MARKETING Licenciatura GESTÃO DE INFORMAÇÃO. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa

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1 MARKETING 2016 Licenciatura GESTÃO DE INFORMAÇÃO Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa

2 Part 7: Marketing Mix 7.1. Product and the Product Mix 7.2 Price and Pricing Strategy 7.3 Place and Distribution

3 The marketing mix The marketing mix is a recipe for effective marketing. Using the marketing mix when planning the marketing for a product allows for a consistent approach Getting a good balance of the 4 Ps will mean an effective marketing campaign

4 Marketing - 4P-Model Product, Price, Place, Promotion

5 Marketing Mix Product Promotion Target Market Price Place

6 Marketing 4P s 4Ps Product Price Promotion Place Main usage Conditions Advertisement Strategic distribution/ sales Side usage Rebate Sales Physical distribution/logistics Additional usage Discount Sponsoring Location Brand Leasing Sales promotion Content Quality Event PPR Packaging

7 Marketing Mix - 7P Classical and new instruments Product policy product Classical instruments New instruments Process policy process Price policy price Distribution policy place Equipment policy physical facilities Personnel policy personnel Communication policy promotion

8 Marketing Mix (4P s) Components of the marketing mix Product policy Price policy Communication policy Distribution policy Product innovations Price Media advertisement Distribution systems Product improvements Price deductions Sales promotion Sales organs Product differentiation Rebates and discounts Direct marketing Logistic systems Marking Delivery conditions Public relations Naming Payment conditions Sponsoring Service performance Personal communication Assortment planning Fairs and exhibitions Packaging Multi-media communication Employee communication Marketing mix Sub-markets and customer groups

9 Service marketing (from 4P s to 7P s) Comparison of 4P s and 7P s 4 P s of the classical consumption goods marketing 7 P s of the service marketing advertisement product advertisement product price positioning employees positioning price process management physical facilities

10 The marketing mix Decisions about Mkt Mix are based on the results of market research problem-identification research problem-solving research. There are two main sources of data - primary and secondary. Primary research is conducted from scratch. It is original and collected to solve the problem in hand.

11 The marketing mix Secondary research already exists since it has been collected for other purposes. It is conducted on data published previously and usually by someone else. Secondary research costs far less than primary research, but seldom comes in a form that exactly meets the needs of the researcher. Methodologically, marketing research uses the following types of research designs: Based on questioning Based on observations

12 The marketing mix Based on questioning Qualitative marketing research - generally used for exploratory purposes - small number of respondents - not generalizable to the whole population - statistical significance and confidence not calculated - examples include focus groups, in-depth interviews, and projective techniques

13 The marketing mix Based on questioning Quantitative marketing research - generally used to draw conclusions - tests a specific hypothesis - uses random sampling techniques so as to infer from the sample to the population - involves a large number of respondents - examples include surveys and questionnaires. Techniques include choice modelling, maximum difference preference scaling, and covariance analysis.

14 The marketing mix Based on observations Ethnographic studies - by nature qualitative, the researcher observes social phenomena in their natural setting - observations can occur cross-sectionally (observations made at one time) or longitudinally (observations occur over several time-periods) - examples include product-use analysis and computer cookie traces.

15 The marketing mix Based on observations Experimental techniques - by nature quantitative, the researcher creates a quasi-artificial environment to try to control spurious factors, then manipulates at least one of the variables - examples include purchase laboratories and test markets

16 The marketing mix Researchers often use more than one research design. They may start with secondary research to get background information, then conduct a focus group (qualitative research design) to explore the issues. Finally they might do a full nation-wide survey (quantitative research design) in order to devise specific recommendations for the client.

17 Start with building your marketing plan!

18 Product

19 Product 1. What are the characteristics of products? 2. How can a company build and manage its product mix and product lines? 3. How can a company make better brand decisions? 4. How can packaging and labeling be used as marketing tools?

20 4 P s - Product

21 A product is defined as "Anything that is capable of satisfying customer needs" The process by which companies distinguish their product offerings from the competition is called branding. For most companies, brands are not developed in isolation - they are part of a product group. A product group (or product line) is a group of brands that are closely related in terms of their functions and the benefits they provide (e.g. Dell's range of personal computers or Sony's range of televisions).

