Marketing Notes (Part 2)

I. PRODUCT

Marketing mix planning begins with formulating an offering that brings

value to target consumers, and satisfies their needs. This offering
becomes the basis on which the company builds profitable
relationships with customers.

What is a product? It is anything that can be offered to a market for

attention, acquisition, use or consumption that might satisfy a need or
want.

Broadly defined, products include physical objects, services,

events, ideas, persons, places, organizations, or mixes of these
entities.

• Services are a form of product that consists of activities,

benefits, or satisfaction offered for sale that are intangible and
do not result in the ownership of any concrete thing/item.

• A company’s market offerings can either be:

1) Pure tangible good – no services accompany the product

EG: bottled mineral water, toothpaste, shampoo

2) Pure services – offers that consists primarily of a service

EG: doctor’s diagnostic exam, plumbing repair

• Today, with more products and services are commoditized, many

companies are moving to a new level in creating value for their
customers.

• Beyond simply making products and delivering services,

companies are staging, marketing and delivering memorable
customer experiences.

• Products and services are external; experiences are personal and

take place in the mind of the consumers.

• EXAMPLES:
• TOY KINGDOM.
• FULLY BOOKED Bookstore.
• STARBUCKS.
 • All these places strive to create experiences that complement
the products/service offerings, without adding value to the
product itself, but rather adding value to the consumer’s end-
experience.

Levels of Products/Services: Marketers need to think about

products/services in 3 different levels

AUGMENTED
PRODUCT

Delivery & credit

ACTUAL
PRODUCT After-sale
service
Brand name

Design
CORE
BENEFIT
Features

Packaging
Installation
Warranty

Core Benefit:
• What is the buyer buying?
• The compelling advantage provided by the product/service that
the consumer finds worth the price.

Actual Product:
• These are the physical and abstract dimensions that allow the
product to deliver its promised core benefit
Augmented Product:
• These are the additional services and advantages that complete
or anticipate the needs of the consumers.

Product/Service Classifications: Products and services fall under

two broad classes based on the type of end-user: consumer products &
industrial products.

Consumer Products:
• Convenience Products – products/services that the customer
buys frequently, immediately and with a minimum comparison
and buying effort; usually low-priced; placed in locations that are
readily accessible and available.

• Shopping Products – less frequently purchased products/services

that customers compare carefully on suitability, quality, price
and style
o Much time and effort is spent in gathering information
o Provided in fewer outlets, but with strong sales support.

• Specialty Products – products/services with unique

characteristics or brand identification for which a significant
group of buyers are willing to make purchase effort.
o Buyers normally don’t compare specialty products; they
invest only in the time to reach dealers carrying the
desired products.

• Unsought Products – products that consumers don’t know about

or knows about but normally don’t think of buying.
o Most major innovations are unsought goods until a
consumer becomes aware of these products.
o By their very nature, unsought products require a lot of
advertising, personal selling, and more aggressive
marketing efforts.

Industrial Products: These are products that are purchased for further
processing or for use in conducting a business. The distinction between
a consumer product & an industrial product is the purpose for which
the product is bought.

• Three types of Industrial Products:

o Materials and parts – raw materials such as farm (wheat,
livestock, fruit, vegetable) or natural products (crude
petroleum, lumber, coal, iron ore).
  Price and services are the major marketing factors;
branding & advertising tend to be less important.

o Capital Items – products that aid in the buyer’s production

and operations
 Fixed equipment like generators, large-scale
computers, elevators
 Accessory equipment like fork lifts, trucks, hand tools
 Office equipment like desks, fax machines,
telephones

o Supplies and services – supplies are the convenience

products of the industrial sector because they are
purchased with minimum effort or comparison; services
come in the form of maintenance/repair or advisory
functions.

Product/Service Decisions: Marketers make product and services at

three levels – individual product decisions, product line decisions, and
product mix decisions.

Individual Product Decisions:

• How one product will function, appear, be named, or be

promoted requires inputs from a marketer.
• Decisions on the following are necessary:
o Product & Service Attributes – quality, features, style and
design
o Branding – the face, name, associations, symbols that the
product will possess in order to be identified and
differentiated.
o Packaging – how the product is contained should still
reflect quality and deliver ease/satisfaction to the
consumer
o Labeling – must clearly identify the product, as well as
truthfully describe the aspects of the product/service like,
where it was made, when it was made, its contents, how it
is to be used, and how to use it safely; labels must also
promote the product.
o Product Support Services – the additional and anticipator
services for future needs of the customers after purchasing
your product.

