Unformatted text preview: Principles of Marketing
Philip Kotler and Gary
Armstrong Chapter 1. Managing Profitable Customer Chapter 1. Managing Profitable Customer Relationships
Marketing The process by which companies crate value for customers and build strong customer relationships in order to capture value from customers in return.
The Marketing Process
1. Understand the marketplace and customer needs and wants.
2. Design a customerdriven marketing strategy.
3. Construct an integrated marketing program that delivers superior value.
4. Build profitable relationships and create customer delight.
5. Capture value from customers to create profits and customer equity. Five core customer and marketplace concepts:
Five core customer and marketplace concepts:
1. Needs, wants and demands
2. Marketing offerings (products, services, and experiences) 3.
5. Value and satisfaction
Exchange and relationships
Markets Needs – states of felt deprivation; to be in want of; ought to have;
the lack of something that is useful or necessary. Wants the form human needs take as shaped by culture and Wants the form human needs take as shaped by culture and individual personality.
the expression of human needs, shaped and attributed by one’s culture, individual personality and upbringing, social and environmental forces in schools, business, firms, and community, families, religion and other organizations. desires, or intentions or expectation for specific satisfiers of these deeper needs. UNDERSTANDING CUSTOMERS NEEDS AND WANTS
5 BASIC HUMAN NEEDS
1. Physiological or Body Needs 2. Security and Safety Needs 3. Social Needs 4. Ego Needs 5. SelfActualization
HUMAN WANTS INTENTIONS, EXPECTIONS, DESIRES, CULTURE, Brought about by INDIVIDUAL DEVELOPMENT TARGET CUSTOMERS SATISFACTION Demands – human wants that are backed by buying power.
the ability and willingness to buy the object he or she desires at a particular price.
Example: Fortuner or BMW would satisfy a person’s need for social status. MARKETERS do not create the need for social status. MARKETERS influence demand by developing a creative balance in products and people.
The demand for COSMETICS for example are triggered by the intense desire to become beautiful, lovable, appealing, attractive, seductive, younglooking all the time for whatever reasons. Typical Need & Wants of Women
Need Boyfriend Husband Lover Wants
Tall,dark,handsome Macho Image
Has a car and house
Welloff financially Typical Need & Wants of Men Need
Beauty and Brains
Rich & Famous
Career Homely & Conservative
Socialite & Carefree
Degree Holder Typical Need & Wants Need
Kapatid,kamaganak Amiable, caring,
Kasosyo, kabarkada hippie,introvert,
masunurin,neurotic restless, sexy,understanding vibrant,wise, palaban Market Offering – some combination of products, services, Market information, or experiences offered to a market to satisfy a need or want. Product – anything that can be offered to a market for attention, acquisition, use of consumption that might satisfy a want or need. It includes physical objects, services, persons, place, organizations, and ideas.
Service – any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Marketing Myopia – the mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products. Customer value the difference between the values the Customer value customer gains from owning and using a product and the costs of obtaining the product.
Customer satisfaction – the extent to which a product’s perceived performance matches a buyer’s expectations.
Exchange – the act of obtaining a desired object from someone by offering something in return.
Market – the set of all actual and potential buyers of a product or service.
aries Final Users Relationship Marketing – the process of creating, Relationship Marketing maintaining, and enhancing strong, valueladen relationships with customers and other stakeholders.
Designing a CustomerDriven Mktg. Strategy
Marketing Management – the art and science of choosing target markets and building profitable relationships with them. 1. Selecting customers to serve.
2. Choosing a value proposition Marketing Management Philosophies
Marketing Management Philosophies
5 Alternative Concepts under which organization design and carry out their marketing strategies:
Production Concept – the idea that consumers will favor products that are available and highly affordable and that the organization should therefore focus on improving production and distribution efficiency.
Product Concept the idea that consumers will favor products that offer the most quality, performance, and features and that the organization should therefore devote its energy to making continuous product improvements.
Selling Concept – the idea that consumers will not buy enough of the firm’s products unless it undertakes a largescale selling and promotion effort Marketing Concept – the marketing management Marketing Concept philosophy that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. Starting pt Focus Means Ends
Concept Existing Selling and Profits through
Factory products promoting sales volume Marketing Customer Integrated Profits through
Market needs marketing customer satis faction Societal Marketing Concept – a principle of Societal Marketing Concept enlightened marketing that holds that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ longrun interests, and society’s longrun interests. Society (Human Welfare) Societal Marketing Concept Consumers Company (want satisfaction) (Profits) Preparing an Integrated marketing Plan and Program
Preparing an Integrated marketing Plan and Program
Marketing Mix – the set of marketing tools the firm uses to implement its marketing strategy. Product, Price, Place, and Promotion Building Customer Relationships
Customer relationship management – the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Identify their touch points to maximize customer loyalty.
Customer perceived value – the customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. Partner Relationship Management – working closely with partners in other company departments and outside the company to jointly bring greater value to customers.
Partners Inside the Company
Marketing Partners Outside the Firm
Capturing Value from Customers
Creating customer loyalty and retention. Good customer relationship management creates customer delights. Should they be delighted they will talk about the company and product resulting to loyalty to them. Customer lifetime value – the value of the entire stream of
purchases that a customer would make over a lifetime of patronage.
