MARKETING MANAGEMENT (FINAL)

Chapter 12: Setting Product Strategy

What is a product? is anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas. Product Classifications Durability and tangibility 1. Nondurable goods tangible goods normally consumed in one or a few uses, such as beer and shampoo. These goods are purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference. 2. Durable goods tangible goods that normally survive many uses: refrigerators, machine tools, and clothing, normally require more personal selling and service, and require more seller guarantees. 3. Services intangible, inseparable, variable, and perishable products that normally require more quality control, supplier credibility, and adaptability. Examples include haircuts, legal advice, and appliance repairs. Consumer-goods classification 1. Convenience goods frequently, immediately, and with minimal effort. Examples include soft drinks, soaps, and newspapers. - Stable goods: convenience goods that consumers purchase on a regular basis - Impulse goods: goods are purchased without any planning or search effort, like candy bars. - Emergency goods: purchased when a need is urgent likes purchase an umbrellas during a rainstorm.

2. Shopping goods are those the consumer characteristically compares on such bases as suitability, quality, price, and style. - Homogeneous: shopping goods that are similar in quality but different enough in price to justify shopping comparisons. - Heterogeneous: shopping goods that differ in product features and services that may be more important than price. 3. Specialty goods have unique characteristics or brand identification for which enough buyers are willing to make a special purchasing effort. 4. Unsought goods those goods that consumer does not know about or normally think of buying, such as smoke detectors and gravestone. Product Differentiation; Form the size, shape, or physical structure of a product. Features offered with varying features that supplement their basic function. Customization marketers can differentiate products by customizing them. Performance quality level at which products primary characteristics operates (low, average, high, or superior) Conformance quality the degree to which all produced units are identical and meet promised specifications. Durability a measure of the products expected operating life under natural or stressful conditions, reputation for long lasting. Reliability a measure of the probability that a product will not malfunction or fail within a specified time period. Repairability the ease of fixing a product when it malfunctions or fails. Style describes the products look and feel to the buyer. It also creates distinctiveness that is hard to copy. Design the totality of features that affect how a product looks and functions in terms of customer requirements. It offers functional and aesthetic benefits and appeals to both our rational and emotional sides.

Service Differentiation; Ordering ease refers to how easy it is for consumer to place an order with the company. Delivery how well the product or services is brought to the customer (speed & care) Installation the work done to make a product operational in its planned location. Customer training train customer to use the equipment properly and efficiently. Customer consulting includes data, information systems, and advice services the seller offers to buyers. Maintenance and repair help customers keep purchased products in good working order. Returns Controllable returns: result from problems or errors by the seller or customer and can mostly be eliminated with improved handling or storage, better packaging, and improved transportation and forward logistics by the seller or its supply chain partners. Uncontrollable returns: result from the need for customers to actually see, try, or experience products in person to determine suitability and cant be eliminated by the company in the short run through any of these means. Product System & Product Mix Product system is a group of diverse but related items that function in a compatible manner. Product mix or product assortment is the set of all products and items a particular seller offers for sale. It should contain the following things; Width refers to how many different product lines that the company carries. Length refers to the total number of items in the mix. Depth number of variants offered of each product in the line.

 Consistency how closely related the various lines are in end use, product requirements, and distribution channels. Product Line Length Company objectives influence product-line length; 1. To create a product line to induce up-selling. 2. To create a product line that facilitates cross-selling. 3. To create a product line that protect economic up & down. A company lengthens its products line in two ways; 1. Line stretching when a company lengthens its product line beyond its current range, whether down-market, up-market or both ways. Down market stretch: A company introduces a lower priced line for any of three reasons; 1. Shoppers want value-priced goods. 2. Wish to tie up lower-end competitors 3. Find that the middle market is stagnating or declining For examples: (Thai Airways 1. More growth 2. Higher margins 3. Simply to position themselves as full line manufacturers Such as (Toyota Lexus) (The mall Emporium) Nok Air) (Singha Leo)

Up market stretch: Company enters the high end of the market for;

Two-way stretch: Companies serving the middle market might decide to stretch the line in both directions. Such as MK restaurant MK Gold MK Trendy

2. Line filling refers to add more items within the present range. Several reasons for line filling; 1. Reaching for incremental profits. 2. Trying to satisfy dealers who complain about lost sales because of missing items in the line.

