Slide1: WARNING! WARNING! DANGER, WILL ROBINSON! THE FOLLOWING LECTURE SLIDES CONTAIN ONLY 10% OF THE MINIMUM DAILY ADULT REQUIREMENT OF KNOWLEDGE NEEDED TO PASS THE COURSE EXAMS! THEY ARE PROVIDED AS A LECTURE OUTLINE TO FACILITATE NOTE TAKING IN CLASS. IN ADDITION, YOU MUST READ THE ASSIGNED CHAPTERS IN THE TEXT.


Principles of Marketing: Principles of Marketing WEEK 1 Introduction to Marketing


Principles of Marketing: Principles of Marketing Introduction Registration Instructor Introduction Syllabus/Text Evaluation/Grading Administrivia Ad Nauseum Lecture


Principles of Marketing: Principles of Marketing Introduction MARKETING: A process of creating, distributing, promoting and pricing goods, services and ideas to facilitate satisfying exchange relationships with customers in a dynamic environment. CUSTOMERS: The purchasers of the organization’s products; the focal point of all marketing activities. MARKET: An aggregate of individuals and/or organizations that have needs for products and have the ability, willingness and authority to make the purchase. TARGET MARKET: A specific group of buyers on whose needs and wants an organization focuses its marketing efforts. MARKETING MIX: The four Marketing activities- PRODUCT, PLACE (Distribution), PROMOTION and PRICING- that an organization can control (by amount of resources committed to each) to meet a customer’s needs.


Principles of Marketing: Principles of Marketing Introduction Marketing builds satisfying “exchange relationships” EXCHANGES: The provision or transfer of goods, services or ideas in return for something of value BUYER SELLER Something of Value Something of Value Money, credit, labor, goods Goods, services, ideas


Principles of Marketing: Principles of Marketing Introduction MARKETING CONCEPT: A managerial philosophy that an organization should try to satisfy customers’ needs through a coordinated set of activities that also allows an organization to achieve its goals. EVOLUTION: Production Orientation: The Industrial Revolution Sales Orientation: 1920’s to the 1950’s Marketing Orientation: Mid 1950’s through today Marketing orientation Sales Orientation Production Orientation 1850 1900 1950 2000


Principles of Marketing: Principles of Marketing Introduction MARKETING ORIENTATION: A organization-wide commitment to researching and responding to customer needs. RELATIONSHIP MARKETING: Establishing long-term, mutually satisfying buyer-seller relationships. CUSTOMER RELATIONSHIP MARKETING (CRM): Focuses on using information about customers to create marketing strategies that develop and sustain desired customer relationships. VALUE / VALUE DRIVEN MARKETING: Value is a customer’s subjective assessment of benefits relative to costs in determining the worth of a product. MARKETING MANAGEMENT: The process of planning, organizing, implementing and controlling marketing activities to facilitate exchanges effectively and efficiently.


Principles of Marketing: Principles of Marketing Introduction IMPORTANCE OF MARKETING: Marketing Cost Consumers Money Marketing is a Function of all Organizations Marketing Helps to Sell Products Marketing Fuels the National and Global Economy Information Enhances Consumer Awareness Responsible Marketing Promotes Customer and Social Welfare


Principles of Marketing: Principles of Marketing Introduction MARKETING REVISITED: A system and process of business activities to plan, produce, price and distribute something of value (a want or need satisfying good, service or idea) to the benefit of the target market at a profit to the producer. A synergism of organization and customer (where the total exceeds the sum of the parts).


Principles of Marketing: Principles of Marketing Introduction ORGANIZATIONAL STRUCTURE: Usually a direct report to CEO level Typically small in size Distinction from “Sales” organizations and functions Sometimes associated with “New Business” development CEO Engineering Production Marketing Finance/ CFO Support


Principles of Marketing: Principles of Marketing WEEK 2


Principles of Marketing: Principles of Marketing Strategic Planning The process of establishing an organizational mission and formulating goals, corporate strategy, marketing objectives, marketing strategy and marketing plan. Components:


Principles of Marketing: Principles of Marketing Strategic Planning Marketing Strategy: A strategy for identifying and analyzing a target market and developing a marketing mix to meet the needs of that market. Marketing Plan: A written document that specifies the activities to be performed to implement and control an organization’s marketing activities.


Principles of Marketing: Principles of Marketing Strategic Planning Process Analysis of the Marketing Environment: external forces which can constrain the firm and influence its goals and/or create opportunities Resource Analysis Strengths and weaknesses Core competencies: things a firm does well, leading to competitive advantage Identification of Market Opportunities: a combination of circumstances and timing that permits an organization to take action to reach a target market Strategic Windows: a temporary period of optimal fit between the key requirements of a market and a firm’s capabilities Competitive Advantage: the result of a company’s matching a core competency to opportunities in the marketplace


Principles of Marketing: Principles of Marketing Strategic Planning Process Developing Corporate and Strategic Business Unit Strategies Corporate Strategy determines the means for utilizing resources in the functional areas of marketing to reach the organizations goals A Strategic Business Unit or SBU is a division, product line or other profit center within a parent company Growth Strategies Intensive Growth: growth occurring when current products and markets have the potential for increasing sales Market Penetration Market Development Product Development Diversified Growth: growth occurring when new products are developed to be sold in new markets


Principles of Marketing: Principles of Marketing Strategic Planning Process Developing a Market Strategy Target Market Selection: important because the target market must be selected before the organization can develop its marketing mix Creating The Marketing Mix: must be consistent with corporate and business unit strategies, as well as resources available