Growing share of customer. Increase number of offerings
Building Customer Equity. The ultimate aim of customer relationship is to produce high customer equity. Customer Equity – the total combined customer lifetime values of all of the company’s customers. Building the right relationships with the right customer
Building the right relationships with the right customer Butterflies true Friends High Profitability Good fit between com Good fit between pany’s offerings and company’s offerings Customer’s need; high and customer’s needs;
Profit potential highest profit potential Strangers Barnacles Low Little fit between Limited fit between Company’s offerings and company’s offerings Profitability Customer’s needs; lowest and customer’s needs
Profit potential low profit potential shortterm longterm customers customers The New Marketing Landscape
The New Marketing Landscape
The New Digital Age
The Call for More Ethics and Social Responsibility
The Growth of NotforProfit Marketing Chapter 2. Partnering to Build Customer Relationship
Chapter 2. Partnering to Build Customer Relationship Companywide Strategic Planning Strategic Planning – the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. Mission Statement – A statement of the organization’s purpose – what it wants to accomplish in the larger environment. Steps in Strategic Planning
Steps in Strategic Planning
Defining the company mission Setting company objectives and goals Designing the business portfolio Planning marketing and other functional strategies Steps in Strategic Planning
Steps in Strategic Planning
1. Defining the company mission
2. Setting Company Objectives and Goals
3. Designing the Business Portfolio Business Portfolio – the collection of businesses and products that make up the company. 2 steps involve in the Business Portfolio Planning: 1. Analyzing the current business portfolio 1. Analyzing the current business portfolio
1. Analyzing the current business portfolio Portfolio Analysis –the process by which management evaluates the products and businesses making up the company.
Strategic Business Unit (SBU) – is a unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses. 2 steps in the Business Portfolio Analysis: 1. Identify the company’s SBUs. 2. Assess the attractiveness of each SBUs and decide how much support each deserves. 2 dimensions used in evaluating SBUs:
2 dimensions used in evaluating SBUs: 1. market/industry attractiveness (growth) 2. strength of position in that market (share)
growthshare matrix – a portfolioplanning method that evaluates a company’s strategic business units in terms of their market growth rate and relative market share SBUs are classified as stars, cash cows, question marks, or dogs. Boston Consulting Group Approach
Boston Consulting Group Approach Market Growth Rate Star Question mark High Low Cash Cow ? Dog $ High
Relative market Share Problems with Matrix Approaches
2. Developing Strategies for Growth and Downsizing Product/market expansion grid – a portfolio
planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification. Market Penetration – a strategy for company growth by increasing sales of current products to current market segments without changing the product. Market Development – a strategy for company growth by identifying and developing new market segments for current company products.
Product Development – a strategy for company growth by offering modified or new products to current market segments. Diversification – a strategy for company growth through starting up or acquiring businesses outside the company’s current products. Downsizing – reducing the business portfolio by Downsizing – reducing the business portfolio by eliminating products of business units that are not profitable or that no longer fit the company’s overall strategy. Planning Marketing: Partnering to Build Customer Relationships Role of Marketing in strategic planning: 1. Provides guiding principle. 2. Provides inputs to strategic planners. 3. Designs strategies for reaching the unit’s objectives. Customer relationship management
Customer relationship management
Partner relationship management a. inside – to form an effective value chain that serves the customers’ value chain – the series of departments that carry out valuecreating activities to design, produce, market, deliver and support a firm’s products. b. outside – to form competitively superior value
delivery network. valuedelivery network – the network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance f the entire system. Managing Marketing Strategy and the Marketing Mix Marketing Strategy – the marketing logic by which the business unit hopes to achieve its marketing objectives. Marketing Mix – is the set of controllable tactical marketing tools that the firm blends to produce the response it wants in the target market. Product, Price, Place, and Promotion (4P’s of Marketing) Market Segmentation – dividing the market into distinct Market Segmentation groups of buyers who have distinct needs, characteristics, or behavior and who might require separate products or marketing programs.
Market segment – a group of consumers who respond in a similar way to a given set of marketing efforts.
Market Targeting – the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.
Positioning – arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Marketing Mix:
Product – variety, quality, design, features, brand name, packaging and services.
Price – list price, discounts, allowances, payment period, and credit terms.
Place – channels, coverage, assortments, locations, inventory, transportation and logistics.
Promotion – advertising, personal selling, sales promotion, and public relations. Managing the Marketing Effort Marketing Analysis SWOT Analysis – an overall evaluation of the company’s strengths (S), weaknesses (W), opportunities (O), and threats (T). Marketing Planning – involves deciding on marketing strategies that will help the company attain its overall strategic objectives. Marketing Plan – outlines how the company intends to grow in the marketplace and win against competitors. Contents of a Marketing Plan:
Contents of a Marketing Plan: a. Executive Summary b. Current marketing situation c. Threats and opportunities analysis d. Objectives and issues e. Marketing Strategy f. Action programs g. Budgets h. Controls Marketing Implementation – the process that turns Marketing Implementation marketing strategies and plans into marketing actions in order to accomplish strategic marketing objectives.
Marketing Control – the process of measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that objectives are achieved.
