin to cover the unallocated fixed costs

price

the amount the customer pays the B for the sale - the value exchanged by the customer to receive the value of the product -the value received by the B for delivering or exchanging the value of the product how does a B determine the price it will charge for the product? -B wants to charge the highest price possible (will max its operating profit and value) -customer wants the B to charge the lowest price possible (wants to receive the product's benefits at the lowest cost to max value) the wants and needs of the B and customer meet through demand and supply

cost-volume-profit analysis

the analysis of different pricing alternatives on the B's profitability -B wants to be able to pay its costs and provide, and ideally maximize, operating profit and thus value

place

the location and means of distributing the product (ex. buying product from discount store, Internet, vending machine - means of distributing the product or place) -to have a sale, a B must be able to get its product to the customer at the right time and in the right place

promotional or marketing communcations mix

the mix of advertising, sales promotion, personal selling, direct-marketing techniques, and public relations used by a B to communicate a marketing message

lifestyle changes

the natural evolution fo customer needs and wants -new, better products are introduced demand, supply, and thus the price of products evolve (ex. transportation, cell phones/letters)

break-even point

the number of sales a B must achieve to generate a zero-operating profit

personal selling (process)

the personal interaction, intended to create a sale, between a B's sales force and potential customer -involves a process of prospecting and qualifyign potential customers, researchign and understanding how to approach targeted custoemrs, approaching them and beginning the seller-buyer relationship, presenting and demonstrating the product, dealing with concerns, completing or closing th esla,e and finally following up on the sale to ensure the customer perceives the sale created value and the seller-buyer relationship is positive

promotion

the process of communicating to customers the absolute and relative values of the product -goal: to create a successful sale (creates perceived value for both the customer and B -promotion informs, persuades, and reminds customers of the value that a product create in customer's life - a communication process

public relations

the process of communicating to the public that the B creates value for the public as a whole

branding equity

the term used to describe the ability of the brand to create value

why Bs use indirect marketing channels and marketing intermediaries

they create value for the B and the customer by providing efficiency, convenience, and cost savings (part of a B's value chain) facilitate the produce in supplying products to the consumer P&G uses supermarkets in its marketing channel because they provide a distribution process that efficiently, conveniently, and inexpensively provides a choice to customers - add value to the customer and P&G Google doesn't use a marketign intermediary b/c it wouldn't add convenience, efficiency, or cost savings (would not add value) when a customer buys a product, the customer is also buying distribution and a marketing channel (the value the customer receives is more than the attributes of the product. the price the customer pays compensates the B for more than acquiring or producing a product)

generic products

unbranded products

variable (marginal) costs

vary directly with the amount sold

cost-plus pricing

when a B prices its products based on costs and desired profit -designed to provide the B sufficient sales revenue to 1) pay its costs 2) create a sufficient operating profit challenge: determining and allocating the cost of acquiring or producing, delivering, and selling the product, and operating the B

price elastic

when price does matter, higher prices mean customers will buy less of the product and lower prices mean customers will buy mroe of the product -price elasticity refers to the impact of price on the buyer's decision to buy or not to buy the product

price inelastic

when prices do not matter, customers will buy the product regardless of price within Maslow's Hierarchy of Needs, theneeds and wants for products shift. demand, supply, and thus prices do change over time 3 forces act to shift the demand and supply of products: cyclicality, seasonality, evolution of customer tastes, needs, and options

average cost

when the B divides the total costs by the number of sales, it computes the average cost of a sale -the B can then use the average cost to price its products a B that can allocate fixed costs to a product can price on average cost

pricing-on-the-margin

when the B focuses only on variable costs, often called marginal costs B does not want to charge a price below the product's marginal or variable cost

direct marketing channel

where the B does not use a marketing intermediary ex. Google sells advertising directly to other Bs: sales force sells Google's services directly to advertisers (in doing so, Google, doesn't use a marketing intermediary)

indirect marketing channel

where the B uses one or more marketing intermediaries ex. P&G sells products to a wholesaler in large quantities, not to directly to consumers (wholesaler and retailer are marketing intermediaries and a significant part of P&G's marketing channel)

promotional push strategy

where the producer's promotional efforts are focused on retailers and other channel members

promotional pull strategy

where the product producer uses a lot of advertising focused on the ultimate consumer -creates a demand in the consumer that pulls retailers and other marketing channel members into offering the product (ex. soda manufacturer like Coke)