Principles of Marketing: Principles of Marketing Strategic Planning Process Creating the Marketing Plan Marketing Planning: The process of assessing opportunities and resources, determining objectives, defining strategies, and establishing guidelines for implementation and control of the marketing program. Components of the Market Plan: an outline of the methods and resources required to achieve a firm’s goals within a specific target market. Executive Summary Environmental Analysis Strengths and Weaknesses, Opportunities and Threats (SWOT) Marketing Objectives Marketing Strategies Marketing Implementation Evaluation and Control


Principles of Marketing: Principles of Marketing The Marketing Environment Consists of external forces that directly or indirectly influence an organization’s acquisition of inputs and creation of outputs. Six Forces that surround the customer and affect the marketing mix: competitive economic political legal and regulatory technological socio-cultural


Principles of Marketing: Principles of Marketing The Marketing Environment Environmental Analysis: the process of collecting, assessing and interpreting information about the forces in the marketing environment Responding to environmental factors Accepting them as uncontrollable (reactive) Attempting to influence and shape them (proactive)


Principles of Marketing: Principles of Marketing The Marketing Environment Competitive Forces Competition: other organizations that market products similar to or can be substituted for a marketer’s products in the same geographical area) Types of Competition Brand Product Generic Total Budget Types of Competitive Structures Pure or Perfect Competition Monopolistic Competition Oligopoly Monopoly


Principles of Marketing: Principles of Marketing The Marketing Environment Economic Forces Economic Conditions Business Cycle: a pattern of economic fluctuation that has 4 stages: Prosperity Recession Depression Recovery Buying Power Income, credit and wealth Willingness to Spend Affected by expectations about employment, income levels, prices, family size and general economic conditions


Principles of Marketing: Principles of Marketing The Marketing Environment Political Forces Often viewed as beyond control Some firms seek to influence the political process to favorably shape legislation Legal and Regulatory Forces Procompetitive Legislation Consumer Protection Legislation Regulatory Agencies Self Regulating Forces


Principles of Marketing: Principles of Marketing The Marketing Environment Technological Forces The application of knowledge and tools to solve problems and perform tasks more efficiently. Influences consumer demand, product development, packaging, price, promotion and distribution systems Socio-Cultural Forces The influences in a society and its culture(s) that change people’s attitudes, beliefs, norms, customs and lifestyles Demographics and Diversity Characteristics: the study of human populations, such as characteristics, behavior and distribution. Cultural Values: health, nutrition, family environment Consumerism: Organized efforts by individuals, groups and organizations to protect consumer’s rights


Principles of Marketing: Principles of Marketing WEEK 3


Principles of Marketing: Principles of Marketing Information/Marketing Research MARKETING RESEARCH: The systematic design, collection, interpretation and reporting of information to help marketers solve specific marketing problems or take advantage of market opportunities. Five step process: Locating and defining problems or issues Designing the research project Collecting data Interpreting research findings Reporting research findings


Principles of Marketing: Principles of Marketing Markets MARKET: An aggregate of individuals and/or organizations that have needs for products and have the ability, willingness and authority to make the purchase. Requirements: They must need or desire a particular product(s) They must have the ability to purchase the product (possess buying power) They must be willing to exercise the buying power They must have the authority to purchase the specific product(s)


Principles of Marketing: Principles of Marketing Markets CONSUMER MARKETS: Producers and household members who intend to consume or benefit from the purchased product and who do not buy the products for resale or make profits. ORGANIZATIONAL or BUSINESS TO BUSINESS MARKETS: Individuals or groups that purchase a specific kind of product for resale, direct use in producing other products, or in general daily operations.


Principles of Marketing: Principles of Marketing Target Markets TARGET MARKET: A specific group of buyers on whose needs and wants an organization focuses its marketing efforts. Selection process: 1. Identify appropriate targeting strategy 2. Determine segmentation variables 3. Develop market segment profiles 4. Evaluate relevant market segments 5. Select specific target markets


Principles of Marketing: Principles of Marketing Targeting Strategy MARKET AGGREGATION OR UNDIFFERENTIATED STRATEGY: Defining an entire market for a particular product as the target market and designing a single marketing mix for it. Appropriate for Homogeneous Markets in which a large portion of the customers have similar product needs.


Principles of Marketing: Principles of Marketing Targeting Strategy CONCENTRATED STRATEGY THROUGH MARKET SEGMENTATION: The process of dividing the total market into groups (segments) with relatively similar product needs in order to design a marketing mix that matches those needs. Market Segment members have one or more similar characteristics that cause them to have similar product needs. Appropriate for Heterogeneous Markets in which a number of groups have diverse, needs for products in a specific product class. CONCENTRATED TARGETING STRATEGY: Targeting a single market segment using one marketing mix. DIFFERENTIATED TARGETING STRATEGY: Targeting two or more market segments by developing a marketing mix for each segment.


Principles of Marketing: Principles of Marketing Determination of Segmentation Variables Segmentation Variables: Characteristics of individuals, groups or organizations used to divide a market into segments. Consumer Market Variables: Demographic Geographic Psychographic Behavioristic Organizational Market Variables: Geographic location Type of organization Customer size Product use


Principles of Marketing: Principles of Marketing Develop Market Segment Profiles Market Segment Profile: Describes the similarities among potential customers within a segment and explains the differences among people and organizations in other segments. Used to assess the degree to which products can match customer’s needs.


