unit 2 there are Marketing Mix in the system position.

there are Marketing Mix in the system position.

1. 1
MARKETING MIX

2. 2
•Marketing mix refers to the primary elements
that must be attended to in order to properly
market a product or service.
•Marketing mix is the combination four elements:
Product, Place, Price and Promotion. They are
called the “Four Ps of the marketing mix”.
•Marketing Mix is a term describing the key
elements used by an organization to help meet its
marketing objectives
MARKETING MIX

3. 3
MARKETING MIX
Customer
Solution
Customer
Cost
Communication
Convenience

4. 4
7 P’s OF MARKETING

5. 5
To create the right marketing mix,
businesses have to meet the following
conditions:
•The product has to have the right features –e.g. it
should look good and work well.
•The price should be right.
•The goods must be in the right place at the right
time. Making sure that the goods arrive when and
where they are wanted is an important operation.
•The target group needs to be made aware of the
existence and availability of the product through
promotion. Successful promotion helps a firm to
spread costs over a larger output.

6. 6
PRODUCT
•To find out what customers want & need & then develop
a product to meet the need of the potential customers.
•Suppose now: The competitors products offer the same
benefits, same quality, same price. You have then to
differentiateyour product with the following:
–Design
–Technology
–Usefulness
–Convenience
–Quality
–Packaging
–Accessories
–Warranty

7. 7
Price
A product is only worth what a customer is prepared to pay
for it.
Premium Pricing.
Use of high pricing where there is a uniqueness about the
product or service. This approach is used where a a
substantial competitive advantage exists. Such high prices
are charge for luxuries such as Cruises, Luxury Hotel
rooms, Designer products.
Penetration Pricing.
It is the strategy of entering the market with a low initial
price to capture greater market share.

8. 8
PriceSkimming.Thepracticeof‘priceskimming’involves
chargingarelativelyhighpriceforashorttimewherea
new,innovative,ormuch-improvedproductislaunched
intoamarket.
Thepricesaresethighinordertoattractleastprice
sensitivecustomerstogeneratehighprofits.
Competitivepricing:Ifyourproductissoldatthelowest
priceregardingallyourcompetitors,youarepracticing
competitivepricing.Sometimes,competitivepricingis
essential.Forinstance,whentheproductsarebasically
thesame,thisstrategywillusuallysucceed.

9. 9
Promotion
•Thisisthewayinwhichyoucommunicatetoyourpotential
customersaboutyourproduct.
•Itincludesthevariouswaysofcommunicatingtothe
customersofwhatthecompanyhastooffer.Itisabout
communicatingthefeatures/benefitsofusingaparticular
productorservice.
–Advertisement:It takes many forms like TV, radio,
internet, newspapers, yellow pages, Leaflets, Posters etc.
–Sales Promotion:Buy One Get One Free. Others include
couponing, money-off promotions, free accessories (such
as free blades with a new razor), introductory offers
(such as buy digital TV and get free installation) and so
on.
–Personal Selling:It is an effective way to manage
personal customer relationships. The sales person acts on
behalf of the organization.

10. 10
Place
It refers to the place where the customers
can buy the product and how the product
reaches out to that place. This is done
through different channels like:
•Retails
•Wholesale
•Internet
•Mail orders
•Direct Sales

11. 11
•An essential ingredient to any service provision is the use of
appropriate staff and people. Recruiting the right staff and
training them appropriately in the delivery of their service is
essential if the organization wants to obtain a form of
competitive advantage. Staff should have the appropriate
interpersonal skills, attitude, and service knowledge to provide
the service that consumers are paying for.
People
Process
•It refers to the methods and process of providing a
service Processes must help the customers get what
they want. Always keep customers informed. This can
be done at the store or through faxes and emails.

12. 12
Physical Evidence
This is particularly important in services marketing as it is the only
physical items that a customer will see and so it must reflect the image
that the service is trying to project. including some of the following:
Internet/web pages.
Brochures.
Furnishings.
Signage (such as those on aircraft and vehicles).
Uniforms.
Business cards.
The building itself (such as prestigious offices or scenic headquarters).

13. 13
Product & Product Mix

14. 14
What is a Product?
Product-Bundleofphysical,service,and
symbolicattributesdesignedtoenhancebuyers’
wantsatisfaction

15. 15
The Product and Product
Mix
Five Product
Levels

16. 16
Classifying Goods and Services for
Consumer and Business Markets
•Consumer products: products destined
for use by ultimate consumers
•Business (or B2B) products: those that
contribute directly or indirectly to the
output of other products for resale
–Also called industrial or organizational
products

17. 17
Types of Consumer Products

18. 18
•Convenience product: good or service
that consumers want to purchase
frequently, immediately, and with
minimal effort
–Impulse goods and servicesare
purchased on the spur of the moment.
–Staplesare convenience goods and
services that consumers constantly
replenish to maintain a ready inventory.
–Emergency goods and servicesare bought
in response to unexpected and urgent
needs.

