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Marketing management notes NUST ZIMBABWE 2014

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Marketing management notes NUST ZIMBABWE 2014

  1. 1. WELCOME TO THE MARKETING MANAGEMENT MODULE LECTURER: MR J. RANGANAI OFFICE SD 17 (Business Management Dept) Email: ranganaij@gmail.com Cell: 0772 122 120 /0713 421 422 /0733 236 657 Marketing Management @ NUST 2014
  2. 2. Marketing & Marketing Management Marketing consists of individual & organizational activities that facilitate & expedite satisfying exchange relationships in a dynamic environment through the creation,distribution,promotion & pricing of goods. Marketing Management @ NUST 2014
  3. 3. The Marketing Management Process Marketing Management is the process of planning, organising,implementing & controlling marketing activities to facilitate & expedite exchanges effectively & efficiently. ANALYSIS Collect and analyse marketing Information (Environmental scanning) MONITOR and CONTROL Outcomes Set standards and Measurements IMPLEMENTATION Resource allocation, organising, programmes PLANNING Take decisions about which consumers to satisfy and the marketing mix Marketing Management @ NUST 2014
  4. 4. Needs Wants and Demands Needs ;- state of felt deprivation.  Physiological needs, social needs, individual needs for fulfillment.  Most basic concept underlying marketing Wants ;- desires shaped by culture and individual personality. Demands ;- wants backed by purchasing power.  Given their resources, people demand products with the benefits that give them the most satisfaction.  Desire + Ability + Willingness + Authority = Effective Demand  Desire – needs/wants  Ability – have resources for exchange  Willingness – want to spend the resources  Have legal capacity to enter into exchanges. Marketing Management @ NUST 2014
  5. 5. Value and Satisfaction Customer Value ;- the relationship between the benefits the customer gains from owning and using the product and the costs of obtaining the product.  Benefits can be functional and emotional  Costs can be monetary (price), time & energy costs.  Perceived value the key to understanding customer judgments e.g. Is Omo better than Sunlight? Customer Satisfaction ;- the extent to which a product’s perceived performance matches a buyer’s expectations.  Benefits of customer satisfaction include; (1) repeat purchases, (2) less price sensitivity, (3) positive word of mouth to friends and thus customer loyalty. Marketing Management @ NUST 2014
  6. 6. Customer Relationships Relationships - The process of creating, maintaining and enhancing strong, value driven relationships with customers. (Kotler; 2003). Important to create mutually beneficial relationships because:  Costs five times as much to attract a new customer as it does to keep a current customer satisfied.  Losing a customer means losing the entire stream of purchases the customer would make over a life-time of purchases.  A happy customer normally tells 2 or 3 other people but a disappointed customer will normally inform 10 or more people. Marketing Management @ NUST 2014
  7. 7. Marketing Management Philosophies *The orientations under which organisations may conduct their marketing activities namely: (i) Production Concept:Orgs that employ this concept assume that customers are only interested in the availability of products at lower prices such that marketing is not really necessary. (ii) Selling Concept: Companies oriented towards selling focus on selling whatever they make -They assume that customers will resist or are reluctant to purchase products or services not essential to them and therefore employ creative advertising and aggressive salespeople to overcome customer resistance/reluctance Marketing Management @ NUST 2014
  8. 8. Marketing Management Philosophies (iii) Product Concept: Premised or based on the belief that customers favour quality, performance or innovative featuresand will buy the high quality products if made available. (iv) Relationship Marketing Concept: Orgs that employ this concept aim @ benefitting by nurturing long terms relationships with customers. -It aims to enhance profitability by retaining customers such that the business benefits from repeat purchases/business. Marketing Management @ NUST 2014
  9. 9. Marketing Management Philosophies (V) Societal Marketing Concept Is one of the newest of the marketing management philosophies It focuses on satisfying both customer and societal needs *It aims to fulfil what society socially expects from business in terms of the three considerations which are Society welfare Customer satisfaction Company profits Marketing Management @ NUST 2014
  10. 10. Marketing Management Philosophies (vi) Marketing Concept: Companies oriented towards the marketing concept firmly believe that the customer and the satisfaction of customer needs is key to organisational success. * Org places the customer needs at the heart of what it does and its activities are driven by the need to achieve the highest level of customer satisfaction *Pillars of the Marketing Concept Customer Centricity Organisational Integration  Mutually Profitable Exchange Marketing Management @ NUST 2014
  11. 11. Recent Marketing Challenges and Developments Rapid globalization Changes in information technology and electronic marketing Income Inequalities Ethical and socially responsible marketing Growth of non-profit marketing The Powerful Customer Marketing Management @ NUST 2014
  12. 12. Concept of the Marketing Mix * A combination of controllable elements that are used by marketers to satisfy their target markets & achieve their objectives. The traditional marketing mix (4ps) consists of: -Product -Price -Promotion -Place Marketing Management @ NUST 2014
  13. 13. Characteristics of a good marketing mix *The use of the words mix & combination in relation to the mkting mix are important in that the marketing mix can only be successful if the elements or the variables are well blended, integrated, flexible and consistent with each other. (i) Well-Blended: Means the elements must be optimally combined such that the marketer offers a quality product, whose price is consistent with the consumer `s perception of value, give it adequate promotional support and efficiently distribute it Marketing Management @ NUST 2014
  14. 14. Characteristics of a good marketing mix (ii) Integrated: Means there must be synergy between the marketing mix elements and as such no element should be used in isolation. -For example a good product that is poorly promoted will fail. -Or the other way around, trying to use creative advertising to make up for a poor product will not work either. -Similarly, no matter the level of quality, a poorly priced product will fail Marketing Management @ NUST 2014
  15. 15. Characteristics of a good marketing mix (iii) Consistent: the elements of the marketing mix must be consistent about what they say about the product. -If they are inconsistent, the consumer will reject the total offering (iv) Flexible: The marketing mix must be flexible such that it should be continuously altered and adjusted to align it with changes in customer tastes and preferences or any other changes that may alter the level of demand Marketing Management @ NUST 2014
  16. 16. Rethinking the Marketing Mix The concept of building marketing strategy around the “4ps”has been the foundational principle of marketing which has served markets well for half a century. Although the “4ps” marketing mix has endured for over a half-century, & continues to be the basis for many marketing strategies, overtime, there has been a progressively a groundswell of a push towards rethinking the bedrock principle (4ps marketing mix) in favour of including more variables or coming up with totally different models to drive competitiveness in markets as follows: Marketing Management @ NUST 2014
  17. 17. (1) Rethinking the Marketing Mix: the 7ps *The drive in the trajectory of rethinking of the 4ps started with the inclusion of an additional 3ps (people, process & physical evidence) to the traditional “4 ps ” resulting in the marketing mix having “7 ps” -Product - Price -Promotion -Place -People -Processes -Physical Evidence *The motivation for including the additional 3ps was to improve the robustness & potency of the model (marketing mix) pursuant to dealing with the challenges of service marketing Marketing Management @ NUST 2014
  18. 18. (2) Rethinking the Marketing Mix:7 C’s Scholars like Kotler have implored managers to relook at the marketing mix from the customer instead of the firm perspective thus focusing on the 7 Cs instead of 7 Ps 7 P’s  Product  Price  Place  Promotion  People  Processes  Physical Evidence 7 C’s  Customer Value  Cost  Convenience  Communication  Consideration  Co-ordination & Concern  Confirmation Marketing Management @ NUST 2014
  19. 19. (3) Rethinking the Marketing Mix: the SAVE framework *According to Motorolla, in business to business markets, the “4ps”yield narrow, product-focused strategies that are increasingly at odds with the imperative to deliver solutions. According to the org, its not that the 4 P’s are irrelevant, just that they need to be reinterpreted (to the SAVE model) in order to serve B2B markets well: S- solutions (instead of products) A- access (instead of place) V- value (instead of price) E-education (instead of promotion) Marketing Management @ NUST 2014
  20. 20. (4) Rethinking the Marketing Mix: the new 10 ps *Bhagat (2012) highlights the 10 new “Ps” as reflecting current thinking about marketing as follows: i) Passion, Philosophy, and Purpose ii) Predictive analysis: marketing information, knowledge management etc iii) People: stakeholder value, relationship marketing and customer experiences iv) Positioning: psychological value and perceptions Marketing Management @ NUST 2014
  21. 21. 4) Rethinking the Marketing Mix: the new 10 ps v) Processes: value chain linkages vi) Pricing: economic value to stakeholders; dynamic pricing; negotiations. vii) Persuasion: communicating value to stakeholders; integrated marketing communications; building & protecting brand and corporate equity viii) Performance and Profits: Return on mkting & measuring mkting productivity. viv) Philanthropy: CSR; economic, social, cultural, and environmental sustainability. (x) Prescient Prescriptions: ethics, cultural sensitivity & technology in strategic planning. Marketing Management @ NUST 2014
  22. 22. (5) Rethinking the Marketing Mix: the SIVA framework *Protano (2011) suggests a new model represented by the acronym SIVA: Product → Solution Promotion → Information & Incentive Price → Value Place → Access *Protano `s model reflects a B2B thrust similar to that of Motorolla `s SAVE framework Marketing Management @ NUST 2014
  23. 23. (6) Rethinking the Marketing Mix: the “OVER” framework *The 4 ps are “OVER” O- offer (instead of product) V- value (instead of price) E- experience (instead of place) R-relationships (instead of promotion) * Best relied on by company is creating and selling either complex services or solutions Marketing Management @ NUST 2014
  24. 24. 7) Rethinking the Marketing Mix: the new “4Es ” framework *Brian Fetherstonhaugh at Olgilvy & Mather suggests the use of the 4 E’s: i. Product → Experience ii. Place → Everyplace iii. Price → Exchange iv. Promotion → Evangelism Marketing Management @ NUST 2014