3. Trying to utilize excess capacity. 4. Trying to be the leading full-line company. 5. Trying to plug holes to keep out of competitors. Product Mix Pricing 1. Product line pricing companies normally develop product lines rather than single products and introduce price steps. The sellers task to establish perceived quality differences that justify the price differences. 2. Optional-feature pricing pricing optional products, accessory products, features, and services with their main product. Companies must decide which items to include in the standard price and which to offer as options. 3. Captive-product pricing pricing product that must use with the main product. ( Razors and razors blades) 4. Two-part pricing consisting of a fixed fee plus a variable usage fee. 5. By-product pricing the product of certain goods results in by products (leftover). If by-product have value they should be priced (Leftover bread from S&P can sold for feeding fish) 6. Product-bundling pricing Pure bundling a company offers product only as a bundle. Mixed bundling offers both individual and bundle, normally the price of bundle charging less than the items that purchased separately. Co-brandling (also called dual branding or brand bundling) It occurs when two or more well-known existing brands are combined into a joint product or marketed together in some fashion. Advantages; 1. Generate greater sales from existing target market. 2. Open additional opportunities with new consumers and channels. 3. Reduce the cost of product introduction because it combines two well know images and speeds adoption.

Disadvantages; 1. Risks and lack of control from becoming aligned with another brand in the consumers mind. 2. Lack of focus on existing brand. 3. Consumers feel less sure of what they know about the brand. Ingredient Branding A special case of co-branding that involves creating brand, brand equity for materials, components, or parts that are necessarily contained within other products. Packaging It related to all activities of designing and producing the container for a product. Packaging must achieve a number of objectives: 1. Identify the brand. 2. Convey descriptive and persuasive information. 3. Facilitate product transportation and protection. 4. Assist at-home storage. 5. Aid product consumption. To achieve these objectives and satisfy consumers desires, marketers must choose the aesthetic and functional components of packaging correctly. Aesthetic considerations relate to a packages size and shape, material, color, text, and graphics. Labeling A label performs several functions; 1. It identifies the product or brand. 2. It might also grade the product. (canned peaches are grade-labeled A, B, and C) 3. The label might describe the product. (Who made it, where and when, what it contains, how it is to be used, and how to use it safely.) 4. The label might promote the product through attractive graphics.

Chapter 9: Creating Brand Equity

What is a Brand? A brand is a name, term, sign, symbol or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. The Scope of Branding (P. 265) Branding is endowing products and services with the power of the brand. Brand Equity is the added value endowed on products and services. It may be reflected in the way consumers, think, feel, and act with respect to the brand. Brand Asset Valuator Model (Brand Equity Model)

1. Energized differentiation: the degree to which a brand is seen as different from others, and its perceived momentum and leadership. 2. Relevance: the appropriateness and breadth of a brands appeal. 3. Esteem: perceptions of quality and loyalty, or how well the brand is regarded and respected. 4. Knowledge: how aware and familiar consumers are with the brand.

Building Brand Equity (P. 271) 3 main sets of brand equity drivers; 1. The brand elements or identities making up the brand. 2. The product, service, and all accompanying marketing activities and supporting marketing programs. 3. Others associations transferred to the brand by linking to some other entities (a person, place, or things) Choosing Brand Element (P. 272) Brand Elements are those trademarkable devices that identify and differentiate the brand. (brand names, logos, symbols, characters, slogans, jingles, and packages) Brand Element Choice Criteria (P.272) There are six criteria for choosing brand elements. The first three memorable, meaningful, and likable are brand building. The latter three transferable, adaptable, and protectable are defensive and help leverage and preserve brand equity against challenges. 1. Memorable easily to recall and recognize 2. Meaningful suggest something about a brand 3. Likable appealing, visually & verbally likable 4. Transferable can be used to introduce new products in the same or different categories 5. Adaptable adjustable and updatable 6. Protectible legally protectible Managing Brand Equity (P. 280-281) 1. Brand Reinforcement brand equity is reinforced by marketing actions that consistently convey the meaning of the brand. 2. Brand Revitalization once-prominent and admired brands fallen on hard times have managed to make impressive comeback. Most of the time the company change some brand elements (package, design, symbols) while keeping the old brand name.