Principles of Marketing: Principles of Marketing Evaluate Relevant Market Segments Estimates of Potential Sales: Market Potential Company Sales Potential Breakdown Approach Buildup Approach Assessment of Competitors already operating in the target segment Estimate the cost of the marketing mix for the product/target segment combination for feasibility


Principles of Marketing: Principles of Marketing Select Specific Target Market Segments Downselection of Segment opportunities: Long term profit potential Consistent with organizational objectives Sufficient resources available


Principles of Marketing: Principles of Marketing Select Specific Target Market Segments


Principles of Marketing: Principles of Marketing Consumer Buying Behavior Buying Behavior: The decision process and acts of people involved in buying and using products. Consumer Buying Behavior: Buying behavior of persons who purchase products for personal or household use (not for business purposes, resale or profit)


Principles of Marketing: Principles of Marketing Consumer Buying Behavior Problem solving processes: Routinized Response Behavior Limited problem solving Extended Problem Solving Impulse Buying Method employed determined in large part by the customer’s “Level of Involvement” in use of the product Consumer Buying Decision Process: Five steps: 1. Problem recognition 2. Information search 3. Evaluation of Alternatives 4. Purchase 5. Postpurchase evaluation


Principles of Marketing: Principles of Marketing Consumer Buying Behavior Situational Influences on the Buying Decision Process: influences resulting from circumstances, time, and location that affect the consumer buying decision process Psychological Influences on the Buying Decision Process: factors that in part determine people’s general behavior, thus influencing their behavior as consumers. Social Influences on the Buying Decision Process: the forces that other people exert on one’s buying behavior


Principles of Marketing: Principles of Marketing Consumer Buying Behavior Mazlow’s “Theory of Motivation” based on a hierarchy, or five levels of “Needs”: a physiological or psychological requirement. “Self Actualization” Self and Peer Esteem Social Safety Physiological


Principles of Marketing: Principles of Marketing Consumer Buying Behavior STIMULUS RESPONSE THEORY Components: Drive Cue Response Reinforcement “Drive/Cue/Response” can become “Drive/Response” or “Cue/Response” based on development of habit


Principles of Marketing: Principles of Marketing Business Markets and Buying Behavior BUSINESS MARKETS: Individuals or groups that purchase a specific kind of product for resale, direct use in producing other products, or use in general daily operations. Types of Markets : Producer Reseller Government Institutional


Principles of Marketing: Principles of Marketing Business Markets and Buying Behavior Business/Organizational Buying Behavior: the buying behavior of producers, government units, institutions and resellers. Business/Organizational Buying Decision Process: Six steps: Problem recognition Develop product specifications to solve problem Search for and evaluate products and suppliers Select product and supplier and order product Evaluate product and supplier performance Influencing factors: Environmental Organizational Interpersonal Individual


Principles of Marketing: Principles of Marketing WEEK 4 “PRODUCT”


Principles of Marketing: Principles of Marketing Product Concepts PRODUCT: Anything, tangible or intangible, received in an exchange. A product can be a good, service or idea and include functional, social and psychological utilities or benefits. A GOOD is a tangible, physical entity A SERVICE is an intangible result of the application of human and mechanical efforts to people or objects An IDEA is a concept, philosophy, image or issue


Principles of Marketing: Principles of Marketing Product Classification CONSUMER PRODUCTS: Products purchased to satisfy personal and family needs. Convenience Products Shopping Products Specialty Products Unsought Products BUSINESS PRODUCTS: Products bought to use in a firm’s operations, to resell, or to make other products. Installations Accessory Equipment Raw Materials Component Parts Process Materials MRO Supplies Business Services


Principles of Marketing: Principles of Marketing Product Lines & Mixes PRODUCT ITEM: A specific version of a product that can be designated as distinct offering among an organization’s products. PRODUCT LINE: A group of closely related product items viewed as a unit because of marketing, technical, or end-use considerations. PRODUCT MIX: The total group of products that an organization makes available to customers. DEPTH: the average number of different products offered in each product line WIDTH: the total number of product lines offered by the firm


Principles of Marketing: Principles of Marketing Product Life Cycle The progression of a product through four stages


Principles of Marketing: Principles of Marketing Product Adoption PRODUCT ADOPTION PROCESS: The five stages that consumers go through in accepting a product: Awareness Interest Evaluation Trial Adoption Distribution of Product Adopter Categories Innovators Early Adopters Early Majority Late Majority Laggards


Principles of Marketing: Principles of Marketing Product Failure Estimates of new product failures range from 30 to 90% Annual cost to consumers of $100 billion Reasons: Failure to match product offerings with customer needs Ineffective or inconsistent branding technical or design shortcomings overestimation of market size poor promotion insufficient distribution


Principles of Marketing: Principles of Marketing Managing Existing Products LINE EXTENSIONS: Development of a product closely related to existing products in the product line, but that meets different customer needs PRODUCT MODIFICATIONS: Change in one or more characteristics of a product Quality Functional Aesthetic


Principles of Marketing: Principles of Marketing Obsolescence Technical or Functional Obsolescence Advances in technology rendering an existing product obsolete Generally considered socially and economically desirable Style Obsolescence Style: a distinctive manner of construction or construction Fashion: a style that is popular or currently accepted Fad: a novelty product or feature of a product whose popularity is short-lived Planned Obsolescence Products are intentionally changed to create impression that earlier versions are out-of-date


Principles of Marketing: Principles of Marketing Developing New Products Product Development Process: a seven phase process for introducing products Idea generation Screening Concept testing Business analysis Product development Test marketing Commercialization


Principles of Marketing: Principles of Marketing Product Differentiation PRODUCT DIFFERENTIATION: The process of creating and designing products so that consumers perceive them as different from competing products. Physical aspects of product differentiation: Level and consistency of Product Quality Product Design and Features Product Support Services PRODUCT POSITIONING: Creating and maintaining a certain concept of a product in the customers’ minds PRODUCT DELETION: Eliminating a product from the product mix