Market Audit – a comprehensive, systematic, independent and periodic examination of a company’s environment, objectives, strategies, and activities to determine problem areas and opportunities and to recommend a plan of action to improve the company’s marketing performance. Measuring and Managing Return on Marketing Investment
Return on marketing investment (Marketing ROI) – the net return from a marketing investment divided by the costs of the marketing investment. Chapter 3 Understanding the Marketing
Chapter 3 Understanding the Marketing Environment Marketing Environment – the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.
Microenvironment – the actors close to the company that affect its ability to serve its customers – the company, suppliers, marketing intermediaries, customer markets, competitors, and publics.
Macroenvironment – the larger societal forces that affect the microenvironment – demographic, economic, natural, technological, political and cultural forces. The Company’s Microenvironment 1. Company 2. Suppliers 3. marketing Intermediaries – firms that help the company promote, sell, and distribute its goods to final buyers; a. resellers – distribution channel firms that help the company find customers or make sales to them. b. physical distribution firms – firms that help the company to stock and move goods from their points of origin to their destinations. c. marketing service agencies – marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets. d. financial intermediaries – firms that help finance transactions or insure against the risks associated with the buying and selling of goods. 4. Customers
4. Customers 5 types of customers: 1. Consumer markets 2. Business markets 3. Reseller markets 4. Government markets 5. International markets
6. Public – any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. 7 types of publics: 1. financial public 2. media publics 3. government publics 4. citizenaction publics 5. local publics 6. general publics 7. internal publics The Company’s Macroenvironment 1. Demography – the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. * Age structure of the population: Baby boomers Generation X Generation Y *family
*diversity 2. Economic Environment – factors that affect consumer buying power and spending patterns.
3. Natural Environment – natural resources that are needed as inputs by marketers or that are affected by marketing activities. trends in the natural environment: a. shortages of raw materials b. increased pollution c. increased government intervention Chapter 5 – Consumer Markets and Consumer Chapter 5 – Consumer Markets and Consumer Buyer Behavior Consumer buyer behavior – the buying behavior
of final consumers – individuals and
households who buy goods and services for
Consumer market – all the individuals and
households who buy or acquire goods and
services for personal consumption.
services Model of Consumer Behavior
Model of Consumer Behavior
Marketing and other
Promotion Buyer’s black
Decision process Buyer responses
Purchase amount Characteristics affecting consumer behavior:
Characteristics affecting consumer behavior:
Cultural Factors Psychological Culture Motivation Subculture Perception Social class Learning Social Factors Beliefs Reference groups Attitudes Family Roles and status Personal Age and lifecycle stage Occupation Economic situation Lifestyle Personality Selfconcept Culture – the set of basic values, perceptions, Culture – the set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions.
Subculture – a group of people with shared value systems based on common life experiences and situations.
Social class – relatively permanent and ordered divisions in a society whose members share similar values, interests, and behaviors. Social factors:Group – two or more people who interact to Social factors:
accomplish individual or mutual goals. Opinion Leader – person within a reference group who, because of special skills, knowledge, personality, or other characteristics, exerts social influence on others.
Role – consists of the activities people are expected to perform according to the persons around them. Each role carries a status reflecting the general esteem given to it by society. Personal factors:
Personal factors: Age and LifeCycle
Lifestyle – a person’s pattern of living as expressed in his or her activities, interests, and opinions.
Personality – the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment.
Brand personality – the specific mix of human traits that may be attributed to a particular brand. 5 brand personality traits: sincerity, excitement, competence, sophistication and ruggedness. Psychological factors
Motivation (drive) – a need that is sufficiently pressing to direct the person to seek satisfaction of the need.
Perception – the process by which people select, organize, and interpret information to form a meaningful picture of the world. 3 perceptual process: 1. Selective attention – the tendency for people to screen out most of the information to which they are exposed 2. Selective distortion – the tendency of people to interpret information in a way that will support what they already believe. 3. Selective retention – the tendency for people to remember good points made about a brand they favor and to forget good points made about competing brands. Learning – changes in an individual’s behavior arising from Learning
Belief – a descriptive thought that a person has about something.
Attitude – a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea.
Types of Buying Decision Behavior 1. Complex buying behavior – consumer buying behavior in situations characterized by high consumer involvement in a purchase and significant perceived differences among brands. 2. Dissonancereducing buying behavior – consumer buying behavior in situations characterized by high involvement but few perceived differences among brands. 3. Habitual buying behavior – consumer buying behavior in 3. Habitual buying behavior – consumer buying behavior in situations characterized by low consumer involvement and few significant perceived brand differences.
4. Varietyseeking buying behavior – consumer buying behavior in situations characterized by low consumer involvement but significant perceived brand differences.
The Buyer Decision Process Need recognition Information
behavior The Buyer Decision Process for New Products
The Buyer Decision Process for New Products
New product – a good, service, or idea that is perceived by some potential customers as new.
Adoption process – the mental process through which an individual passes from first hearing about an innovation to final adoption. 5 stages: 1. Awareness 2. Interest 3. Evaluation 4. Trial 5. Adoption Consumer Behavior Across International Borders Chapter 6 Business Markets and Business Chapter 6 Business Markets and Business Buyer Behavior
Business buyer behavior – the buying behavior of the organizations that buy goods and services for use in the production of other products and services or for the purpose of reselling or renting them to others at a profit.