Devising a Branding Strategy (P. 282) 3 main choices for introducing new product; 1. It can develop new brand elements for the new product. 2. It can apply some of its existing brand elements. 3. It can use a combination of new and existing brand elements. Brand Extension: A firm uses an established brand to introduce a new product. 1. Line Extension: the parent brand covers a new product within a product category. 2. Category Extension: the parent brand is used to enter a new product category. Firms can combine an existing brand with a new brand

Parent Brand is an existing brand that gives birth to brand extension or subbrand.

Subbrand is a new brand combined with an existing brand.

If the parent brand is associated with multiple products, it is also called Family Brand or Master Brand. Brand Mix (Brand Assortment): the set of all brand lines that a particular seller makes available to buyers. Brand Line: consists of all products (line and category extension) sold under a particular brand. Branded Variants: specific brand lines supplied to specific retailers or distribution channels. Licensed Product: whose brand name has been licensed to other manufacturers that actually make the product. Branding Decisions 1. Individual names using one name for one product. Separate family brand names using one name foe one product line

Advantages; The company does not tie its reputation to the product. If it fails, it will not hurt the companys name/image. Companies use different brand names for different product quality. 2. Corporate Umbrella or Company brand name using only one name for all product line. Advantages; Lower development cost because no need to run name research or spend heavily on advertising. If the company has a good name, sales of new products trend to be strong. 3. Corporate name combined with individual product names the combination between corporate name and individual product name. Two Key Components of Branding Strategy (P.284) Brand Extension: introduce new product under same brand name. Brand Portfolio: introduce multiple brands in a category. Brand Extension Advantages; 1. Improved Odds of New-product Success Consumers can form expectations about a new product based on what they know about the parent brand. Extension results in reduced costs of the introductory launch campaign. Brand extension can improve consumer loyalty and perception of the credibility of the company. Line extension benefits the parent brand by expanding market coverage. Disadvantages; Brand Dilution Consumer may perceived that what exactly your strength on. The worst scenario is that it also harms the parent brand image in the process. 2. Positive Feedback Effects

10

Cannibalizing occur when the new brand eat the existing brand.

Brand Portfolio The set of all brands and brand lines a particular firm offers for sale in a particular category or market segment. Reasons for introducing multiple brands in a category; 1. To increase shelf presence in the store. 2. To attract consumers seeking variety who may otherwise have switched to another brand. 3. To increase internal competition within the firm. 4. To yield economies of scale in advertising, sales, merchandising, and Physical distribution. There are four main types of brand portfolio; Flankers are positioned with respect to competitors brands so that more important and more profitable. Flagship brands can retain their desired positioning. The purpose is to protect the brand leader of the brand or maintain brand. Cash Cows brands may be kept around despite dwindling sales because they manage to maintain their profitability with no marketing support. Low End Entry Level the role of a relatively low priced brand in the portfolio often may be to attract customers to the brand franchise. High-end Prestige it is to add prestige and credibility to the entire portfolio. It is to target upper group.

11

Chapter 14: Developing Pricing Strategies and Programs

6 Step in setting price; Step 1: Select the price objective Step 2: Determine demand Step 3: Estimate costs Step 4: Analyze competitor price mix Step 5: Select pricing method Step 6: Select final price

Step 1: Select the price objective (P. 411-412) Five major objectives are; 1. Survival low prices to cover variable costs and some fixed costs to stays in business. 2. Maximum current profit choose the price that produces maximum current profit. 3. Maximum market share Market-penetration Strategy set a lowest price to win a large market share. 4. Maximum market skimming Market-skimming strategy prices start high and are slowly lowered over time. 5. Product quality leadership high level of perceived quality with a price high enough no to be out of reach.

Step 2: Determine demand Price Sensitivity (P. 412) It is a reaction of customer towards the price changed. Prices Prices Demand Demand = Buy less = Buy more

12

Price Elasticity of demand (P. 414) It related to the responsiveness of customer demand to change in a products

price.

Small changes in price do not result in significant changes in demand.