Principles of Marketing: Principles of Marketing Branding and Packaging BRAND: An identifying name, term, design, symbol BRAND NAME: The part of the brand that can be spoken BRAND MARK: The part of the brand not made up of words TRADE MARK: Legal designation of exclusive use of a brand TRADE NAME: Full legal name of an organization rather than the name of a specific brand


Principles of Marketing: Principles of Marketing Value of Branding Helps consumers identify products and association of satisfaction, reducing time required for search and comparison Helps consumers evaluate the quality of a product, reducing risk and time Psychological reward and self expression of owning a “status brand” Fosters brand loyalty


Principles of Marketing: Principles of Marketing Branding and Packaging BRAND LOYALTY: A customer’s favorable attitude toward a specific brand Brand Recognition: A customer’s awareness that a brand exists and is an alternative to purchase if the preferred brand is not available Brand Preference: Customer prefers one brand over competitive offerings Brand Insistence: Customer strongly prefers a specific brand and will accept no substitute


Principles of Marketing: Principles of Marketing Branding and Packaging BRAND EQUITY: The marketing and financial value associated with a brand’s strength in the market Major elements: Brand name awareness Brand loyalty Perceived brand quality Brand associations TYPES OF BRANDS: Manufacturer’s Brand Private Distributor’s Brand Generic Brands


Principles of Marketing: Principles of Marketing Branding and Packaging Selecting a brand name Protecting a brand Branding Policies Individual branding Family branding Brand extension branding Co-branding Brand Licensing Agreements


Principles of Marketing: Principles of Marketing Branding and Packaging PACKAGING: The development of a container and graphic design for a product. Functions/considerations: Product Safety and Protection Convenience Promotion Attract attention Communication of Product Features, Benefits and Uses Utility Value of Package Itself Needs of resellers


Principles of Marketing: Principles of Marketing Branding and Packaging Packaging and Marketing Strategy Altering the package Secondary use packaging Category-consistent packaging Innovative packaging Multiple packaging Handling -improved packaging Criticisms of Packaging Functional problems Safety Deception Cost


Principles of Marketing: Principles of Marketing Branding and Packaging LABELING: Providing identifying, promotional or other information about the product on the package label. Used to Identify: Brand and Producer Grade Contents Ingredients/Source Use and Care Information Nutritional Information


Principles of Marketing: Principles of Marketing Services SERVICE: An intangible product involving a deed, performance or effort that cannot be physically possessed. Provided through the application of human and/or mechanical efforts directed at people or objects. Basic Characteristics: Intangibility Inseparability of production and consumption Perishability Heterogeneity Client-Based Relationships Customer Contact


Principles of Marketing: Principles of Marketing Services Creating Marketing Mixes for Services Development Distribution Promotion Pricing SERVICE QUALITY: Customer’s perception of how well a service meets or exceeds their expectation Customer Evaluation Dimensions of Service Quality Service Quality Model Analysis of Customer Expectations Service Quality Specifications Employee Performance Management of Service Expectations


Principles of Marketing: Principles of Marketing Nonprofit Marketing NONPROFIT MARKETING: Marketing conducted to achieve some goal other than business goals of profit, market share or return on investment (ROI) Uses most of the same concepts applicable to profit oriented businesses Marketing objective is to obtain a desired response from a target market Marketing Mix


Mid Term Exam Review Topics: Mid Term Exam Review Topics Definition of Marketing Marketing Mix (4 P’s) Marketing Concept, evolution Marketing Environment Model (forces) Importance of Marketing Strategic Planning: Process, Marketing Strategy, Marketing Plan, Growth Strategies Marketing Environment and Environmental Forces Markets: definition and requirements Types of Markets (Consumer and Organizational/Business to Business Target markets Market Aggregation (Undifferentiated) Strategy Concentrated Strategy through Segmentation Market Segments Consumer and Industrial Market Buying Behavior Stimulus Response Theory Product: Characteristics, Classifications, Item/Line/Mix, Life Cycle, Adoption Process, Failure, Obsolescence, Styles/Fashions/ Fads, Extension, Positioning, Differentiation Brands/Branding, Value of, Loyalty, Equity, Types Packaging, Functions Labeling, Functions Services, Characteristics, Mixes Principles of Marketing


Principles of Marketing: Principles of Marketing WEEK 5 Mid Term Exam


Principles of Marketing: Principles of Marketing WEEK 6 “PLACE (Distribution)”


Principles of Marketing: Principles of Marketing Distribution DISTRIBUTION: The activities that make products available to customers when and where they want to purchase them. Includes trade channels, intermediaries (middlemen), levels of distribution, physical distribution/logistics, wholesaling and retailing


Principles of Marketing: Principles of Marketing Distribution MARKETING CHANNELS: A group of individuals and organizations directing products from producers to customers. MARKETING INTERMEDIARY: A “Middleman” linking producers to other middlemen or ultimate consumers through contractual arrangements or through the purchase and resale of products. Functions: Concentrating: Collecting and concentrating the output of several producers. Equalizing: Subdividing the output into amounts and assortments desired by his many clients (retailers/ consumers). Dispersing: Transporting and delivering the packages to clients. Marketing Channels: Create Utility: time, place and possession Facilitate Exchange Efficiencies


Principles of Marketing: Principles of Marketing Distribution Marketing Channel members form and manage a Supply Chain Supply Chain Management: Long term partnerships among marketing channel members to reduce inefficiencies, costs, redundancies, and to develop innovative approaches in order to satisfy customers. Channel Leadership Channel Cooperation Channel Conflict Channel Integration Legal Issues Dual distribution Restricted sales territories Tying agreements Exclusive dealing Refusal to deal


