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Business: A Changing World, 4/e
O.C. Ferrell, Colorado State University
Geoffrey Hirt, DePaul University

Dimensions of Marketing Strategy

CyberSummary


THE MARKETING MIX

The key to developing a marketing strategy is maintaining the right marketing mix that satisfies the target market and creates long-term relationships with customers. To develop meaningful customer relationships, marketers have to develop and manage the dimensions of the marketing mix to give their firm an advantage over competitors.

PRODUCT STRATEGY

The term product refers to goods, services, and ideas. Because the product is often the most visible of the marketing mix dimensions, managing product decisions is crucial.

To introduce a new product, a business generally follows a multistep process: idea development, idea screening, business analysis, product development, test marketing, and commercialization. New ideas can come from marketing research engineers, and outside sources such as advertising agencies, management consultants, or customers. In the idea-screening phase, marketers look at the organization's resources and objectives; assess their ability to produce and market the product; and consider consumer desires, competition, technological changes, social trends, and political, economic, and environmental considerations. Business analysis is a basic assessment of a product's compatibility in the marketplace and its potential profitability. In the product-development stage, the idea is developed into a prototype, and various elements of the marketing mix are developed for testing. Test marketing is a trial minilaunch of a product in limited areas that represent the potential market, allowing a complete test of the marketing strategy in a natural environment. Commercialization is the full introduction of a complete marketing strategy and the launch of the product for commercial success.

Products are classified as either consumer products or industrial products. Consumer products are for household or family use; they are not intended for any purpose other than daily living. They can be further classified on the basis of consumers' buying behavior and intentions. Convenience products are bought frequently without a lengthy search and often for immediate consumption. Shopping products are purchased after consumers have compared competitive products and shopped around. Specialty products require even greater research and shopping effort.

Industrial products are used directly or indirectly in the operation or manufacturing processes of businesses. Industrial products are also divided into several categories. Raw materials are natural products taken from the earth and oceans and recycled solid waste. Major equipment is large, expensive items used in production. Accessory equipment includes items used for production, office, or management purposes that usually do not become part of the final product. Component parts are finished items, ready to be assembled into the company's final products. Processed materials are used directly in production or management operations but are not readily identifiable as component parts. Supplies include materials that make production, management, and other operations possible. Industrial services include financial consulting, legal, marketing research, janitorial, and exterminating services.

A product line is a group of closely related products that are treated as a unit because of similar marketing strategy, production, or end-use considerations. A product mix is all the products offered by an organization.

There are four stages in the life cycle of a product: introduction, growth, maturity, and decline. The stage a product is in helps determine marketing strategy. In the introductory stage, consumer awareness and acceptance of the new product are limited, sales are zero, and profits are negative because of research and development expenses for the product. Marketers focus on making consumers aware of the product and its benefits during the introductory stage. Sales increase rapidly and profits peak during the growth stage, then start to decline as new companies enter the market, driving prices down and increasing marketing expenses. During the growth stage, the firm tries to strengthen its position in the market by emphasizing the product's benefits and identifying market segments that want these benefits. Sales continue to increase at the beginning of the maturity stage, but then the sales curve peaks and starts to decline while profits continue to decline. This stage is characterized by severe competition and heavy marketing expenditures. During the decline stage, sales continue to fall rapidly, and profits decline and may become losses as prices are cut and necessary marketing expenditures are made.

Branding, packaging, and labeling identify or distinguish one product from others and thus are key marketing activities that help position a product appropriately for its target market.

Branding is the process of naming and identifying products. Identification may occur through a brand (a name, term, symbol, design, or combination that identifies a product and distinguishes it from other products), a brand name (the part of the brand that can be spoken and consists of letters, words, and numbers), a brand mark (the part of the brand that is a distinctive design), and/or a trademark (a brand that is registered with the U.S. Patent and Trademark Office and is thus legally protected from use by any other firm). Two major categories of brands are private distributor brands and manufacturer brands. Manufacturer brands are initiated and owned by the manufacturer to identify products from the point of production to the point of purchase. Private distributor brands, which may be less expensive than manufacturer brands, are owned and controlled by a wholesaler or retailer. Generic products have no brand name at all. Marketers may give each product within its complete product mix its own brand name or develop a family of brands with each of the firm's products carrying the same name or at least part of the name.