22 Physical goods Services Experiences Events Persons Places Properties Organizations Information Ideas Components of the Market Offering

23 Product Levels Customer value hierarchy Core benefit Basic product Expected product Augmented product Five Product Levels

24 The Product and the Product Mix Product hierarchy Need family Product family Product class Product line Product type Item Product classifications Durability and Tangibility Classification: Nondurable goods Durable goods Services

25 The Product and the Product Mix Consumer-Goods Classification: Convenience goods Staples Impulse goods Emergency goods Shopping goods Homogeneous shopping goods Heterogeneous shopping goods Specialty goods Unsought goods

26 The Product and the Product Mix Industrial- -Goods Classification Materials and parts Farm products Natural products Manufactured materials and parts Component materials Component parts Capital items Installations Equipment

27 The Product and the Product Mix Supplies and business services Maintenance and repair items Operating supplies Maintenance and repair services Business advisory services

28 The Product and the Product Mix Product mix (Product assortment) Product mix has a certain: Width Length Depth Consistency

29 The Product and the Product Mix Product-Mix Width and Product-Line Length example

30 The Product and the Product Mix Product Map for a Paper-Product Line

31 The Product and the Product Mix Brand decisions What is brand? Attributes Benefits Values Culture Personality User

32 Corporate Identity vs. Image Differentiation of two perspectives Company Corporate Identity Image Image from inside Image from Outside

33 Branding policy Task steps of branding Customer Loyalty (Brand loyalty) Security when buying Popularity Recognition Recognition of originator (origin)

34 Branding policy - Requirements for a Brand Major tasks of branding policy: development of brand names and trademarks Criteria and characteristics of a brand 1 Brand name/ marking 2 Brand protection 3 Distinctiveness Product design Packaging Trademark Protectability of brand differentiation from other brands Difference in performance compared with competitive offerings 4 Standards 5 Price stability 6 Availability 7 Publicity Standardized Quality Consistently high Quality No specials, action prices or sales Availability and widespread distribution Perception and recognition in the market through advertising

35 Differentiation of Trademarks Examples according to trademark types Word signs Image Trademark Word-Image Trademark Recognition by selfdeveloped script. Easily represented in all media. Only work if you about to be published across years (through advertising) Highest conciseness by logo and illustration of the peculiarity of the offer.

36 Corporate Identity The total of all communication political measures, the behavior, appearance and market communication of a company Corporate Identity

Corporate Identity Detailed presentation of the three

releases, ads, posters, TV spots, staff newspaper,

company celebration, trade show appearance, packing

37 Corporate Identity Detailed presentation of the three activities of a company, aligned upon a corporate philosophy Appearance: logo, fonts, color, layout Internal and external corporate communication: press releases, ads, posters, TV spots, staff newspaper, customer magazine, website, banners, Open house, company celebration, trade show appearance, packing design Behavior from inside to outside: to employees, customers and suppliers

38 The Product and the Product Mix Building Brand Identity Brand bonding Brands are not built by advertising but by the brand experience Everyone in the company lives the brand Three ways to carry on internal branding Employees must Understand Desire, and Deliver on the brand promise

39 The Product and the Product Mix Brand Equity Brand awareness Brand acceptability Brand preference Aaker s five levels of customer attitude: The customer will change brands, especially for price reasons. Nobrand loyalty. Customer is satisfied. No reason to change brands. Customer is satisfied and would incur cost by changing brand. Customer values the brand and sees it as a friend. Customer is devoted to the brand

40 The Product and the Product Mix Value of Brand Equity Brand valuation Competitive advantages of high brand equity: The company will have more leverage in bargaining with distributors and retailers because customers expect them to carry the brand. The company can charge a higher price than its competitors because the brand has higher perceived quality. The company can more easily launch extensions because the brand name carries high credibility. The brand offers some defense against price competition

41 The Product and the Product Mix Branding Decision: To Brandor Not to Brand? Branding gives the seller several advantages: Brand name makes it easier for the seller to process orders and track down problems Seller s brand name and trademark provide legal protection of unique product features Branding gives the seller the opportunity to attract a loyal and profitable set of customers. Branding helps the seller segment markets. Strongbrands helpbuildcorporate image, making it easier to launchnew brandsandgain acceptance by distributors and consumers

42 The Product and the Product Mix Desirable qualities for a brandname It should suggest something aboutthe product s benefits It should suggest the product or service category It should suggest concrete, high imagery qualities It should be easy to spell, pronounce,recognize, and remember It should be distinctive It should not carry poor meanings in other countries and languages