19. 19
Gum and Candy
An Impulse Convenience Good

20. 20
•Shopping product: good or service
purchased only after the customer
compares competing offerings from
competing vendors on such
characteristics as price, quality,
style, and color
–Typically cost more than convenience
purchases.
–Include tangible items.
–Shopper lacks complete information and
gathers information during the buying
process.

21. 21
Ads for shopping products

22. 22
•Specialty product: good or service
with unique characteristics that
cause the buyer to value it and make
a special effort to obtain it

23. 23
•Gucci
A Specialty
Product
–Print reads:
Gucci
timepieces

24. 24
•Unsought
product: good
or service
marketed to
consumers who
may not yet
recognized in
the need for it
–Pet Insurance

25. 25
•Installation:
major capital
investment by a
business buyer
that typically
involves
expensive and
relatively long-
lived products,
such as a new
factory or piece
of heavy
machinery
Types of
Industrial Goods

26. 26
•Accessory
equipment: capital
product, usually
less expensive
and shorter-lived
that insulation,
such as a laptop
computer
–Industrial
distributor--
wholesaling
marketing
intermediary

27. 27
•Component parts and
materials: finished
business products that
become parts of buying
firms’ final products, such
as spark plugs for new cars
•Raw materials: business
product, such as a farm
product (wheat, cotton,
soybeans) or natural
product (coal, lumber, iron
ore) that become part of a
final product

28. 28
•Supplies: products that represent
regular expenses necessary to carry
out a firm’s daily operations but are
not part of the final product.
Supplies are sometimes called MRO
items
–MRO [Maintenance, Repair, Operating
Supplies] item: part of business supplies
categorized as maintenance items, repair
items, or operating supplies such as light
bulbs, nuts and bolts used in repairing
equipment, or pencils

29. 29
•Business services:
intangible product
purchased to
facilitate a firm’s
production and
operating processes
such as financial
services, leasing of
vehicles, legal advice
and consulting
–Wireless
Communications for a
Mobile Workforce

30. 30
Product and Service
Decisions
•Individual Product
•Product Line
•Product Mix
•Product attributes
–Quality, features, style
and design
•Branding
•Packaging
•Labeling
•Product support
services
Key Decisions

31. 31
Product and Service
Decisions
•Product line
–A group of products that
are closely related
because they may:
•function in a similar
manner
•be sold to the same
customer groups,
•be marketed through the
same types of outlets
•fall within given price
ranges
Key Decisions
•Individual Product
•Product Line
•Product Mix

32. 32
Product and Service
Decisions
•Individual Product
•Product Line
•Product Mix
•Product line length
–Line stretching:adding
products that are higher
or lower priced than the
existing line
–Line filling:adding more
items within the present
price range
Key Decisions

33. 33
Product and Service
Decisions
•Individual Product
•Product Line
•Product Mix
•Product mix
–Also known as product
assortment
–Consists of all the
product lines and items
that a particular seller
offers for sale
Key Decisions

34. 34
Product and Service
Decisions
•Individual Product
•Product Line
•Product Mix
•Product mix width:
–Number of different
product lines carried by
company
•Product mix depth:
–Number of different
versions of each product
in the line
Key Decisions

35. 35
Product Lines and Product Mixes at Gillette

36. 36
•Product Mix Decisions
–A firm may lengthen or widen its product
mix
–A Company may decide to add variations
that will attract new users
–A product may be pruned or altered, and
new product may extend the product life
cycle
–Line extension: introduction of a new
product that is closely related to other
products in the firm’s existing line

37. 37
New Product Development

38. 38
Causes of New Product Failures
•Overestimation of Market Size
•Product Design Problems
•Product Incorrectly Positioned, Priced or
Advertised
•Costs of Product Development
•Competitive Actions
•To create successful new products, the
company must:
–understand it’s customers, markets and
competitors
–develop products that deliver superiorvalue
to customers.