Small price changes result in large change in demand.

Price elasticity of demand = % change in quality demand % change in price

Q2-Q1 Q1 P2-P1 P1

Q1 = Quantity sold before price change Q2 = Quantity sold after price change P1 = Old price P2 = New price If elasticity >1 means that elasticity If elasticity =1 means that unitary elastic If elasticity <1 means that inelasticity

13

Step 3: Estimate costs (P. 415-416) 1. Fixed Cost or overhead cost Cost that does not vary with production level or sales revenue. 2. Variable Cost Cost that varies directly with the level of production. 3. Total Cost sum of the fixed and variable cost for any given of production. 4. Average Cost the cost per unit at the level of production.

Experience Curve or Learning Curve: The decline in the average cost with accumulated production experience Cost can also change as a result of a concentrated effort to reduce them through Target Costing.

Step 4: Analyze competitor price mix (P.417) Step 5: Select pricing method There are six pricing method; 1. Markup Pricing (P. 418)

Selling price = Unit cost + Markup price

Unit cost = variable cost + Fixed cost Unit Sale

Markup price =

Unit cost (1 Desirable return on sales)

14

2. Target-return Pricing (P.419) The firm determines the price that yield its target rate on investments (ROI) Target-return price = Unit cost + Desired return * Invested capital Unit Sale

The firm can use a break-even chart to learn what would happen at other sales level.

Price per unit = $20 Variable cost/unit = $10 Fixed cost = $300,000

Break-even volume (unit) =

Fixed cost Price Variable cost/unit

= =

$300,000 $20 - $10 30,000 units

Break even volume ($) = BEP (units) * Price

3. Perceived Value Pricing (P. 420) Perceived value is made up of a host of inputs, such as the buyers image of the product performance, the channel deliverables, the warranty quality, customer support, and softer attributes such as the suppliers reputation, trustworthiness, and esteem.

15

4. Value Pricing (P. 421-423) Everyday low pricing (EDLP): charges a constant low price with little or no price promotions and special sales. High low pricing: charges higher price on an everyday basis but then runs frequent promotions. 5. Going-rate Pricing (P. 423) The firm bases its price largely on competitors prices. Step 6: Select final price (P. 424) In selecting that price, the company must consider additional factors; Impact of other marketing activities Company pricing policies Gain-and-risk sharing pricing Impact of price on other parties

Adapting Pricing (P. 425-429) 1. Price Discounts and Allowances (P. 426) Cash Discount a price reduction to buyers who pay bill promptly. Quality Discount a price reduction to those who buy large volumes. Functional Discount discount offered by a manufacturer to trade channel members if they will perform certain functions. Seasonal Discount a price reduction to those who buy merchandise or services out of season. Trade-in Allowances turning in an old item when buying a new one. Promotional Allowances >>> reward dealers for participating in advertising and sales support programs. 2. Promotional Pricing (P. 427) Loss-leader Pricing store drop the price on well-known brands to stimulate additional store traffic. Special event pricing sellers will establish special prices in certain seasons to draw in more customers.

16

Cash rebates the refund as a portion of the purchase price returned to the buyer in the form of cash. Low-interest financing use no-interest financing to attract more customers. Longer payment terms stretch loans over longer periods and thus lower the monthly payment. Warranties and service contracts adding a free or low-cost warranty or service contracts. Psychological discounting set an artificially high price and then offers product at substantial saving; Was $359, Now $299

3. Differentiating Pricing (P. 428) Price Discrimination: occurs when a company sells a product or service at two or more prices that do not reflect a proportional in costs. Customer-segment pricing different customer groups pay different prices for the same product or service. Product-form pricing different versions of the products are priced differently. Image pricing the same product is priced at two different levels based on image differences. Channel pricing a different price depend on where customer purchase it. Location pricing the same product is priced different location even though the cost is the same such as concert seats. Time pricing prices are varied by season, day, or hour.