  25. 25. 7) Rethinking the Marketing Mix: the new “4ps ” frameworks Process People Platforms partners Purpose Passion Pain Power Personality Publishing Packaging Physics The above frameworks rarely make sense in terms of contrasting with the original “4ps” such that at best, they just reflect some attempts to repackage the 4 “Ps” while at worst they mirror the meaningless efforts of some people who want to be seen as having said or done something in this debate of rethinking the marketing mix Marketing Management @ NUST 2014
  26. 26. Conclusion: Rethinking the Marketing Mix Despite the suggestions towards rethinking the marketing mix, the model remains a timeless,valuable,simple (but effective) bedrock of mkting strategy especially in consumer markets where benefits are offered to customers through simple prdts New additions /models like the additional 3ps (people, process & physical evidence) and SAVE & SIVA framework have shown potency in improving marketing strategy in service & industrial markets respectively. The 7Cs can be very effective in relation to achieving a high level of customer centricity The new 10Ps are a very comprehensive mkting strategy framework Marketing Management @ NUST 2014
  27. 27. THE MARKETING ENVIRONMENT An assessment of the forces outside marketing that affect marketing manager’s ability to develop and maintain successful relationships with its target customers Marketing Management @ NUST 2014
  28. 28. Elements of the Marketing Environment Internal environment Resources, management Structure, culture, policies, etc. Micro-environment Suppliers, intermediaries Agencies, customers, competitors Macro-environment •Demographic •Political •Economic •Technological •Socio-cultural •Natural Marketing Management @ NUST 2014
  29. 29. Importance of Understanding the Environment Degree of dynamism ;- rate of change of factors in the environment. Degree of complexity ;- the many and varied factors in the environment and their cross impact on each other. Degree of uncertainty ;- as a result of the dynamism and complexity of the environment, marketing decisions and outcomes are made under conditions of risk. Marketing Management @ NUST 2014
  30. 30. Techniques for Analysing the Environment External Environment Analysis  PESTLEI Analysis  Industry and Competitive Analysis Internal Environment Analysis  Resources and capabilities analysis  McKinsey 7s Framework Overall Situational Analysis  SWOT Analysis Marketing Management @ NUST 2014
  31. 31. The Marketing Mix PRODUCT & SERVICES STRATEGY Marketing Management @ NUST 2014
  32. 32. What is a product?  A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.  Businesses should think in terms of customer benefits instead of physical products and services to gain competitive advantage  A product has 4 levels: the core product, actual product, augmented product & expected product Marketing Management @ NUST 2014
  33. 33. Product Anatomy Marketing Management @ NUST 2014
  34. 34. Product Anatomy Core Product: is the basic problem-solving benefit that consumers seek when they buy a product. e.g. transport, status, beauty & can be functional or psychological Actual product: A product`s parts,styling,features,brand name, packaging and other attributes that combine to deliver and communicate the core benefits. Augmented product: additional consumer services and benefits. e.g. warranty, repair services, training etc Expected product: what the product could or should be in future. This includes possible ways of differentiating it form competitors Marketing Management @ NUST 2014
  35. 35. PRODUCT CLASSIFICATION *Products can be broadly classified into consumer and industrial products.  Consumer products are those purchased for personal use and consumption by final consumers Industrial goods are those destined for use in a production process in order to generate other goods and services Marketing Management @ NUST 2014
  36. 36. Types of Consumer Goods Marketers usually classify consumer goods on the properties of durability, and customer shopping habits. Marketing Management @ NUST 2014
  37. 37. (a) Basis of durability *Based on the properties of durability, goods can be divided into durable and non-durable goods as well as services • Durable goods: • Non-durable goods • Services Marketing Management @ NUST 2014
  38. 38. (b) Classification on the basis of shopping habits Convenience products: are bought frequently with minimum comparison and effort e.g. Bread, chocolates, newspapers... are usually low priced and intensively distributed. Shopping products: are less frequently purchased, compared carefully on quality, price, style, suitability e.g. furniture, clothing, basic cars… are selectively distributed but given more sales support. Specialty products: have unique characteristics and brand identification for some consumers who spend special effort to purchase e.g. specific brands and types of cars, Jewellery, designer clothing… e.g. Rolls Royce buyers do not compare cars, they only invest the time needed to reach the sellers. Unsought products:Are consumer goods the consumer either do not know about or knows about them but does not normally think of buying them. Classic examples of unsought goods are life assurance policies, encyclopedias, blood donation & vasectomy Marketing Management @ NUST 2014
  39. 39. 2.Industrial Goods Installations: industrial products such as heavy equipment, buildings and new machinery which are relatively expensive and for long term Assessory equipment: industrial products that provides peripheral support to the production process without direct involvement e. g hand tools, forlift trucks, storage bins etc Raw materials: Primary industry output such as beef, cotton, milk, poutry, soyabeans, copper,iron ore, in their natural state constitute raw materials. Component parts and materials: finished products of one producer that actually become part of the final products of another producer Operating supplies: Frequently purchased consumable items that do not become part of the product.eg lubricating oils, cleaning materials, floor polish, and stationery etc.They are the convenience goods of the industrial markets Business services: intangible products that firms buy to facilitate their production processes e.g financial services, leasing services, rental services, insurance services, security, legal advice and consultancy Marketing Management @ NUST 2014
  40. 40. Product Decisions *There are five important decisions to be made in the development and marketing of individual products; a) Product Mix & Line Decisions b) Product Attribute Decisions c) Branding Decisions d)Packaging Decisions e) Product-support services decisions Marketing Management @ NUST 2014
  41. 41. Product AAttttrriibbuuttee DDeecciissiioonnss Three attributes of importance to customers when selecting a product; Product quality  Involves a product meeting customer specifications in terms of durability, reliability, precision, repair and other quality attributes valued by the customer Product features  Features differentiate a company’s products to those of competitors.  A company needs to know which features are valued by the customers e.g. computer features, cell phone features etc. Product design  Design contributes to a product’s usefulness and appearance.  A good design can attract attention, improve product performance and give a product a strong competitive edge Marketing Management @ NUST 2014
  42. 42. Product Mix & Line Decisions * PRODUCT LINE • A product line is a group of products that are closely related because of any of the following reasons: • they satisfy the same needs eg shampoos,toothpaste,deodorants,soaps • They are used together eg cellophone accessories • They are bought by the same customer groups eg stationery items bought by students • They are marketed through similar channels e.g hardware products • They fall within the same price range e.g products with a selling price of say between R10 and R15 Marketing Management @ NUST 2014
  43. 43. Product Mix & Line Decisions *PRODUCT MIX Also known as an assortment, is a the set of /combination of all product lines and items that a particular firm /reseller offers for sale Or it is the combination of all various kinds of all products which a business makes/sells. Marketing Management @ NUST 2014
  44. 44. Example of a Prdt Mix and a Prdct Line: Unilever South East Africa Washing Powders Soaps Foodstuffs Personal Care Prdts Omo Geisha Royco Ponds Surf Lifebuoy Stock Brut Sunlight Key Rama Sunsilk Vaseline Flora Fair & Lovely Cream Dove Knorr Axe Lux Vaseline Close-Up Marketing Management @ NUST 2014
  45. 45. BRANDING DECISIONS A product brand is a name, term, sign, design or a combination of all them intended to identify the goods of a seller & differentiate them from those of competitors A brand is a flag that signifies to the buyer what he has to expect in terms of quality, service and functionality Marketing Management @ NUST 2014
  46. 46. Brand Equity  Is the value of a brand.  A powerful brand has high brand equity.  Requirements for high brand equity: High brand loyalty, High brand awareness High brand image  Positive Brand Associations  Interbrand `s Top five global brands (2013) were (1)Apple (2) Google (3) Coca-Cola (4) IBM (5) Microsoft (6) General Electric (7) McDonalds (8) Samsung (9) Intel (10) Toyota . Marketing Management @ NUST 2014
  47. 47. Branding Decisions Major branding decisions are a)Selecting the brand name b)Finding a brand sponsor c)Identifying the brand strategy d)Repositioning the brand Marketing Management @ NUST 2014
  48. 48. a) Selecting the brand name *A good brand differentiates the product communicates its benefits, suits the target market and marketing strategies. *Characteristics of good brand names  Must be internationally acceptable ie it should blend into various international cultures & should not be offensive. Must say something very positive about the core product eg Econet Can be legally protected through registered trademarks Marketing Management @ NUST 2014
  49. 49. a) Selecting the brand name *Characteristics of good brand names They must be distinctive They must be easy to pronounce e.g Sony Must be easy to remember such that short names are preferable : (if long customers usually shorten themselves) Must suggest quality e.g. Topics, Bakers` Pride Marketing Management @ NUST 2014
  50. 50. b) Brand Sponsorship *A producer has four sponsorship options. The product may be sold i. as a manufacturer’s (producer’s) brand, ii. to a reseller (middleman) who gives it a private brand (who create and own the brand) iii. As a licensed brand (a company may be licensed to sell its products under another company’s brand) iv. As a co-brand (two companies combine their brands and create a new one). Marketing Management @ NUST 2014
  51. 51. (c) Brand strategy A company has four choices; (i) Line extension; using a successful brand name to introduce additional items in an existing product category under the same brand name, such as new flavors, forms, colors, added ingredients, or package sizes. (ii) brand extension; using a successful brand name to launch a new product in a new category.  Helps the company introduce new product categories more easily, provides instant recognition and acceptance, decreases advertising costs.  But may be dangerous if it fails, because it may tarnish the company’s whole image Marketing Management @ NUST 2014
