BBA III Personal Selling and Promotion

Description
BBA III personal selling n promotion mix

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The term 'marketing mix' was first used in 1953 when Neil Borden, in his American Marketing Association presidential address, took the recipe idea one step further and coined the term "marketingmix". A prominent marketer, E. Jerome McCarthy, proposed a 4 P’s classification in 1960, which has seen wide use.

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Marketing Mix is a combination of marketing tools that a company uses to satisfy their target customers, and achieving organizational goals. McCarthy classified all these marketing tools under four broad categories: Product Price Place Promotion These four elements are the basic components of a marketing plan and are collectively called 4 P’s of marketing.

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All marketing decision-making can be classified into four strategy elements, sometimes referred to as the marketing mix or the four P’s. Product: What are the benefits of this product and service to its customers? Price: Should this product and service be free or funded by a grant? Should a price be charged to cover costs only? Should the price allow for a profit? Place: What can be done to make this product and service more accessible and available? Promotion: What can be done to increase the visibility of this product and service? What can be done to increase its usage or exposure?

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Value perceived in the mind of the consumer

Cover location, distribution, channels and logistics

Marketing communication s

Collection of features and benefits that provide customer satisfaction

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Product is the actually offering by the company to its targeted customers which also includes value added stuff. Product may be tangible (goods) or intangible (services). For many a product is simply the tangible, physical entity that they may be buying or selling. While formulating the marketing strategy, product decisions include: What to offer? Brand name Packaging Quality Appearance Functionality Accessories Installation After sale services

Product
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The CORE product is NOT the tangible, physical product. You can't touch it. That's because the core product is the BENEFIT of the product that makes it valuable to you. So with the car example, the benefit is convenience i.e. the ease way at which you can go where you like, when you want to. Another core benefit is speed since you can travel around relatively quickly. The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with the car example, it is the vehicle that you test drive, buy and then collect. The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

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Price includes the pricing strategy of the company for its products. How much customer should pay for a product? Pricing strategy is not only related to the profit margins but also helps in finding target customers. Pricing decision also influence the choice of marketing channels. Price decisions include: Pricing Strategy (Penetration, Skim, etc) List Price Payment period Discounts Financing Credit terms

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Using price as a weapon for rivals is as old as mankind, but it’s risky too. Consumers are often sensitive for price, discounts and additional offers. Another aspect of pricing is that expensive products are considered of good quality.

Price Price is one of the most complex marketing decisions.
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It plays a number of roles in most marketing strategies: it can be a key component in product image (quality); a powerful sales promotion tool; or a versatile element in competition.
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Determining pricing strategy is a delicate task. It requires that you assess customer demand and analyze cost in order to choose a price that will create customer satisfaction and yield a satisfactory level of profit. Pricing is related to the goals and objectives of your organization. What are the objectives for your library? Are you a profit making institution or is cost recovery your goal? One thing is clear, nothing is free anymore, especially information. When thinking about pricing, you must consider all costs associated with any given product. The final price is a marketing decision.

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It not only includes the place where the product is placed, all those activities performed by the company to ensure the availability of the product tot he targeted customers. Availability of the product at the right place, at the right time and in the right quantity is crucial in placement decisions. Placement decisions include: Placement Distribution channels Logistics Inventory Order processing Market coverage selection of channel members There are many types of intermediaries such as wholesalers, agents, retailers, the Internet, overseas distributors, direct marketing (from manufacturer to user without an intermediary), and many others.

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Promotion includes all communication and selling activities to pursuade future prospects to buy the product. Promotion decisions include: Advertising Media Types Message Budgets Sales promotion Personal selling Public relations/publicity Direct marketing Sponsorship

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The elements of the promotions mix are integrated to form a coherent campaign. As with all forms of communication. As these costs are huge as compared to product price, So it’s good to perform a break-even analysis before allocating the budget. It helps in determining whether the new customers are worth of promotion cost or not.

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Marketing mix (4 P’s) was more useful in early 19’s when production concept was in and physical products were in larger proportion. Today, with latest marketing concepts, marketing environment has become more integrated. So, in order to extend the usefulness of marketing mix, some authors introduced a fifth P’s and then seven P’s (People, Packaging, Process). But the foundation of Marketing Mix still stands on the basic 4P’s.