43 The Product and the Product Mix Packaging Package Primary Package Secondary Package Shipping Package Factors which havecontributed to the growing use of packaging as a marketing tool Self- -Service Consumer affluence Company and brand image Innovation opportunity

44 Price

45 Pricing Decisions Definition Pricing strategies Ten ways to increase prices without increasing price - Winkler

46 Definition Price The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. Goal 1: Identify and define internal factors affecting pricing decisions

47 What is Price? Price Has Many Names Rent Fee Rate Commission Assessment Tuition Fare Toll Premium Retainer

48 What is Price? Dynamic Pricing on the Web allows SELLERS to: Monitor customer behavior and tailor offers. Change prices on the fly to adjust for changes in demand or costs. Aid consumers with price comparisons. Negotiate prices in online auctions and exchanges.

49 What is Price? Price and the Marketing Mix: Only element to produce revenues Most flexible element Can be changed quickly Common Pricing Mistakes Reducing prices too quickly to get sales Pricing based on costs, not customer value

50 Factors to Consider When Setting Price Internal Factors Marketing objectives Marketing mix strategies Costs Organizational considerations Market positioning influences pricing strategy Other pricing objectives: Survival Current profit maximization Market share leadership Product quality leadership

51 Internal Factors Marketing objectives Marketing mix strategies Costs Organizational considerations Pricing must be carefully coordinated with the other marketing mix elements Target costing is often used to support product positioning strategies based on price Nonprice positioning can also be used

52 Internal Factors Marketing objectives Marketing mix strategies Costs Organizational considerations Types of costs: Variable Fixed Total costs How costs vary at different production levels will influence price setting Experience (learning) curve affects price

53 Internal Factors Marketing objectives Marketing mix strategies Costs Organizational considerations Who sets the price? Small companies: CEO or top management Large companies: Divisional or product line managers Price negotiation is common in industrial settings where pricing departments may be created

54 Goal 2: Identify and define external factors affecting pricing decisions External Factors Nature of market and demand Competitors costs, prices, and offers Other environmental elements Types of markets Pure competition Monopolistic competition Oligopolistic competition Pure monopoly Consumer perceptions of price and value Price-demand relationship Demand curve Price elasticity of demand

55 External Factors Nature of market and demand Competitors costs, prices, and offers Other environmental elements Consider competitors costs, prices, and possible reactions Pricing strategy influences the nature of competition Low-price low-margin strategies inhibit competition High-price high-margin strategies attract competition Benchmarking costs against the competition is recommended

56 External Factors Nature of market and demand Competitors costs, prices, and offers Other environmental elements Economic conditions Affect production costs Affect buyer perceptions of price and value Reseller reactions to prices must be considered Government may restrict or limit pricing options Social considerations may be taken into account

57 General Pricing Approaches Cost-Based Pricing: Cost-Plus Pricing Adding a standard markup to cost Ignores demand and competition Popular pricing technique because: It simplifies the pricing process Price competition may be minimized It is perceived as more fair to both buyers and sellers Goal 3: Contrast the three general approaches to setting prices

58 General Pricing Approaches Cost-Based Pricing Example - Variable costs: $20 - Fixed costs: $ 500,000 - Expected sales: 100,000 units - Desired Sales Markup: 20% Variable Cost + Fixed Costs/Unit Sales = Unit Cost $20 + $500,000/100,000 = $25 per unit Unit Cost/(1 Desired Return on Sales) = Markup Price $25 / (1 -.20) = $31.25 Goal 3: Contrast the three general approaches to setting prices

59 General Pricing Approaches Cost-Based Pricing: Break-Even Analysis and Target Profit Pricing Break-even charts show total cost and total revenues at different levels of unit volume. The intersection of the total revenue and total cost curves is the break-even point. Companies wishing to make a profit must exceed the break-even unit volume.

60 General Pricing Approaches Value-Based Pricing: Uses buyers perceptions of value rather than seller s costs to set price. Measuring perceived value can be difficult. Consumer attitudes toward price and quality have shifted during the last decade. Value pricing at the retail level Everyday low pricing (EDLP) vs. high-low pricing

61 General Pricing Approaches Competition-Based Pricing: Also called going-rate pricing May price at the same level, above, or below the competition Bidding for jobs is another variation of competition-based pricing Sealed bid pricing