17

Chapter 15: Designing and Managing Integrated Marketing Channels

Marketing channels or trade channels or distribution channels are sets of interdependent organizations participating in the process of making a product or service available for use or consumption. Hybrid channels or multichannel marketing occurs when a single firm uses two or more marketing channels to reach customer segments. Channel-Design Decision I. Analyzing customer needs & wants Channels product five service outputs; 1. Lot size: the number of units the channel permits a typical customer to purchase on one occasion. 2. Waiting and delivery time: the average time customers wait for receipt of goods. 3. Spatial convenience: the degree to which the marketing channel makes it easy for customers to purchase the products. 4. Product variety: the assortment breadth provide by marketing channel. 5. Service Backup: add-on service (credit, delivery, installation, and repair) provided by the channel. II. Establishing objectives and constraints Channel objective vary with product characteristics; Perishable product: require more direct marketing. Bulky Product: require channel that minimize the shipping distance. Nonstandard product: sold directly by sales representatives. Identifying major channel alternatives Types of intermediaries Company can choose form a wide variety of channel for reaching customer form sales force to agents, distributors, dealers, direct mail, telemarketing, and internet 1. Sales Forces Handle complex product But expensive

III.

18

2. Internet Less expensive But not as effective with complex product 3. Distributors Create sale But may lose contract with customer Distribution Intensity Strategy 1. Exclusive distribution severely limiting the number of intermediaries. It is to maintain control over the service level and outputs offered by the resellers. 2. Selective distribution relies on only some of the intermediaries willing to carry a particular product. It can gain adequate market coverage with more control and less cost than intensive distribution. 3. Intensive distribution places the goods or services in as many outlets as possible. Especially product consume by frequently such as snack foods, soft drinks, newspapers, candies, and gum. The more exposure it get, the more it sell. IV. Evaluate major channel alternatives

E-Commerce Marketing Practices: uses a Web site to transact or facilitate the sale of products and services online. Pure click companies are those that have launched website without any previous existing firms. Brick and Click companies are existing companies that have added an online site for information or e-commerce. M-Commerce Marketing Practice: allows people to connect to the Internet and place online orders on the move, keep consumers connected and interacting with a brand throughout their day-to-day lives such as QR Code

19

Chapter 16: Managing Retailing, Wholesaling, and Logistics

Retailing includes all the activities in selling goods or services directly to final consumers for their own purpose, not business purpose. Major Types of Store Retailers; 1. Specialty Stores: Carries a narrow product line in a relatively small store. Provide high level of service and sales expertise. 2. Department Stores: Carries a wide variety of product line and offer service to customer 3. Supermarket: Large, low-cost, high volume. Self -service store designed to meet total need for food & household products. 4. Convenience Store: Small store, self-service, tend to open all day. 5. Drug Store: Prescription and pharmacies, health and beauty aids (Boots) 6. Discount Store: Standard or specialty merchandise; low price, low margin, high volume stores. 7. Extreme Value or Hard-discount Store: A more restricted merchandise mix than discount stores but at even lower prices such as DISO. 8. Off Price Retailers: Leftover goods, irregular merchandise sold at less than retails, including factory outlets and warehouse club. 9. Superstore: Hugh selling space, routinely purchased food & household items, plus services. Category Killer: Deep assortment in one category such as Toy R Us. Hypermarket: Huge store that combine supermarket, discount, and warehouse retailing like Carrefour. 10. Catalog Showroom: Broad selection of high-markup, fast-moving, brandname goods sold by catalog at a discount. Customer picks up merchandise at a store.

20

Chapter 19: Managing Personal Communications

Direct marketing is the use of consumer-direct channels to reach and deliver goods and services to customers without using market middlemen. Designing the sales force; 1. Sales force objectives 2. Sales force strategy 3. Sales force structure 4. Sales force size 5. Sales force compensation Sales Force Objectives and Strategy Salespeople perform one or more specific task; Prospecting searching for prospects or leads and customers. Targeting >> deciding how to allocate their time among prospects and customers. Communicating communicate information about the companys products and service. Selling approaching, presenting, answering questions, overcoming objections, and closing sales. Servicing providing various services to the customers; consulting on problems. Information gathering conducting marketing research and doing intelligence work. Allocating deciding which customers will get the product first Sales Force Size To arrive at the number of salesperson needed.. 1. Group customers into size classes according to annual sales volume. A: 1,000 customers B: 2,000 customers

21

2. Establish desirable call frequencies. A: 36 calls a year B: 12 calls a year 3. Multiple the numbers of accounts in each size class by the corresponding call frequency. A: 1,000 * 36 = 36,000 Calls B: 2,000 * 12 = 24,000 Calls TOTAL= 60,000 Calls 4. Determine the average number of calls a sales representative can make per year (per one sale).