Principles of Marketing: Principles of Marketing Marketing Channels for Consumer Products Producer Producer Producer Producer Consumers Consumers Consumers Consumers Retailers Retailers Retailers Wholesalers Wholesalers Agents or Brokers A B C D


Principles of Marketing: Principles of Marketing Marketing Channels for Business Products Organizational Buyers Organizational Buyers Organizational Buyers Organizational Buyers Industrial Distributors Industrial Distributors Agents Agents Producer Producer Producer Producer E F G H


Principles of Marketing: Principles of Marketing Distribution Multiple Marketing Channels Dual Distribution: Use of two or more channels to distribute the same product to the same target market Strategic Channel Alliance: An agreement whereby the products of one organization are distributed through the market channels of another organization Intensity of Market Coverage Intensive: Using all available outlets to distribute a product Selective: Using only some available outlets to distribute a product. Exclusive: Using a single outlet in a fairly large geographic area to distribute a product.


Principles of Marketing: Principles of Marketing Wholesaling WHOLESALING: Transactions in which products are purchased for resale, making other products, or for general business operations. WHOLESALER: An individual or organization that facilitates and expedites wholesale transactions. Functions: Supply Chain Management Promotion Warehousing, Shipping and Product Handling Shared Risk Taking Financing and Budgeting Marketing Research and information Systems Services: Extension of sales force Financing Information Efficiency


Principles of Marketing: Principles of Marketing Wholesaling Wholesaler Classifications: Merchant Wholesalers: Independently owned business that take title to goods, assume ownership risks, and buy and resell products to other wholesalers, organizational customers, or retailers. Full Service Wholesalers Limited Service Wholesalers Intermediaries: Agents and Brokers that negotiate purchases and expedite sales, but do not take title to products. Manufacturer’s Sales Branches and Offices: Manufacturer owned operations that sell products and provide support services.


Principles of Marketing: Principles of Marketing Physical Distribution PHYSICAL DISTRIBUTION/LOGISTICS: Activities used to move products from producers to consumers and other end users. OUTSOURCING: The contracting of physical distribution tasks to third parties who do not have managerial authority within the marketing channel. Objectives Meeting Standards of Customer Service Reducing Total Distribution costs Reducing Cycle time Functions Order Processing Inventory Management Material Handling Warehousing Transportation


Principles of Marketing: Principles of Marketing Retailing RETAILING: Transactions in which ultimate consumers are the buyer. RETAILER: An organization that purchases products for the purpose of reselling them to ultimate consumers.


Principles of Marketing: Principles of Marketing Retailing Categories of Retail Stores: General Merchandise Retailers: A retail establishment that offers a variety of product lines, stocked in depth Department Store Discount Store Supermarket Superstore Hypermarket Warehouse Club Warehouse Showroom Catalog Showroom Specialty Retailers: A retail establishment that offer substantial assortments in a few product lines Traditional Specialty Retailers Off-price Retailers Category Killers


Principles of Marketing: Principles of Marketing Retailing NON-STORE RETAILING: The selling of goods and services outside the confines of a retail facility. Direct Selling: The marketing of of products to ultimate consumers through face-to-face sales presentations at home or in the work place Direct Marketing: The use of the telephone and non-personal media to introduce products to consumers, who then purchase them via mail, telephone or the internet Catalog Marketing Direct-response Marketing Telemarketing Television Home Shopping On-line Retailing Automatic Vending: The use of machines to dispense products


Principles of Marketing: Principles of Marketing Retailing FRANCHISING: An arrangement in which a supplier (Franchiser) grants a dealer (Franchisee) the right to sell products in exchange for some type of consideration Types: Manufacturer authorizes independent Franchisee’s to sell a specific brand name Manufacturer licenses Franchisee’s to sell a specific product to retailers Franchiser supplies brand names and services instead of complete products Advantages: Franchisee can start business with limited capital Pre-existing brand recognition and loyalty Pre-existing distribution and promotion Disadvantages: Franchiser restrictions Franchise fees and royalties


Principles of Marketing: Principles of Marketing Retailing Issues Location Dictates trading area Ease of access (customers and suppliers) Types of pre-existing businesses near location Retail Positioning: Identifying an unserved or underserved market niche or segment and serving it through a strategy that distinguishes the retailer from others in that market Store Image: The physical elements in a store’s design that appeals to consumers’ emotions and encourage buying Scrambled Merchandising: The addition of unrelated products and product lines to an existing product mix, particularly fast-moving items that can be sold in volume Wheel of Retailing: A hypothesis holding that new retailers usually enter the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high-price merchants


Principles of Marketing: Principles of Marketing WEEK 7 “PROMOTION”


Principles of Marketing: Principles of Marketing Promotion PROMOTION: Communication to build and maintain relationships by informing and persuading one or more audiences Essential in differentiating products from competitive offerings Objectives: Create product awareness Stimulate Demand Encourage product trial Identify sales prospects Retain loyal customers Facilitate reseller support Combat competitive promotion Reduce sales fluctuations


Principles of Marketing: Principles of Marketing Promotion COMMUNICATION: A sharing of meaning. Verbal and/or non-verbal transmission of information between someone wanting to express an idea and an intended recipient. SOURCE CODED MESSAGE DECODED MESSAGE RECEIVER MEDIUM of TRANSMISSION FEEDBACK


Principles of Marketing: Principles of Marketing Promotion PROMOTIONAL MIX: A combination of promotional methods used to promote a specific product. Elements/Methods: Advertising Public Relations Personal Selling Sales Promotions