Business buying process – the decision process by which business buyers determine which products and services their organizations need to purchase, and then find, evaluate, and choose among alternative suppliers and brands. Characteristics of Business Markets
Characteristics of Business Markets
Marketing Structure and Demand
Business markets contain fewer bust larger buyers.
Business customers are more geographically concentrated.
Business buyer demand is derived from final consumer demand.
Demand in many business markets is more inelastic.
Demand in business markets fluctuates more, and more quickly.
Nature of the Buying Unit
Business purchase involve more buyers.
Business buying involves a more professional purchasing effort. Type of Decisions and the Decision Process
Type of Decisions and the Decision Process
Business buyers usually face more complex buying decisions.
The business buying process is more formalized.
In business buying, buyers and sellers work closely together and build longterm relationships.
Supplier development – systematic development of networks of supplierpartners to ensure an appropriate and dependable supply of products and materials for use in making products or reselling them to others. A Model of Business Buyer Behavior
A Model of Business Buyer Behavior
Competitive The buying organization The buying center Buying
Process Interpersonal and
Organizational influences Buyer responses
Payment MAJOR TYPES OF BUYING SITUATIONS
MAJOR TYPES OF BUYING SITUATIONS Straight Rebuy – A business buying situation in which the buyer routinely reorders something without any modification. Modified Rebuy – A business buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers. New Task – A business buying situation in which the buyer purchases a product or service for thefirst time.
Systems Selling – Buying a packaged solution to a problem from a single seller, thus avoiding all the separate decisions involved in a complex buying situation. Buying Center – All the individuals and units that play a role Buying Center – All the individuals and units that play a role in the purchase decisionmaking process.
Participants in the Business Buying Process Users – members of the buying organization who will actually use the purchased product or service. Influencers – people in an organization’s buying center who affect the buying decision; they often help decline specifications and also provide information for evaluating alternatives. Buyers – the people in the organization’s buying center who make an actual purchase. Deciders – people in the organization’s buying center who have formal or informal power to select or approve the final suppliers. Gatekeepers – people in the organization’s buying Major Influences on Business Buyers
Major Influences on Business Buyers Environmental Factors Organizational Factors Interpersonal Factors Individual Factors
The Business Buying Process
5. Problem recognition 6. Proposal solicitation General need description 7. Supplier selection
Product specification 8.Orderroutine specification
Value analysis 9. Performance review Supplier search Problem recognition – the first stage of the Problem recognition
business buying process in which someone in the company recognizes a problem or need that can be met by acquiring a good or a service.
General need description – the stage in the business buying process in which the company describes general characteristics and quantity of a needed item.
Product specification – the stage of the business buying process in which the buying organization decides on and specifies the best technical product characteristics for a needed item. Value Analysis – an approach to cost reduction in which Value Analysis components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production.
Supplier search – the stage in which the buyer tries to find the best vendors.
Proposal solicitation – the stage in which the buyer invites qualified suppliers to submit proposals.
Supplier selection – the stage in which the buyer reviews proposals and selects a supplier/s.
Orderroutine specification – the stage in which the buyer invites the final order with the chosen supplier(s), listing the technical specifications, quantity needed, expected time of delivery, return policies, and warranties. Performance review – the stage in which the Performance review – the stage in which the buyer assess the performance of the supplier and decides to continue, modify, or drop the arrangement. E procurement: Buying on the Internet.
Institutional and Government Markets Institutional market – schools, hospitals, nursing homes, prisons, and other institutions that provide goods and services for people in their care.
Government market – governmental units that purchase goods and services for carrying out the main functions of government. Market segmentation – dividing a market into smaller groups with distinct needs, characteristics, or behaviors who might require separate products or marketing mixes.
Market targeting – the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.
Differentiation – actually differentiating the firm’s market offering to create superior customer value.
Positioning – arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Chapter 7 – Examining CustomerDriven Chapter 7 – Examining CustomerDriven Marketing Strategy: Creating Value for Target Customers
Four major steps in designing a customerdriven marketing strategy: 1. market segmentation 2. market targeting 3. differentiation 4. positioning
Mass Marketing – the total market approach that assumes that everybody has the same needs and wants and will therefore look for the same product or services.
Target Marketing – identifying market segments, selecting one or more of them, and developing products and marketing programs tailored for each segment. Market Segmentation – consumer mkts., business mkts, international mkts. Ways of segmenting the consumer markets: 1. demographic 3. psychographic 2. geographic 4. behavioral Demographic segmentation – dividing a market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. “who you are”, “how much do you earn”
Geographic – dividing a market into different geographical units such as nations, states, regions, cities or neighborhoods. Demographics Segmentation Variables
Demographics Segmentation Variables Age
Civil status Income
Education profession Newborn, baby, child, teenager, work beginner, yuppies, matured, middle age, retirees
Male, female, “inbetween”
Legitimate single, single parent, married, separated, widow/widower
A, B, C, D
Illiterate, grade school, high school, vocational, college, masters/doctoral
Unemployed, housewife, mother, white/blue collar worker, executive, owner, professional, farmer, etc. Family size Religion Nationality Climate Bachelor, husband and wife, small family, big family
Catholic, Protestant, Iglesia ni Kristo, Born
Again, Buddhist, Muslims
Filipino, Japanese, Korean, Chinese, American
Hot, cold For age segmentation: Milk
For age segmentation: Milk WyethSuaco has S26 for infants up to six months
Promil, for babies six months to four years old.
