Chapter Thirteen

1. Chapter Thirteen Dimensions ofMarketing Strategy

2. The Key to Successful Marketing Strategy • The Right Marketing Mix to Satisfy the Customer: • The Right Product • The Right Promotion • The Right Price • The Right Distribution

3. The Right Product Strategy • To satisfy the target market • To create long-term relationships with customers FAST FACT: Domino’s is the largest privately held restaurant chain in the world. In one year in the US, Domino’s used 25.5 million pounds of pepperoni and 146 million pounds of mozzarella cheese. Source: Domino’s Web site, http://www.dominos.com/About/PR98Usage.cfm (accessed August 24, 2001).

4. Developing New Products Idea Development Screening New Ideas Business Analysis Product Development FAST FACT: In 2001, Microsoft planned to spend $4 billion on R&D. Test Marketing Commercialization Source: Rebecca Buckman, “Window into the future,” Wall Street Journal, June 25, 2001, p. R19.

5. Consumer Products Industrial Products Classifying Products

6. Classifications of Consumer Products Convenience Products Products bought frequently without a lengthy search and bought for immediate consumption. Shopping Products Products purchased after buyer has compared competitive products. Specialty Products Products that the buyer searches for and makes a special effort to obtain.

7. Classifications of Industrial Products • Raw Materials • Major Equipment • Accessory Equipment • Component Parts • Processed Materials • Supplies • Industrial Services

8. 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 Product Line and Product Mix

9. Sales $ Introduction Growth Maturity Decline SalesVolume Profit 0 Time Product Life Cycle

10. 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.

11. The 10 Most Valuable Brands in the World • Rank: Brand: 2001 Brand Value ($billions) • Coca-Cola 68.9 • Microsoft 65.1 • IBM 52.8 • GE 42.4 • Nokia 35.0 • Intel 34.7 • Disney 32.6 • Ford 30.1 • McDonald’s 25.3 • AT&T 22.8 Source: Gerry Khermouch, Stanley Holmes, and Moon Ihlawn, “The Best Global Brands,” Business Week, August 6, 2001, p. 50.

12. Categories of Brands • Manufacturer Brands • Kellogg’s, Ford, Sony • Private Distributor Brands • Kenmore appliances (Sears) • Generic Brands • Peanut Butter, Dog Food, Kitty Litter

13. Packaging • The external container that holds and describes the product inside. • Packaging Functions: • Protection • Economy • Convenience • Promotion FAST FACT: While shopping, the average time a consumer looks at a package is 2.5 seconds.

14. Labeling • The presentation of important information on a package: • Product content information may be required by law • Useful information – manufacturer’s toll-free number and address • Directions and suggestions for use

15. Product Quality • The degree to which a good, service, or idea meets the demands and requirements of customers. • In the global marketplace, product quality is a key means of differentiating products and positioning them above the competition in the consumer’s mind.

16. Pricing Strategy Four Common Pricing Objectives: • Maximize Profits and Sales • Boost Market Share • Maintain the Status Quo • Survival

17. Pricing Strategies • New Product PricingPrice skimming Penetration pricing • Psychological Pricing Odd/EvenPrestige pricing • Price DiscountingQuantity discountsSeasonal discountsPromotional discounts

18. Distribution Strategy • Marketing Channels • Retailers (Wal-Mart, Sears) • Wholesalers (food brokers to restaurants) • E-tailers (Amazon.com) • Supply Chain Management • Long-term partnerships among channel members to reduce costs, waste, and unnecessary movement through the channel to satisfy customers.

19. Producer Producer Producer Producer Agents(Middlemen) Wholesalers(Middlemen) Wholesalers(Middlemen) Retailers(Middlemen) Retailers(Middlemen) Retailers(Middlemen) Consumers Consumers Consumers Consumers Channels forConsumer Products

20. Channel for Services • Services are generally produced and consumed at the same time.

21. 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.

22. Physical Distribution Producer Inventory Planning & Control Transportation Warehousing Materials Handling Consumer

23. Distribution Decisions are the Least Flexible Marketing Decisions • Distribution decisions: • Use committed resources • Establish contractual relationships • Are bound by time

24. Integrated Marketing Communications (IMC)The Goal of Promotion Strategy • IMC • Coordinating the promotion mix elements and synchronizing promotion as a unified effort.