  52. 52. (c) Brand strategy (iii) Multi-brands; a strategy under which a seller develops two or more brands in the same product category e.g Unilever (Geisha,Lifebuoy,Lux & Dove) (iv) New brands; introducing new brand names in new product categories.  Demands lot of company resources, that is why, nowadays some companies use megabrand strategies - spending resources only on brands that can achieve the number one or two market share position in their categories and dropping the weaker brands. Marketing Management @ NUST 2014
  53. 53. BBrraannddiinngg SSttrraatteeggyy AAlltteerrnnaattiivveess Product Category Existing New Existing Line Brand Brand Name extension extension New Multi-brands New brands Marketing Management @ NUST 2014
  54. 54. d) Repositioning the brand: Rebranding Rebranding is the creation of a new name, term, symbol, design, or a combination of them for an established brand with the intention of developing a differentiated (new) position in the mind of stakeholders and competitors. Corporate re-branding is defined as “the practice of building a new a name representative of a differentiated position in the mind frame of stakeholders and a distinctive identity from competitors Marketing Management @ NUST 2014
  55. 55. d) Repositioning the brand: Rebranding contd *Corporations often rebrand in order to respond to external and/or internal issues that include:  Need to differentiate from competitors e.g FBC Holdings  Align brand with international positioning e.g Telecel Zimbabwe  Shedding a negative image e.g Renaissance Bank to Capital Bank  No enhance market appeal e.g Express to Jet Rebranding  As part of corporate restructuring e.g Zimbabwe Broadcasting Holdings  To reflect a new ownership structure e.g Murray & Roberts to Masimba Holdings /CFX to Interfin Bank ,TN to Steward rebranding  To refresh the brand e.g Toppers Uniforms rebranding  To potray a new image e.g ZABG to Allied Bank Marketing Management @ NUST 2014
  56. 56. PPaacckkaaggiinngg DDeecciissiioonnss *The activities of designing and producing the container or wrapper for a product. Packaging Functions  Protecting the product and maintaining its functional form.  To protect consumers from product tempering e.g. use of plastic sealing.  To offer convenience to shoppers e.g. pasteurised packaging that does not require refrigeration, small single serving tins to minimise waste…  To promote the product by communicating its features, uses and benefits.  Re-usable packages can be developed to make the product desirable e.g. ice cream containers as food storage containers. Marketing Management @ NUST 2014
  57. 57. Product-Support Services  The product-support services augment the actual product, can help the product to gain a competitive advantage and create customer loyalty.  The company should periodically survey its customers to assess its customers’ satisfaction and to get new ideas for product improvements.  E.g. services to handle complaints, credit, maintenance, technical issues, customer information. Marketing Management @ NUST 2014
  58. 58. SERVICES MARKETING *Are intangible activities, benefits and satisfaction that are offered for sale. *Services can be classified on the basis of provider or on the basis of the levels of customer contact. Marketing Management @ NUST 2014
  59. 59. (a) Classification of the basis of provider Governmental services - courts, hospitals, police, fire departments, postal services, schools etc; non-profit organization `s services - museums, colleges, services by NGOs business organizations `services - airlines, hotels, restaurants, advertising, real estate etc. Marketing Management @ NUST 2014
  60. 60. (a) Classification of the basis of level of customer contact Contact Level Explanation (i) High Contact Services Customers visit the service setting so that they are personally involved throughout the service delivery process e.g a hair cut,dentist `s services etc (ii) Medium Contact Services Customers visit the facility but not remain for the duration of the service delievery e.g delivering & collecting items to be repaired (iii) Low Contact Services Little or no contact between customer or service provider.Service is delievered from a remote location often through electronic means e.g social networks,radio & television entertainment etc Marketing Management @ NUST 2014
  61. 61. Characteristics of Services 1.Intangibility  Services do not have physical features that buyers can see, touch, feel, smell or taste before the purchase decision.  Service firms essentially ask their customers to buy a promise 2. Ininventorabilty Services cannot be stockpiled for later use or sale. Because of this characteristic, unused capacity cannot be stored for future use. For example, spare seats on an aeroplane cannot be transferred to the next flight. Marketing Management @ NUST 2014
  62. 62. Characteristics of Services 3. Inseparability  Production & consumption of services take place simultaneously.  Because services are real time experiences, services providers have to get it right first time as correction of a service blunder is impossible.  Further because of the inherent characteristic of simultaneity in production & consumption, the client has to avail themselves at the point of service provision Marketing Management @ NUST 2014
  63. 63. Characteristics of Services 4. Inconsistence (variability) Service quality is usually not the same every time because of the labour intensive nature of services. The quality of the service depends on the morale, motivation, mood, training and attitude of those providing the service. For example, there is a strong possibility that the same enquiry would be answered slightly differently by different people (or even by the same person at different times) Marketing Management @ NUST 2014
  64. 64. Characteristics of Services 5. Involvement of other people Other people other than the service providers may be involved in the service setting thus affecting the quality of service provided for example a bank customer may queue with other customers before being served (6) 6. Non-Ownership A service as a nonmaterial equivalent of goods does not result in ownership and this is what differentiates it from providing physical goods. Marketing Management @ NUST 2014
  65. 65. Strategies to deal with unique characteristics of services The unique characteristics of services impose the need for marketers to come up with strategies to deal with the challenges. (i)Intangibility Develop a tangible presentation of the service which implies high service quality eg cheque books, credit cards,calenders Offer tangible benefits in sales promotions eg when hotel occupancy rates are low offer say free breakfast. Ensure high quality physical evidence like outlets design, surroundings, and staff uniforms etc because it gives a good impression of service quality to consumers Use third party endorsements eg by credible high status people Marketing Management @ NUST 2014
  66. 66. Strategies to deal with unique characteristics of services (ii) Ininventorability Use of discounts to ensure usage of service during off peak hours e.g mobile phone tariffs can be lowered say between 12 midnight and 6am Educate customers to use service during non peak hours (iii) Inconsistence  Set service standards eg the telephone should be answered within a certain number of seconds Offer adequate training to personnel so that variability is minimized Employees should be well motivated by way of both monetary and non-monetary methods Benchmark your processes with those of the best service providers internationally Make sure employees are aware of values,mission,vision etc Marketing Management @ NUST 2014
  67. 67. Strategies to deal with unique characteristics of services (iv) Inseparability: Use technology to bridge the inseparability gap eg internet banking such that the consumer doesn’t need to visit the bank or online distance education such that the student doesnt need to be physically on campus (v) Involvement of other people Increase the number of service delievery channels to avoid inconveniencing customers eg a bank can increase the number of service counters, ATMs and use electronic banking platforms like internet, sms and telebanking Use of agents for example insurance companies can use brokers to minimize congestion at the own premises. Marketing Management @ NUST 2014
  68. 68. Strategies to deal with unique characteristics of services (vi) Use of service blueprints. A service blueprint is a graphical illustration of the service process.  It is a sequential illustration of the stages involved in the service process.  Pursuant to improving service quality, a service blueprint helps managers to identify points potential points of failure or where improvements can be made to improve service quality. (vii) Use of an expanded marketing mix To improve service quality, managers have to harness the additional variables of people, process and physical evidence to improve service quality. Marketing Management @ NUST 2014
  69. 69. NEW PRODUCT DEVELOPMENT Because of the rapid changes in consumer tastes, technology, and competition, companies must develop new products and services. A firm can obtain new products in two ways; • acquisition; buying a whole company, a patent, or a license. • new-product development; developing original products, product improvements / product modifications and new brands. • Strategic alliances Marketing Management @ NUST 2014
  70. 70. Importance of New Products Keep up with changes in consumer tastes. Adapt to new technologies To stay ahead of competition To widen the company’s product mix and thus growth and profitability. New products spread the marketing risk. *Despite the importance of new products, many researches indicate that over 70% of all new products fail within 2 years of launch. What are the likely reasons for such failures? Marketing Management @ NUST 2014
  71. 71. New Product failure: Causes *New Product failure is a very real and very common phenomenon. There are many reasons for new product failure and some of the more commonly cited include: Poor planning: incorporates issues such as developing a product that doesn’t fit a company’s strategy, competencies and/or distribution strength Poor test market research: the failure of New Coke in 1985 is a classic example of how poorly executed test marketing can lead to product failure Marketing Management @ NUST 2014
  72. 72. New Product failure: Causes Legislation: unfavorable legislation may lead to the failure of a new product eg Dasani, a Coca-Cola Company mineral water drink was stopped by the French gvt because it had a high level of bromate level Poor Market Analysis: failure to properly analyze the market to understand whether and what type of opportunity may exist in a category and what specific unsolved problems consumers have Improper blending of marketing mix elements: such as overpricing of a product, for example, the entry price for Mazda 929 was too high Marketing Management @ NUST 2014
  73. 73. New Product failure: Causes Competition: the activities of competitors can lead to product failure. For example IBM killed several laptop models they had developed because competitors introduced better and more advanced machines to the market before IBM could get there. Unconducive organizational climate: new product failure is sometimes traced to organisational factors like poor organizational culture, lack of mngt support and inadequacy of resources to support the new product `s strategy. Marketing Management @ NUST 2014