39. 39
New Product
Development
•Six product development options:
–New-to-the-world products (discontinuous
innovations)
–New product lines
–Product line extensions
–Improvements or revisions of existing products
–Repositioning
–Cost reductions

40. 40
Idea
Generation
Idea
Screening
Concept
Development
and Testing
Marketing
Strategy
Business
Analysis
Product
Development
Test
Marketing
Commercialization
New Product Development Process

41. 41
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New Product Development Process
Step 1. Idea Generation
Idea Generation is the Systematic
Search for New Product Ideas Obtained
Internally and From:

42. 42
New Product Development Process
Step 3. Concept Development & Testing
1. Develop Product Ideas into
Alternative
Product Concepts
2. Concept Testing -Test the
Product Concepts with Groups
of Target Customers
3. Choose the Best One

43. 43
New Product Development Process
Step 3. Concept Development & Testing
1. Develop Product Ideas into
Alternative
Product Concepts
2. Concept Testing -Test the
Product Concepts with Groups
of Target Customers
3. Choose the Best One

44. 44
New Product Development Process
Step 4. Marketing Strategy Development
Part Two Describes Short-Term:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
Marketing Strategy Statement Formulation
Part One Describes Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share

45. 45
New Product Development Process
Step 5. Business Analysis
Step 6. Product Development
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives
If Yes, Move to
Product Development
If No, Eliminate
Product Concept

46. 46
New Product Development Process
Step 7. Test Marketing
Standard
Test Market
Full marketing campaign
in a small number of
representative cities.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
Controlled
Test Market
A few stores that have
agreed to carry new
products for a fee.

47. 47
Product Life Cycle
Time
Product
Develop-
ment
Introduction
Profits
Sales
Growth Maturity Decline
Losses/
Investments ($)
Sales and
Profits ($)
Sales and Profits Over the Product’s Life From
Introduction to Decline

48. 48
The Product Life Cycle
•Product life cycle: progression of products
through introduction, growth, maturity, and
decline stages

49. 49
Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Costs
Profits
Marketing Objectives
Product
Price
Low sales
High cost per customer
Negative
Create product awareness
and trial
Offer a basic product
Use cost-plus
Distribution Build selective distribution
Advertising
Build product awareness among
early adopters and dealers

50. 50
Growth Stage of the PLC
Summary of Characteristics, Objectives, &
Strategies
Sales
Costs
Profits
Marketing Objectives
Product
Price
Rapidly rising sales
Average cost per customer
Rising profits
Maximize market share
Offer product extensions,
service, warranty
Price to penetrate market
Distribution Build intensive distribution
Advertising
Build awareness and interest in
the mass market

51. 51
Maturity Stage of the PLC
Summary of Characteristics, Objectives, &
Strategies
Sales
Costs
Profits
Marketing Objectives
Product
Price
Peak sales
Low cost per customer
High profits
Maximize profit while defending
market share
Diversify brand and models
Price to match or best
competitors
Distribution Build more intensive distribution
Advertising
Stress brand differences and
benefits

52. 52
Decline Stage of the PLC
Summary of Characteristics, Objectives, &
Strategies
Sales
Costs
Profits
Marketing Objectives
Product
Price
Declining sales
Low cost per customer
Declining profits
Reduce expenditure and milk the
brand
Phase out weak items
Cut price
Distribution
Go selective: phase out
unprofitable outlets
Advertising Reduce to level needed to retain
hard-core loyal customers

53. 53
Brand Decisions
•The AMA definition of a brand:
“A name, term, sign, symbol, or design, or
a combination of these, intended to
identify the goods or services of one
seller or group of sellers and to
differentiate them from the
competition.”

54. 54
Brand Decisions
•Brand equityrefers to the positive
differential effect that a brand name has on
customers.
•Brand equity:
–is related to many factors.
–allows for reduced marketing costs.
–is a major contributor to customer equity.

55. 55
Packaging and
Labeling
Secondary Package
Primary
Package
Shipping
Package
Packaging
Aspects

56. 56
Packaging and Labeling
•Developing an
effective package:
–Determine the
packaging concept
–Determine key package
elements
–Testing:
•Engineering tests
•Visual tests
•Dealer tests
•Consumer tests

57. 57
Packaging and Labeling
May Promote the Product
Functions of Labeling
May Describe the Product
May Identify Product Grade
Identifies the Product or Brand

58. 58
Pricing Decisions

59. 59
Pricing Decisions
Price X Volume=Revenue
All other elements of marketing mix
add up to the cost
Price can be a major differentiator
(apart from other factors)
Apart from cost of goods, there are
other factors which impact the
pricing decisions.

