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MARKETING MANAGEMENT (FINAL)

Chapter 12: Setting Product Strategy

What is a product?

is anything that can be offered to a market to satisfy a want or need, including

physical goods, services, experiences, events, persons, places, properties,

organizations, information, and ideas.

Product Classifications

Durability and tangibility

1. Nondurable goods tangible goods normally consumed in one or

a few uses, such as beer and shampoo. These goods are

purchased frequently, the appropriate strategy is to make them

available in many locations, charge only a small markup, and

advertise heavily to induce trial and build preference.

2. Durable goods tangible goods that normally survive many

uses: refrigerators, machine tools, and clothing, normally require

more personal selling and service, and require more seller

guarantees.

3. Services intangible, inseparable, variable, and perishable

products that normally require more quality control, supplier

credibility, and adaptability. Examples include haircuts, legal advice,

and appliance repairs.

Consumer-goods classification

1. Convenience goods frequently, immediately, and with minimal

effort. Examples include soft drinks, soaps, and newspapers.

- Stable goods: convenience goods that consumers purchase

on a regular basis

- Impulse goods: goods are purchased without any planning or

search effort, like candy bars.

- Emergency goods: purchased when a need is urgent likes

purchase an umbrellas during a rainstorm.

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2. Shopping goods are those the consumer characteristically

compares on such bases as suitability, quality, price, and style.

- Homogeneous: shopping goods that are similar in quality but

different enough in price to justify shopping comparisons.

- Heterogeneous: shopping goods that differ in product features

and services that may be more important than price.

3. Specialty goods have unique characteristics or brand

identification for which enough buyers are willing to make a special

purchasing effort.

4. Unsought goods those goods that consumer does not know

about or normally think of buying, such as smoke detectors and

gravestone.

Product Differentiation;

Form the size, shape, or physical structure of a product.

Features offered with varying features that supplement their basic function.

Customization marketers can differentiate products by customizing them.

Performance quality level at which products primary characteristics

operates (low, average, high, or superior)

Conformance quality the degree to which all produced units are identical

and meet promised specifications.

Durabilitya measure of the products expected operating life undernatural

or stressful conditions, reputation for long lasting.

Reliability a measure of the probability that a product will not malfunction or

fail within a specified time period. Repairability the ease of fixing a product when it malfunctions or fails.

Style describes the products look and feel to the buyer. It also creates

distinctiveness that is hard to copy.

Design the totality of features that affect how a product looks and functions

in terms of customer requirements. It offers functional and aesthetic benefits

and appeals to both our rational and emotional sides.

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Service Differentiation;

Ordering ease refers to how easy it is for consumer to place an order with

the company.

Delivery how well the product or services is brought to the customer (speed

& care)

Installation the work done to make a product operational in its planned

location.

Customer training train customer to use the equipment properly and

efficiently.

Customer consulting includes data, information systems, and advice

services the seller offers to buyers.

Maintenance and repair help customers keep purchased products in good

working order.

Returns

Controllable returns: result from problems or errors by the

seller or customer and can mostly be eliminated with improved

handling or storage, better packaging, and improved

transportation and forward logistics by the seller or its supply

chain partners.

Uncontrollable returns: result from the need for customers to

actually see, try, or experience products in person to determine

suitability and cant be eliminated by the company in the short

run through any of these means.

Product System & Product Mix

Product system is a group of diverse but related items that function in a compatible

manner.

Product mix or product assortmentis the set of all products and items a particular

seller offers for sale. It should contain the following things;

Width refers to how many different product lines that the company carries.

Length refers to the total number of items in the mix.

Depth

number of variants offered of each product in the line.

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Consistency how closely related the various lines are in end use, product

requirements, and distribution channels.

Product Line Length

Company objectives influence product-line length;

1. To create a product line to induce up-selling.

2. To create a product line that facilitates cross-selling.

3. To create a product line that protect economic up & down.

A company lengthens its products line in two ways;

1. Line stretching when a company lengthens its product line beyond its

current range, whether down-market, up-market or both ways.

Down market stretch: A company introduces a lower priced line for any

of three reasons;

1. Shoppers want value-priced goods.

2. Wish to tie up lower-end competitors

3. Find that the middle market is stagnating or declining

For examples: (Thai Airways Nok Air) (Singha Leo)

Up market stretch: Company enters the high end of the market for;1. More growth

2. Higher margins

3. Simply to position themselves as full line manufacturers

Such as (Toyota Lexus) (The mall Emporium)

Two-way stretch: Companies serving the middle market might decide to

stretch the line in both directions.

