Marketing Mix of Traditional Products & Services • The marketing mix is the set of controllable, tactical marketing tools that the producer/craft maker blends to produce the response in the marketplace.
Marketing Mix. 4 P’s into 7 P's 4Ps serves forselection consumers with their reaction only for product presentation or observation. 7Ps – Price, Product, Promotion, Place, People, Process, Physical Environment -extends to encompass growth of services, and helps to gain the reaction from its target market 9 Ps consists of everything controllable, tactical the craftmakers can influence the interest or demand for TG.
Marketing Mix. 4 P’s into 7 P's 1. Process of Planning to come with TP to a target market 2.People or a target market 3. Product - TP (goods and services in combination) offered to target market. • Variety of product mix, features, designs, packaging, sizes, services, warrantees and return policies. 4.Price for TP consumers is important shift for communication or interactive behavior. • Retail price/wholesale • Discounts
Marketing Mix. 4 P’s into 7 P's 5. Promotion - activities trended to communicate the merits of TP. • Personal Selling or Sales Force • Advertising • Sales Promotion – samples, coupons, premiums, cash refunds, demos, point-of-purchase materials, display allowances, trade shows, sales rep contests • Public relations • Direct marketing - direct mail, Internet, telemarketing, and direct-response, catalogs.
Marketing Mix. 4 P’s into 7 P's 6. Place/Distribution - activities that make the TP available to the target market. Includes distribution channel, geographic coverage, locations, inventory, transportation or logistics. 7. Partners/Alliances - joint relationships involving cooperation and responsibilities for duties including products, distribution and promotion functions.
Marion Harper: “To manage a business well is to manage its future; and to manage the future is to manage information.” Integrated Marketing Concept When craft maker works so hard to serve the customer’s interests Two levels of marketing integration: • The various marketing functions of marketing research, planning, sales force, advertising, TP/brand management, pricing and promotion are using together. • “Think about Customer” - as marketing is well-coordinated by craft maker.
Most popular myths – Marketing myopia about consumers • No guarantee against product obsolescence. • Always appears better TP combination. • Customers buy “by their eyes and emotions” • They buy when they see variety • Customers have special experience not to buy a lot of TP from one place • Customers can’t evaluate quality. • They always evaluate quality for sized TP • Demanded TP with style • Customers need TP • They need it when they are 1st time in target place • Higher inspiration from more advertised or famous places
Marketing’s Role • Marketing should try to mobilize resources to develop customer satisfaction. • Requests to increase product design, material costs, disrupt production schedules, increase costs and create budget headaches.
DISTRIBUTION – 3P Lecturer R. RukuižienėLithunian University of AgricultureFaculty of Economics and ManagementDEPARTMENT OF BUSINESS MANAGEMENT 2011-05-06
DISTRIBUTION CONCEPTION Learning Objectives of Distribution Theory: • Understanding of decisions range concerning distribution planning. • Alternative distribution channels’ structure and relevant criteria of their choice. • Distinctive characteristics of distribution management. • Contributions to distribution process and marketing strategy.
DISTRIBUTION CONCEPTION • Distribution is a process of identification and appliance of production distribution shifts. • Distribution as supply system applied for customers to find the useful products at determined place and moment. • Distribution as communication system of producers, purchasers, customers in concrete area and time period.
DISTRIBUTION Distribution – element of marketing mix, which is oriented to the decisions and acts concerning production movement from producer to consumer.
Consumers Flows (Products & Information & Money) Market of … products Producer organizations Distributors Trade organizations Wholesalers Retailers Managerial market shifts Marketing mix (4 P’s) Product Price Place (distribution) Promotion Distribution - the element of marketing mix, - concerning decisions and activity, - focused upon production movement from producers to consumers. DISTRIBUTION CONCEPTION
DISTRIBUTION CONCEPTION Distribution process Distribution process is focused on: • Order of processing and it’s management. • Purchasing and selling of products (raw materials and other resources). • Production possession and storing. • Transportation and protection. • Production delivery and money transfers. • Reserve store formation and quality management.
DISTRIBUTION CONCEPTION Complexity factors of distribution system : • Dispersion of products into territorial units. • Frequency of ordering. • Products submission methods and dates. • Complexity of “route” schema. • Products nomenclature and it’s formation complexity. • Policy of reserve management.