Principles of Marketing: Principles of Marketing Promotion ADVERTISING: Paid non-personal communication about an organization transmitted to a target audience through mass media Institutional: Promotes organizational images, ideas and political issues. Develops goodwill and attitudes. Advocacy: Promotes a firm’s position on a public issue. Product: Promotes uses, features and benefits. Pioneer: Stimulates a “Primary Demand” for a product category rather than specific brand Competitive: Stimulates “Selective Demand” for a specific brand Comparative: Two or more brands are compared on the basis of one or more product characteristics Reminder: Reminds consumers about established brands Reinforcement: Assures users they chose the right brand


Principles of Marketing: Principles of Marketing Promotion ADVERTISING CAMPAIGN: The creation and execution of a series of advertisements to communicate with a particular target audience PUBLIC RELATIONS: Communications activities used to create and maintain favorable relations between an organization and the public. Tools: Publicity News releases Feature Articles Captioned Photography Press Conferences


Principles of Marketing: Principles of Marketing Promotion PERSONAL SELLING: Paid personal communication that informs customers and persuade them to purchase products. Process Elements: Prospecting Preapproach Approach Making the presentation Overcoming objections Closing the sale Following up Types of Salespersons: Order Getter Order Taker Support Personnel


Principles of Marketing: Consumer Methods: Coupons Demonstrations Frequent User Incentives Point of Purchase Displays Free Samples Trade Sales Methods: Buy-Back Allowances Buying Allowances Scan-Back Allowances Count and Recount Free Merchandise Merchandise Allowances Money Refunds and Rebates Premiums Cents-off offers Contests Sweepstakes Cooperative Advertising Dealer Listings Premium or Push Money Sales Contests Dealer Loaders Principles of Marketing Promotion SALES PROMOTIONS: An activity and/or materials meant to induce resellers or salespersons to sell a product, or consumers to buy a product.


Principles of Marketing: Principles of Marketing Promotion FACTORS AFFECTING SELECTION OF A PROMOTIONAL MIX: Promotional Resources, Objectives and Policies Characteristics of the Target Market Characteristics of the Product Cost and Availability of Promotional Methods Push and Pull Channel Policies


Principles of Marketing: Principles of Marketing Promotion Criticisms of Promotion Promotion is deceptive Promotion increases prices Promotion creates needs Promotion encourages Materialism Promotion cost to much to help customers Potentially harmful products are promoted


Principles of Marketing: Principles of Marketing WEEK 8 “PRICING”


Principles of Marketing: Principles of Marketing Pricing PRICE: Value exchanged for products in a marketing exchange Considered the key activity of free enterprise, allocating the factors of production and distribution UTILITY creates VALUE measured as PRICE Price is often the only marketing mix variable that can be changed quickly Price has a psychological association with quality PRICE COMPETITION: Emphasizing (low) price as the principle factor and matching or beating competitor’s prices NON-PRICE COMPETITION: Emphasizing factors other than price to distinguish a product from competing brands


Slide94: Pricing Demand: A schedule which shows the various amounts of a product consumers are willing and able to purchase at each price in a series of possible prices during a specified period of time. LAW OF DEMAND: The Quantity Demanded of a product is inversely related to its Price, all other factors remaining the same. For most products, the quantity demanded will: 1. increase as price decreases 2. decrease as price increases In order to sell more of a product, the price will generally have to be lowered in consideration of a downward sloping demand curve. Demand Schedule Price Quantity Demanded 5 4 4 8 3 12 2 15 1 20 Principles of Marketing


Principles of Marketing: Principles of Marketing Pricing: Elasticity of Demand ED = % Increase in Q % Decrease in P INELASTIC ED 1 A decrease in Price results in a large increase in Demand as to make Total Revenue rise 4 x 2 = 8 2 x 5 = 10


Principles of Marketing: Principles of Marketing Pricing FIXED COST: Costs which are incurred regardless of the level of production (overhead, rent, etc.) VARIABLE COST: Costs which vary with the level of production (labor, material, energy) TOTAL COST: TC = FC + VC


Principles of Marketing: Principles of Marketing Pricing MARGINAL ANALYSIS: The analysis of what happens to a firm’s costs and revenues when production/sales are changed by one unit. “Marginal” means “extra”. MARGINAL COST: The additional cost incurred in producing one extra unit of output. Marginal Cost is “U” shaped, decreasing at first due to “Economies of Scale”, bottoming out and then begins to climb due to “Diminishing Returns” MARGINAL REVENUE: The change in total revenue (Income derived from the sale of products) made by the sale of one additional unit.


Principles of Marketing: Principles of Marketing Pricing PROFIT: Profit = Revenue (Price x Quantity Sold) - Total Costs Total Cost / Revenue Analysis Maximum profit is achieved at the production level where the Total Revenue exceeds Total Cost by the greatest amount Marginal Cost / Revenue Analysis Maximum profit is achieved at the production level where the Marginal Cost of producing one additional unit is equal to the Marginal Revenue derived from its sale Also known as the “Profit Maximization Rule The answer will always be the same for both methods of analysis.