Such as MK restaurant MK Gold

MK Trendy

2. Line filling refers to add more items within the present range.

Several reasons for line filling;

1. Reaching for incremental profits.

2. Trying to satisfy dealers who complain about lost sales because of missing

items in the line.

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3. Trying to utilize excess capacity.

4. Trying to be the leading full-line company.

5. Trying to plug holes to keep out of competitors.

Product Mix Pricing

1. Product line pricing companies normally develop product lines

rather than single products and introduce price steps. The sellers task

to establish perceived quality differences that justify the price

differences.

2. Optional-feature pricing pricing optional products, accessory

products, features, and services with their main product. Companies

must decide which items to include in the standard price and which to

offer as options.

3. Captive-product pricing pricing product that must use with the

main product. ( Razors and razors blades)

4. Two-part pricingconsisting of a fixed fee plus a variable usage fee.5. By-product pricing the product of certain goods results in by

products (leftover). If by-product have value they should be priced

(Leftover bread from S&P can sold for feeding fish)6. Product-bundling pricing

Pure bundling a company offers product only as a bundle.

Mixed bundling offers both individual and bundle, normally

the price of bundle charging less than the items that purchased

separately.

Co-brandling (also called dual branding or brand bundling)

It occurs when two or more well-known existing brands are combined into a

joint product or marketed together in some fashion.

Advantages;

1. Generate greater sales from existing target market.

2. Open additional opportunities with new consumers and channels.

3. Reduce the cost of product introduction because it combines two

well know images and speeds adoption.

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Disadvantages;

1. Risks and lack of control from becoming aligned with another brand

in the consumers mind.

2. Lack of focus on existing brand.

3. Consumers feel less sure of what they know about the brand.

Ingredient Branding

A special case of co-branding that involves creating brand, brand equity for

materials, components, or parts that are necessarily contained within other products.

Packaging

It related to all activities of designing and producing the container for a

product.Packaging must achieve a number of objectives:

1. Identify the brand.

2. Convey descriptive and persuasive information.

3. Facilitate product transportation and protection.

4. Assist at-home storage.

5. Aid product consumption.

To achieve these objectives and satisfy consumers desires, marketers must choosethe aesthetic and functional components of packaging correctly. Aesthetic

considerations relate to a packages size and shape, material, color, text, and

graphics.

Labeling

A label performs several functions;

1. It identifies the product or brand.

2. It might also grade the product. (canned peaches are grade-labeled A, B, and

C)

3. The label might describe the product. (Who made it, where and when, what it

contains, how it is to be used, and how to use it safely.)

4. The label might promote the product through attractive graphics.

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Chapter 9: Creating Brand Equity

What is a Brand?

A brand is a name, term, sign, symbol or design, or a combination of them,

intended to identify the goods or services of one seller or group of sellers and to

differentiate them from those of competitors.

The Scope of Branding (P. 265)

Branding is endowing products and services with the power of the brand.

Brand Equity is the added value endowed on products and services. It may

be reflected in the way consumers, think, feel, and act with respect to the

brand.

Brand Asset Valuator Model (Brand Equity Model)

1. Energized differentiation: the degree to which a brand is seen as different

from others, and its perceived momentum and leadership.

2. Relevance:the appropriateness and breadth of a brands appeal.

3. Esteem: perceptions of quality and loyalty, or how well the brand is regarded

and respected.

4. Knowledge: how aware and familiar consumers are with the brand.

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Building Brand Equity (P. 271)

3 main sets of brand equity drivers;

1. The brand elements or identities making up the brand.

2. The product, service, and all accompanying marketing activities and

supporting marketing programs.

3. Others associations transferred to the brand by linking to some

other entities (a person, place, or things)

Choosing Brand Element (P. 272)

Brand Elements are thosetrademarkable devices that identify and

differentiate the brand. (brand names, logos, symbols, characters, slogans,

jingles, and packages)

Brand Element Choice Criteria (P.272)

There are six criteria for choosing brand elements. The first three memorable,

meaningful, and likable are brand building. The latter three transferable, adaptable,

and protectable are defensive and help leverage and preserve brand equity against

challenges.

1. Memorable easily to recall and recognize2. Meaningful suggest something about a brand

3. Likable appealing, visually & verbally likable

4. Transferable can be used to introduce new products in the same or

different categories

5. Adaptable adjustable and updatable

6. Protectible legally protectible

Managing Brand Equity (P. 280-281)

1. Brand Reinforcement brand equity is reinforced by marketing actions that

consistently convey the meaning of the brand.