The packaging, or external container that holds and describes the product, influences consumers' attitudes and their buying decisions. A package can perform several functions, including protection, economy, convenience, and promotion.

Labeling, the presentation of important information on the package, is closely associated with packaging. The content of labeling, often required by law, may include ingredients or content, nutrition facts, care instructions, suggestions for use, the manufacturer's address and toll-free number, and other useful information.

Quality reflects the degree to which a good, service, or idea meets the demands and requirements of customers. Quality has become a key means for differentiating products in consumers' minds.

PRICING STRATEGY

Price, the value placed on an object exchanged between a buyer and a seller, is probably the most flexible variable in the marketing mix.

Pricing objectives specify the role of price in an organization's marketing mix and strategy. These objectives are usually influenced not only by marketing mix decisions but also by finance, accounting, and production factors. Maximizing profits and sales, boosting market share, maintaining the status quo, and survival are common pricing objectives.

Pricing strategies provide guidelines for achieving the company's pricing objectives and overall marketing strategy; they specify how price will be used as a variable in the marketing mix. Setting the price for a new product is critical: The right price leads to profitability; the wrong price may kill the product. There are two basic strategies to setting the price for a new product. Price skimming is charging the highest possible price that buyers who want the product will pay, while a penetration price is a low price designed to help a product enter the market and gain market share rapidly. Penetration pricing is less flexible than price skimming; it is more difficult to raise a penetration price than to lower a skimming price. Psychological pricing encourages purchases based on emotional rather than rational responses to the price. Even/odd pricing assumes that consumers will buy more of a product priced at $9.99 than at $10 because the product seems a bargain at the lower odd price. Symbolic/prestige pricing assumes that high prices connote high quality. Temporary price reductions, or discounts, are often employed to boost sales. Although there are many types of price discounts, quantity, seasonal, and promotional discounts are widely used.

DISTRIBUTION STRATEGY

The best products in the world will not be successful unless companies make them available where and when customers want to buy them.

A marketing channel, or channel of distribution, is a group of organizations that move products from their producer to customers. Such organizations are called middlemen, or intermediaries. Two intermediary organizations are retailers and wholesalers. Retailers buy products from manufacturers (or other intermediaries) and sell them to consumers for home and household use rather than for resale or for use in producing other products. Retailing usually occurs in a store, but may also take place through the Internet, vending machines, mail-order catalogs, and entertainment. By bringing together an assortment of products from competing producers, retailers create place, time, and ownership utility. Competition between different types of stores is changing the nature of retailing. Wholesalers are intermediaries who buy from producers or from other wholesalers and sell to retailers. Although it is true that wholesalers can be eliminated, their functions must be passed on to some other entity, such as the producer, another intermediary, or even the customer. Supply chain management refers to long-term partnerships among marketing channel members working together to reduce costs, waste, and unnecessary movement in the channel in order to satisfy customers.

Typical marketing channels for consumer products were shown in Figure 13.4 of your text. In Channel A, the product moves from the producer directly to the consumer. In Channel B, the product goes from producer to retailer to consumer. In Channel C, the product is handled by a wholesaler and a retailer before it reaches the consumer. In Channel D, the product goes to an agent, a wholesaler, and a retailer before going to the consumer. Services are usually distributed through direct marketing channels because they are generally produced and consumed simultaneously.

A major distribution decision is how many and what type of outlets should carry the product. The intensity of market coverage depends on buyer behavior and the nature of the target market and the competition. Intensive distribution makes a product available in as many outlets as possible. Because availability is important to purchasers of convenience products, a nearby location with a minimum of time spent searching and waiting in line is most important to the consumer. Selective distribution uses only a small number of all available outlets to expose products. It is used most often for products for which consumers buy only after shopping and comparing price, quality, and style. Exclusive distribution exists when a manufacturer gives a middleman the sole right to sell a product in a defined geographic territory. Exclusive distribution is the opposite of intensive distribution in that products are purchased and consumed over a long period of time, and service or information are required to develop a satisfactory sales relationship.