  74. 74. New Product failure: Causes Poor timing of launch: Too early or late entry into the market is a common cause of failure. Kinetic Merlin was launched in India in June 1991.It was a 3 in 1 set consisting of a colour television, a stereo with detachable speakers and a home computer. Poor product concept: a new product that lacks a compelling consumer benefit, is a simple me-too item with no real and relevant difference from items already available is bound to fail. Marketing Management @ NUST 2014
  75. 75. New Product failure: Causes Kainotophobia: Kainotophobia means fear of change and thus resistance to it. It is this fear of various risks of associated with unknown products that makes customers reluctant to adopt them.  Poor execution: failure to properly execute the marketing plan and achieve targeted levels of distribution, as well as failure to achieve appropriate display and retailer support, all contribute to new product failure Marketing Management @ NUST 2014
  76. 76. New Product failure: Causes Poor Product Positioning Poor or inconsistent quality Insufficient differentiation from existing offerings Branding blunders e.g black cat Rapid change in the economy just after the product is introduced eg an economic recession Poor estimates of the market potential of the new product Non-delievery of promised product benefits Improper channels of distribution selected Marketing Management @ NUST 2014
  77. 77. Types of New Products *Seven types of new products exist •Products which are new and original in every respect e.g. the first telephone when it was introduced by Alexander Bell in 1876 • Important alterations of existing products so that they differ significantly from the current products e.g. smartphones/high definition flat screen TVs •Products which are new to the firm but not quite new to the market eg if Apple starts making cars, the products would be new to the firm (Apple),but not quite new to the market Marketing Management @ NUST 2014
  78. 78. Types of New Products • Products which are quite new to the target market but not new to the firm. • New according to the law: for example a product that has been on the market for less than 12 months(Zimbabwe) or less than 6 months (USA) • Additions to product lines: line extensions, flankers so on • Repositionings: Products retargeted for new uses or applications Marketing Management @ NUST 2014
  79. 79. New Product Development Is the development of original products, products improvements, product modifications, and new brands through the firm`s own R & D efforts. NDP in companies is carried out as a process which consists of 8 major steps which are as follows: Marketing Management @ NUST 2014
  80. 80. New Product Development Process Stage Tasks to be Undertaken 1. Idea Generation •Systematic search for new ideas •Org has to generate may ideas in order to find few good ones. •Major sources of NP ideas include customers, competitors, employees, senior management, channel members, scientists etc 2. Idea Screening •Ideas are evaluated to identify good ideas and drop poor ones as soon as possible. •In screening of ideas, companies take care to a void both drop and go errors. •Org needs to consider 3 categories of risk, i.e strategic, market & internal risk. 3. Concept Development & Testing •Turn surviving ideas into concepts by developing a detailed version of the product idea in meaningful consumer terms •Testing involves asking a sample of consumers what they feel of the product concept before turning it into actual product. Marketing Management @ NUST 2014
  81. 81. New Product Development Process Stage Tasks to be undertaken 4. Marketing Strategy Development •Describes the target market, planned product positioning, the potential sales, market share and profit goals for the first year. •Outline the planned long-run sales, profit goals and marketing plan for a given time-frame. 5. Business Analysis •Involves reviewing, (1) projection of sales, (2) costs and (3) profit (ideally cash flow) for the new product to see whether it satisfies the company’s objectives 6. Product Development and Testing •Product concept is developed into a physical product (prototype) to see if the idea can be turned into a workable product •Developed prototype is then tested under laboratory and field conditions to make sure the product performs safely and as expected. Marketing Management @ NUST 2014
  82. 82. New Product Development Process Stage Tasks to be Undertaken 7. Test Marketing •Testing the product in realistic market conditions •Company is able to judge product acceptability, effectiveness of marketing strategy, customer reaction before going into full production. 8. Commercialization •If market testing returns with positive results, then the firm commercializes/launches the product in the entire market •For a product launch to be successful, questions of when, where, how and to whom should guide the marketers. •Commercialization/launch brings us to the last stage of the NPD process but however introduces us to the first stage of the product life cycle Marketing Management @ NUST 2014
  83. 83. Product Life Cycle Concept Time Sales and Profits ($) Product Develop-ment Introduction Profits Sales Growth Maturity Decline Losses/ Investments ($) Marketing Management @ NUST 2014
  84. 84. PRODUCT LIFE CYCLE CONCEPT  After launching a new product, management wants it to enjoy a long and rewarding life, although it does not expect the product to sell forever.  The product life cycle (PLC) is the course that a product’s sales and profits take over its lifetime. It has five stages; 1. Product development begins when the company develops a new-product idea. During product development, sales are zero and the company’s investment costs mount. 2. Introduction is a period of slow sales growth as the product enters in the market. Profits are low or nonexistent in this stage because of the heavy expenses of product introduction. 3. Growth is a period of rapid market acceptance and increasing profits. 4. Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers.  Profits level off or decline because of increased marketing outlays to defend the product against competition. 5. Decline is the period when sales fall off and profits drop. Marketing Management @ NUST 2014
  85. 85. Product Life Cycle Concept Time Sales and Profits ($) Product Develop-ment Introduction Profits Sales Growth Maturity Decline Losses/ Investments ($) Marketing Management @ NUST 2014
  86. 86. STAGES OF THE PRODUCT LIFE CYCLE Introduction Growth Maturity Decline Sales Low Rising /Increasing PEAK Declining Average Costs High Falling Increasing Rising Profits Negative Or Low Rapidly Increasing Peak To Declining Declining Typical Customers Innovators Early Adopters & Early Majority Late Majority Laggards Competitors (Number Of Firms & Products) One Or A Few Few Bt Increasing High Number Of Competitor Low Number Of Competitors Marketing Management @ NUST 2014
  87. 87. Introduction Stage Characteristics Sales revenue is likely to be low because many potential customers may be unaware of the product and its benefits Costs are very high at this stage because of high distribution and promotional costs being incurred The higher costs coupled with low sales revenue make the introduction stage a period of low or negative profits There may be one or a few competitors at this stage The New Product at this stage is typically bought by innovators Marketing Management @ NUST 2014
  88. 88. Marketing Strategy @ Introduction Stage *Goal of the marketing strategy is to establish a market and build primary demand for the product. Product – usually a basic product is offered to the market Price – Either a skimming or penetration pricing strategy is employed. Distribution is selective High promotional expenditure aimed at building brand awareness Marketing Management @ NUST 2014
  89. 89. Growth Stage Characteristics Sales increase as more customers become aware of the product and its benefits & additional market segments are targeted Average costs fall as promotional and distribution costs are spread over a larger volume of output Higher sales on the backdrop of falling average costs results in an increase in profits in this stage. The new product at this stage is typically bought by early adopters and early majority Attracted by the opportunities for profit, more competitors enter the market Marketing Management @ NUST 2014
  90. 90. Marketing Strategy @ Growth Stage *Goal of strategy is to gain consumer preference and increase sales. Product - New product features &packaging options to improve product quality. Price is maintained at a high level if demand is high, or reduced to capture additional customers. Distribution becomes more intensive. Promotion - Increased advertising to build brand preference. Marketing Management @ NUST 2014
  91. 91. Maturity Stage Characteristics Sales reach their peak at this stage, while they continue to increase, they do so at a slower pace Costs increase as firm vigorously defends market share against competitors The triad of increased of increased costs, price reductions and slowdown in sales growth results in profits being at peak or mostly declining. The product at this stage is typically bought by the late majority This stage is characterized by high number of competitors and competitive products. Marketing Management @ NUST 2014
  92. 92. Marketing Strategy @ Maturity Stage  Primary goal of strategy is to maintain market share and extend the product life cycle  Product - modifications are made and features are added for differentiation. Price - Possible reductions in response to competition while avoiding a price war. Distribution - new distribution channels & incentives to resellers in order to avoid losing shelf space. Promotion – Emphasises differentiation & building of brand loyalty. Incentives to get competitors' customers to switch to company brand. Marketing Management @ NUST 2014
  93. 93. Decline Stage Characteristics Sales decline as the market becomes saturated, the product becomes technologically obsolete, or customer tastes change. Unit costs may increase with the declining production volumes and eventually no more profit can be made. Decline in sales on the backdrop of rising unit costs results in a corresponding decline in profits As falling profits make the industry unattractive, producers leave the industry resulting in a low number of competitors and products The product at this stage is typically bought by laggards Marketing Management @ NUST 2014
  94. 94. Marketing Strategies @ Decline Stage During the decline phase, the firm generally has FOUR options in relation to the PRODUCT. • Maintain the product without changing it in the hope that competitors will exit the market. • Harvest the product by reducing costs (advertising, sales force) hoping to improve sales margins • Divest the product either by liquidation or selling it off to another company • Reposition the product to extend its useful life e.g by rebranding Price - Prices may be lowered to liquidate inventory of discontinued products. Prices may be maintained for continued products. Distribution - Distribution becomes more selective with channels that no longer are profitable being phased out. Promotion - Expenditures are lower and aimed at reinforcing the brand image for continued products. Marketing Management @ NUST 2014
