McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Dimensions of Marketing StrategyDimensions of Marketing Strategy

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The Marketing Mix

• Maintaining the right marketing mix that satisfies the target market and creates long-term relationships with customers

Did You Know? Domino’s Pizza delivery drivers cover 9 million miles a week delivering 400 million pizzas a year.

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Product Strategy

• Product development• Classification• Mix• Life cycle• Identification

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Developing New Products

• New Idea Screening

• Business Analysis

• Product Development

• Test Marketing

• Commercialization

Source: Rebecca Buckman, “Window into the future,” Wall Street Journal, June 25, 2001, p. R19.

Did You Know? In 2001, Microsoft planned to spend $4 billion on R&D.

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Classifying Products

• Consumer Products– Convenience products– Shopping products– Specialty products

• Business Products– Raw materials– Major equipment– Accessory equipment– Component parts– Processed materials– Industrial services

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Product Line and Product Mix

• Product Line– Closely related products

that are treated as a unit because of similar marketing strategy, production, or end-use considerations

• Product Mix– All of the products

offered by an organization

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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).

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Product Life Cycle

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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

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The 10 Most Valuable Brands in the World

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Categories of Brands

• Manufacturer Brands– Kellogg’s, Ford, Sony

• Private Distributor Brands– Kenmore appliances (Sears)

• Generic Brands– peanut butter, dog food, kitty litter

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Packaging Functions

• Protection• Economy• Convenience• Promotion

Did You Know? While shopping, the average time a consumer looks at a package is 2.5 seconds.

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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

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Product Quality

• The degree to which a good, service, or idea meets the demands and requirements of customers

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Pricing Strategy

• Four Common Pricing Objectives:– Maximize profits and sales– Boost market share– Maintain the status quo– Survival

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Pricing Strategies

• New Product Pricing– Price skimming – Penetration pricing

• Psychological Pricing – Odd/Even– Prestige pricing

• Price Discounting– Quantity discounts– Seasonal discount– Promotional discounts

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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

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Distribution Strategy

• Marketing Channels– Retailers (Wal-Mart, Sears)– Wholesalers (food brokers to restaurants)– E-tailers (Amazon.com)

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Supply Chain Management

• Long-term partnerships among channel members to reduce costs, waste, and unnecessary movement through the channel to satisfy customers

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Channels for Consumer Products

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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

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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

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Physical Distribution

• Physical distribution includes all the activities necessary to move products from producers to customers.– Inventory control– Transportation– Warehousing– Materials handling

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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

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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

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Advertising

• A paid form of non-personal communication transmitted through a mass medium – Advertising campaign

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Advertising Media

• Print media– Newspapers– Magazines– Direct mail– Outdoor (billboards)

• Electronic media– Television– Radio– Cyber ads

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U.S. Advertising Expenditures in Millions of Dollars

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Internet Advertising

• Total revenues from internet advertising in the U.S. increased over 30 % between 2004 and 2005 and now totals over $12.5 billion.

Source: “IAB Internet Advertising Revenue Report,” PriceWaterhouseCoopers and the Interactive Advertising Bureau, April 2006, p. 3.

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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 $1,402Source: “U.S. Advertising Spending Rose More than 5% in 2003, Nielson Media Research press release, February 19, 2004, available at http://www.nielsenmedia.com

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Ten Leading National Advertisers

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Personal Selling

• Direct, two-way communication with buyers and potential buyers

• A six-step process:– Prospecting– Approaching– Presenting– Handling objections– Closing – asking for the order– Following up

Did You Know? A typical sales call on an industrial customer can cost between $200 and $300 per call

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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

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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

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Push and Pull Strategies

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Objectives of Promotions

• Stimulate demand

• Stabilize sales

• Inform, remind, and reinforce customers

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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

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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

Average of all Positions $111,135 $70,588 $40,547

Source: Galea, Christine. “The 2004 compensation Survey,” Sales & Marketing Management, May 2004, table p.29.

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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?

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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?

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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?

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Additional Discussion Questions

and Exercises3. 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?

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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 calleda. penetrating pricing

b. psychological pricing

c. price skimming

d. break-even point

2. Branding may include:a. the brand name

b. the brand mark

c. the trade mark

d. all of the above

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Chapter 13 Quiz

3. Products that are purchased after the consumer has compared competitive products are:a. convenience productsb. shopping productsc. specialty productsd. 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. wholesalersb. retailersc. merchant middlemend. agent middlemen

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Multiple Choice Questions about the Video

1. How much market share does Apple have of the digital music devices market?a. 90%b. 60%c. 30%d. 10%

2. Which of the following is not currently offered by Apple?a. GarageBandb. iMoviesc. iThingd. iWeb