Product Line Decisions:

 • Beyond deciding on how one product is made, a marketer
decides on producing other offerings to satisfy the consumer or
other types of consumers

• A product line is a group of products that are closely related

because they function in a similar manner, are sold to the same
consumer segment, are marketed through the same outlets, or
fall within the same price ranges.

• The Concept of Product Line Stretching

o This occurs when a company lengthens its product line
beyond its current range
o Done for several reasons: reaching for extra profits,
satisfying dealers, using excess capacity, being the leading
full-line company, plugging holes to keep out competitors.

• The Concept of Product Line Filling

o This occurs when a company adds more items within the
present range of the line
o The problem with product line filling if overdone 
cannibalization and customer confusion
o The company should ensure that new items are noticeably
different from existing ones.

Product Mix Decisions:

• Beyond product lines, marketers decide how one product line

complements other product lines that the company may offer.
• A product mix consists of all the product lines and items that a
particular manufacturer/seller/organization offers for sale.

The Marketing of Services: Services are a form of product that

consists of activities, benefits, or satisfaction offered for sale that are
intangible and do not result in the ownership of any concrete
thing/item.

Nature and Characteristics of a Service:

• Service Intangibility – Services cannot be seen, tasted, felt, heard

or smelled before they are bought.
• Service Inseparability – This means that services cannot be
separated from their providers, whether the service-providers
are people or machines.
• Service Variability – This means that service quality depends on
who provides the service, as well as when, where and how they
 are provided.
• Service Perishability – A major characteristic of services is that
they cannot be stored for later sale or use.

II. PRICE

• In the narrowest sense, price is the amount of money charged for

a product or service.
• More broadly, price is the sum of all the values that consumers
exchange for the benefits of having or using the product or
service.
• Historically, prices were set by negotiation by buyers and sellers.
Fixed Price Policies – setting one price for all buyers – came
about with the development of large-scale retailing.
• Now, many companies are reversing the fixed pricing trend;
Dynamic Pricing is being implemented. Here prices are charged
differently, depending on individual customers and situations.

The Role of Pricing in Businesses:

• In any business, the act of strategic pricing is a tedious effort

that yields concrete directions for a company’s growth and
profitability.
• Prices provide the defined, measurable ways a company can
cover the cost of operating the business, or in a bigger
perspective, the ways a company can sustain the business.
• Prices command and communicate the quality and standard of a
product/service and the company supplying the product/service.

Determinants of Price:

• The Strategic Objective of the Company – a company’s strategic

objective generally falls under two types:
o Market Share – the portion of the total market value that
can be attributed to your company or product.
 You will find the common price target that attracts
the most consumers, without compromising their
perception of your product/service’s quality.
o Profitability – efforts that concentrate on how to drive more
profit or maintaining your products’ profit
margin/company’s net profits without depending entirely
on volume sales and market share.
 You will price less aggressively, and seek those
market segments that are wiling to pay your prices
 rather than cut prices to appeal to a larger segment.

• Costs – sets the floor for the price the company can charge
o A company must charge a price that covers all its cost for
producing, distributing, and selling the product and
delivers a fair rate of return for its effort and risk.
o Costs come in two forms:
 Fixed Costs – or Overhead; these costs do not vary
with production or sales level
 Variable Costs – the elements that change depending
on production demands.

• Customer Value – the first step in understanding the role of

customer value is to segment customer markets
o The relative importance of price among the benefits or
values identified in each segment is critical in determining
how to price the product.
o Price is more complicated than other elements of the mix.
A product, including its functional features and service
levels, its brand name, country of origin, mode of
distribution, and communication creates the value of the
product.
o Price captures that value. It becomes a complicated
decision because value can be manipulated/controlled.
o Effective consumer-oriented pricing involves understanding
how much value consumers place on the benefits they
receive from the product and setting a price that fits that
value.

• Competition
o Effects of competition:
 Forces prices down
 More substitutes, giving customers more choices,
and raising pricing sensitivity
 Competitive price pressure starts to increase when
customers become more knowledgeable;
productivity and delivery capacity of sellers also
increase with this.
 Competition forces weaker players out, and the
better managed companies to improve
o Given the target segment that your product serves, you
have to stay within a price range of competition.
o The name of the game is also differentiation. Despite price
wars that can exist in your industry, consumers are quick
to sense the value that you add that competitors don’t.
 • Distribution Channels
o When pricing, one of the questions to ask is whether the
manufacturer/seller benefits from using channel
intermediaries or is it better to go direct to the end-user?
o Or should a seller employ both direct and indirect
channels?
o Usually for prestige products – it is required to have a
distribution channel since the product requires display and
demonstration, and after sales service and support to sell
them.
o For other products like detergent, soft-drinks, toothpaste,
etc. – a distribution channel is critical.
o Products that are non-perishable, possess relatively higher
value per unit weight, and can be easily-packaged and
shipped are more suited to direct channels
o When pricing, manufacturing companies then have to
consider a price that satisfies their profit margins, and still
allow room for retailers or distribution channels to achieve
their profit margins as well.
o Both manufacturer and distribution channel should agree
on an acceptable profit margin for the product so that the
‘final selling price’ still protects the product’s equity, as
well as the consumer’s perception of it.