  95. 95. Limitations of the PLC Concept The term "life cycle" implies a well-defined life cycle as observed in living organisms, but products do not have such a predictable life and the specific life cycle curves followed by different products vary substantially. Consequently, the life cycle concept may not be well-suited for the forecasting of product sales. Marketing Management @ NUST 2014
  96. 96. Limitations of the Product Life Cycle Concept Further, critics have argued that the product life cycle may become self-fulfilling. -For example, if sales peak and then decline, managers may conclude that the product is in the decline phase and therefore cut the advertising budget, thus precipitating a further decline. Marketing Management @ NUST 2014
  97. 97. Limitations of the Product Life Cycle Concept According to Kotler & Armstrong (2006),using the PLC Concept to develop marketing strategy can also be difficult because the PLC is both a cause and result of the marketing strategy Marketing Management @ NUST 2014
  98. 98. Limitations of the Product Life Cycle Concept According to Brassington and Pettitt (2003), It is difficult to predict when the key transition periods from one stage to the next will happen, yet this is critical information for planning strategy changes. The problem is that the shape of the PLC is affected by many things. It is not only the pace of change but the organization `s handling of the product throughout its life. Marketing Management @ NUST 2014
  99. 99. Limitations of the Product Life Cycle Concept *However despite all the criticisms, the PLC Concept remains a key theoretical framework that guides manager in marketing strategy formulation a product progresses through various stages of its life Marketing Management @ NUST 2014
  100. 100. Diffusion of Innovation:Definition Is the rate at which a new product is adopted in the market Customers usually do not adopt a new product at the same time. Some quickly adopt a new product while others are a bit resistant to change and only adopt a new product later when it will have been tried and tested or only when it becomes the last resort. Marketing Management @ NUST 2014
  101. 101. The Consumer Adoption Process In the adoption process, consumers go through a series of stages from learning about the new product to trying it and deciding whether to purchase it regularly or to reject it. The stages in the consumer adoption process can be classified as follows: a)Awareness: Individuals first learn about the new product, but they lack full information about it b)Interest: Potential buyers develop interest in the product and begin to seek information about it Marketing Management @ NUST 2014
  102. 102. Stages in the Consumer Adoption process a) Evaluation: They consider the likely benefits of the product b) Trial: they make trial purchases to determine its usefulness c) Adoption/Rejection:If the trial purchase produces satisfactory results, they decide to use the product regularly Marketing Management @ NUST 2014
  103. 103. The Product Adoption Curve Rogers (1962) came up with The Product Diffusion Curve a theoretical framework that groups customers according to how quickly they adopt a new product. Marketing Management @ NUST 2014
  104. 104. Adopter Groups Adopter Group Description Innovators Very knowledgeable grp of customers who are willing to take risk by being the first to try a new and unproven product Are only a small group (represent the first 2.5% to adopt the new product) & are the earliest to buy Tend to be younger, better educated, more confident & are wealthy enough not to worry too much if the product doesn't work. Important in the earliest stages of the PLC to get the product off the ground & start the process of gaining acceptance as they are influential. Early Adopters Members of this group gauge the response of the innovators before rushing in to purchase a new product. Buy early (after the innovators) and are contend to let the innovators take real pioneering risks with a new product. They represent about 13.5% of the total consumer population. Once early adopters enter the market, the growth stage of the PLC starts developing Marketing Management @ NUST 2014
  105. 105. Adopter Groups Adopter Group Description Early Majority Represents 34% of the total consumer population,are relatively well educated & careful consumers who tend to avoid risk associated with purchasing an unproven product. Adopt the product once it has been proven by the early adopters. Rely on recommendations or product endorsements from others who have experience with the product Late Majority Somewhat skeptical consumers who acquire a product only after it has become commonplace. Less interested and bothered about the product / are contend to wait until they see how the market develops Represent about 34% of consumers. Marketing Management @ NUST 2014
  106. 106. Adopter Groups Marketing Management @ NUST 2014
  107. 107. Factors affecting Rate of Adoption (i) Relative Advantage: the greater the perceived value possessed by a new product,the quicker it is likely to be adopted. (ii) Compability: Adoption is quicker if the new prdt is consistent with current use & practice. (iii) Complexity: speed adoption is hindered by products that are difficult to understand & use. (iv) Divisibility: Adoption is stimulated if customers can sample the product in a part of their operations or sample it for a limited period. (v) Risk: The greater the risk attached to a prdt,the more reluctant buyers will be to try it. (vi) Communicability: Where prdt performance can be seen or easily demonstrated,adoption is facilitated. Marketing Management @ NUST 2014
  108. 108. Usefulness of the Product Diffusion Curve The Product Diffusion Curve`s strong links with the PLC makes it a useful tool in formulating marketing strategies for new products The Product Diffusion Curve as a model guides you as to who you should be targeting at different stages of the life of your product or service i.e. whether its innovators, early adopters, Laggards etc Marketing Management @ NUST 2014
  109. 109. MARKETING MANAGEMENT PRICING PRODUCTS Marketing Management @ NUST 2014
  110. 110. PRICE *Money or any other considerations exchanged for ownership/use/consumption or enjoyment of a product. *Importance of Pricing Decisions Price relates directly to the generation of revenue and ultimately profits which are the life-blood for an organization's survival. Is a variable that a marketer can change quickly to respond to changes in demand or to actions of competitors. Can be used symbolically to communicate about the product. *Price can be viewed from marketing, customer & societal perspectives Marketing Management @ NUST 2014
  111. 111. Factors affecting pricing decisions Nature of the product e.g. whether luxury or necessity, industrial or consumer product etc Costs Competition Company Objectives i.e profit maximization/sales maximisation/growth /survival Marketing Objectives e.g market share Government Policies Level of Demand Stage of product in its PLC Nature of the market e.g in terms of purchasing power & price sensitivity Marketing Management @ NUST 2014
  112. 112. Factors affecting pricing decisions Market Structure Product` intended positioning Prevailing economic fundamentals e.g inflation, interests rates etc Marketing Management @ NUST 2014
  113. 113. Pricing Objectives *Expectations that specify the role of price in an org`s marketing & strategic plans. They include: 1.Sales Revenue maximization 2.Sales Volume Maximization 3.Profit maximization 4.Market Share 5.Quality leadership 6.Survival 7.Social Responsibility Marketing Management @ NUST 2014
  114. 114. Pricing Methods/Approaches 1.Cost Oriented Approaches 2.Profit Oriented Approaches 3.Demand Oriented Approaches 4.Competition Oriented Approaches Marketing Management @ NUST 2014
  115. 115. 1.Cost Oriented Approaches *Price setter stresses the cost side of the pricing task (i) Standard Mark up Pricing: involves adding a certain percentage of the cost to arrive at a price (ii) Cost-Plus Pricing: Involves calculating/estimating the total unit cost of producing a product & adding a specific amount to the cost to arrive at a price for a given product (iii) Marginal Cost Pricing – Price set in line with the cost of producing an extra unit of a product -allows for pricing flexible & variable pricing structure e.g on a flight from Harare to Bulawayo – provided the cost of the extra passenger is covered, the price could be varied a good deal to attract customers and fill the aircraft Marketing Management @ NUST 2014
  116. 116. 2.Profit Oriented Approaches *Price setter is guided by a certain desired profit level pursuant to setting a price: (i)Target Profit Pricing: firm sets an annual target for a specific dollar volume of profit (ii)Target Return on Sales Pricing: Firms such as supermarkets often use target return on sales prices that will give them a profit that is a specified percentage say 10% of sales revenue (iii)(iii) Target Return on Investment Pricing: firms such as public utilities use target return on investment pricing in order to set prices that will achieve a ROI target such as a percentage mandated by the directors or regulators Marketing Management @ NUST 2014
  117. 117. 3.Demand Oriented Approaches *Price of a product is based on the extent and nature of its demand by customers e.g (i) Skimming Price Strategy: Selling a product at a higher initial price to take advantage of high income innovators, to quickly recover cost of R & D or position a product as high quality (ii)Penetration Pricing Strategy Launching a product at a low price to garner market share the increase the price substantially once org gains foothold in the market ‘Low’ price to secure high volumes Typical in mass market products – chocolate bars, food stuffs, household goods, etc. Suitable for products with long anticipated life cycles Marketing Management @ NUST 2014
  118. 118. 3.Demand-Oriented Approaches (iii) Price Bundling Offering a product, options and customer service for one total price. May unbundle,ie breakdown price & allow customers to decide what they want to purchase among other reasons (iv) Psychological Pricing Used to play on consumer perceptions based on the consumer’s emotive responses, subjective assessments and feelings towards specific figures. *Odd-Even Pricing - Odd numbers convey a bargain image -- $.79, $9.99, $699 *Even numbers convey a quality image -- $10, $50, $100 *Multiple-Unit Pricing – 3 for $.99 suggests a bargain and helps increase sales volume. Marketing Management @ NUST 2014
  119. 119. 3.Demand-Oriented Approaches (v) Prestige Pricing Involves setting a high price so that quality or status conscious consumers will be attracted to the product e.g Rolls-Royce Cars, Rolex watches (vi) Target Pricing Mostly used by manufacturers, this strategy is based on estimating the price the customer is willing to pay for the product. The producer then works backwards through marks taken by intermediaries to determine what price to charge to the wholesaler/immediate agent Marketing Management @ NUST 2014
  120. 120. 3.Demand-Oriented Approaches vii) Price Discrimination The practice of charging different prices for the same product for reasons not related to production costs. (viii) Value Based pricing  Pricing a product based on the perceived value and not on any other factor.  Perceived value is made up of several elements , such as the buyer’s image of the product performance, channel deliverables, warranty, quality, customer support, supplier’s reputation, trustworthiness etc Marketing Management @ NUST 2014