Enfapro by Mead Johnson from six months to two years.
Gain by Abbott Laboratories from six months to four years.
Nestle’s Neslac is for children one year old and onwards. For gender segmentation : Anlene, Carnation, and Athena are all targeting women’s calcium needs to prevent osteoporosis.
“gay bars” for ‘in=betweens” For civil status: Lawyers who specialize in separations and annulments.
Mrs. Philippines pageant targeting beauties who are already married. For education:
For education: ICS/Open University caters to those who want correspondence education.
Asian Institute of Management caters to the graduate school level only.
Mansmith and fielders, Inc. offers shortterm marketing courses. For income segmentation: Luxury cars like Jaguar, Volvo, Audi, Mercedes Benz and BMW cater to the exclusive class A income market.
The Banco de Oro card has the middleincome class as the bulk of their cardholders, being a sister company of the mall giant SM. By profession: Asiatrust is known as the bank for the small and medium scale entrepreneurs so they are open until late in the afternoon and on Saturdays.
Foreign embassies have a list of professions that would be granted easier entrance depending on the needs of their countries at that particular time period. In terms of family segmentation:
In terms of family segmentation: Real estate projects cater either to bachelors or newly weds (one room), small families (two to three rooms) or big families (four rooms or more). Movies in drama or comedy targets the whole family while love stories usually cater to couples.
For religion: Politicians are usually seen courting the religious voles of El Shaddai or the Jesus is Lord Movement during election time. Some companies are known to favor hiring members of the Inglesia Ni Kristo knowing they are not allowed to go on strike. Geographic examples: Quick chow instant mami targeted the pricesensitive CDE market in Visayas and Mindanao to become number 1 in the instant noodle industry in these regions.
Political candidates usually have their geographical stronghold – Marcos in Ilocos, Ramos in Pangasinan, Macapagal in Central Luzon, Roco in Bicol, Osmena in Cebu, Romualdez inLeyte and Rasul in Mindanao. Psychographics segmentation – dividing a market into Psychographics segmentation – dividing a market into different groups based on social class, lifestyle, or personality characteristics.
Psychographics Segmentation Variables Social Issues Personal Interest Religion Family Politics Home Work Food Drugs Health Women’s right Friends Sex Shopping Avon (by personality and profession): high school students – energetic college – romantic feminine mother/housewife – elegant charming and fresh yuppies experimental Behavioral segmentation – dividing a market into groups Behavioral segmentation – dividing a market into groups based on consumer knowledge, attitude, use, or response to a product. Behavioral Segmentation variables: variables examples 1. Purchase frequency regular , Occasional 2. User status nonuser, exuser, first time user, regular user 3. User rate heavy user, medium user, light user. 4. Loyalty status absolute, strong, medium, small, none 5. Readiness unaware, aware, interested, desirous, intending to buy In terms of purchase frequency:
In terms of purchase frequency: Tower Inn in Davao specializes in serving the “regular or frequent travelers” segment like businessmen, auditors, and sales executives instead of tourists who are occasional users. San Miguel beer tried to reverse a steadily declining beer market by launching their “Affordaboys: price off campaign in 1996 after they noticed that their flagship brand has been relegated to an occasional purchase with the presence of more and more beverage substitutes.
For user rate: San Miguel Beer has the San Miguel Grande size for the heavy users segment while Pale Pilsen is for regular users. Credit card companies like Visa and MasterCard cluster their customers based on “revolver” or those who pay on installment, and “transactor” or those who pay their bills in full. For loyalty:
For loyalty: Mobile phone players like Smart and Globe entice existing users to switch from a competing brand by offering a set of benefits exclusive to switchers, obviously targeting the nonloyal segment.
Airlines like Northwest and Cathay Pacific have their versions of frequent flyer programs that encourage loyalty to their airlines or other airlines allied with them. For readiness: Family First, the pioneer in selling preneed plans in the malls, sends thousands of direct mails regularly offering prizes that entice consumers to visit them for a product presentation.
Advertising agencies can segment consumers based on their expected purchase behavior. A hard sell ad is placed in the yellow pages and a softer sell ad in the newspapers. Segmenting Business Markets – industrial marketing or businesstobusiness markets. Industrial Segmentation Variables Examples 1. Demographic Industry, company size, geography 2. Operating Variables User/nonuser status, customer requirements, technology 3. Purchasing approaches Purchase policies, organization, decision criteria 4. Situation factors Urgency, specific application or end use, order size 5. Personal characteristics Compatibility, attitude toward risk, loyalty. In industrial market demographic segmentation:
In industrial market demographic segmentation: Water Care focuses its water purifiers to the fast food industry, Aqua Soft in supplying the needs of the water refilling stations and PURA in corporate accounts. (industry type) Companies distributing bottled water in dispensers like Wilkins and Viva would target companies with more employees (company size). Pioneer HiBred Agricultural Technologies (PHAT), the market leader in corn seeds, has different products for different areas (geography) depending on the type of soil.
