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Marketing mix

Business A level

Channels of distribution

Direct selling:

How managers determine the appropriate price:

Single intermediary channel:

1. cost of production

2. competitive conditions in the market

3. competitors price

4. business and marketing objectives

5. price elasticity of demand

6. whether is it a new or existing product

Pricing strategies for new products

Two intermediaries:

Packaging

Cost based pricing methods:

1. mark up pricing (adding a percentage (mark-up) to the cost of the product in order to form a price)

2. target pricing (setting a price that will give a required rate of return at a certain level of output/sales)

3. full cost pricing (setting a price by calculating a unit cost for a product and then adding fixed cost margin)

4. contribution cost pricing (setting prices based on the variable costs of making a product in order to make a contribution towards fixed costs and pricing).

5. competition based pricing (firm bases its price upon the price set by competitors).

1. Penetration pricing

(setting a relatively low price often supported by a strong promotion in order to achieve high volume of sales)

2. Market skimming

(setting a high price for a product when a firm has a unique of highly differentiated product with a low price elasticity of demand)

Role of packaging is broadening and may include functions such as to attract attention, assist in promotion, provide machine identification (barcodes, etc.), impart essential or additional information, and help in utilization. See also packing.

Channel of distribution and concept

Concept of distribution is distribution the product to the right consumer.

Factors that determine price elasticity:

Channel strategy

- should the product be sent directly to consumer

- should it be sold through retailer

- how long should a channel be

- where should the product be available

- should the internet be the main channel

1. How necessary the product is

2. How many similar competing products or brands are there

3. The level of consumer loyalty

4. The price of the product as a proportion of consumer incomes

Price?

Applications of price elasticity of demand:

1. Making more accurate sales forecasts

2. Assisting in sales decisions

- determining the value of the product and value added for the business

- determining the revenue for the specific products

- reflect the marketing objectives of the business and help establish the identity of the product

Open bookson the page: 262., do the activities 18.5 and 18.6

Price elasticity of demand:

Price elastic measures the responsiveness of demand following a change in price.

D2

price

Formula:

5

percentage change in quantity demanded

PED

percentage change in price

rise

4

Open books on the page 261.

Do the activity 18.4

fall

D2

quantity

270

300

0

So USP or not to USP? That is the question...

E-commerce

Let's try to determine the cycles of the following products:

Electronic commerce, commonly written as e-commerce or eCommerce, is the trading or facilitation of trading in products or services using computer networks, such as the Internet.

Viral marketing

a marketing technique whereby information about a company's goods or services is passed electronically from one Internet user to another.

All integrate marketing mix

Open books on the page 270.

Integrated Marketing is an approach to creating a unified and seamless experience for consumers to interact with the brand/enterprise; it attempts to meld all aspects of marketing communication such as advertising, sales promotion, public relations, direct marketing, and social media, through their respective mix of tactics, methods, channels, media, and activities, so that all work together as a unified force.

Pricing decisions

Tangible and intangible atributes:

1. level of competition

2. loss leader

3. psychological pricing

Product life cycle - evaluation

BRAND is a distinguishing symbol, mark, logo, name, word, sentence or a combination of these items that companies use to distinguish their product from others in the market. Legal protection given to a brand name is called a trademark.

In every firm, products have to be evaluated in order to determine the flaws of the strategy.

The product life cycle is based on a past and current data - it cannot be used to predict the future.

KFC flavored nail polish – a brand too far?

Case study exercises

Open books on the page 268

do the activity 198.9 and 18.10

Intangible Attributes

Intangible attributes may include such characteristics as price, quality, reliability, beauty or aesthetics, and je ne sais quoi (an indefinable, elusive pleasing quality).

Again, if you are looking to buy a new car, you might also consider intangible attributes such as price, quality, and safety test scores.

Tangible Attributes

Tangible attributes can include such product characteristics as size, color, weight, volume, smell, taste, touch, quantity, or material composition.

For example, when you want to buy a new car, you might consider tangible attributes such as its size, color, and material composition. If you are looking for a 2-door, red sports car with a leather interior, you are searching for a product based on its tangible attributes.

