Chapter Thirteen Dimensions of Marketing Strategy Mc Graw-Hill Irwin

Chapter Thirteen Dimensions of Marketing Strategy Mc. Graw-Hill/Irwin Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

The Marketing Mix Maintaining the right marketing mix that satisfies the target market and creates longterm relationships with customers Did You Know? Domino’s Pizza delivery drivers cover 9 million miles a year delivering 400 million pizzas. 2 3 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Product Strategy Product development Classification Mix Life cycle Identification 4 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Developing New Products New Idea Screening Business Analysis Product Development Test Marketing Commercialization Did You Know? In 2001, Microsoft planned to spend $4 billion on R&D. Source: Rebecca Buckman, “Window into the future, ” Wall Street Journal, June 25, 2001, p. R 19. 5

Classifying Products Consumer Products Business Products Convenience products Shopping products Specialty products Raw materials Major equipment Accessory equipment Component parts Processed materials Industrial services 6 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Product Line and Product Mix Product Line Product Mix Closely related products that are treated as a unit because of similar marketing strategy, production, or end-use considerations All of the products offered by an organization 7 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Colgate-Palmolive’s Product Mix and Product Lines Source: “Our Products, ” Colgate-Palmolive (n. d. ), www. colgate. com/app/Colgate/US/Corp/Products. cvsp (accessed June 5, 2004). 8

Product Life Cycle 9 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Identifying Products Branding The process of naming and identifying products; can use a brand mark or trademark Packaging The external container that holds and describes the product Labeling The presentation of important information on a package 10 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

The 10 Bottled Water Brands For each of the top 10 bottled water brands, discuss potential competitive advantages. Rank: Brand (Marketer) U. D. Market Ad Spending Share ($ mil) 1 Aquafina (Pepsi. Co) 15. 1% $33. 9 2 Dasani (Coca-cola Co. ) 13. 8% $20. 4 3 Poland Spring (Nestle) 11. 5% $4. 0 4 Arrowhead (Nestle) 6. 8% $7. 1 5 Crystal Geyser (Roxanne) 6. 0% $1. 0 6 Aberfoyle (Nestle) 4. 5% $0. 0 7 Deer Park (Nestle) 4. 1% $3. 1 8 Ozarka (Nestle) 3. 9% $2. 4 9 Ice Mountain (Nestle) 3. 9% $3. 0 10 Zephyrhillis (Nestle) 2. 9% $1. 9 Source: Advertising Age Fact Pack 2004 Edition, p. 23. 11

Categories of Brands Manufacturer Brands Kellogg’s, Ford, Sony Private Distributor Brands Kenmore appliances (Sears) Generic Brands peanut butter, dog food, kitty litter 12 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Packaging Functions Protection Economy Convenience Promotion Did You Know? While shopping, the average time a consumer looks at a package is 2. 5 seconds. Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved 13

Labeling The content of labeling, often required by law, may include: Ingredients or content Nutrition facts (calories, fat, etc. ) Care instructions Suggestions or use (such as recipes) The manufacturer’s address and toll-free number Web site Other useful information 14 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Product Quality The degree to which a good, service, or idea meets the demands and requirements of customers 15 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Pricing Strategy Four Common Pricing Objectives: Maximize profits and sales Boost market share Maintain the status quo Survival 16 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Pricing Strategies New Product Pricing Price skimming Penetration pricing Psychological Pricing Odd/Even Prestige pricing Price Discounting Quantity discounts Seasonal discount Promotional discounts 17 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Price vs. Non-Price Competition For the following products, indicate whether they are sold using price competition or non-price competition and defend your selection: Toyota Hybrid Prius Hyundai Sonata Porsche Cayenne SUV Estee Lauder Electric Intense Lipcreme Avon Brilliant Moisture Lip Color Louis Vuitton’s Murakami Handbags Olay Complete Moisturizing Lotion Toshiba Widescreen Televisions 18 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Distribution Strategy Marketing Channels Retailers (Wal-Mart, Sears) Wholesalers (food brokers to restaurants) E-tailers (Amazon. com) 19 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Supply Chain Management Long-term partnerships among channel members to reduce costs, waste, and unnecessary movement through the channel to satisfy customers 20 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Channels for Consumer Products 21 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Channels for Business Products More than half of all business products are sold through direct marketing channels Other business products may be distributed through channels employing wholesaling intermediaries Industrial distributors Manufacturer’s agents 22 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Intensity of Market Coverage Intensive distribution Makes a product available in as many outlets as possible Selective distribution Uses only a small proportion of all available outlets to expose products Exclusive distribution Exists when a manufacturer gives a middleman the sole right to sell a product in a defined geographic territory 23 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Physical Distribution Physical distribution includes all the activities necessary to move products from producers to customers Inventory control Transportation Warehousing Materials handling 24 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Importance of Distribution in a Marketing Strategy Distribution decisions are the least flexible marketing decisions Use committed resources Establish contractual relationships Are bound by time 25 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