2. Brand Revitalization once-prominent and admired brands fallen on hard

times have managed to make impressive comeback. Most of the time the

company change some brand elements (package, design, symbols) while

keeping the old brand name.

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Devising a Branding Strategy (P. 282)

3 main choices for introducing new product;

1. It can develop new brand elements for the new product.

2. It can apply some of its existing brand elements.

3. It can use a combination of new and existing brand elements.

Brand Extension:A firm uses an established brand to introduce a newproduct.

1. Line Extension: the parent brand covers a new product within a

product category.

2. Category Extension: the parent brand is used to enter a new

product category.

Firms can combine an existing brandwith a new brand

If the parent brand is associated with multiple products, it is also called Family

Brand or Master Brand.

Brand Mix (Brand Assortment): the set of all brand lines that a particular

seller makes available to buyers.

Brand Line: consists of all products (line and category extension) sold

under a particular brand.

Branded Variants: specific brand lines supplied to specific retailers or

distribution channels.

Licensed Product: whose brand name has been licensed to other

manufacturers that actually make the product.

Branding Decisions

1. Individual names using one name for one product.

Separate family brand names using one name foe one product line

Parent Brand is an

existing brand that

gives birth to brand

extension or subbrand.

Subbrand is a new

brand combined with

an existing brand.

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Advantages;

The company does not tie its reputation to the product. If it fails, it will

not hurt the companys name/image.

Companies use different brand names for different product quality.2. Corporate Umbrella or Company brand name using only one name for

all product line.

Advantages;

Lower development cost because no need to run name research or

spend heavily on advertising.

If the company has a good name, sales of new products trend to be

strong.

3. Corporate name combined with individual productnames the

combination between corporate name and individual product name.

Two Key Components of Branding Strategy (P.284)

Brand Extension: introduce new product under same brand name.

Brand Portfolio: introduce multiple brands in a category.

Brand Extension

Advantages;

1. Improved Odds of New-product Success

Consumers can form expectations about a new product based on what

they know about the parent brand.

Extension results in reduced costs of the introductory launch campaign.

2. Positive Feedback Effects

Brand extension can improve consumer loyalty and perception of the

credibility of the company.

Line extension benefits the parent brand by expanding market

coverage.

Disadvantages;

Brand Dilution Consumer may perceived that what exactly your strength

on.

The worst scenario is that it also harms the parent brand image in theprocess.

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Cannibalizing occur when the new brand eat the existing brand.

Brand Portfolio

The set of all brands and brand lines a particular firm offers for sale in a particular

category or market segment.

Reasons for introducing multiple brands in a category;

1. To increase shelf presence in the store.

2. To attract consumers seeking variety who may otherwise have

switched to another brand.

3. To increase internal competition within the firm.

4. To yield economies of scale in advertising, sales, merchandising, and

Physical distribution.

There are four main types of brand portfolio;

Flankersare positioned with respect to competitors brands so that more

important and more profitable. Flagship brands can retain their desired

positioning. The purpose is to protect the brand leader of the brand or

maintain brand.

Cash Cows brands may be kept around despite dwindling sales becausethey manage to maintain their profitability with no marketing support.

Low End Entry Level the role of a relatively low priced brand in the

portfolio often may be to attract customers to the brand franchise.

High-end Prestige it is to add prestige and credibility to the entire portfolio.

It is to target upper group.

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Chapter 14: Developing Pricing Strategies and Programs

6 Step in setting price;

Step 1: Select the price objective

Step 2: Determine demand

Step 3: Estimate costs

Step 4: Analyze competitor price mix

Step 5: Select pricing method

Step 6: Select final price

Step 1: Select the price objective (P. 411-412)

Five major objectives are;

1. Survival low prices to cover variable costs and some fixed costs to stays in

business.

2. Maximum current profit choose the price that produces maximum current

profit.

3. Maximum market shareMarket-penetration Strategy set a lowest price

to win a large market share.

4. Maximum market skimmingMarket-skimming strategy prices start

high and are slowly lowered over time.

5. Product quality leadership high level of perceived quality with a price

high enough no to be out of reach.

Step 2: Determine demand

Price Sensitivity (P. 412)

It is a reaction of customer towards the price changed.

Prices Demand = Buy less

Prices Demand = Buy more

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Price Elasticity of demand (P. 414)

It related to the responsiveness of customer demand to change in a products

price.