Watch the video then answer questions

KFC has introduced chicken flavored nail polish into their Hong Kong market. This new product (in 2016) is a significant extension to their brand. According to their publicity:

“This campaign is designed to be intriguing and fun to increase excitement around the KFC brand in Hong Kong.“

  • McDonald’s is a strong global brand, does their variety of food throughout the world help to strengthen or weaken their positioning and brand image?

  • From a cost and logistics perspective, would McDonald’s prefer a standardized or localized menu across the world?

  • What are the risks inherent in McDonald’s trying to compete in local markets against local “experts”? (For example, a Mexican menu item in Mexico?)

  • Is this approach (of localized menu items) likely to deliver more or less innovation across all of McDonald’s operations (worldwide)?

  • Taking these above questions in account, plus your other thoughts, list the advantages and disadvantages of this menu adaption strategy to McDonald’s.

  • And an easy question to finish with, what other product/menu ideas do you think that McDonald’s could introduce?
  • Review KFC’s TV commercial for their flavored nail polish for the Hong Kong market. How well do you think it works as a persuasive message? Would this style of communication encourage younger consumers to become more engaged with the brand?

  • Do you agree with KFC’s decision to extend their brand to flavored nail polish? Why/why not?

  • Do you think that they will be successful with their goal of increasing excitement around the brand in Hong Kong?
  • Could this be a new product that KFC could also launch successfully in other countries?
  • What other brand extension ideas do you have for KFC?

Which Celebrity to Use?

Sometimes it can be effective for a firm to utilize a celebrity to help promote their product/brand. Your task is to identify whether any of the following firms could possibly benefit from using an ‘available’ celebrity. If so, which available celebrity would be most appropriate? (Note: A limited list of celebrities has been provided to make this activity more manageable.)

ACTIVITY/TASK

List of firms/brands – looking for a celebrity endorser

  • Kit Kat (chocolate bar)
  • Virgin (airline)
  • Reebok
  • Toyota
  • Madrid (as a holiday destination)
  • Revlon cosmetics
  • AT&T (for mobile phones)
  • KFC (fast food)

List of ‘Available’ Celebrities

  • Tom Cruise (actor)
  • David Beckham (football/soccer player)
  • Tiger Woods (golfer)
  • Michael Phelps (Olympic swimmer)
  • Michael Jordan (basketball player)
  • Lady Gaga (singer)
  • Bill Clinton (former American president)
  • Elle McPherson (model)

QUESTIONS

Choose who you believe to be the best celebrity endorser for the products/firms listed.

Then work through the following checklist to see how well they would fit to the product and the promotional goals.

  • Is the person well known?
  • Is the person well liked?
  • Would the person be seen as credible/believable?
  • Is the person a good ‘fit’ to the product?
  • Is the person a good ‘fit’ to the likely target market?
  • Does the person present a risk of ‘poor behavior’?
  • Is the person already strongly associated with another product/brand?

Product positioning

Product positioning is an important element of a marketing plan.

Product positioning is the process marketers use to determine how to best communicate their products' attributes to their target customers based on customer needs, competitive pressures, available communication channels and carefully crafted key messages.

Sugar level / calories

Feminine

Masculine

Product life cycle:

Sales promotion

No Sugar / no calories

Below the line promotion that is not directlyh paid for means of communication but based on short-term incentives to purchase.

Sales promotion are the set of marketing activities undertaken to boost sales of the product or service. There are two basic types of sales promotions: trade and consumer sales promotions.

A product portfolio is the collection of different items a company sells. Within the product portfolio, each item typically makes different contributions to the company's bottom line.

Product life cycle (PLC) is the cycle through which every product goes through from introduction to withdrawal or eventual demise.

Consumer durables are a category of consumer products that do not have to be purchased frequently because they are made to last for an extended period of time (typically more than three years). They are also called durable goods or durables.

Sponsorship

An extension strategy is a practice used to increase the market share for a given product or service and thus keep it in the maturity phase of the marketing product lifecycle rather than going into decline.

  • A corporate sponsorship is a form of marketing in which a corporation pays for all of some of the costs associated with a project or program in exchange for recognition.