  121. 121. 4.Competitor-Oriented Approaches *Rather than focusing demand, cost or profit factors, a firm relies on competitor/market prices as the benchmark when setting prices e.g (i) Loss Leader Pricing: This is when retail stores deliberately sell a product below its customary price to attract customers in hopes that they will buy other products as well, particularly those with higher mark ups (ii) Predatory Pricing: A firm set a very low price for one or more of its products with the intention of pricing competition out of the market. Illegal in most countries but predation is difficult to prove Marketing Management @ NUST 2014
  122. 122. 4.Competitor-Oriented Approaches (iii) Going Rate Pricing Firm follows the pricing leads of rivals especially where those rivals have a clear dominance of market share In case of price leader, rivals have difficulty in competing on price – too high and they lose market share, too low and the price leader would match price and force smaller rival out of market. (iv) At, above or below the market pricing Using the competitors` average price or market price as the benchmark, a firm then may deliberately choose a strategy of above-at-or below the market pricing e.g Marketing Management @ NUST 2014
  123. 123. 4.Competitor-Oriented Approaches (v) Tendering Many contracts awarded on a tender basis Firm (or firms) submit their price for carrying out the work Purchaser then chooses which represents best value Mostly done in secret Marketing Management @ NUST 2014
  124. 124. MANAGEMENT OF PRICING Concept of price elasticity of demand Making special adjustments to prices Marketing Management @ NUST 2014
  125. 125. Concept of price elasticity of demand Any pricing decision must be mindful of the impact of price elasticity The degree of price elasticity impacts on the level of sales and hence revenue Elasticity focuses on proportionate (percentage) changes PED = % Change in Quantity demanded/% Change in Price Marketing Management @ NUST 2014
  126. 126. Concept of price elasticity of demand (i) Price Elastic: % change in quantity demanded > % change in price e.g. A 50% rise in price would lead to sales falling by something more than 50% Revenue would fall A 33% fall in price would lead to a rise in sales of something more than 33% thus Revenue would rise (ii) Price Inelastic: % change in Q < % change in P e.g. a 50% increase in price would be met by a fall in sales of something less than 50% Revenue would rise A 33 % reduction in price would lead to a rise in sales of something less than 33 % thus Revenue would fall Marketing Management @ NUST 2014
  127. 127. Special Adjustments to prices Firms allow flexibility in their pricing models by through special adjustments to prices that result in different customers paying different net prices. Discounts Allowances Geographical adjustments Marketing Management @ NUST 2014
  128. 128. Discounts Deductions from the list price that the seller gives to the buyer for some form of activity that is favorable to the seller e.g Quantity discount-to encourage purchase of larger quantities Seasonal Discounts- to encourage buyers to stock inventory earlier than their normal demand would require Trade Discount-to reward intermediaries for channel functions they perform Cash Discount-to encourage early settlement of bills Marketing Management @ NUST 2014
  129. 129. Allowances Trade in allowance: is a price reduction given when a used is part of the payment on a new product. An effective way to lower the price that a customer can pay without formally reducing the list price. Promotional Allowances: Reduction in price for undertaking certain channel activities like advertising or selling activities. Marketing Management @ NUST 2014
  130. 130. Geographical Adjustments These are adjustments made by manufacturers /wholesalers to list or quoted prices to reflect costs such as transportation & insurance e.g FOB,CIF,CF etc Marketing Management @ NUST 2014
  131. 131. DISTRIBUTION (PLACE) STRATEGY Channel Management and Channel Design Decisions Marketing Management @ NUST 2014
  132. 132. What is Place / Distribution? All activities that focus on making sure the product is available to the customer at the right place, at the right time in the right form An order fulfillment function of the marketing mix comprising the distribution channels and physical distribution (Logistics) Distribution activities should support the org`s marketing strategy and ensure that customers derive time, place, form and assortment utilities Marketing Management @ NUST 2014
  133. 133. The Role of Distribution Driving growth Order fulfilment Market coverage Customer service Relationship and reputation building Ensure consistent availability Convenience Customer satisfaction Logistics efficiency – Transport, inventory management, order processing. Marketing Management @ NUST 2014
  134. 134. Distribution Channels The route that a product follows from the manufacturer to the final intended consumer. Producer Middlemen / Distributors / Dealers Consumer Producer Consumer Thus distribution channel levels can be direct (zero channel level) or indirect distribution (multi-level channel) Marketing Management @ NUST 2014
  135. 135. Distribution Channels contd Producer uses strategies to reach end users/consumers without going through any intermediary. *Examples of Direct Distribution Channels Producer Consumer Producer Business User Service Provider Consumer/Business User Marketing Management @ NUST 2014
  136. 136. Circumstances which impose the need for a direct channel • The firm prefers direct interface with customers • If special technical advice is needed e.g. industrial equipment manufacturers • If the product is highly perishable e.g. flowers/services • Where there is need to maintain personal relationships with customers. • Where specialist skills are involved e.g. auditing/legal services Marketing Management @ NUST 2014
  137. 137. Circumstances which impose the need for a direct channel • Where after sales service is important and is best provided by the manufacturer. • To complement indirect channels of distribution • Where there is need to dispose sub-standard goods • To maximise profits by eliminating intermediaries Marketing Management @ NUST 2014
  138. 138. Indirect Channels of Distribution Producer relies on intermediaries in distributing products and services to final consumers/users. • Examples of Indirect Channels Producer Wholesaler Retailer Consumer Producer Retailer Consumer Producer Agent /Broker Wholesaler Retailer Consumer Service Provider Agent /Broker Consumer/Business User Marketing Management @ NUST 2014
  139. 139. Factors influencing the choice of a distribution channel *A considerable number of factors impact on the selection of a distribution channel such that the final distribution channel as follows; (i) Product attributes • Perishable products are typically sold through shorter channels. • Complex products are often sold directly to customers • Services, because of their inseparability nature, are mostly sold directly to customers Marketing Management @ NUST 2014
  140. 140. Factors influencing the choice of a distribution channel *(ii) Market Characteristics Consumer / Business markets Concentrated / dispersed market (iii) Organisational Objectives The objectives being pursued by an organisation can influence its choice of a distribution channel • e.g. where the company wants to achieve higher market share it can try & maximize on distribution Marketing Management @ NUST 2014
  141. 141. Factors influencing the choice of a distribution channel (iv) Competition • Org may use same channels used by competitors as they are relevant as well as to ensure visibility of products alongside those of competitors. • Org may also opt for a shorter channel relative to competition in order to achieve the highest possible level of customer satisfaction in relation to customer utilities. • Some orgs may develop new distribution channels to remedy inadequate promotion of its products by intermediaries who may have strong links with competitors Marketing Management @ NUST 2014
  142. 142. Factors influencing the choice of a distribution channel *(v) Organizational Factors • Factors specific to the org also influence the choice of a distribution channel, e.g a production oriented firm may need the marketing expertise of its intermediaries to offset its own lack of such skills OR • A company with adequate financial, management and marketing resources may feel little need for help from intermediaries and therefore distribute its products through a network of company owned outlets Marketing Management @ NUST 2014
  143. 143. Factors influencing the choice of a distribution channel (vi) Degree of control required If an org,desires a high degree of control over the marketing of each products, it has to rely on direct distribution Use of many indirect forms of distribution means firm has surrendered some control over the marketing of its products Marketing Management @ NUST 2014
  144. 144. What are Middlemen/Channels of Distribution? A group of individuals and organisations that direct the flow of products from producers to customers (Pride and Ferrell et al 2005) Middlemen can be retailers,wholesalers,brokers or agents Marketing Management @ NUST 2014
  145. 145. The Functions of Middlemen (Distributors) Buying Selling Risk taking Transportation Sorting Storing Assorting Financing Grading Marketing Information & research Marketing Management @ NUST 2014
  146. 146. Key Distribution Channel Decisions: 1.Understanding the different types of intermediaries 2. Selecting the right type of intermediary to use 3.Deciding on the level of market coverage required 4.Managing intermediary relationships Marketing Management @ NUST 2014
  147. 147. Levels of Market Coverage *Intensive distribution An approach to market coverage that involves making the product available in as many outlets as possible. Typically used for convenient goods where producers aim at enabling purchasers to buy their products with minimum efforts. Suits products with a wide appeal across broad groups of consumers e.g. soft drinks Usually employed in the growth & maturity stages of PLC Marketing Management @ NUST 2014
  148. 148. Levels of Market Coverage *Selective Distribution  An approach to market coverage whereby a limited number of outlets in a specific geographical area stocks a firm`s products. By limiting the number of intermediaries reduce marketing costs are reduced while establishing strong working relationships in the channel.  Typical for shopping goods Usually employed in the introduction & decline stage of the PLC for new products Marketing Management @ NUST 2014
  149. 149. Levels of Market Coverage *Exclusive Distribution A producer practices exclusive distribution where it grants exclusive rights to an intermediary to sell its products in a given geographical area. Marketers sacrifice total market coverage for the product in order to develop and maintain an image of quality and prestige for the product. Limits marketing costs since the firm deals with a small number of intermediaries Typical for highly priced speciality goods Marketing Management @ NUST 2014