Using operating variables: San Miguel foods, a major player in animal feeds, may try to convince existing users of “food leftovers” to shift to using their BMeg animal feeds (user/nonuser status) San Miguel foods may also choose the big farm segment where the customers would require more services (customer requirements) such s having BMeg animal specialists helping them attain better efficiency. Electronic billboard suppliers can target advertisers who prefer digital hi
tech displays as opposed to traditional panel boards 9technology) By purchasing habits:
By purchasing habits: Generator supplier may choose to concentrate on companies who prefer to lease than buy the generator unit (purchase policy) . They may also choose companies with centralized or decentralized operations (organizations)
By situational factors: Some automotive repair shops focus on a “niche” of companies needing quick service (urgency). Manila Cordage can offer their heavyduty ropes to those in the shipping industry, or those interested in camping (specific enduse). The food service group of RFM can offer their meat products to restaurant chains for bulk orders or to small individual restaurants (order size). By personal characteristics:
By personal characteristics: Companies supplying products or services to the government may choose to transact with the departments or bureaus that can deal with them professionally (compatibility). Advertising companies can choose corporate clients who value creative innovation more than tradition (attitude towards risk). Insurance companies like Insular Life that tap into corporate accounts may segment clients according to companies that automatically renew every year versus companies that hold a yearly bidding (loyalty). Segmenting International Markets Geographic location Economic Factors Political and Legal factors Cultural factors Intermarket segmentation – an approach whereby a company form segments of consumers who have similar needs and buying behavior even though they are located in different countries. Requirements for effective segmentation
1.Measurable 4. differentiable
2.Acessible 5. actionable
3.Substantial Market Targeting Evaluating Market Segments
Target market – a set of buyers sharing common needs or characteristics that the company decides to serve. Four target marketing strategies 1. Undifferentiated (mass) Marketing – a market
coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. 2. Differentiated (segmented) marketing – a market
coverage strategy in which a firm decides to target several market segments and designs separate offers for each. 3. Concentrated (niche) marketing – a market=coverage strategy in which a firm goes after a large share of one or a few segments or niches. 4. Micromarketing – the practice of tailoring products and marketing programs to the needs and wants of specific individuals and local customer groups. Local marketing – tailoring brands and promotions to the needs and wants of local customer groups – cities, neighborhoods, and even specific stores.
Individual marketing – tailoring products and marketing programs to the needs and preferences of individual customers – also labeled “customized marketing”, “one –to
one marketing” and “marketsofone marketing”. Factors to consider in choosing a targeting strategy: 1. Company Resources 2.Product Variability 3.Products life cycle stage 4.Market Variability 5. Competitor’s Marketing Strategies Differentiation and Positioning Product position – The way the product is defined by consumers on important attributes – the place the product occupies in consumers’ minds relative to competing products.
Positioning Maps – show consumer perceptions of their brands versus competing products on important buying dimensions – price and performance. Steps in choosing differentiation and positioning strategies: 1. identifying a set of possible customer value differences and competitive advantages. 2. choosing the right competitive advantages. 3. selecting an overall positioning strategy. Identifying possible value differences and competitive advantages Competitive advantage – an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. product, services, channels, people or image. Chapter 10 Pricing Strategies
Chapter 10 Pricing Strategies Price – the amount of money charged for a product
Function of Price:
1. making the product affordable to its target market
2. reflecting the value of the product.
2. Factors to consider in pricing
1. Internal factors
a. product cost
2. External factors
a. market demand
b. Pricing Strategy – a reasoned choice from a set of alternative prices that aim at profit maximization within a planning period in response to a given scenario.
Pricing Strategies: 1. NewProduct Pricing Strategies – for products in the introductory stage of the product life cycle. 2. Product Mix Pricing Strategies – for related products in the product mix 3. Priceadjustment strategies – for customer differences and changing situations 4. Strategies for initiating and responding to price changes. New Product Pricing Strategies 1. MarketSkimming Pricing – setting a high price for a new product to skim maximum revenues layer by layer from the segments wiling to pay the high price; the company makes fewer but more profitable sales. 2. MarketPenetration – setting a low price for a new product in order to attract a large number of buyers and a large market share. Product Mix Pricing Strategies Product line pricing Optionalproduct pricing Captiveproduct pricing Byproduct pricing Bundle pricing 1.
1. 2. 3. 4. 5. Product line pricing – setting price steps between product line items.
Optionalproduct pricing – pricing optional or accessory products sold with the main product.
Captiveproduct pricing – pricing products that must be used with the main product.
Byproduct pricing – pricing lowvalue by
products to get rid of them.
Product bundle pricing – pricing bundles of products sold together. 1. PriceAdjustment Strategies
Discount and Allowance Pricing – reducing prices to reward customer responses such as paying early of promoting the product. a. cash discounts b. quantity discounts c. functional discount (trade discount) d. seasonal discount e. tradein allowances f. promotional allowances 2. Segmented Pricing – adjusting prices to allow 2. for differences in customers, products, or locations. a. customersegmented pricing b. productform pricing c. location pricing d. time pricing 3. Psychological Pricing – adjusting prices for psychological effect.