The first P is = Product
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Which means
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Anything that can be offered to create an exchange It is looking at satisfying a customer problem Hence we say that a product is a customer solution

Kotler says
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At the heart of a great brand is a great product. Product is a key element in the market offering Market leaders generally offer products and services of superior quality that provide unsurpassed customer value

Product decisions
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At the time of deciding your marketing plan you will have to take a number of product decisions such as
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What will constitute the product How many variants of it should be there on offer How it should be different from competing products How it should be packaged

Levels of product

Levels of product (Extended)

Levels explained
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We take an example of a Hotel

Core benefit
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At the first level In a hotel (which is a product) the core benefit is
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Rest and sleep (A hotel guest is basically buying rest and sleep in a hotel) it is the basic benefit

Basic Product
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In case of hotel the basic product will constitute
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Hotel room (including a bed, bathroom, towels, desk, TV etc) At this second level marketers must turn the basic benefit into a basic product. Match basic benefit with a basic product

Expected Product
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At the third level, the marketer prepares on expected product A set of attributes and conditions buyers normally expect when they purchase this product.
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Hotel guests expect a clean bed, fresh towels, working lamps, and a relative degree of quite

Augmented Product
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At the fourth level, the marketer prepares an augmented product that exceeds customer expectations
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In Developed countries, brand positioning and competition take place at this level. However in developing countries like India and Brazil competition takes place mostly at the expected product level. In a hotel augmented prdt may be a PC in the room or the welcome drink to improve the position of the product in the eyes of the customer

Potential Product
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It includes all the possible augmentations and transformations the product or offering might undergo in the future. Here is where companies search for new ways to satisfy customers and distinguish their offerings
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Like a Hotelier might look forward to add Gym or swimming pool in future

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Differentiation arises and competition increasingly occurs on the basis of product augmentation, which also leads the marketer to look at the user‘s total consumption system: The way the user performs the task of getting and using products and related services.

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Each augmentation adds cost, and Augmented benefits soon become expected benefits and necessary points of parity Today‘s Hotel guests expect cable or satellite TV with a remote control and high speed internet access or two phone lines. This means competitors must search for still other features and benefits

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As some companies raise the price of their augmented product, others offer a ?stripped down version? at a much lower price

Example : ITC Welcome Group
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It has four set of properties
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Super Delux hotels (ITC Hotels) Five star hotels (Welcome Hotels) Budget hotels (Fortune Hotels) Palaces, Forts and Havelis (Welcome heritage)

Product Classification
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Basis
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Durability and tangibility Consumer goods classification Industrial goods classification

Durability and tangibility
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Nondurable (Soft Drink and soaps) Durable (Refrigerators, TV etc) Services (Intangible)

Consumer Goods classification
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Convenience (Soft Drink, Soap)
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Shopping (Furniture, Clothing)
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Staples (Purchase on regular basis) – toothpaste Impulse (without any planning or search effort) – Chocolate, Candy etc Emergency Goods (Urgent need ) - Umbrella
Homogeneous (Similar in quality may be different in price) – Lux and Rexona Heterogeneous (Differ in product features and services which happens to be more significant than price) – Lux and Dove

Contd..
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Specialty goods (a Mercedes) Unsought (Life insurance)

Industrial goods classification
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Materials and parts
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Raw Materials
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Farm products Natural products Component materials (pig iron, yarn – to be further processed) Component parts (finished products, small motor, light)

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Manufactured materials and parts
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Contd..
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Capital items
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Installations (Buildings and heavy equipments) Equipments (Portable factory equipments and tools) – hand tools, lift trucks etc

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Supplies and business services
Maintenance and repair (Paints, nails) ? Operating supplies (Lubes, coal, writing paper) Together they come under the category MRO
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Contd..
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Business services include
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Maintenance and repair services Business advisory services

New-Product Development and Product Life-Cycle Strategies

Objectives
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Understand how companies find and develop new-product ideas. Learn the steps in the new-product development process. Know the stages of the product life cycle. Understand how marketing strategies change during the product‘s life cycle.
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Microsoft c
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$50 billion in profits over 27 years Early new product development relied heavily on copying the competition $4.2 billion annually invested in R & D
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Innovation is critical to Microsoft‘s future success Much of R & D efforts are Internet related Many new products and services are in development

Definition
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New Product Development
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Development of original products, product improvements, product modifications, and new brands through the firm‘s own R & D efforts.