Characterization of Distribution Channels Criteria and motivation of feasibility as a basement to form distribution channel according producers or purchasers philosophy
Functions of Distribution Channel Intermediaries in channel are subordinated to general schema of organization, possession and control. Subordinated actions of intermediaries upon: • Pricing items. • Purchase items. • Market penetration and/or retention items. • Total responsibility and unified service system.
Formation of Distribution Channel • Distributor acceptance • Distributor elimination • Distributor change to more competitive Distributors are available to act in distribution channel as long as they have power to impact distribution service scope and price concerning supplier’s requirements to sale management
DISTRIBUTION System of distribution channels is organizations (intermediaries) which coordinate the products flows and make contracts. • Length of distribution channel – amount of members (intermediaries) in distribution chain. • With of distribution channel – amount of independent members in each distribution chain.
Producer Wholesaler Trader Consumers 1 level 2 level Producer Wholesaler Trader Consumers Producer Wholesaler Trader Consumers Vertical marketing systems (VMS - 1) The net of intermediaries - territorial trade unit where the strongest member of distribution channel keeps the control in his hands (as current stockholder or franchiser with the higher-stock financial capital) in managing separately all members as unified in corporation. Moderator of distribution channel - a producer or intermediary of any level
VMS Producer Distributor Trader Consumers Synergy effect = (1) Economic effect = Product diffusion (2) Technologic effect (3) Financial effect (4) Communicational effect Vertical marketing systems (VMS - 2) DISTRIBUTION CONCEPTION VMS creates managerial net of intermediaries (channel) with financial, technologic and communication matches to prevent conflicts inside the channel of differentiation the goals of corporative activity.
Vertical marketing systems (VMS - 3)Types of VRS: • Corporative systemscover the net of intermediaries as warrant for production circulation from producers to customers. • Administered systems cover companies, whichkeep the net of intermediaries (channel) with the provision of their support to accountancy, provision or technological adequacy. • Contractual systemscover the independent producers with different specialization, distribution ability, and actively cooperating in creation contracts for higher turnovers. • Voluntary trading systems(vertical channels) cover the collaboration contracts between wholesalers and retailers, where wholesalers manage the activity of retailers. • Cooperated retailing systems (vertical channels) corporate the amount of retailers in producing addition functions of reproduction, storage, packaging, transporting, delivering. • Franchise organizations cover special created channels of distribution for special production delivery and distribution for special customers.
Horizontal marketing systems (HMS - 1) DISTRIBUTION CONCEPTION HMS is a corporative formation of independent intermediaries (horizontal channel), which join their resources for effective actions in the market under beneficial or risky circumstances. HMS help to develop such channel in building financial stability, innovative technologies, marketing strategy of each intermediary under market obstacles.
DISTRIBUTION CONCEPTION Horizontal marketing systems (HMS - 1) HMS coordinate themselves by special managerial departments for trading, information system possession, implementation of integrated marketing tools. General coordination of HMS (horizontal channel) members • Assessment of market obstacles. • Planning of production flows. • Management of production reserves. • Prognostication of turnover. • Implementation of differentiated pricing policy.
Multi-channel marketing systems (McMS – 1) McMS create the possibilities to producers to get into different market segments by the help of different distribution channels. McMS - popular distribution formula under market profilation to eliminate conflicts in different distribution channels, and under implementation of general marketing strategy: • In covering new market segments. • In forming new demand. • In creating higher dispersion of production.
4 support activities • Firm’s infrastructure • Human resources management • Technology development • Procurement Margin 5 primary activities Inbound logistics * Operations * Outbound logistics * Marketing and sales * Service Margin Management of Distribution Channel Channel Choice Decisions Value chain for creation competitive advantage
Lecturer Rasa RukuižienėLithunian University of AgricultureDEPARTMENT OF BUSINESS MANAGEMENT2011-05-06 MARKETING MIX. PRODUCT PRICE AND PRICING Formation of product/service pricing under impact of market globalization PRICING DECISIONS
MARKETING MIX. PRODUCT PRICE AND PRICING Price – value in exchanging market of products/services. Price – products’ value, which in market could be defined as pushing process for presenting products to consumers. (Ph.Kotler,H.Amstrong, J.Sonders, V. Wong).
MARKETING MIX. PRODUCT PRICE AND PRICING PRICING IMPACTS THE REQUIREMENTS OF ACTIVITY: • reduce the costs; • enhance the profit; • correspond with the value of consumers in communication; • reflect the TP distribution (other MM) problems; • correspond with other marketing mix elements, but is not the single competition providence mode.