Physical distribution is all the activities necessary to move products from producers to customers--inventory control, transportation, warehousing, and materials handling. It creates time and place utility by making products available when they are wanted, with adequate service and at minimum cost. Both goods and services require physical distribution. Transportation, the shipment of products to buyers, creates time and place utility for products, and thus is a key element in the flow of goods and services from producer to consumer. Five major modes of transportation used to move products are railways, motor vehicles, inland waterways, pipelines, and airways. Factors affecting the selection of a mode of transportation include cost, capability to handle the product, reliability, and availability. Warehousing is the design and operation of facilities to receive, store, and ship products. Regardless of whether a private or a public warehouse is used, warehousing is important because it makes products available for shipment to match demand at different geographic locations. Materials handling is the physical handling and movement of products in warehousing and transportation. Well-coordinated loading and movement systems increase efficiency and reduce costs.

Distribution decisions are among the least flexible marketing mix decisions. They often commit resources and establish contractual relationships that are difficult if not impossible to change.

PROMOTION STRATEGY

The role of promotion is to communicate with individuals, groups, and organizations to facilitate an exchange directly or indirectly. Promotion is used not only to sell products but also to influence opinions and attitudes toward an organization, person, or cause. The role that these elements play in a marketing strategy is extremely important.

Advertising, personal selling, publicity, and sales promotion are collectively known as the promotion mix because a strong promotion program results from the careful selection and blending of these elements. Coordinating the promotion mix elements and synchronizing promotion as a unified effort is called integrated marketing communications.

Advertising is a paid form of nonpersonal communication transmitted through a mass medium, such as television commercials, magazine advertisements, or online ads. Advertising media are the vehicles or forms of communication used to reach a desired audience--newspapers, magazines, direct mail, billboards, television, radio, and cyber ads. Infomercials are large blocks of radio or television air time featuring a celebrity or upbeat host talking about and demonstrating a product.

Personal selling is direct, two-way communication with buyers and potential buyers. For many products--especially large, expensive ones with specialized uses, such as cars and houses--interaction between a salesperson and the customer is probably the most important promotional tool. Personal selling is the most flexible of the promotional methods because it gives marketers the greatest opportunity to communicate specific information that might trigger a purchase; it is also one of the most costly forms of promotion. There are three distinct categories of salespersons: order takers, creative salespersons, and support salespersons. For most of these salespeople, personal selling is a six-step process: prospecting (identifying potential buyers), approaching (using a referral or calling on a customer without prior notice to determine interest in the product), presenting (getting the prospect's attention with a product demonstration), handling objections (countering reasons for not buying the product), closing (asking the prospect to buy the product), and following up (checking customer satisfaction with the purchased product).

Publicity is nonpersonal communication transmitted through the mass media but not paid for directly by the firm. A firm does not pay the media cost for publicity and is not identified as the originator of the message; instead, the message is presented in news story form. Many companies have public relations departments to try to gain favorable publicity and minimize negative publicity for the firm. Although publicity and advertising are both carried by the mass media, they differ in several major ways. Advertising, personal selling, and sales promotion are especially useful for influencing exchanges directly. Publicity is extremely important when communication focuses on a company's activities and products and is directed at interest groups, current and potential investors, regulatory agencies, and society in general. Two variations of traditional publicity are buzz marketing and viral marketing.

Sales promotion involves direct inducements offering added value or some other incentive for buyers to enter into an exchange. The major tools of sales promotion are store displays, premiums, samples and demonstrations, coupons, contests and sweepstakes, refunds, and trade shows. It is used to enhance and supplement other forms of promotion.

In developing a promotion mix, organizations must decide whether to push or pull the product. A push strategy attempts to motivate middlemen to push the product down to their customers. A pull strategy uses promotion to create consumer demand for a product so that consumers exert pressure on marketing channel members to make it available. A company can use either strategy, or it can use a variation or combination of the two. The allocation of promotional resources to various marketing mix elements probably determines which strategy a marketer uses.

Firms use promotion for many reasons, but typical objectives are to stimulate demand; to stabilize sales; and to inform, remind, and reinforce customers. Increasing demand for a product is probably the most typical promotional objective. Reinforcement promotion attempts to assure current users of the product that they have made the right choice and tells them how to get the most satisfaction from the product.

Promotional positioning uses promotion to create and maintain an image of a product in buyers' minds. It is a natural result of market segmentation. A promotional strategy helps differentiate the product and make it appeal to a particular market segment.





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