4. Promotional Pricing – temporarily reducing prices to increase shortrun sales. a. lossleader pricing b. special event pricing c. cash rebates 5. Geographical Pricing – adjusting prices to account for the geographic location. a. FOB Origin – pricing strategy in which goods are placed free on board a carrier. b. Uniform delivered pricing – the company charges the same price plus freight to all customers, regardless of their location. c. Zone Pricing – the company sets up two or more zones. All customers within a zone pay the same total price. d. Basingpoint pricing – the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer. e. Freightabsorption pricing – the seller absorbs all or part of the freight charges in order to get the desired business. 6. Fixed Price Policies – setting one price for all 6. Fixed Price Policies – setting one price for all buyers. Dynamic Pricing – adjusting prices continually to meet the characteristics and needs of individual customers and situations.
7. International Pricing – adjusting prices for international markets considering economic conditions, competitive situations, laws and regulations, and development of the wholesaling and retailing system. Strategies for initiating and responding to price changes When to Increase Price When to Sell Below When to Increase Price When to Sell Below Cost Inflation Perishable Goods Foreign Exchange Phaseout Products Shortages Damaged Products Product Repositioning When to Cut Price Lower Cost Falling Market Shares Excess Capacity Excess Inventory Chapter 11 – Understanding Marketing Channels Chapter 11 – Understanding Marketing Channels and Supply Chain Management Marketing Channel (distribution channel) – a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user. Supply Chain Management – managing upstream and downstream valueadded flows of materials, final goods and relation information among suppliers, the company, resellers, and final consumers. Upstream – set of firms that supply the raw materials, components, parts, information, finances, and expertise needed to create a product or service. Downstream – focused on the marketing channels or distribution channels that look forward toward the customer. Value Delivery Network – who “partner” with each other to improve the performance of the entire system. Number of Channel Levels Channel Level – a layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. a. Direct marketing channel b. Indirect marketing channel Channel conflict disagreement among marketing channel members on goals and roles – who should do what and for what rewards. a. Horizontal conflict b. Vertical conflict Conventional distribution channel – consists of one or more independent producers, wholesalers, and retailers who seek to maximize its own profits. Vertical marketing system – consists of producers, wholesalers, and retailers acting a a unified system. One channel owns the others, has contracts with them or has so much power that thy must all cooperate. Producer Wholesaler Producer
Wholesaler Retailer Retailer Consumer Consumer Conventional marketing Vertical marketing Channel system 3 types of VMS: 1. Corporate VMS – corporate ownership along the channel. 2. Contractual VMS – channel members agree by contract to cooperate with each other. Franchise organization – a contractual vertical marketing system in which a channel member, called a franchiser, links several stages in the production
distribution process. a. manufacturer sponsored retailer b. manufacturer sponsored wholesaler c. servicefirm sponsored retailer 3. Administered VMS – channel members informally agree to 3. Administered VMS – cooperate with each other. Horizontal marketing system two or more companies at one level join together to follow a new marketing opportunity. Multichannel distribution system – a single firm sets up two or more marketing channels to reach one or more customer segments. Disintermediation – the cutting out of marketing channel intermedieares by product or service producers, or the displacement of traditional resellers by radixal new tyupes of intermediaries. Producer Distributors
Segment 1 Dealers Consumer Segment 2 Business