MARKETING MIX. PRODUCT PRICE AND PRICING • Low price – as a competition providence force possible in situation when enterprises have low costs or their sales are sensitive to lower prices. • Effective marketing goal – to create pleasing environment with low sensitiveness to price fluctuations.
MARKETING MIX. PRODUCT PRICE AND PRICING PRICING APPROACHES
MARKETING MIX. PRODUCT PRICE AND PRICING • Goals of craft makers • Level of PLC • Product position in the market • Potential competitors • Costs (internal and competitors’) • Distribution channels and impact of retailers FACTORS IMPACTING PRICING DECISIONS
DETERMINATION OF PRICING GOALS (1-3) MARKETING MIX. PRODUCT PRICE AND PRICING 1. ORIENTED TO PROFIT • Efficiency of invested capital or sales • Maximization of profit under perfect demand elasticity, low prices and market enlargement • Maximization of profit under imperfect demand, high prices (“cream skimming” strategy) and concentrated market segments
MARKETING MIX. PRODUCT PRICE AND PRICING 2. ORIENTED TO SALES • Up-grade products value and sales • Sales of new products and advertising of new enterprises DETERMINATION OF PRICING GOALS
MARKETING MIX. PRODUCT PRICE AND PRICING 3. ORIENTED TO MARKET POSITION PROTECTION • Prices reflect the level of competition and competitive prices • Competition is concentrated to different elements of marketing mix, ex., quality of products, consumers service and etc. DETERMINATION OF PRICING GOALS
PRICING UNDER PLC CONCEPT MARKETING MIX. PRODUCT PRICE AND PRICING Strategies in different levels of PLC
PRICING METHODS MARKETING MIX. PRODUCT PRICE AND PRICING • ORIENTATION TO COSTS Orientation to production costs under calculation the direct fixed costs and percentage of fixed profit rate.
PRICING METHODS MARKETING MIX. PRODUCT PRICE AND PRICING 2. AGREGATION METHOD Orientation to product price under summing prices of separate product’s elements.
PRICING METHODS MARKETING MIX. PRODUCT PRICE AND PRICING 3. PARAMETRIC METHOD Orientation to product price under analysis of product’s quality parameters, evaluation and comparison of them.
PRICING METHODS MARKETING MIX. PRODUCT PRICE AND PRICING 4. ORIENTATION TO COMPETITION Orientation to product price under competitors actions, but not to production costs or market demand.
PRICING METHODS MARKETING MIX. PRODUCT PRICE AND PRICING 5. ORIENTATION TO PROFIT SHARE Orientation to product price under determined profit rate.
PRICING METHODS (1-2) MARKETING MIX. PRODUCT PRICE AND PRICING 5. ORIENTATION TO PROFITABILITY * Orientation to product price under determined profitability rate. * The comparison of income and costs lets to evaluate margin sale after deduction fixed and variable costs from income rate. * Break – Even – Point model shows the situation of activity profitability.
PRICING METHODS (1-2) MARKETING MIX. PRODUCT PRICE AND PRICING Break – Even – Point model A - break-even-point, units of products; Ipast - total fixed costs, Lt; k - product price, Lt per unit; Ikint- fixed costs per product unit, Lt
PRICING METHODS (1-2) MARKETING MIX. PRODUCT PRICE AND PRICING 7. ORIENTATION TO DEMAND CURVE TREND Orientation to product price under the highest income rate.
Product not becoming obsolete Product becoming obsolete Sales per period O Time (1) Launch (4) Decline (2) Growth (3) Maturity Pricing concept - PLC The nature of product life cycle - 4 stages • launch • growth • maturity • decline
MARKETING MIX. PRODUCT PRICE AND PRICING PRICING STRATEGIES “Cream skimming” price strategy is oriented to reach high profitability rate, and helpful: a) in short terms the changes of competition level are invisible under impact of business licenses, high expenditures to market entrance, new technologies and etc.; b) unique features of TP make the barriers in pricing under creation imperfect demand elasticity; c) demand limitation depends on TP quantity for sales; d) efficiency of TP requires the quick investment return.
MARKETING MIX. PRODUCT PRICE AND PRICING PRICING STRATEGIES “Scrolling” price strategy is the modification of “cream skimming” price strategy, and effectively implementing after mentioned strategy. The amount of consumers is very important under the conditions when in long term period prices are going down, and market share is growing, then the conditions for competitors access to market is limited of limited profit rate.