  150. 150. Which specific organisations to use? Capability Number of outlets & location Reputation & Image Accessibility Resources Compatibility – technology, culture, policies, stock mgmt, Business terms Market share & performance Co-operation Marketing Management @ NUST 2014
  151. 151. Managing Intermediary Relationships Management issues include:- Training and motivating channel members Gaining cooperation and minimising conflict Evaluating channel member perfomance Marketing Management @ NUST 2014
  152. 152. Channel Conflict Arises when one channel member`s action prevents the channel from achieving its goal (Kotler & Keller: 2005) Horizontal conflict: occurs among firms at the same level of the channel, e.g. Holiday Inn franchisees might complain about other Holiday Inn franchisees over-charging guests or giving poor service, hurting the overall Holiday Inn image. Vertical Conflict: conflicts between different levels of the same channel, e.g a furniture maker may create conflict with its dealers if it opens an online store selling its products directly to customers Marketing Management @ NUST 2014
  153. 153. The Marketing Logistics Network Marketing Logistics ;- a system of efficiently and effectively making and getting products and services to customers. Involves the process of planning, implementing and controlling the cost effective flow and storage of materials, in-process inventory, finished goods and related information from point of origin to point of consumption for the purpose of conforming to customer requirements. Marketing Management @ NUST 2014
  154. 154. Physical Distribution;- A set of activities consisting of order processing, materials handling, inventory management and transportation used in the movement of products from producers to consumers and users. Objectives of Physical Distribution  To manage the costs of physical distribution to acceptable levels so as to ensure profitability.  To ensure effective customer service by ensuring product availability, promptness and quality.  The process calls for cost/service trade-off, that is; the trade off in costs involved when deciding on the service level to be offered to customers. Marketing Management @ NUST 2014
  155. 155. Tasks of Physical Distribution 1. Order Processing ;- the receipt and transmission of sales order information. Involves three main tasks;-  Order entry – the placement of purchase orders from customers or sales people by mail, telephone or on-line  Order handling – checking customer credit, verifying product availability and preparing products for transportation  Order delivery – selecting the transport mode most suitable for a desired level of customer service Marketing Management @ NUST 2014
  156. 156. 2. Materials Handling ;- physical handling of the product and involves the coordination of packaging, loading and movement systems taking into account the need for both cost reduction and customer requirements. 3. Warehousing ;- the design and operation of facilities for storing and moving goods. 4. Inventory Management ;- the development and maintenance of sufficient assortments of products to meet customer needs. Decision involves balancing between stock-outs and inventory holding costs. 5. Transportation ;- adds time and place utility to a product by moving it from where it is made to where it is needed. Marketing Management @ NUST 2014
  157. 157. Conclusion Distribution management involves coordinating the activities of the whole supply chain to deliver maximum value to customers It involves managing distribution channels (middlemen) as well as the physical distribution interface. Physical distribution functions account for about one-third of all marketing costs and have a significant impact on customer satisfaction. Therefore, effective marketers are actively involved in the design and control of the distribution strategy so as to meet customer changing needs and preferences. Marketing Management @ NUST 2014
  159. 159. What is Promotion/Marketing Communication? *Any form of communication used to inform, persuade & remind pple of an org 's goals, goods, sevices,image, community involvement or impact on society. Elements of the Marketing Communications/Promotional Mix (i) Advertising:- Any paid form of non-personal communication about org & its products that is transmitted to the target market thru the mass media. (ii) Sales Promotion:- a variety of short term incentives to encourage trial or purchase of a product or service. (iii) Public Relations & Publicity:- a variety of programmes designed to promote or protect a company’s image or its products (iv) Direct Marketing:- use of mail, telephone, e-mail or the internet to communicate directly with or solicit response or dialogue from specific customers or prospects. v)Personal selling:- face-to-face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions Marketing Managem eant n@d N UpSTr o20c1u4 ring orders
  160. 160. What is Promotion/Marketing Communications? Elements of the Marketing Communications/Promotional Mix (vi)Interactive marketing:- online activities and programmes designed to engage customers and directly or indirectly raise awareness, improve image or elicit product sales. (vii) Word of mouth marketing:- people to people oral, written or electronic communications that relate to the merits or experiences of purchasing or consuming a product or service. Marketing Management @ NUST 2014
  161. 161. The strategic role of Marketing Communications Create or increase awareness Create interest & cultivate desire Motivating purchasing action (induce behaviour) Create, enhance & restore corporate image Encourage brand loyalty & discourage brand switching Educate consumers & other stakeholders Inform consumers & other stakeholders about products, prices, courses of action, changes, community activities Positioning & Influence attitudes Marketing Management @ NUST 2014
  163. 163. 1. Advertising *Any paid form of non-personal communication about the org and its products that is transmitted to the target market through the mass media. Five critical decisions of advertising: 5 Ms a) Mission: What are the advertising objectives? b)Money: How much can be spent? c) Message: What message should be sent? d)Media: What media should be used? e) Measurement: How should the results be evaluated? Marketing Management @ NUST 2014
  164. 164. (a) Setting the Advertising Objectives (Mission) (i) Output objectives are what the firm ultimately wants to achieve, like higher sales, repeat purchase,market share, and brand loyalty (ii) Intermediate objectives relate to hierarchy-of-effects models and include awareness (inform),presuade,remind and reinforce which respect to a product. Marketing Management @ NUST 2014
  165. 165. (a) Setting the Advertising Objectives (ii) Intermediate Objectives To inform  Telling the market about a new product  Suggesting new product uses  Explaining how the product works  Correcting false impressions  Building company image To persuade  building brand preference  Encouraging brand switching  Persuading buyers to purchase now Marketing Management @ NUST 2014
  166. 166. (a) Setting the Advertising Objectives (ii) Intermediate Objectives  To remind  Reminding buyers where to buy the product  Maintaining a top of the mind awareness  Reminding the buyers that the product may be needed in future  To reinforce  Convince purchasers that they made the right choice  Ensure customer satisfaction and repurchase Marketing Management @ NUST 2014
  167. 167. Setting the Advertising Objectives (iii) Illustrative Advertising Objectives Specific advertising targets to be achieved within an indicated time frame e.g To increase repeat purchase of Munchee chocolate bars from 30 to 50 percent among 10- to 16-year-old boys by April 2013 Marketing Management @ NUST 2014
  168. 168. (b) Deciding on the Advertising Budget (Money) Management should consider these five factors when setting the advertising budget: i.Product life cycle stage ii.Market share and consumer base iii. Competition and clutter iv. Advertising frequency v. Product substitutability Marketing Management @ NUST 2014
  169. 169. Approaches to setting the advertising budget (i) Competitive Parity method: firms base their budgets on competitors’ spending per market share point. (ii) Percentage of Sales method: The advertising budget is set a percentage of sales. (iii) Objective & task method: firm sets advertising objectives, identifies the necessary tasks, estimates the budget for each task, then adds up the total cost Marketing Management @ NUST 2014
  170. 170. Approaches to setting the advertising budget (iv) Research approach: Here advertising budget is argued for and presented on the basis of research findings. (v) Affordable: advertising budget set at a level the company think they can afford. (vi) Residual: advertising budget based on what is left after allocating for other organisational tasks & activities. Marketing Management @ NUST 2014
  171. 171. (c) Creating the Advertising Message (Message) • Advertising campaigns vary in their creativity. • Advertisers and their agencies must be sure their “creative” advertising does not overstep social and legal norms. *Advertising message creation comes in two major forms ; I. Rational approaches. II. Emotional approaches. Marketing Management @ NUST 2014
  172. 172. (i) Rational approaches Demonstration: Brands are presented in a problem solving context which focuses on their performance. Comparative: Direct Comparison with competitor brand e.g brand x is compared favourably on two or three main attributes with a leading competitor. Factual: messages provided in a rational, logical and straightforward manner. Slice of life: Uses pple who are similar to the target audience,presenting them in scenes that the target audience can readily associate with & understand Refutational Appeals: A special case of two-sided advertising that explicitly mentions competitors claims, but then directly refutes them. Marketing Management @ NUST 2014
  173. 173. (i)Rational approaches *One-sided and Two-sided appeals  One-sided appeals are most effective when the target audience is less educated and feels positive about the product.  Two-sided appeals are more effective when the audience’s initial opinion is not necessarily positive and the audience is educated and/or sceptical. Marketing Management @ NUST 2014
  174. 174. (ii) Emotionals Appeals *Advertising approaches appealing to emotions.The main styles are: Humour-based-effective @ creating awareness, sets a positive tone, and enhances memory, but if improperly crafted may distract from the core message. Fear-based- Fear appeals creates anxiety, behaving as the advertising suggests removes the anxiety Celebrity endorsement-based. Advertisers often use well-known people to endorse products, especially on TV Marketing Management @ NUST 2014
  175. 175. (ii) Emotionals Appeals (Storytelling: Storytelling can be a very effective way of appealing to people’s emotions. Animation: Used to reach children and as a way of communicating potentially boring & uninteresting products (gas,insurance) to adults. Sex: excellent for getting the attention of the target audience,but if the product is not related (e.g perfume,clothing) these ads generally do not work. Music: Good because of subliminal effect as well for getting attention & differentiating brands. Marketing Management @ NUST 2014