• Regulations set by the government

o The involvement of government in business decision-
making affects pricing directly and indirectly
 Electricity, utilities, taxation, tariff policies, patents
o Companies then need to religiously observe the regulations
within the location where their products/services are
offered – as these may affect the cost of operations, and
eventually – the price of the goods.

III. PLACE

• A value delivery network is made up of the company, suppliers,

distributors, and ultimately customers who “partner” with each
other to improve the performance of the entire system
o Upstream Partners – the set of firms that supply the raw
materials, components, parts, information, finances, and
expertise needed to create the products and services
o Downstream Partners – the marketing channels or
distribution channels that look toward the consumer;
wholesalers and retailers.
*The marketing mix consists of dealing mostly with the “downstream”
partners or the marketing channels.

Marketing Channels

• Broadly defined, a marketing channel is a set of organizations

involved in the process of making a product or service available
for use or consumption by the consumer

• Distribution channels and systems work best for your company

on a long-term basis, as they become attuned to how to serve
your business

• The use of intermediaries result from their greater efficiency in

making goods available to target markets.

• Marketing intermediaries add value to companies by:

o Reducing the number of channel transactions a
manufacturer needs to deal with.
o Transforming the assortments of products made by
producers into assortments wanted by the consumers.
o Bridging the huge time, space and possession gaps that
separate goods and services from those who would use
them

• Two basic classifications:

o Direct Marketing Channel – one that has no layers or
intermediary levels that bring the product closer to the
end-user (e.g. Avon, Boardwalk)
o Indirect Marketing Channel – one that contains one of more
than one intermediary levels to bring the product closer to
the end-user

Channel Decisions: In designing marketing channels, a company must

be able to maximize market opportunities and address market
conditions.

1) Analyze consumer needs

• Marketing channels are part of the overall customer
value delivery network.
• Each channel member adds value for the customer
• Thus designing the marketing channel starts with
finding out what target consumers want from the
channel.
 • Do consumers want to buy from nearby
locations or are they willing to travel to more
distant centralized locations?
• Would they rather buy in person, over the
phone, through mail, or via the Internet?
• Do they value breadth of assortment or do they
prefer specialization?
• Do consumers want many add-on services, or
will they obtain this elsewhere?
• The company must balance consumer needs, against
feasibility and costs of meeting these needs, along with
consumer price preferences.

2) Setting channel objectives

• Channel objectives are set in terms of targeted levels of
customer service.
• A company must then identify several segments
wanting different levels of service
3) Identifying & evaluating major alternatives
• What type of intermediaries can you employ?
• Company’s sales force V. Independent firms
acting as agencies V. Industrial distributors
• What kind of distribution do you intend to execute?
• Intensive distribution V. Exclusive distribution V.
Selective distribution

IV. PROMOTION

Creative Brief:
• Ensures that all are in agreement with the communication
objectives and strategies prior to development and production
of messages.
• Points out the benefits that make the product desirable
• Points out that the product will deliver on the promised
benefits
• Points out that the product is a better choice than competition
• Elements of a CB:
o Key Message – Brief statement that summarizes the
bottom-line message
o Target Audience – Brief description of target audiences
o Communication Objectives – Specifies what we want our
target audiences to think, believe, and/or do.
o Benefits to Promise – Key benefits the audience hopes
they will receive from adopting the behavior
 o Support for Promise – Brief list of additional benefits and
highlights
o Openings – The times, places and situations when the
audience will be most attentive to, and able to act on
the message

• The goal is to develop communications that will capture the

attention of the target audience and persuade them to avail of
the product/service
• The task, then, is to consider and choose from a variety of
potential communication elements, styles, tones, words, and
formats.

• Framework on generating potential messages:

o Rational – focused on delivering straightforward
information and facts
o Emotional – designed to elicit some negative feeling or
positive emotion that will motivate the desired behavior
o Moral – directed to the audiences’ sense of what is right
and proper
o Non-verbal – refers to visual cues, graphic images –
symbols