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New-Product Development Strategies
Strategies for Obtaining New Product Ideas
Acquired Companies Acquired Patents Acquired Licenses Original Products Product Improvements Product Modifications New Brands

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New Product Development Process
Marketing Strategy Concept Development and Testing Idea Screening Idea Generation Business Analysis Product Development

Test Marketing Commercialization

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New Product Development Strategy
New Product Development Process:
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Stage 1: Idea Generation
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Internal idea sources:
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R&D Customers, competitors, distributors, suppliers

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External idea sources:
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3M’s corporate culture encourages, supports, and rewards new product ideas and innovation

Using the Web to Solicit Product Ideas

Procter and Gamble

To see how P&G solicits ideas from customers, visit the Procter and Gamble home page, click on the Resources and Offers button, then select the Share Your Thoughts listing.
Procter & Gamble

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New Product Development Process
Step 2. Idea Screening
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Many companies have systems for rating and screening ideas which estimate: Process to spot good ideas and drop poor ones as soon as possible. ? Market Size ? Product Price ? Development Time & Costs ? Manufacturing Costs ? Rate of Return Then, the idea is evaluated against a set of general company criteria.

New Product Development Process
Step 3. Concept Development & Testing
1. Develop Product Ideas into Alternative Product Concepts

2. Concept Testing - Test the Product Concepts with Groups of Target Customers

3. Choose the Best One

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New Product Development Process
Step 4. Marketing Strategy Development

Marketing Strategy Statement Formulation
Part One Describes Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share

Part Two Describes Short-Term:
Product’s Planned Price Distribution Marketing Budget

Part Three Describes Long-Term:
Sales & Profit Goals Marketing Mix Strategy
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New Product Development Process
Step 5. Business Analysis Step 6. Product Development
Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

If No, Eliminate Product Concept
If Yes, Move to Product Development
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Daimler is currently road-testing its prototype NECAR 5 (New Electric Car)

New Product Development Strategy

IRI BehaviorScan
provides an inmarket laboratory for testing new products and marketing programs

IRI BehaviorScan
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New Product Development Process Step 7. Test Marketing
Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings.
Budget Levels Packaging Product Positioning

Branding Pricing
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Elements that May be Test Marketed by a Company

Advertising Distribution

New Product Development Process
Step 7. Test Marketing
Standard Test Market
Full marketing campaign in a small number of representative cities.

Controlled Test Market
A few stores that have agreed to carry new products for a fee.

Simulated Test Market
Test in a simulated shopping environment to a sample of consumers.

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Where is a good test market?
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Factors to consider Size Demographics Isolation from other cities Media availability and cost Retailer support

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2. Popular cities - Big cities: Detroit, St. Louis, Columbus, Philadelphia - Small cities:

New Product Development Process
Step 8. Commercialization

Commercialization is the Introduction of the New Product into the Marketplace.

When?

Where?

To Whom?

How?

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LIFE IS SHORT AND THEN YOU INTRODUCE A NEW PRODUCT
Product lifetimes are shrinking, as competitors pressure innovators by offering imitations of successful, high-margin products.
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Panasonic now replaces electronic consumer products on a 90-day cycle (with older models going to discounters) the big Japanese car makers are aiming to offer new models every two years. (from the New York Times)

Speeding Up Development
Sequential Simultaneous

Step 1

Step 1 Step 3
Step 4 Step 2

Step 2

Step 3

Step 4
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Discussion Question
Why do products fail?
See if you can identify the fatal flaw in the brands below and at right.

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Causes of New Product Failures
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Overestimation of Market Size Product Design Problems ? Insignificant difference Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions No access to the market Bad timing To create successful new products, the company must: ? understand it‘s customers, markets and competitors ? develop products that deliver superior value to customers.