Small changes in price do

not result in significant

changes in demand.

Small price changes result in

large change in demand.

Price elasticity of demand = % change in quality demand

% change in price

Q2-Q1

= Q1

P2-P1

P1

Q1 = Quantity sold before price change

Q2 = Quantity sold afterprice change

P1 = Old price

P2 = New price

If elasticity >1 means that elasticity

If elasticity =1 means that unitary elastic

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Step 3: Estimate costs (P. 415-416)

1. Fixed Cost oroverhead cost Cost that does not vary with production level

or sales revenue.

2. Variable Cost Cost that varies directly with the level of production.

3. Total Cost sum of the fixed and variable cost for any given of production.

4. Average Cost the cost per unit at the level of production.

Experience Curve orLearning Curve: The decline in the average

cost with accumulated production experience

Cost can also change as a result of a concentrated effort to reduce

them through Target Costing.

Step 4: Analyze competitor price mix (P.417)

Step 5: Select pricing method

There are six pricing method;

1. Markup Pricing (P. 418)

Selling price = Unit cost + Markup price

Unit cost = variable cost + Fixed cost

Unit Sale

Markup price = Unit cost

(1 Desirable return on sales)

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2. Target-return Pricing (P.419)

The firm determines the price that yield its target rate on investments (ROI)

The firm can use a break-even chart to learn what would happen at other

sales level.

3. Perceived Value Pricing (P. 420)

Perceived value is made up of a host of inputs, such as the buyers

image of the product performance, the channel deliverables, the warranty

quality, customer support, and softer attributes such as the suppliers

reputation, trustworthiness, and esteem.

Target-return price = Unit cost + Desired return * Invested capital

Unit Sale

Break-even volume (unit) = Fixed cost = $300,000Price Variable cost/unit $20 - $10

= 30,000 units

Price per unit = $20

Variable cost/unit = $10

Fixed cost = $300,000

Break even volume ($) = BEP (units) * Price

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4. Value Pricing (P. 421-423)

Everyday low pricing (EDLP): charges a constant low price with little

or no price promotions and special sales.

High low pricing: charges higher price on an everyday basis butthen runs frequent promotions.

5. Going-rate Pricing (P. 423)

The firm bases its price largely on competitors prices .

Step 6: Select final price (P. 424)

In selecting that price, the company must consider additional factors;

Impact of other marketing activities Company pricing policies

Gain-and-risk sharing pricing

Impact of price on other parties

Adapting Pricing (P. 425-429)

1. Price Discounts and Allowances (P. 426)

Cash Discount a price reduction to buyers who pay bill promptly.

Quality Discount a price reduction to those who buy large volumes.

Functional Discount discount offered by a manufacturer to trade

channel members if they will perform certain functions.

Seasonal Discount a price reduction to those who buy

merchandise or services out of season.

Trade-in Allowances turning in an old item when buying a new one.

Promotional Allowances >>> reward dealers for participating in

advertising and sales support programs.

2. Promotional Pricing (P. 427)

Loss-leader Pricing store drop the price on well-known brands to

stimulate additional store traffic.

Special event pricing sellers will establish special prices in certain

seasons to draw in more customers.

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Cash rebates the refund as a portion of the purchase price returned

to the buyer in the form of cash.

Low-interest financing use no-interest financing to attract more

customers. Longer payment terms stretch loans over longer periods and thus

lower the monthly payment.

Warranties and service contracts adding a free or low-cost

warranty or service contracts.

Psychological discounting set an artificially high price and then

offers product at substantial saving; Was $359, Now $299

3. Differentiating Pricing (P. 428)

Price Discrimination: occurs when a company sells a product or service at

two or more prices that do not reflect a proportional in costs.

Customer-segment pricing different customer groups pay different

prices for the same product or service.

Product-form pricing different versions of the products are priced

differently.

Image pricing the same product is priced at two different levels

based on image differences.

Channel pricinga different price depend on where customer

purchase it.

Location pricing the same product is priced different location even

though the cost is the same such as concert seats.

Time pricing prices are varied by season, day, or hour.

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Chapter 15: Designing and Managing Integrated Marketing

Channels

Marketing channels ortrade channels ordistribution channels are sets of

interdependent organizations participating in the process of making a product or

service available for use or consumption.

Hybrid channels ormultichannel marketing occurs whena single firm uses two ormore marketing channels to reach customer segments.