  • Corporations may have their logos and brand names displayed alongside of the organization undertaking the project or program, with specific mention that the corporation has provided funding.

  • Corporate sponsorships are commonly associated with nonprofit groups, who generally would not be able to fund operations and activities without outside financial assistance.

  • It is not the same as philanthropy

THE PROMOTIONAL MIX

Marketing or promotion expenditure budget

Open books on the page 284 and 285. Do the skills activities

1. A percentage of sales

2. Objective based budgeting

3. Competitor based budgeting

4. What a business can afford

5. Incremental budgeting - reflection to the past period

CRM strategies can be obtained through:

1. target marketing

2. customer service and support

3. providing as much information to consumers as possible

4. using social media

Is the marketing budget well spent?

1. From the view of society - just a waste

So why is product a key part of the marketing mix?

In marketing, a product is anything that can be offered to a market that might satisfy a want or need. In retailing, products are called merchandise. In manufacturing, products are bought as raw materials and sold as finished goods.

They can be:

- tangible - physical products

- non-tangible - services

Products are measured based on:

- quality

- durability

- performance

- appearance

2. From the view of business - cost effective, brand building, vital:

- Sales performance before and after promotion

- Consumer awareness data

- Consumer panels

- Responce rates to advertisement

Uses of the product life cycle

- assisting with planning and marketing decisions:

- when will the firm lower the price of the product when growing or declining stage

- in which phase advertising is crucial

- when should variations be made for a product during introduction or maturity

- identifying how cash flow might depend on the cycle

- cash flow varies through different stages

- cash flow is declining in development phase and the costs are high

- in introduction, heavy advertising costs may occur

- the maturity may have the most positive cash flows

- recognized the need for a balanced product portfolio

- having a good extension strategy and variation to the product creates a balanced life cycle

Advertising

Advertisements are messages paid for by those who send them and are intended to inform or influence people who receive them.

Open books on the page 294 and do the exam style questions

Types:

1. Informative advertising

2. Persuasive advertising

Agencies:

An advertising agency is a service based business dedicated to creating, planning, and handling advertising (and sometimes other forms of promotion) for its clients.

Personal selling

Personal selling is where businesses use people (the "sales force") to sell the product after meeting face-to-face with the customer. The sellers promote the product through their attitude, appearance and specialist product knowledge. They aim to inform and encourage the customer to buy, or at least trial the product.

Director mail

Direct mail encompasses a wide variety of marketing materials, including brochures, catalogs, postcards, newsletters and sales letters. Major corporations know that direct-mail advertising is one of the most effective and profitable ways to reach out to new and existing clients

Advertising decisions:

Trade fairs

Promotions refer to the entire set of activities, which communicate the product, brand or service to the user. The idea is to make people aware, attract and induce to buy the product, in preference over others.

A trade fair (trade show, trade exhibition, or expo) is an exhibition organized so that companies in a specific industry can showcase and demonstrate their latest products and services, meet with industry partners and customers, study activities of rivals, and examine recent market trends and opportunities.

Considering:

1. Cost

2. Size of audience

3. The profile/target

4. Message to be sent

5. Legal/constraints

6. Other aims

Aims:

1. Increase sales

2. Increase purchases

3. demonstrate the uniqueness of the product

4. create or reinforce the brand image

5. correct misleading reports about the product

6. develop the public image of the business

7. encourage retailers to actively promote products

Advertising expenditure: depending on the economic situation, sometimes investing in advertising in the economy in recession is good?

Public Relations (PR)

Public relations is a strategic communication process that builds mutually beneficial relationships between organizations and their publics

Branding

Branding is a marketing strategy that involves creating a differentiated name and image -- often using a logo and/or tag line -- in order to establish a presence in the consumer's mind and attract and keep customers.

A company using brand extension hopes to leverage its existing customer base and brand loyalty to increase its profits with a new product offering.

The role of consumer - THE 4 C's

1. Customer solution's

2. Cost to customer

3. Communication with customer

4. Convenience to customer

CRM: Customer relationship management (CRM) is a term that refers to practices, strategies and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle, with the goal of improving business relationships with customers, assisting in customer retention and driving sales growth.

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