62 Quality Low High Low Economy Strategy e.g. Penetration e.g. Price High Skimming e.g. Premium e.g. BA first class

63 Pricing strategies Premium pricing Uses a high price, but gives a good product/service exchange e.g. Private Jets, The Ritz Hotel Penetration pricing offers low price to gain market share - then increases price e.g. MEO- to attract new clients Economy pricing placed at no frills, low price e.g. Soups, spaghetti, beans - economy brands

64 Price skimming where prices are high - usually during introduction e.g new albums or films on release ultimately prices will reduce to the parity Psychological pricing to get a customer to respond on an emotional, rather than rational basis.e.g 99p not 1.01 price point perspective Product line pricing rationale of a product range e.g. MARS 32p, Four-pack 99p, Bite-size 1.2

65 Pricing variations off-peak pricing, early booking discounts,etc e.g Grundig offers a cash back incentive for expensive goods Optional product-pricing e.g. optional extras - BMW famously under-equipped Captive product pricing products that complement others e.g Gillette razors (low price) and blades (high price)

66 Product-bundle pricing sellers combine several products at the same price e.g software, books, CDs. Promotional pricing BOGOF (Buy one, get one free) e.g. toothpaste, soups, etc

67 Geographical pricing different prices for customers in different parts of the world e.g.include shipping costs, or place onplc Value pricing usually during difficult economic conditions e.g. Value menus at McDonalds

68 Ten ways to increase prices without increasing price - Winkler 1. Revise the discount structure 2. Change the minimum order size 3. Charge for delivery and special services 4. Invoice for repairs on serviced equipment 5. Charge for engineering, installation 6. Charge for overtime on rushed orders 7. Collect interest on overdue accounts

69 8. Produce less of the lower margin models in the line 9. Write penalty clauses into contracts 10.Change the physical characteristics of the product

70 PLACE

71 Channel and Distribution Tactics Bucklin s definition of distribution Today s system of exchange Channel intermediaries Six basic channel decisions Selection consideration Potential Influence Strategies - Frazier and Sheth (1989) Frequencies of use of influence strategies - Frazier and Summers (1984)

72 A channel of distribution comprises a set of institutions which perform all of the activities utilised to move a product and its title from production to consumption Bucklin - Theory of Distribution Channel Structure (1966)

73 Today s system of exchange Promotion Contact Producers Negotiation Transporting and storing Financing Users Packaging Money Goods

74 Channel intermediaries - Wholesalers Break down bulk buys from producers and sell small quantities to retailers Provides storage facilities reduces contact cost between producer and consumer Wholesaler takes some of the marketing responsibility e.g sales force, promotions

75 Channel intermediaries - Agents Mainly used in international markets Commission agent - does not take title of the goods. Secures orders. Stockist agent - hold consignment stock Control is difficult due to cultural differences Training, motivation, etc are expensive

76 Channel intermediaries - Retailer Much stronger personal relationship with the consumer Hold a variety of products Offer consumers credit Promote and merchandise products Price the final product Build retailer brand in the high street

77 Channel intermediaries - Internet Sell to a geographically disperse market Able to target and focus on specific segments Relatively low set-up costs Use of e-commerce technology (for payment, shopping software, etc) Paradigm shift in commerce and consumption

78 Six basic channel decisions Direct or indirect channels Single or multiple channels Length of channel Types of intermediaries Number of intermediaries at each level Which intermediaries? Avoid intrachannel conflict

79 Selection consideration Market segment - must know the specific segment and target customer Changes during plc - different channels are exploited at various stages of plc Producer-distributor fit - their policies, strategies and image Qualification assessment - experience and track record must be established Distributor training and support

80 Potential Influence Strategies Frazier and Sheth (1989) Indirect influence strategies - information is merely exchanged with channel member personnel Direct unmediated strategies - consequences of a poor response from the market are stressed Reward and punishment strategies - given to channel members and their firms

81 Direct unweighted strategy or request - producer s wishes are communicated. No consequences are applied or mentioned Direct mediated strategies - specific action is requested and consequences of rejection are stressed e.g.1 control of retail pricing e.g.2 minimum order size e.g.3 salesperson training e.g.4 physical layout of store e.g. 5 territorial and customer restrictions

Definition. Case Study Priceline.com. Price. Chapter 10 Pricing Products: Pricing Considerations and Approaches

Definition. Case Study Priceline.com. Price. Chapter 10 Pricing Products: Pricing Considerations and Approaches Chapter 10 Pricing Products: Pricing Considerations and Case Study Priceline.com Buyer-driven commerce concept offers lower prices to consumers and the ability to sell excess inventory to sellers 13.5