Principles of Marketing: Principles of Marketing Pricing 1 2 3 4 5 6 7 Total Total Marginal Marginal Net Q Price Revenue Cost Cost Revenue Revenue (TR) (TC) (MC) (MR) 0 16 0 25 - 25 10 15 1 15 15 35 - 20 6 13 2 14 28 41 - 13 4 11 3 13 39 45 - 6 2 9 4 12 48 47 1 2 7 5 11 55 49 6 3 5 6 10 60 52 4 8 5 3 7 9 63 57 6 8 1 8 8 64 65 - 1 14 -1 40 30 $ 20 10 0 0 1 2 3 4 5 6 7 8 Q MARGINAL ANALYSIS MC MR


Principles of Marketing: Principles of Marketing Pricing BREAK-EVEN POINT: The point (quantity and price) at which the costs of producing a product equal the revenue made from selling it. QBE = F QBE = Quantity Breakeven in Units P - V F = Fixed Costs $154,000 P = Sales Price per Unit $15 = 154,000 V = Variable Cost per Unit $12 15 - 12 SBE = Sales Breakeven in Dollars = 154,000 QBE (51,334) x P (15) = $770,010 3 = 51,334 Units


Principles of Marketing: Principles of Marketing Breakeven Pricing SBE = Operating Breakeven in Dollars $770,010 QBE = Operating Breakeven in Units 51,334 Q = Sales in Units F = Fixed Costs $154 K V = Variable Costs per Unit $12 P = Sales Price per Unit $15 QUANTITY IN THOUSANDS $ IN THOUSANDS FIXED COSTS SBE 770 OPERATING BREAKEVEN POINT (EBIT = 0) TOTAL COSTS V x Q + F 154 0 200 400 600 800 1000 20 40 60 80 51 QBE REVENUES P x Q PROFIT LOSS


Principles of Marketing: Principles of Marketing Pricing Break even analysis at various sales prices


Principles of Marketing: Principles of Marketing Pricing FACTORS AFFECTING PRICING DECISIONS: Organizational and Marketing Objectives Types of Pricing Objectives Cost Impact on Other Marketing Mix Variables Channel Member Expectations Customers’ Interpretation and Response Competition Legal and Regulatory Issues


Principles of Marketing: Principles of Marketing Pricing PRICING FOR BUSINESS MARKETS: PRICE DISCOUNTING Trade Quantity Cash Seasonal Allowances GEOGRAPHIC PRICING Free On Board Uniform Zone Base Point Freight Absorption TRANSFER PRICING


Principles of Marketing: Principles of Marketing Pricing STAGES FOR ESTABLISHING PRICES: 1. Development of Pricing Objectives 2. Assessment of Target Market’s Evaluation of Price 3. Evaluation of Competitors’ Prices 4. Selection of a Basis for Pricing 5. Selection of a Pricing Strategy 6. Determination of a Specific Price


Principles of Marketing: Principles of Marketing Pricing 1. Development of Pricing Objectives PRICING OBJECTIVES: Goals that describe what a firm wants to achieve through pricing. Survival Profit Maximization Return on Investment (ROI) Market Share Cash Flow Status Quo Product Quality


Principles of Marketing: Principles of Marketing Pricing 2. Assessment of Target Market’s Evaluation of Price Understanding the importance of the product to customers as well as their expectations about quality and value helps determine how much emphasis to place on price, and how far above the competition a firm can set its prices 3. Evaluation of Competitors’ Prices Price data collection is a routine function of market research Such data is critical in a market where price competition prevails


Principles of Marketing: Principles of Marketing Pricing 4. Selection of a Basis for Pricing COST BASED PRICING: Adding a dollar amount or percentage to the cost of a product. Cost Plus Pricing: Adding a specified dollar amount or percentage to the cost of the product. Mark-up Pricing: Adding to the cost of the product a predetermined percentage of that cost. DEMAND BASED PRICING: Pricing based on the level of demand for the product. COMPETITION BASED PRICING: Pricing influenced primarily by competitors’ prices rather than cost and revenue


Principles of Marketing: Principles of Marketing Pricing 5. Selection of a Pricing Strategy DIFFERENTIAL PRICING: Charging different prices to different customers for the same quality and quantity of product Negotiated Secondary Market Periodic and Random Discounting NEW PRODUCT PRICING: Introduction pricing techniques Price Skimming Penetration PRODUCT LINE PRICING: Establishing and adjusting prices of multiple products within a product line Captive Premium Bait Pricing Price Lining


Principles of Marketing: Principles of Marketing Pricing 5. Selection of a Pricing Strategy (Continued) PSYCHOLOGICAL PRICING: Pricing that attempts to influence a customer’s perception of price to make a product’s price more attractive Reference Bundle Multiple Unit Every Day Low Prices (EDLP) Odd-even Customary Prestige PROFESSIONAL PRICING: Fees set by persons with great skill or experience in a particular field


Principles of Marketing: Principles of Marketing Pricing 5. Selection of a Pricing Strategy (Continued) PROMOTIONAL PRICING: Pricing that is coordinated with promotional events or policies Price Leaders Special Event Comparison Discounting 6. Determination of a Specific Price Once a price is determined using one or more strategies, it may require refinement to make the price consistent with pricing practices in a particular market or industry


Principles of Marketing: Principles of Marketing International Markets INTERNATIONAL MARKETING: Developing and performing marketing activities across national boundaries REASONS TO ENTER FOREIGN MARKETS: To utilize excess production capacity Saturated domestic markets Escape domestic recession Keep up with or escape competition Economies of scale in production Extend product life cycle Tax advantages Counter adverse domestic changes in demographics Dispose of excess inventories Balance of Trade


Principles of Marketing: Principles of Marketing International Markets PRODUCT STRATEGIES: Extension of a standard product into multiple foreign markets Adaptation or modification of a standard product into foreign markets Invention of new products specifically for foreign markets CHALLENGES: Pricing Exchange Rates Tariffs, Restrictions Repatriotization of Profits Distribution Different Trade Channels Bribery Promotion Language Customs Regulations