  176. 176. (d) Developing Media Strategies (Media) After creating the message, the next task is to choose media to carry it. When deciding which type of media to use – known as an advertising medium – a business needs to consider the following factors. Marketing Management @ NUST 2014
  177. 177. Factors affecting media choice Reach of the media – national or local; number of potential customers it could reach Nature of the product – the media needs to reflect the image of the product or should be appropriate to the product Position in product life cycle – launch stage will need different advertising from products undergoing extension strategies Cost of medium & size of advertising budget – e.g. local newspaper advertising is cheaper than radio, which in turn is cheaper than TV. Effectiveness of the media – the final medium chosen should be effective given the task @ hand Message Characteristics –timeliness & info content influence media choice Marketing Management @ NUST 2014
  178. 178. (v).Evaluating Advertising Effectiveness (Measurement) Good planning and control of advertising depend on measures of advertising effectiveness.  Advertisers should try to measure the communication effect of an ad—that is, its potential effect on awareness, knowledge, or preference—as well as the ad’s sales effect.  Advertisers should try to measure the sales-effect of advertising Marketing Management @ NUST 2014
  179. 179. (2) Personal Selling Communicating with the target market through personal interaction in an exchange situation. Involves use of the company’s own sales personnel (sales reps, key account managers, sales consultants, sales engineers etc. *Role of the sales force a) Identifying and qualifying prospects b) Presentation and demonstration of a company’s offering (product) c) Negotiations d)Closing a sale e) Follow-up and maintenance to ensure customer satisfaction f) Developing relationships. Marketing Management @ NUST 2014
  180. 180. (3) Direct marketing  Communicating with customers without use of middlemen.  Includes use of E-mail, direct mail,telemarketing, catalogues  Factors fuelling the growth of direct marketing include; technological developments,demographic & lifestyle changes,product quality improvements,improved delivery systems etc Marketing Management @ NUST 2014
  181. 181. (4) Public Relations PR involves a variety of activities designed to promote or protect a company `s imagine or its individual products. -Most org have PR depts that monitor the attitude of the org `s publics & distributes info & communications to build goodwill. *PR departments perform five functions: (a)Press Relations: presenting news & info about the org in the most positive light. (b)Corporate Communications: Promoting understanding of the org thru internal & external communications Marketing Management @ NUST 2014
  182. 182. (4) Public Relations (c) Lobbying: Dealing with legislators & gvt officials to promote or defeat legislation. (d) Counselling: Advising management about public issues,company positions & image during good & bad times. (e) Publicity: Non-personal stimulation of demand for a product, service or business unit by generating commercially significant news about it in published media or obtaining favourable presentation of it on radio, television or stage. Marketing Management @ NUST 2014
  183. 183. (4) Public Relations (e) Publicity: Businesses cannot wait around for the news to present opportunities. They must also try to create their own news thru some of the following techniques: Be involved in a activity that enhances the environment Publish a report Take a stand on a controversial subject Announce an appointment/acquistion Invent and then present an award Stage a debate / Arrange a speech or talk Organize a tour of your business or projects Event sponsorship Conduct a poll or survey Marketing Management @ NUST 2014
  184. 184. (5) Sales Promotion Is a short term promotional technique designed to improve sales by way of inventive to customers,trade partners and sales people. * Factors affecting sales promotion Cost of promotional undertaking Consistence with the brand image Long term effectiveness of the promotion Marketing Management @ NUST 2014
  185. 185. Sales promotions directed @ customers Money off coupons – customers receive coupons, or cut coupons out of newspapers or a products packaging that enables them to buy the product next time at a reduced price Competitions – buying the product will allow the customer to take part in a chance to win a prize Discount vouchers – a voucher (like a money off coupon) Free gifts – a free product when buy another product Loyalty cards –where customers earn points for buying certain goods or shopping at certain retailers – that can later be exchanged for money, goods or other offers Marketing Management @ NUST 2014
  186. 186. Sales promotions directed @ trade partners • Price-Off (off-invoice or off-list): A straight discount off the list price on each case purchased during a stated time period. • Allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s products in some way. • Free Goods: offers of extra cases of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size Marketing Management @ NUST 2014
  187. 187. Concept of Integrated Marketing Communication • It encompasses all the promotional mix elements in combination to provide clarity, consistence and maximum communication impact. • Rather than consisting of separated marketing communication elements with no unified control, the IMC approach regards each of the business `s promotional elements as part of a whole ,each of which offers a different means to connect with the target audience Ensures use of all communication tools some being the key ones for any activity and others assuming a supportive role. All tools must project the same message (consistency) and reinforce each other in the market Marketing Management @ NUST 2014
  188. 188. Steps in Developing Integrated Marketing Communication  Identify the target audience – will affect the marketer’s decisions on what will be said, how it will be said, when it will be said, where it will be said and who will say it.  Determine the response sought (objectives) ;- based on the hierarchy of effects model.  Develop the IMC budget;- how much will be spent in the communication.  Design an effective message;- ideal message should get Attention, hold Interest, arouse Desire and obtain Action (AIDA)  Select media to use ;- decide on personal communication channels (sales reps, consultants) vs. non-personal channels (newspapers, radio)  Select the message source ;- who will deliver the message e.g. celebrities, doctors, models etc.  Collect feedback ;- assess effect of the message on target audience. Marketing Management @ NUST 2014
  189. 189. Conclusion • As highlighted,the marketing communications mix consists of five major modes of communication: advertising, sales promotions, public relations and publicity, personal selling and direct marketing. • Managing and coordinating the entire communications process calls for integrated marketing communications (IMC), that combines the various communications mix to provide clarity, consistency and maximum impact through the seamless integration of discrete messages. Marketing Management @ NUST 2014
  191. 191. MARKETING RESEARCH *Is the systematic design, collection, analysis and reporting of data relevant to a specific marketing situation facing an org. Marketing Research Process Defining the problem and research objectives Developin g the research plan for collecting informati on Impleme nting the research plan Interpreting and reporting the findings Marketing Management @ NUST 2014
  192. 192. Importance of Marketing Research Supports marketing efforts towards ensuring that the org `s marketing mix is reflective of environmental imperatives. Ensures successful NPD for many product classes Is a prerequisite for a successful market development initiatives. Provides info that helps marketing managers interpret past performance as well as plan future activities. Provides timely,actionable & accurate information on consumers,competitors & their brands. Marketing Management @ NUST 2014
  193. 193. Defining Consumer Behaviour The decision processes and physical activities consumers engage when evaluating, acquiring (obtaining), consuming/using or disposing goods OBaTnAdIN sIeNrGvices CONSUMING OBTAINING •How you decide you •How you use the want to buy product •Other products you •How you store the consider product in your home buying •Who uses the product •Where you buy •How much you •How you pay for consume product •How product •How you transport compares with product home expectations •How you get rid of remaining product •How much you throw away after use •If you resell items yourself or through a consignment store •How you recycle some products Marketing Management @ NUST 2014
  194. 194. WHY STUDY CONSUMER BEHAVIOUR? Marketing concept remains one of the best practices of marketing. To stay in business by attracting and retaining customers. To benefit from understanding consumer needs. Designing marketing strategies that create competitive advantage. Consumers do not always act or react as theory suggests. Need to segment, target and position is line with consumer behaviour imperatives. To sell products that might not sell easily. It helps them gain insights as to why a consumer behaves differently to another consumer; as well as, why a consumer behaves differently in different times and buying situations. Marketing Management @ NUST 2014
  195. 195. Consumer Decision Making Consumer Decision Making pertains to making choices/choosing courses of action regarding product and service offerings. Consumer decision making involves a continuous flow of interactions among environmental factors, cognitive and affective processes and behavioural actions. Marketing Management @ NUST 2014
  196. 196. Consumer Decision Making Process 1. Need /Problem recognition 2. Pre-purchase information search 3. Evaluation of alternatives 4. Purchase decision 5. Post-purchase outcome and reactions Marketing Management @ NUST 2014
  197. 197. 1.Need Problem Recognition Is a stage of perceiving a deficiency/need which can be triggered off by an internal or external stimuli. Can be simple or complex Can result when the Actual State (AS) or Desired State (DS) changes Marketing Management @ NUST 2014
  198. 198. 2.Pre-Purchase Information Search After a need is recognized, the consumer goes for an Info search, so as to be able to make the right purchase decision by gathering info about the product category & the various alternatives available. Can be specific, ongoing or incidental Info sources can be in internal or external Marketing Management @ NUST 2014
  199. 199. 3.Evaluation of Alternatives Once the consumer has gathered info and identified the alternatives, s/he compares the different alternatives available on certain criteria like economic e.g price value assessment or behavioral e.g need/motivation, lifestyle etc or functionality. In relation to generation of alternatives,a consumer moves from evoked/consideration set towards the choice set as follows: Evoked Set Inept Set Inert Set Choice Set Marketing Management @ NUST 2014
  200. 200. 4.Purchase Decision *After the consumer has evaluated the various alternatives, he selects a particular brand. Consumer purchases may be: Trials/First purchase Repeat purchases Marketing Management @ NUST 2014