Segment 1 Business Segment 2 Multichannel Distribution System Channel Design Decisions 1. Analyzing consumer needs 2. Setting channel objectives 3. Identifying major channel alternatives a. types of intermediaries b. number of intermediaries c. responsibilities of each channel member. 4. Evaluating the major alternatives. TANGIBLE GOODS THAT THE BENEFITS WE ENJOY
FIXTURES MERCHANDISING & DISPLAY
PROMOTIONAL MATERIALS MONEY,CHEQUES,
REAL ESTATE PROPERTIES
(LAND & BUILDINGS) FINISHED GOODS INVENTORY PHYSICAL OBJECTS AS
AUDIOVISUAL EQUIPMENT & SUPLIES GOODS & MERCHANDISE
IN SALES OUTLETS INDIVIDUALS OR GROUPS
THAT SATISFY THE NEED AND WANT MARKETING EDUCATORS,TRAINORS,
RESOURCE SPEAKERS OFFICE,FACTORY
FIELS WORKERS SALES AND MARKETING
SOCIAL WORKER JOB APPLICANTS,STUDENTS
PERSONALITIES NOMINEES FOR PROMOTIONS or
ADVANCEMENT POLITICAL CANDIDATES
PRESIDENTS AND CEO`S
MANAGER & EXECUTIVES PERSONS
ENGINEERS INTANGIBLES THAT INVOLVES HUMAN OR MECHANICAL
TRAVEL & TRANSPORT SERVICE HOTEL &RESTAURANT SERVICES HEALTH SERVICES BANKING & PAWNSHOP SERVICES EDUCATIONAL & CONSULTANCY
SERVICES PRENEED & INSURANCE SERVICES PROFESSIONAL SERVICES OF
& BEAUTY SERVICES SERVICE AS PRODUCTS MARKETABLE AND DESIRABLE LOCATIONS SOUVENIR & MEAT SHOPS RESTAURANT & FASTFOOD
CENTERS SHOPPING MALLS NIGHT MARKETS ACATIONAL RESORTS
AND HOTELS TOURIST DESTINATIONS
CHURCHES,CHAPELS & TEMPLES GAMBLING & RECREATIONAL
CENTERS PLACES AS
PRODUCTS A PHILOSOPHY,A CONCEPT
OR IMAGE THAT CAN BE
COPY CLAIM UNIQUE SELLING PREPOSITIONS DOCTRINES THESIS,DESSITATION SOCIALPOLITICAL
NVIRONMENTAL CONCERNS HYPOTHESIS
CONCEPTUAL FRAMEWORK IDEOLOGY
STUDIES TERM PAPER
PRODUCTS ENTITIES THAT SEEKS
COOPERATIVE & CREDIT
UNIONS ROTARY CLUBS
LIONS,K OF C
ELIGIOUS ORDERS &
CONGREGATIONS SOCIALCIVICCULTURAL LABOR UNIONS TECHNOLOGICAL INSTITUTIONS COTTAGE & SMALL
MEDIUM SCALE INDUSTRIES HEALTH FITNESS
AS PRODUCTS ANYTHING FOR MENTAL,
PHYSICAL & SPIRITUAL
WELLBEING FGD CONFERENCES
OUTREACH SEMINARS & WORKSHOPS
COUNSELING SYMPOSIA GYMNASTICS
EROBICS BODY BUILDING BALLROOM DANCING ACTIVITIES AS PRODUCTS MARKETABLE DATA BANK RETIAL PRICE
& DEVELOPMENT SEC FINANCIAL
STATEMENT BY INDUSTRY INFORMATION
INDUSRTY & MARKET
MARKET FORECAST &
TRENDS INFORMATION AS PRODUCTS PARTICULARS STRATEGY TANGIBLE GOODS THAT
NORMALLY SURVIVE MANY
USES OR THAT LAST AFTER THE
PURCHASE TIME. SUPPLIER CREDIBILITY &
REABILITY.MORE SELLER GUARANTEE
& WARRANTY.HIGHER CUSTOMER
SERVICE LEVEL.STRICTER QC
STANDARD. APPLIANCES FURNITURES FASHION WEAR JEWELRIES EQUIPMENT
DURABLE GOODS PARTICULARS TANGIBLE GOOD NORMALLY
CONSUMEIN ONE OR FEW USES,
EVERY DAY OR ANYTIME HOUSEHOLD PRODUCTS SALT,SUGAR,VINEGAR,COOKING
BUTTER,& JAMS FRUITS &
VAGETABLE STRATEGY AVAILABILITY & VISIBILITY
AT THE POINTOF SALE OR IN MANY
PROMOTIONSMIX EFFORTS BEVERAGES,JUICES,
NONDURABLE GOODS PARTICULARS INTANGIBLE ACTIVITIES,
BENEFITS & SATISFACTIONS
THAT ARE PERISHABLE. HEALTH & BEAUTY FACELIFT,FACIAL&BODY
HAIR COLOR,MANICURES AND PEDICURES. STRATEGY SUPPLIER IMAGE & REPUTATION.
ROAD & BRIDGE
REPAIRS REPAIRS & MAINTENANCE
AUTO & HOUSE REPAIRS,AIR
PUTER CHECKUPS & PARTS REPLACEMENTS SERVICE PRODUCTS PARTICULARS STRATEGY GOODS INCLUSIVE OF MATERIAL & PARTS,
SUPPLIES & SERVICES:
CAPITAL ITEMS. MAINTENANCE & REPAIR
SERVICES SUPPLIED UNDER
CONTRACT,BY PRODUCERS. MANUFACTURING
PARTS RAW MATERIALS FOR
FARMS & NATURAL
PRODUCTS EQUIPMENTS &
INSTALLATIONS MAINTENANCE &
REPAIR SERVICES OPERATING SUPPLIES
REPAIR ITEMS BUSINESS ADVISORY
SERVICES INDUSTRIAL GOODS/SERVICES PARTICULARS GOODS UNFAMILIAR OR
CONSUMERS DO NOT
NORMALLY THINK OF BUYING. MEMORIAL PLANS
CEMETERY LOTS STRATEGY DIRECT SELLING.
CHANNELS. HEALTH FOODS
SMOKE DETECTORS STEAM LAUNDRY
HOUSE & CAR
SYSTEM EDUCATIONS &
PENSION PLAN UNSOUGHT GOODS CONVINIENCE
IMMEDIATELY & WITH
THE LEAST OF EFFORT NEWSPAPER,MAGAZINES,
HOUSEHOLD CONDIMENTS STAPLE GOODS PURCHASED ON A REGULAR
COFFEE,CHOCOLATES,KETCHUP IMPULSE GOODS PURCHASED WITHOUT
PLANNING OR SEARCH
CHECKOUTCOUNTERS EMERGENCY GOODS PURCHASED WHEN A
NEED IS URGENT
UMBRELLAS DURINGRAIN GOODS COMPARATIVEY PURCHASEDON THE BASIS
OF STYLE,DESIGN,QUALITY,AND,OTHER ATTRIBUTES
MUSICAL INSTRUMENT FASHION JEWELRIES APPLIANCES FASHION WEAR FURNITURES & FIXTURES SIGNATURE CLOTHING,SHOES & BAGS PANTIES,BRIEFS,BRAS & GIRDLE COSMETICS,TOILETRIES,SKIN CARELINES SHOPPING GOODS
SWIMMING GEAR SPORTS WEAR
TV/COMPUTER MOBILE WEB PHONES ...
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- Spring '11