The Promotion Mix A strong promotion program results from the careful selection and blending of: Advertising Personal selling Publicity Sales promotion Integrated marketing communications The process of coordinating the promotion mix elements and synchronizing promotion as a unified effort 26 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Advertising A paid form of non-personal communication transmitted through a mass medium Advertising campaign 27 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Advertising Media Print media Electronic media Newspapers Magazines Direct mail Outdoor (billboards) Television Radio Cyber ads 28 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

U. S. Advertising Expenditures in Millions of Dollars 29

Internet Advertising Total revenues from advertising, paid content, and e-commerce on mobile devices in the U. S. is projected to grow from $100 million today to $3. 3 billion in 2005 Source: “E-MONEY, ” American Demographics, June, 2001, p. 32. 30

Top 10 Product Categories for Advertising Spending in the United States for the year 2003 Product Category Advertising Spending ($mil) Automotive – Factory $8, 938 Auto Dealerships – Local $4, 953 Autos – Dealer Association $4, 320 Department Stores $4, 070 Motion Pictures $3, 468 Restaurant – Quick Service $3, 442 Prescription Drugs – Human $3, 226 Telephone Services – Wireless $2, 307 Direct Response Products $1, 757 Furniture Stores $1, 402 Source: “U. S. Advertising Spending Rose More than 5% in 2003, Nielson Media Research press release, February 19, 2004, available at http: //www. nielsenmedia. com 31

Ten Leading National Advertisers 32

Personal Selling Direct, two-way communication with buyers and potential buyers A six-step process: Did You Know? A typical sales call on an Prospecting industrial customer can cost Approaching between $200 and $300 per call Presenting Handling objections Closing – asking for the order Following up 33 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Publicity Non-personal communication transmitted through mass media but not paid for directly by the firm Presented in news story form Describes what a firm is doing, what products it is launching, or other newsworthy information 34 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Sales Promotion Direct inducements offering added value or some other incentive for buyers to enter into an exchange Store displays Premiums Sampling and demonstrations Coupons Consumer contests and sweepstakes Refunds Trade shows Did You Know? Annually, 248 billion cents-off coupons are distributed, but less than 2% are redeemed 35 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Push and Pull Strategies 36 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Objectives of Promotions Stimulate demand Stabilize sales Inform, remind, and reinforce customers 37 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Promotional Positioning The use of promotion to create and maintain an image of a product in the buyer’s mind A natural result of market segmentation Assists in product differentiation 38 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Average Salary for Sales and Marketing Executives, 2003 Total Compensation Base Salary Bonus Plus Commissions Executive $144, 653 $95, 170 $49, 483 Top Performer $153, 417 $87, 342 $66, 075 Mid-level Performer $92, 337 $58, 546 $33, 791 Low-level Performer $63, 775 $44, 289 $19, 486 $111, 135 $70, 588 $40, 547 Average of all Positions Source: Galea, Christine. “the 2004 compensation Survey, ” Sales & Marketing Management, May 2004, table p. 29. 39

Solve the Dilemma 1. Design a marketing strategy for the new product line. 2. Critique your marketing strategy in terms of its strengths and weaknesses. 3. What are your suggestions for implementation of the marketing strategy? 40 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Explore Your Career Options Do you think the role of marketing will continue to be important in the face of increasing technological advances? Should professionals such as doctors, lawyers, and dentists utilize marketing in the same way that manufacturing and retail firms do? 41 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Additional Discussion Questions and Exercises 1. Research and development is the process of identifying new ideas and technologies that can be developed into new products. Where do these new ideas come from? 2. Assume you have the opportunity to buy a company that markets a product. Which stage of the life cycle of that product would offer you the greatest opportunity for profits? Why? 42 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Additional Discussion Questions and Exercises 3. What is the difference between a “brand mark” and a “trademark”? 4. What are the advantages of businesses using coupons and/or contests and sweepstakes for sales promotion purposes? 43 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Chapter 13 Quiz 1. In the introductory stage of a product’s life, buyers may be charged the highest possible price for the product. This pricing approach is called a. b. c. d. penetrating pricing psychological pricing price skimming. break-even point. 2. Branding may include a. b. c. d. the brand name. the brand mark the trade mark all of the above. 44 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Chapter 13 Quiz 3. Products that are purchased after the consumer has compared competitive products are a. b. c. d. convenience products. shopping products. specialty products. a product line. 4. Intermediaries who sell products to ultimate consumers for home and household use rather than for resale or for use in producing other products are a. b. c. d. wholesalers. retailers. merchant middlemen agent middlemen. 45 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved

Multiple Choice Questions about the Video 1. One way that Hotel Monaco sets itself apart is by offering guests a(n) ______ as a temporary pet companion during their stay. a. b. c. d. dog cat goldfish bird 2. According to Business Week readers, after price and location, _______ is very important in a hotel service. a. b. c. d. room quality food quality bed quality Web site quality 46 Copyright © 2006 by The Mc. Graw-Hill Companies, Inc. All rights reserved