Suppose that the average full-time rep can make 1,000 calls a year

5. Divide the total annual calls required by the average annual calls made by a sales representative. Salesperson needed = 60,000 1,000

= 60 representatives. Sales Force Compensation 1. The fixed amount >>> a salary, satisfies the need for income stability. 2. The variable amount >>> whether commissions, bonus, or profit sharing, serves to stimulate and reward effort. 3. Expense allowances >>> expenses of travel and entertaining. 4. Benefits >>> such as paid vacations, sickness, accident benefits, pensions, and life insurance, provide security and job satisfaction.

22

Chapter 17: Designing and Managing Integrated Marketing Communications

The Role of Marketing Communications Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers (directly or indirectly) about the products and brands that they sell. 8 Major Modes of Communications; 1. Advertising: any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. 2. Sales promotion: any variety of short-term incentives to encourage trial or purchase of a product or service. 3. Events and experiences: company-sponsored activities and programs designed to create daily or special brand-related interactions with consumers. 4. Public relations and publicity: a variety of programs directed internally to employees of the company or externally to consumers, other firms, the government, and media. 5. Direct marketing: the use of mail, telephone, fax, e-mail, or Internet to communicate directly with or solicit response or dialogue from specific customers and prospects. 6. Interactive marketing: online activities and programs designed to engage customers or prospects. 7. Word-of-mouth marketing: refers to people-to-people oral, written, or electronic communications. 8. Personal selling: face-to-face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions, and procuring orders. Eight steps in developing effective communications 1. Identify target audience The process must start with a clear target audience in mind: potential buyers of the companys products, current users, deciders, or influencers, and individuals, groups, particular publics.

23

2. Determine the communication objectives There are four key communications objectives; I. II. III. IV. Category need creating primary demand is appropriate for a new to the world product. Brand awareness ability to identify (recognize or recall) the brand within the category. Brand attitude evaluate the brands perceived ability to meet a currently need. Brand purchase intention Promotional offers (coupons, deals) encourage consumer to make commitment to buy. 3. Design the communications Formulating the communications to achieve the desired response requires solving three problems; Message strategy (What to say) Appeals, themes, or ideas that will tie in to the brand positioning and help establish points of parity or points of difference. Creative strategy (How to say) It is the way marketers translate their message into a specific communication. Informational Appeal: elaborates on product or service attributes or benefits. Problem solution ad Product demonstration Product comparison Testimonials from endorsers. Transformational Appeals: elaborates on a nonproductrelated benefit or image. Stir up emotions that motivate purchase. Negative appeals: such as fear, guilt, and shame to get people to do things. Positive emotional appeals: such as humor, love, pride, and joy. Motivational or "borrowed interest device: cute babies, puppies, popular music is used to attract attention. Message source (Who should say): Message delivered by attractive or popular sources can achieve higher attention and recall.

24

Three factors for creating source credibility; a) Expertise the specialized knowledge the communicator possesses to back the claim. b) Trustworthiness describes how objective and honest the source is perceived to be. c) Likability describes the sources attractiveness. 4. Select the communication channels Personal communication channels: two or more persons communicate face to face or person to audience through a phone, surface, mail, or email. Advocate channels consist of company salespeople contacting buyers in the target market. Expert channels consist of independent experts making statements to target buyers. Social channels consist of neighbors, friends, family members, and associates talking to target buyers. Nonpersonal communication: communications directed to more than one person and include advertising, sales promotions, events and experiences, and public relation. 5. Establish the total marketing communication budget Companies decide on the promotion budget in four common ways; I. II. III. Affordable method sets the communication budget at what they think the company can afford. Percentage-of-sales method sets communication expenditures at a specified percentage of current sales or price. Competitive parity method sets to achieve share-of-voice parity with competitors. The company need to estimate the total amount spend on communications by overall firms. IV. Objective and task method - Defining specific objective. - Determining all tasks that must be performed to achieve objective. - Estimating the cost of performing these tasks. - The sum of these costs is the purpose of promotion budget. 6. Deciding on the marketing communication mix