Alternatives to Development:

Acquire new Products ? Develop "me-too" products. ? Revive old products
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Product Life-Cycle Strategies
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The Typical Product Life Cycle (PLC) Has Five Stages
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Product Development, Introduction, Growth, Maturity, Decline Not all products follow this cycle:
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Fads Styles Fashions

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Sales and Profits Over A Product’s Life

Product Life Cycle
length
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style - comes, goes, comes back fashion - come, goes away slowly fad - comes and goes way

quickly

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Styles, Fashions, and Fads

Companies want their products to enjoy a long life cycle. Hershey’s actively promotes the fact that it has been “unchanged since 1899”

Product Life-Cycle Strategies
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Additional marketing investments can move a product back into the growth stage, as in the case of Cracker Jack.

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Product Life-Cycle Strategies
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The product life cycle concept can be applied to a:
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Product class (soft drinks) Product form (diet colas) Brand (Diet Dr. Pepper)
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Using the PLC to forecast brand performance or to develop marketing strategies is problematic

Problems Using the PLC
The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product LifeCycle, However Some Problems Can Arise:
Trouble identifying Which Stage of the PLC the Product Is In

Difficult to Forecast the Sales Level, the Length of Each Stage, and Shape of the PLC

Strategy is Both a Cause and a Result of the Product‘s Life Cycle
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Product Life-Cycle Strategies
PLC Stages
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Product development ? Introduction ? Growth ? Maturity ? Decline
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Begins when the company develops a new-product idea Sales are zero Investment costs are high Profits are negative

Product Life-Cycle Strategies
PLC Stages
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Product development ? Introduction ? Growth ? Maturity ? Decline
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Low sales High cost per customer acquired Negative profits Innovators are targeted Little competition

Product Life-Cycle Strategies
PLC Stages
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Product development ? Introduction ? Growth ? Maturity ? Decline
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Rapidly rising sales Average cost per customer Rising profits Early adopters are targeted Growing competition

Product Life-Cycle Strategies
PLC Stages
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Product development ? Introduction ? Growth ? Maturity ? Decline
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Sales peak Low cost per customer High profits Middle majority are targeted Competition begins to decline

Product Life-Cycle Strategies
PLC Stages
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Product development ? Introduction ? Growth ? Maturity ? Decline
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Declining sales Low cost per customer Declining profits Laggards are targeted Declining competition

Branding and Brand Equity

What is Branding
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Branding allows a company to differentiate its products and services from the competition by creating a bond with its customers in order to create customer loyalty. This way, a company can have a position in the marketplace that is much more difficult for the competition to poach. A satisfied customer may leave. But a loyal customer is more likely to stay.

Concept of Branding
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A company image as seen by the customer Good branding = getting people to recognize you first Having an effective logo with which customers can identify you A brand is what differentiates you from your competitors Good advertising and how it attracts customers A compelling customer experience

Branding is sending a message
Think of it this way:
Marketing is a conversation. The brand name initiates the conversation which will develop multiple concepts and criteria, namely:
Vision, mission, message, service, package, image, differentiation, understanding the customer, advertising, logo, name recognition, customer service, internal training, team work, The Small and Medium-Sized Enterprises (SMEs) Division of WIPO

Branding matters
?Consumers are starved for time and overwhelmed by the choices available to them. They want strong brands that simplify their decision making and reduce their risks.?
Kevin Lane Keller, Tuck School of Business

Purpose of Branding
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Gives a business a significant edge over the competition Have the customer view a business as the only solution to their problem A strong brand engenders feelings of trust, reliability, loyalty, empathy, responsiveness and recognition in the customer‘s mind
The Small and Medium-Sized Enterprises (SMEs) Division of WIPO

Choose the right format
There are several ways the publishing industry can exploit the online publishing market and it‘s important that publishers choose the path that will suit them best. Daily newspapers may rely on a website and downloadable news service that allows readers to find out more, access archives and post comments. Magazine publishers, on the other hand, may find that their subscribers want to see an online magazine version – using a page-turning, searchable format that they can browse at their convenience. Book publishers can give readers a taste of new releases by putting the first chapter online, in the same, page-turnable form – already available on Amazon. Podcasts may allow publishers to give their readers access to an audio trailer for the written publication, highlighting columnists, features and special offers, directing the listener to the website or webmag for more details. Careful market and technology research is needed to ensure that publishers are choosing the best option for their core publications.

Content is king
In the end, it doesn’t just matter how people choose to access your content; it matters that your content is worth accessing. If you publish good material, people will read it. Newspapers, journals and magazines will still need to employ journalists whose writing is of a high standard. They will still need to have access to photographers who can produce images that make us stop and think, or want to know more.