Channel-Design Decision

I. Analyzing customer needs & wants

Channels product five service outputs;

1. Lot size: the number of units the channel permits a typical customer to

purchase on one occasion.

2. Waiting and delivery time: the average time customers wait for receipt of

goods.

3. Spatial convenience: the degree to which the marketing channel makes it

easy for customers to purchase the products.

4. Product variety:the assortment breadth provide by marketing channel.

5. Service Backup:add-on service (credit, delivery, installation, and repair)

provided by the channel.

II. Establishing objectives and constraints

Channel objective vary with product characteristics;

Perishable product: require more direct marketing.

Bulky Product: require channel that minimize the shipping distance.

Nonstandard product: sold directly by sales representatives.

III. Identifying major channel alternatives

Types of intermediaries

Company can choose form a wide variety of channel for reaching

customer form sales force to agents, distributors, dealers, direct mail,

telemarketing, and internet

1. Sales Forces

Handle complex product

But expensive

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2. Internet

Less expensive

But not as effective with complex product

3. Distributors

Create sale

But may lose contract with customer

Distribution Intensity Strategy

1. Exclusive distribution severely limiting the number of intermediaries.

It is to maintain control over the service level and outputs offered by the

resellers.

2. Selective distribution relies on only some of the intermediaries willing

to carry a particular product. It can gain adequate market coverage with

more control and less cost than intensive distribution.

3. Intensive distribution places the goods or services in as many outlets

as possible. Especially product consume by frequently such as snack

foods, soft drinks, newspapers, candies, and gum. The more exposure it

get, the more it sell.

IV. Evaluate major channel alternatives

E-Commerce Marketing Practices: uses a Web site to transact or facilitate the sale

of products and services online.

Pure click companies are those that have launched website without any

previous existing firms.

Brick and Click companies are existing companies that have added an

online site for information or e-commerce.

M-Commerce Marketing Practice: allows people to connect to the Internet and

place online orders on the move, keep consumers connected and interacting with a

brand throughout their day-to-day lives such as QR Code

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Chapter 16: Managing Retailing, Wholesaling, and Logistics

Retailing includes all the activities in selling goods or services directly to final

consumers for their own purpose, not business purpose.

Major Types of Store Retailers;

1. Specialty Stores: Carries a narrow product line in a relatively small store.

Provide high level of service and sales expertise.

2. Department Stores: Carries a wide variety of product line and offer

service to customer

3. Supermarket: Large, low-cost, high volume. Self -service store designed

to meet total need for food & household products.4. Convenience Store: Small store, self-service, tend to open all day.

5. Drug Store: Prescription and pharmacies, health and beauty aids (Boots)

6. Discount Store: Standard or specialty merchandise; low price, low

margin, high volume stores.

7. Extreme Value orHard-discount Store: A more restricted merchandise

mix than discount stores but at even lower prices such as DISO.

8. Off Price Retailers: Leftover goods, irregular merchandise sold at less

than retails, including factory outlets and warehouse club.

9. Superstore: Hugh selling space, routinely purchased food & household

items, plus services.

Category Killer:Deep assortment in one category such as Toy R

Us.

Hypermarket: Huge store that combine supermarket, discount, and

warehouse retailing like Carrefour.

10. Catalog Showroom: Broad selection of high-markup, fast-moving, brand-

name goods sold by catalog at a discount. Customer picks up

merchandise at a store.

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Chapter 19: Managing Personal Communications

Direct marketing is the use of consumer-direct channels to reach and deliver goods

and services to customers without using market middlemen.

Designing the sales force;

1. Sales force objectives

2. Sales force strategy

3. Sales force structure

4. Sales force size

5. Sales force compensation

Sales Force Objectives and Strategy

Salespeople perform one or more specific task;

Prospecting searching for prospects or leads and customers.

Targeting >> deciding how to allocate their time among prospects and

customers.

Communicatingcommunicate information about the companys

products and service.

Selling approaching, presenting, answering questions, overcoming

objections, and closing sales.

Servicing providing various services to the customers; consulting

on problems.

Information gatheringconducting marketing research and doing

intelligence work.

Allocating deciding which customers will get the product first

Sales Force Size

To arrive at the number of salesperson needed..

1. Group customers into size classes according to annual sales volume.

A: 1,000 customers

B: 2,000 customers

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2. Establish desirable call frequencies.

3. Multiple the numbers of accounts in each size class by the corresponding call

frequency.

4. Determine the average number of calls a sales representative can make per

year (per one sale).

5. Divide the total annual calls required by the average annual calls made by a

sales representative.