25

Companies must consider several factors in developing their communications mix; 1. Type of product market: communications-mix allocations vary between consumer and business markets. Consumer marketers tend to spend comparatively more on sales promotion and advertising Business marketers tend to spend comparatively more on personal selling 2. Buyer readiness stage 3. Product life cycle stage; Introduction Advertising, events, PR. Growth WOM (encourage people to pass along) Maturity Advertising, event, personal selling. Decline Sales promotion 7. Measuring communication result

Brand A should improve redesign products while Brand B needed to improve communication.

8. Managing IMC

26

Chapter 18: Managing Mass Communication

An advertising objective (or goal) is a specific communications task and achievement level to be accomplished with a specific audience in a specific period of time. The Five Ms of Advertising

Types of Advertising Objective; Informative advertising aims to create brand awareness and knowledge of new products or new features of existing products. Persuasive advertising aims to create liking, preference, conviction, and purchase of a product or service (uses comparative advertising) Reminder advertising aims to stimulate repeat purchase of products and services. Reinforcement advertising aims to convince current purchasers that they made the right choice. Alternative Advertising Options; Place Advertising or out of home advertising is a broad category including many creative and unexpected forms to grab consumers attention. Billboards use colorful, graphics, sounds, backlight, movement, and so on.

27

Public spaces placed on movie screens, on airplanes, and in fitness clubs, hotel, and other public areas. Product Placement pays fees on movie or television. Point of purchase includes ads on shopping carts, cart straps, aisles, and shelves as well as promotion option such as in-store demonstration.

Deciding on Media timing and allocation 1. 2. 3. Continuity exposures appear evenly thought the year, use in expanding market saturation with frequently purchased items. Concentration calls for spending on the advertising dollars in a single period, suitable for one selling season or related holiday. Flighting calls for advertising during a period, followed by a period with no advertising, followed by a second period of advertising activity. It is useful when funding is limited, the purchase cycle is relatively infrequent, or items are seasonal such as business airline. 4. Pulsing continuous advertising at low-weight levels, reinforced periodically by waves of heavier activity. A combination of the continuity and flighting: it draws on the strength of continuous advertising and flights to create a compromise scheduling strategy.

Measuring Sales Impact of Advertising; Share of expenditures

Co. B total budget 10,000,000 Spending in advertising 2,000,000 So, share of expenditure on ads. = 2,000,000 10,000,000 = 20%

28

Share of voice (proportion of company advertising of that product to all advertising of that product)

Co. A Co. B Co. C

13,000,000 2,000,000 5,000,000

Total budget = 20,000,000

So, share of voice = 2,000,000 = 10% Of Co. B 20,000,000

Share of minds and hearts Total population 60,000,000 # of people like/prefer 6,000,000 So, share of mind and heart = 6,000,000 60,000,000 = 15%

Share of market

Sales Volumes Co. A Co. B Co. C Total (All) 130,000,000 50,000,000 20,000,000 200,000,000

Share of market 65% 25% 10% 100%

29

Sales promotion consists of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or trade. Trade Promotion Tools; 1. Price-Off (off-invoice or off-list) a straight discount off the list price on each case purchased during a stated time period. 2. Allowance: an amount offered in return for the retailers agreeing to feature the manufacturers products in some way. Advertising allowance compensates retailers for advertising the manufacturers product. Display allowance compensates them for carrying a special product display. 3. Free Goods offers includes extra cases of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size. Consumer Promotion Tools; 1. Samples offer of a free amount of a product or service delivered door-to-door, sent in the mail, picked up in a store, attached to another product, or featured in an advertising offer. 2. Coupons certificates entitling the bearer to a stated saving on the purchase of a specific product. 3. Cash Refund Offers (rebates) provide a price reduction after purchase rather than at the retail shop. 4. Price Packs (cents-off deals) offer to consumers of savings off the regular price of a product, flagged on the label or package. 5. Premiums (gifts) merchandise offered at a relatively low cost or free as an incentive to purchase a particular product. 6. Frequency Programs programs providing rewards related to the consumers frequency and intensity in purchasing the companys products or services. 7. Prizes (contests, sweepstakes, and games) offers of the chance to win cash, trips, or merchandise as a result of purchasing something.

