CHAPTER 11: Marketing

Creating and Pricing Products

Identifying Target Market
Creating New Products
Product Differentiation
Pricing Strategy

Good Marketing is No Accident

Starbucks plans to
ensure its marketing
successes in
countries around the
world.

1-2

What is Marketing?
Marketing is an organizational function
and a set of processes for creating,
communicating, and delivering value
to customers and for managing
customer relationships
in ways that benefit the
organization and its stakeholders.
1-3

What is Marketing Management?

Marketing management is the

art and science
of choosing target markets
and getting, keeping, and growing
customers through
creating, delivering, and communicating
superior customer value.
1-4

What is Marketed?
Goods
Goods
Services
Services
Events
Events &
& Experiences
Experiences
Persons
Persons
Places
Places &
& Properties
Properties
Organizations
Organizations
Information
Information
1-5

Ideas
Ideas

Key Customer Markets

Consumer Markets

Business Markets

1-6

Global Markets

Nonprofit/ Government Markets

Definitions
Consumer Buying Behavior
Buying behavior of individuals and
households that buy products for
personal consumption.

Consumer Market
All individuals/households who buy
products for personal consumption.

Factors Influencing
Consumer Behavior

6-8

Target Market
Focuses all marketing decisions on the
specific group of people you want to reach.
Undifferentiated
Targeting

Concentrated
Targeting

Market is as one
group with no
individual
segments.
Eg: Newspaper

Select a particular
market niche/small
on which marketing
effort is targeted.
Eg: AirAsia focuses
on low fare.

Differentiate
d Targeting

Multi-Segment
Targeting
Need to focus on two
or more well defined
market segments and
want to develop
different strategies.
Eg:

Market coverage strategy to several market

segments & divide into different groups. Eg:
Shoes(Size,Colors, Design)

Segmentation Variables
Dividing the total market into smaller parts.
Market is heterogeneous/dissimilar.
By segmentation, heterogeneous market is
converted into homogeneous components.
Basis for segmentation
Geographic Basis.
Demographic Basis.
Psychographic Basis.

DEMOGRAPHIC

PSYCHOGRAPHIC
GEOGRAPHIC

Age and life cycle

Gender
Income and occupation
Generation (Baby boomer,
Gen X, Gen Y)
Education

Activities
Interest
Opinions
Attitudes
Values

Region : continent, country, state, or neighborhood

Size of metropolitan area
Population Density
Climate

15 Ps of Marketing Mix

Product/Service
Price
Promotion
Place
People
Politics
Public Relations

Probe
Partition
Prioritize
Position
Profit
Plan
Performance
Positive
Implementation

Product
Product: what to make, how to package it,
what brand name to use, and what image to
project
EXAMPLE: Pink Gildan t-shirt, Made in
China, tie-dye swirl print

Price
Price: reflects what customers are
willing & able to pay
EXAMPLE: UnderArmor hoods are
$50 customers are willing to pay
more for this high quality product

Place
Place: how/where a product will be
distributed
EXAMPLE: Florida Oranges arrive via
delivery truck and are displayed at
Harris Teeter for sale.

Promotion
Promotion: deals with how potential
customers will be told about the new
product
EXAMPLE: Keebler cookies are on
sale with coupon buy TWO packages
& save $1.00

People
The right people to support the companys
products and/or service.
EXAMPLE: Excellent customer service
personnel who can provide support with
clearly known expectations, such as hours of
operation and average response time, is key
to maintaining a high level of customer
satisfaction.

Process
Solid procedures and policies that are in
place.
EXAMPLE:
Customers want to understand more than just
your product; they also want to focus on the
shape and form your business will take.

Physical Evidence
The way your product, service, and
everything about your company, appears from
the outside.
EXAMPLE: size, shape, color, material, UPC
bar code, and label of the packaging. This
should be customer tested and updated when
needed.

Classification of Consumer
Products
Consumer Products

Convenience
Products

Shopping
Products

Specialty
Products

Unsought
Products

Convenience:
Inexpensive, little shopping effort, regularly buy products, no prior
planning. Eg: coke, mineral water, chicken
Shopping:
Homogeneous prod is familiar where customers look for lower
price brand.
Heterogeneous prod different where customers have trouble
comparing the products
Specialty:
Status-conscious advertising, expensive products.
Unsought:
Customers not having intention of buying unless marketer do
aggressive marketing. Eg: Insurance

Market Targeting
Product Differentiation
To differentiate the product from other
products on the basis of features.
Product differentiation is used to avoid
competition.
The objective of differentiation is to develop
a position that potential customers see as unique The
objective of differentiation is to develop a position that
potential customers see as unique

Marketing Concept
The marketing concept:states
that to make a profit a business
must focus all efforts on
satisfying the needs & wants
of the customer

Customers
Customers

Value
Value

Price
Price
Cost
Cost

Product
Product

Cost-Based Pricing

Break-Even Analysis
and Target Profit
Pricing

BE= Fixed Costs/Contribution (SP-VC)

Example - Meal - SP = $20, VC = $8
Fixed costs are $2400 a day
BE=$2400/$12 = 200
Need to sell 200 meals @ $20 to break-even
VC = 40%, contribution = 60%
BE = $2400/.6 = $4000

Product
Product

Cost
Cost

Price
Price

Value
Value

Customer
Customer

Value-Based Pricing

New Product Pricing

1.Market-skimming
pricing

Setting a high price for a new

product to skim maximum
revenues layer by layer from
the segments willing to pay the
high price: the company makes
fewer but more profitable sales

The conditions:
1. A sufficient number of buyers have a high
current demand;
2. The unit costs of producing a small
volume are not so high that they cancel
the advantage of charging what the traffic
will bear;
3. The high initial price does not attract more
competitors to market;
4. The high price communicates the image
of a superior product.

New Product Pricing

2. Market-penetration pricing

Setting a low price for a new

product in order to attract a
large number of buyers and a
large market share.

The conditions:
1. The market is highly
price sensitive and a
low price stimulates
market growth;
2. Production and
distribution costs fall
with accumulated
production experience;