60. 60
Factors affecting pricing
Internal
•Corporate/Marketing objectives
•Characteristics of the product
•Price elasticity of the product
•Stage of product in PLC
•Cost of manufacturing
•Other elements of marketing mix

61. 61
Factors affecting pricing
External Factors
•Market characteristics*
•Competitors’ pricing strategy
•Cartels
•Government controls/regulations
•Social responsibility of business

62. 62
Pricing Objectives
•Profit maximization -Short term or long
term?
•ROI, profit margin (in line with
corporate objectives)
•Volume/market share
•Market penetration/Development
•Tackling competition
•Social development
Usually a set of objectives is chosen

63. 63
Common approaches to Pricing
Cost based
Demand based
Competition based
Value based
Affordability based
Tender based

64. 64
Cost based pricing
•Cost plus (mark-up)
•Full cost*(absorption cost)
What are the demerits?
•Target ROR
More scientific. Less flexible.
•Marginal cost pricing
Direct VC+A portion of FC
Effective tool to fight competition, particularly in
tenders.
Should be used on a selective, short term basis.

65. 65

66. 66
Pricing Decisions
Break Even Analysis
Volume at which revenue equals cost
Price Elasticity of Demand
PED = change in demand/change in price
Both numerator and denominator are in
percentages
If PED < 1 the product is price inelastic
If PED > 1 it is elastic

67. 67
Demand based pricing
•Skimming
Price initially high. Subsequently lowered.
•What traffic can bear
A variant of skimming. Mostly adopted by retailers
in the short-term.
•Penetration
Opposite of skimming. Higher volumes at a
reasonable price. Keeps the competition out.

68. 68
Competition Based Pricing
•Premium pricing
•Discount pricing
•Going rate pricing

69. 69
Value based pricing
Purpose of pricing is not to recover costs
but to capture the value of product
perceivedby customer
As long as the marketer is able to deliver
the value in excess of his cost his profits
are ensured
Price=Value>Cost

70. 70
Differential Pricing
Also known as discriminatory pricing
E.g. Entry fees for foreigners higher than
the normal fees
Indian editions of books costing less than
international editions
Registration fee for students <normal fees

71. 71
Affordability based
pricing
•Price<Cost
•Social welfare pricing.
•Subsidized by state.
•Distribution normally through PDS

72. 72
Tender based pricing
Prices are quoted in sealed bids
Usually followed by Government agencies
Quoting the right price-A challenge to the
bidder

73. 73
Pricing Strategies for New
Products
Pricing decisions for new products evolve out of
a)Purpose for which company has developed the
new product *
b)Uniqueness of the product
Common pricing strategies for new products are
1.Skimming pricing
2.Penetration pricing

74. 74
Pricing Policies
•Psychological pricing-Price gives out cues
about quality.
Rs49.90 or Rs 50?Psychologically it makes a lot of
difference.
•Influence of other elements of marketing
mix-Pricing can not be decided in isolation. TCO
(Total Cost of Ownership) should be effectively
communicated for high involvement products.
•Transfer pricing-Price charged by one division
to another

75. 75
Price Adjustments
•Geographical Pricing
Different prices for different regions based
on the cost of transportation
•Promotional Pricing
To maximize sales for a limited period .
•Experience curve pricing
Entrypriceusuallylow.Marginscanbe
improvedgraduallybyloweringthecostof
productionastheemployeesmasterthe
technologybygainingonexperience.

76. 76
Price Adjustments
Product Mix Pricing
•Product line pricing-Product lines are optimally
priced. Not necessarily individual products.
•Optional feature pricing-Basic product +Add ons
(Car accessories)
•Captive product pricing-Spares priced relatively
higher than the basic product. (Consumer durables,
computers)
•Two-part pricing-Fixed +Variable components of
pricing (Mobile service providers)
•By-Product pricing-Sugar and molasses
•Product bundling pricing-Computer manufacturers,
Mobile service providers

77. 77
Price Changes
•Buyers’ perceptions-Frequent price
increases annoy buyers. They have to
be taken into confidence.
•Competitors’ reactions-To be
predicted. Price wars harm industry as
a whole.

78. 78
Pricing-Miscellaneous
Other pricing strategies
•Value pricing-EDLP. Through innovations.
•Auctions-Online, auction houses
•Group pricing (Cooperative societies)
•Loss-Leader pricing (Promotional pricing) .
Attracts more foot falls.

79. 79
Pricing-Miscellaneous
Commercial terms
FOB -Freight on Board. The dispatcher's responsibility/cost
etc is limited to getting the product on board the ship/flight
C&F-"Cost and Freight" paid to a point of destination and
included in the price quoted
CIF-Cost, Insurance and Freight (CIF) is a common term in a
sales contract that may be encountered in international
trading when ocean transport
Door Delivery -Distribution and deliverycombined air sea
freight services, air and sea export freight consolidation,
custom consultation as well as clearance
Activity Based Costing (ABC)
Instead of allocating costs arbitrarily, it is done based on actual
activities involved to arrive at the real contribution/profit