30

8. Patronage Awards offer values in cash or in other forms that are proportional to patronage of a certain vendor or group of vendors. 9. Free Trials invite prospective purchasers to try the product without cost in the hope that they will buy. 10. Tie-in Promotions two or more brands or companies team up on coupons, refunds, and contests to increase pulling power. 11. Cross-promotions using one brand to advertising another noncompeting brand. 12. Point-of-purchase displays and demonstrations takes place at the point of purchase or sales. Business and Sales Force Promotion Tools; 1. Trade Shows and Conventions industry associations organize annual trade shows and conventions. 2. Sales contest aims at inducing the sales force or dealers to increase their sales results over a stated period, with prizes (money, trips, gifts, or points) going to those who succeed. 3. Specialty advertising consists of useful, low-cost items bearing the companys name and address, and sometimes an advertising message that salespeople give to prospects and customers. Major Tools in Marketing Public Relation; 1. Publications Companies rely extensively on published materials to reach and influence their target markets. (annual reports, brochures, articles, company newsletters and magazines, and audiovisual materials) 2. Events company activities by arranging and publicizing special events such as news conferences, seminars, outings, trade shows, exhibits, contests and competitions, and anniversaries that will reach the target publics. 3. Sponsorships by sponsoring and publicizing sports and cultural events and highly regarded causes. 4. News to create favorable news about the company, its products, and its people and to get the media to accept press releases and attend press conferences.

31

5. Speeches company executives must field questions from the media or give talks at trade associations or sales meetings, and these appearances can build the companys image. 6. Public Service Activities build goodwill by contributing money and time to good causes. 7. Identity Media a visual identity that the public immediately recognizes. The visual identity is carried by company logos, stationery, brochures, signs, business forms, business cards, buildings, uniforms, and dress codes.

32

Chapter 5: Creating Long-term Loyalty Relationship

Traditional Organization vs. Modern Customer Oriented Organization

Customer-perceived value (CPV) It is the difference between the prospective customers evaluation of all the benefits and all the costs of an offering and the perceived alternatives.

Total customer benefit

Total customer cost

Product benefit

Monetary cost
Time cost

Services benefit
Personal benefit Image benefit

Energy cost

Psychological cost

Total customers benefit the perceived monetary value of the bundle of economic, functional, and psychological benefit.

33

Total customer cost the perceived bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering, including monetary, time, energy, and psychological costs. Delivering high customer value Value proposition consists of the whole cluster of benefits the company promises to deliver, it is more than the core positioning of the offering. Value delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. At the heart of a good value delivery system is a set of core business processes that help deliver distinctive consumer value. Customer profitability A profitable customer a person, household, or company that over time yields a revenue stream exceeding by an acceptable amount the companys cost stream for attracting, selling, and serving that customer. Customer profitability analysis

Customer 1 is very profitable; he buys two profit-making products (P1 and P2). Customer 2 yields mixed profitability; he buys one profitable product (P1) and one unprofitable product (P3). Customer 3 is a losing customer because he buys one profitable product (P1) and two unprofitable products (P3 and P4). What can the company do about customers 2 and 3? (1) It can raise the price of its less profitable products or eliminate them, or (2) it can try to sell customers 2 and 3 its profit-making products. Unprofitable customers who defect should not concern the company. In fact, the company should encourage them to switch to competitors.

34

Customer Relationship Management the process of carefully managing detailed information about individual customers and all customer touch points to maximize loyalty. A customer touch point is any occasion on which a customer encounters the brand and product from actual experience to personal or mass communication. Building Loyalty 1. Interacting with Customers listening to customers is crucial to customer relationship management. 2. Developing Loyalty Programs Frequency programs designed to reward customers who buy frequently and in substantial amounts. Club membership program can be open to everyone who purchases a product or service, or limited to an affinity group or those willing to pay a small fee. 3. Creating Institutional Ties Company may supply customer with special equipment or computer links that help them to manage orders, payroll, and inventory.

35