Principles of Marketing: Principles of Marketing International Markets Regional Trade Alliances, Markets and Agreements North American Free Trade Agreement (NAFTA) Merges Canada, Mexico and the United States into worlds single market Virtually eliminates all tariffs by 2009 European Union (EU) European Common Market, 2nd largest Common Market of the Southern Cone (MERCOSUA) Most of South America, 3rd largest Asia-Pacific Economic Cooperation (APEC) Australia to Japan, Russia, Mexico and South American nations General Agreement on Tariffs and Trade (GATT) Agreement to reduce worldwide tariffs and increase international trade 124 member nations World Trade Organization (WTO) promoting free trade among member nations


Principles of Marketing: Principles of Marketing International Markets METHODS OF OPERATION Exporting Trading Companies Licensing Franchising Contract Manufacturing Joint Venture Strategic Alliance Direct Ownership Multinational Enterprise


Principles of Marketing: Principles of Marketing Marketing Implementation and Control MARKETING IMPLEMENTATION: The process of putting marketing strategies into action Intended strategies frequently differ from Realized strategies because: Marketing Strategies and Implementation are related Marketing Strategies and Implementation are constantly evolving The responsibility for Marketing Strategies and Implementation are separated Components Approaches Internal Marketing Total Quality Management


Principles of Marketing: Principles of Marketing Marketing Implementation and Control ORGANIZING MARKETING ACTIVITIES Centralized vs Decentralized By Function By Product By Regions By Type of Customer IMPLEMENTING ACTIVITIES Motivating Marketing Personnel Communication Coordination Establishing a Timetable


Principles of Marketing: Principles of Marketing Marketing Implementation and Control MARKETING CONTROL PROCESS: Establishing performance standards and trying to match actual performance to those standards METHODS OF EVALUATION: Sales Analysis: Use of sales figures to evaluate a firm’s current performance. Marketing Cost Analysis: Breaking down and classifying costs to determine which are associated with specific marketing activities. Marketing Audit: A systematic, periodic examination of the firm’s marketing objectives, strategies, organization and performance.


Principles of Marketing: Principles of Marketing Marketing on the Internet ELECTRONIC COMMERCE (E-Commerce): Sharing business information, maintaining business relationships, and conducting business transactions by means of telecommunications networks ELECTRONIC MARKETING (E-Marketing): The strategic process of creating, distributing, promoting, and pricing products for targeted customers in the virtual environment of the Internet Basic Characteristics: Addressability Interactivity Memory Control Accessibility Digitalization


Principles of Marketing: Principles of Marketing Marketing on the Internet E-MARKETING STRATEGY: Target Markets: More precise, Shift from Share-of-Market to Share-of-Customer (purchases) Products and Services: Information, convenience Distribution: Speed of order processing and delivery Promotion: Websites, flow of information, interactive dialogues Pricing: Proliferation of cost and price information changing the balance of negotiations Legal and Ethical Issues: Invasion of privacy, unsolicited commercial e-mail (UCE or Spam), misappropriation of registered trademarks


Principles of Marketing: Principles of Marketing Social Responsibility and Ethics in Marketing SOCIAL RESPONSIBILITY: An organization’s obligation to maximize its positive impact and minimize its negative impact on society MARKETING CITIZENSHIP: The incorporation of economic, legal, ethical and philanthropic concerns into a firm’s marketing strategies MARKETING ETHICS: Principles and standards that define acceptable marketing conduct as determined by various stakeholders CAUSE-RELATED MARKETING: The practice of linking products to a particular social cause on an on-going or short-term basis GREEN MARKETING: The specific development, pricing, promotion and distribution of products that do not harm the natural environment


Principles of Marketing: Principles of Marketing Marketing Appraisal BASIS FOR EVALUATING MARKETING PERFORMANCE: How well does Business satisfy the needs of the Target Market? How well does Business satisfy its own organizational objectives? How well does Business serve the interests or welfare of society? CONSUMERISM: The efforts of independent individuals, groups and organizations to protect the rights of consumers The Consumer protest against perceived injustices in the exchange relationship, and the efforts to remedy those injustices. The Major implication of Consumerism to Marketing Managers is that to the extent that it exists, the Marketing Concept has failed.


Principles of Marketing : Principles of Marketing Criticisms of Marketing PRODUCT Poor Quality Unsafe Products Confusing / Worthless Warranties Deceptive Packaging and Labeling Over Promoted “Improvements” Planned Obsolescence PRICE Too High Controlled by Large Firms Excessive Profit DISTRIBUTION Too Complex Too Many Players PROMOTION Stimulation of Unwarranted Demand Exploitive Adds to price Restraint of Competition (Promotion Expense Barrier)


Final Exam Review Topics: Final Exam Review Topics Distribution Marketing Channels Marketing Intermediaries, Functions, Classifications Intensity of Market Coverage Wholesaling/Wholesalers, Functions, Services, Classifications Physical Distribution, Objectives, Functions, Retailing/Retailers, Categories of Stores, Non-Store Retailing Promotion, objectives Communication, process components Promotional Mix, factors affecting selection, effect on buyer behavior, criticisms Advertising, types, media, life cycle considerations, Primary and Selective Demand Public Relations, tools Personal Selling Sales Promotions Price: Utility model, price/non-price competition, factors affecting pricing decisions objectives, stages for establishing prices Demand Costs, types Marginal and Total Analysis Break Even Analysis, limitations Pricing for Business Markets Pricing Objectives Basis for Pricing Pricing Strategies International Marketing: reasons for entering, methods of operations, product strategies, challenges Marketing Implementation Marketing Control Process, methods of evaluation Electronic Commerce and Marketing Social Responsibility and Ethics Consumerism, effects Criticisms of Marketing Principles of Marketing