Sales Force Compensation

1. The fixed amount >>> a salary, satisfies the need for income stability.

2. The variable amount>>> whether commissions, bonus, or profit sharing,

serves to stimulate and reward effort.

3. Expense allowances >>> expenses of travel and entertaining.

4. Benefits >>> such as paid vacations, sickness, accident benefits, pensions,

and life insurance, provide security and job satisfaction.

A: 36 calls a year

B: 12 calls a year

A: 1,000 * 36 = 36,000 Calls

B: 2,000 * 12 = 24,000 Calls

TOTAL= 60,000 Calls

Suppose that the average full-time rep can make 1,000 calls a year

Salesperson needed = 60,000

1,000

= 60 re resentatives.

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Chapter 17: Designing and Managing Integrated Marketing

Communications

The Role of Marketing Communications

Marketing communications are the means by which firms attempt to inform,

persuade, and remind consumers (directly or indirectly) about the products and

brands that they sell.

8 Major Modes of Communications;

1. Advertising: any paid form of non-personal presentation and promotion of

ideas, goods, or services by an identified sponsor.

2. Sales promotion: any variety of short-term incentives to encourage trial orpurchase of a product or service.

3. Events and experiences: company-sponsored activities and programs

designed to create daily or special brand-related interactions with consumers.

4. Public relations and publicity: a variety of programs directed internally to

employees of the company or externally to consumers, other firms, the

government, and media.

5. Direct marketing: the use of mail, telephone, fax, e-mail, or Internet tocommunicate directly with or solicit response or dialogue from specific

customers and prospects.

6. Interactive marketing: online activities and programs designed to engage

customers or prospects.

7. Word-of-mouth marketing: refers to people-to-people oral, written, or

electronic communications.

8. Personal selling: face-to-face interaction with one or more prospective

purchasers for the purpose of making presentations, answering questions,

and procuring orders.

Eight steps in developing effective communications

1. Identify target audience

The process must start with a clear target audience in mind: potential

buyers of the companys products, current users, deciders, or influencers, and

individuals, groups, particular publics.

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2. Determine the communication objectives

There are four key communications objectives;

I. Category need creating primary demand is appropriate for a new to

the world product.

II. Brand awareness ability to identify (recognize or recall) the brand

within the category.

III. Brand attitudeevaluate the brands perceived ability to meet a

currently need.

IV. Brand purchase intention Promotional offers (coupons, deals)

encourage consumer to make commitment to buy.

3. Design the communications

Formulating the communications to achieve the desired response requires

solving three problems;

Message strategy (What to say)

Appeals, themes, or ideas that will tie in to the brand positioning

and help establish points of parity or points of difference.

Creative strategy (How to say)

It is the way marketers translate their message into a specific

communication. Informational Appeal: elaborates on product or service

attributes or benefits.

Problem solution ad

Product demonstration

Product comparison

Testimonials from endorsers.

Transformational Appeals:elaborates on a nonproduct-related benefit or image. Stir up emotions that motivate

purchase.

Negative appeals: such as fear, guilt, and shame

to get people to do things.

Positive emotional appeals: such as humor,

love, pride, and joy.

Motivational or"borrowed interest device: cute

babies, puppies, popular music is used to attract

attention.

Message source (Who should say): Message delivered by attractive or

popular sources can achieve higher attention and recall.

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Three factors for creating source credibility;

a) Expertise the specialized knowledge the

communicator possesses to back the claim.

b) Trustworthiness describes how objective and honest

the source is perceived to be.

c) Likabilitydescribes the sources attractiveness.

4. Select the communication channels

Personal communication channels: two or more persons

communicate face to face or person to audience through a phone,

surface, mail, or email.

Advocate channels consist of company salespeople

contacting buyers in the target market.

Expert channels consist of independent experts

making statements to target buyers.

Social channels consist of neighbors, friends, family

members, and associates talking to target buyers.

Nonpersonal communication: communications directed to more than

one person and include advertising, sales promotions, events and

experiences, and public relation.

5. Establish the total marketing communication budget

Companies decide on the promotion budget in four common ways;

I. Affordable method sets the communication budget at what they

think the company can afford.

II. Percentage-of-sales method sets communication expenditures at

a specified percentage of current sales or price.

III. Competitive parity method sets to achieve share-of-voice parity

with competitors. The company need to estimate the total amount

spend on communications by overall firms.

IV. Objective and task method

- Defining specific objective.