25. Publicity SalesPromotion Advertising PersonalSelling The Promotion Mix

26. Advertising A paid form of non-personal communication transmitted through a mass medium, such as television commercials or magazine advertisements.

27. Ad Spending in the USTotal Advertising Expenditures for 2001 General Motors $2.84 billion Phillip Morris $1.77 DaimlerChrysler $1.67 Procter & Gamble $1.53 AOL Time Warner $1.44 Ford Motor $1.16 Walt Disney $1.05 Source: Vanessa O’Connell, “Advertising,” Wall Street Journal, May 31, 2001, p. B14.

28. Personal Selling • Direct, two-way communication with buyers and potential buyers. FAST FACT: A typical sales call on an industrial customer can cost between $200 and $300 per call.

29. Personal Selling Three Categories of Salespersons: • Order Takers • Creative Salespersons • Support Salespersons

30. Personal Selling is a Six Step Process • Prospecting • Approaching • Presenting • Handling Objections • Closing – Asking for the Order • Following Up

31. In Personal Selling, Appearance Sells • Sales managers tell what personal attributes they feel work against a salesperson’s ability to sell: • Sloppy dresser 94% • Unstylish dresser 75% • Physically unattractive 59% • Overweight 54% • Heavy accent 54% • Young looking 32% Source: “Appearance sells,” USA Today Snapshots, October 9, 2001, p. B1.

32. Publicity • Non-personal communication transmitted through mass media but not paid for directly by the firm. • May be done by the Public Relations Department or an outside PR firm.

33. Principal Publicity Mechanisms • News releases • Feature articles • Captioned photographs • Press conferences • Interviews

34. Sales Promotion • Direct inducements offering added value or some other incentive for buyers to enter into an exchange. FAST FACT: Annually, 248 billion cents-off coupons are distributed, but less than 2% are redeemed. Source: Renae Merle, “US Slowdown is Good News for Coupon Seller Valassis,” Wall Street Journal, May 1, 2001, p. B2.

35. Tools of Sales Promotion • Store displays • Premiums • Sampling and demonstrations • Coupons • Consumer contests and sweepstakes • Refunds • Trade shows

36. Print Media Newspapers Magazines Direct mail Outdoor (billboards) Electronic Media Television Radio Cyber ads Advertising Media

37. 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.

38. Pushing Strategy Producer Wholesalers Retailers Consumers Pulling Strategy Producer Wholesalers Retailers Consumers Push and Pull Strategies Flow of Communications

39. Objectives of Promotions • Stimulate Demand • Stabilize Sales • Inform, Remind, and ReinforceCustomers

40. 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.

41. Marketing PaysSalary Ranges for Selected Marketing Professionals • Corporate Marketing Manager $51,500 - $85,000 • Ad Agency Marketing Manager $50,000 - $88,750 • Brand/Product Manager $60,000 - $91,500 • Public Relations Manager $56,750 - $88,250 • PR Account Executive $38,500 - $56,000 • Advertising Copywriter $42,000 - $61,500 Source: “Agency and Corporate Advertising and Marketing Professionals Annual Salary Range,” CareerJournal.com from http://www.careerjournal.com/salaries/industries/advertising/20010417 -advmktgcreative-tab.html (accessed July 10, 2001) and “Public Relations Professionals Annual Salary Ranges,” CareerJournal.com http://www.careerjournal.com/salaries/industries/publicrelations/ 20010417-pr-tab.html (accessed July 10, 2001).

42. 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?

43. 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?

44. 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? 3. What is the difference between a “brand mark” and a “trademark”?

45. Additional Discussion Questions and Exercises 4. What are the advantages of businesses using coupons and/or contests and sweepstakes for sales promotion purposes?

46. 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. 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.

47. Chapter 13 Quiz 3. Products that are purchased after the consumer has compared competitive products are a. convenience products. b. shopping products. c. specialty products. d. 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. wholesalers. b. retailers. c. merchant middlemen. d. agent middlemen.

48. Multiple Choice Questions about the Video 1. Which of the following represents the target market for Alligator Records? a. country music fans b. hard rock fans c. blues fans d. classical music fans 2. Which type of market coverage is probably being used by Alligator Records? a. selective distribution b. intensive distribution c. exclusive distribution d. ad-hoc distribution