- Determining all tasks that must be performed to achieve objective.

- Estimating the cost of performing these tasks.

- The sum of these costs is the purpose of promotion budget.6. Deciding on the marketing communication mix

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Companies must consider several factors in developing their communications

mix;

1. Type of product market: communications-mix allocations vary between

consumer and business markets.

Consumer marketers tend to spend comparatively more on sales

promotion and advertising

Business marketers tend to spend comparatively more on personal

selling

2. Buyer readiness stage

3. Product life cycle stage;

Introduction Advertising, events, PR.

Growth WOM (encourage people to pass along)

Maturity Advertising, event, personal selling.

DeclineSales promotion

7. Measuring communication result

8. Managing IMC

Brand A should

improve redesign

products while

Brand B needed to

improve

communication.

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Chapter 18: Managing Mass Communication

An advertising objective (or goal) is a specific communications task and

achievement level to be accomplished with a specific audience in a specific period of

time.

The FiveMs of Advertising

Types of Advertising Objective;

Informative advertising aims to create brand awareness and knowledge

of new products or new features of existing products.

Persuasive advertising aims to create liking, preference, conviction, and

purchase of a product or service (uses comparative advertising)

Reminder advertising aims to stimulate repeat purchase of products and

services.

Reinforcement advertising aims to convince current purchasers that they

made the right choice.

Alternative Advertising Options;

Place Advertising orout of home advertising is a broad category including

many creative and unexpected forms to grab consumers attention.

Billboards use colorful, graphics, sounds, backlight, movement,

and so on.

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Public spaces placed on movie screens, on airplanes, and in

fitness clubs, hotel, and other public areas.

Product Placement pays fees on movie or television.

Point of purchase

includes ads on shopping carts, cart straps,aisles, and shelves as well as promotion option such as in-store

demonstration.

Deciding on Media timing and allocation

1. Continuity exposures appear evenly thought the year, use in

expanding market saturation with frequently purchased items.

2. Concentration calls for spending on the advertising dollars in a

single period, suitable for one selling season or related holiday.

3. Flighting calls for advertising during a period, followed by a period

with no advertising, followed by a second period of advertising activity.

It is useful when funding is limited, the purchase cycle is relatively

infrequent, or items are seasonal such as business airline.

4. Pulsing continuous advertising at low-weight levels, reinforced

periodically by waves of heavier activity. A combination of the

continuity and flighting: it draws on the strength of continuous

advertising and flights to create a compromise scheduling strategy.

Measuring Sales Impact of Advertising;

Share of expenditures

Co. B total budget 10,000,000

Spending in advertising 2,000,000

So, share of expenditure on ads. = 2,000,000

10,000,000

= 20%

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Share of voice (proportion of company advertising of that product to all

advertising of that product)

Share of minds and hearts

Share of market

Co. A 13,000,000Co. B 2,000,000

Co. C 5,000,000

Total budget = 20,000,000

So, share of voice = 2,000,000 = 10%

Of Co. B 20,000,000

Total population 60,000,000

# of people like/prefer 6,000,000

So, share of mind and heart = 6,000,000

60,000,000

= 15%

Sales Volumes Share of market

Co. A 130,000,000 65%

Co. B 50,000,000 25%Co. C 20,000,000 10%

Total (All) 200,000,000 100%

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Sales promotion consists of a collection of incentive tools, mostly short term,

designed to stimulate quicker or greater purchase of particular products or services

by consumers or trade.

Trade Promotion Tools;

1. Price-Off (off-invoice or off-list) a straight discount off the list

price on each case purchased during a stated time period.

2. Allowance:an amount offered in return for the retailers agreeing

to feature the manufacturers products in some way.

Advertising allowance compensates retailers for

advertising the manufacturers product.

Display allowance compensates them for carrying a

special product display.

3. Free Goods offers includes extra cases of merchandise to

intermediaries who buy a certain quantity or who feature a certain

flavor or size.

Consumer Promotion Tools;

1. Samples offer of a free amount of a product or service delivered

door-to-door, sent in the mail, picked up in a store, attached toanother product, or featured in an advertising offer.

2. Coupons certificates entitling the bearer to a stated saving on

the purchase of a specific product.

3. Cash Refund Offers (rebates) provide a price reduction after

purchase rather than at the retail shop.

4. Price Packs (cents-off deals) offer to consumers of savings off

the regular price of a product, flagged on the label or package.5. Premiums (gifts) merchandise offered at a relatively low cost or

free as an incentive to purchase a particular product.

6. Frequency Programs programs providing rewards related to

the consumers frequency and intensity in purchasing the

companys products or services.

7. Prizes (contests, sweepstakes, and games) offers of the

chance to win cash, trips, or merchandise as a result of purchasing

something.

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8. Patronage Awards offer values in cash or in other forms that

are proportional to patronage of a certain vendor or group of

vendors.

9. Free Trials invite prospective purchasers to try the product

without cost in the hope that they will buy.

10.Tie-in Promotions two or more brands or companies team up

on coupons, refunds, and contests to increase pulling power. 11.Cross-promotions using one brand to advertising another non-

competing brand.

12.Point-of-purchase displays and demonstrations takes place

at the point of purchase or sales.

Business and Sales Force Promotion Tools;

1. Trade Shows and Conventions industry associations organize

annual trade shows and conventions.

2. Sales contest aims at inducing the sales force or dealers to

increase their sales results over a stated period, with prizes

(money, trips, gifts, or points) going to those who succeed.

3. Specialty advertising consists of useful, low-cost items bearing

the companys name and address, and sometimes an advertising

message that salespeople give to prospects and customers.

Major Tools in Marketing Public Relation;

1. Publications Companies rely extensively on published materials to reach

and influence their target markets. (annual reports, brochures, articles,

company newsletters and magazines, and audiovisual materials)

2. Eventscompany activities by arranging and publicizing special eventssuch as news conferences, seminars, outings, trade shows, exhibits, contests

and competitions, and anniversaries that will reach the target publics. 3. Sponsorships by sponsoring and publicizing sports and cultural events

and highly regarded causes.4. News to create favorable news about the company, its products, and its

people and to get the media to accept press releases and attend press

conferences.

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5. Speeches company executives must field questions from the media orgive talks at trade associations or sales meetings, and these appearances

can build the companys image.6. Public Service Activities build goodwill by contributing money and time to

good causes.7. Identity Media a visual identity that the public immediately recognizes. The

visual identity is carried by company logos, stationery, brochures, signs,

business forms, business cards, buildings, uniforms, and dress codes.

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Chapter 5: Creating Long-term Loyalty Relationship

Traditional Organization vs. Modern Customer Oriented Organization

Customer-perceived value (CPV)

It is the difference between the prospective customers evaluation of all the

benefits and all the costs of an offering and the perceived alternatives.

Total customers benefit the perceived monetary value of the bundle of

economic, functional, and psychological benefit.

Image benefit Psychological cost

Personal benefit Energy cost

Services benefit Time costProduct benefit Monetary cost

Total customer benefit Total customer cost

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Total customer cost the perceived bundle of costs customers expect to incur in

evaluating, obtaining, using, and disposing of the given market offering, including

monetary, time, energy, and psychological costs.

Delivering high customer value

Value proposition consists of the whole cluster of benefits the company

promises to deliver, it is more than the core positioning of the offering.

Value delivery system includes all the experiences the customer will have

on the way to obtaining and using the offering. At the heart of a good value

delivery system is a set of core business processes that help deliver

distinctive consumer value.

Customer profitability

A profitable customer a person, household, or company that over time

yields a revenue stream exceeding by an acceptable amount the companys cost

stream for attracting, selling, and serving that customer.

Customer profitability analysis

Customer 1 is very profitable; he buys two profit-making products (P1 and

P2). Customer 2 yields mixed profitability; he buys one profitable product (P1) and

one unprofitable product (P3). Customer 3 is a losing customer because he buys one

profitable product (P1) and two unprofitable products (P3 and P4). What can the

company do about customers 2 and 3? (1) It can raise the price of its less profitable

products or eliminate them, or (2) it can try to sell customers 2 and 3 its profit-making

products. Unprofitable customers who defect should not concern the company. Infact, the company should encourage them to switch to competitors.

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Customer Relationship Management the process of carefully managing detailed

information about individual customers and all customertouch points to maximize

loyalty. A customer touch point is any occasion on which a customer encounters

the brand and product from actual experience to personal or mass communication.

Building Loyalty

1. Interacting with Customers listening to customers is crucial to customer

relationship management.

2. Developing Loyalty Programs

Frequency programs designed to reward customers who

buy frequently and in substantial amounts.

Club membership program can be open to everyone who

purchases a product or service, or limited to an affinity group or

those willing to pay a small fee.

3. Creating Institutional Ties Company may supply customer with special

equipment or computer links that help them to manage orders, payroll, and

inventory.