They will need designers who can make the content accessible through a variety of formats. The better your content and the more available it is, the more readers you will attract.

The Nike’s case
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Reflects the popularity of a well-known TM The ?Swoosh? is the well known symbol of Nike Originally Nike‘s logo included also the shoemaker‘s name At the end of the nineties, the Nike‘s name disappeared The swoosh remained as the main identification symbol of the shoemaker Today there is no need to include the brand into this logo since the recognition of a simple swoosh automatically brings our attention to Nike

The “Swoosh”

Purpose of Branding
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Gives a business/enterprise a significant edge over the competition Makes the customer view a business/enterprise as the only solution to their need or problem A strong brand engenders feelings of trust, reliability, loyalty and recognition in the customer’s mind. Through its brand image an enterprise will attract and retain customer loyalty for its goods and services and increase the value of its business

Successful Branding

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Developing a brand part and parcel of every strategic business plan Target what customers care about: articulate precise values and qualities that are relevant and of direct interest Emphasize features that are both important to consumer and quite differentiated from competitors Sell the brand outside and inside: Motivate employees to identify with brand Keep brand flexible Communicate the brand image at all levels of operation Intellectual Property Rights such as trademarks and industrial designs important tools for branding

What is Brand Loyalty?
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In groups create a definition

Aaker (1991)

Definitions
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Brand
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A distinguishing symbol, mark, logo, name, word, sentence or a combination of these items that companies use to distinguish their product from others in the market.

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Brand Awareness
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The likelihood that consumers recognize the existence and availability of a company's product or service. Creating brand awareness is one of the key steps in promoting a product.

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Brand Equity
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The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. Companies can create brand equity for their products by making

Brand Loyalty Defined
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The American Marketing Association (2011) defines brand loyalty as:
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Consumer Behaviour Definition
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"The degree to which a consumer consistently purchases the same brand within a product class"

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AMA - Sales Promotion Definition
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"The situation in which a consumer generally buys the same manufactureroriginated product or service repeatedly over time rather than buying from multiple suppliers within the category"

"Spurious Loyalty"
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Is Brand Loyalty more than simple repurchasing?
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Customers may repurchase a brand due to situational constraints; e.g.
Vendor lock-in Lack of viable alternatives, Convenience

1. 2. 3.

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Such loyalty is referred to as "spurious loyalty".
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Loyalty Cards Is created loyalty true or spurious?

Farris et al: (2010). Marketing

Metrics

True Brand Loyalty
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Exists when customers have: ? ?a high relative attitude toward the brand which is then exhibited through repurchase behaviour?
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Dick and Kunal (1994)

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Great asset to a firm:
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Customers:
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Willing to pay higher prices, Cost less to serve, Bring new customers

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From marketers viewpoint
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Loyalty a key factor in terms of consumer usage

Key Factors
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Usage Rate / Rate Of Usage
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Suppliers often segment into
Heavy Medium Light Users

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Pareto 80-20 Rule applies.
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'Heavy Users' - disproportionately important
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20% of users accounting for 80% of usage / profit

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Key target = heavy users.
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Kotler (1991)

Key Factors
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Loyalty - Is customer is committed to brand?
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Hard-core loyals
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Split loyals
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Buy the brand all the time. Loyal to two or three brands. Moving from one brand to another.

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Shifting loyals
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Switchers
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No loyalty
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Deal-prone - looking for bargain Vanity prone - looking for something different

Key Factors
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Other Factors
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Pre-dispositional commitment toward a brand
BL a Multidimensional construct
Entails multivariate measurements: e.g. ? Customers' perceived value ? Brand trust ? Customer satisfaction ? Repeat purchase behaviour ? Commitment

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Commitment and = necessary conditioRepeated Purchase Behaviour ns
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followed by Perceived Value, Satisfaction, And Brand Trust
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Reichheld (1996) /Punniyamoorthy & Raj (2007)

Benefits From Brand Loyalty
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Dramatic effects on profitability
Longer tenure as a customer Lower sensitivity to price increases.

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Portfolios of Brands
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Consumers Buy 'Portfolios of Brands
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Switch regularly between brands
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often because they simply want a change

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'Brand Penetration' or 'Brand Share'
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A statistical chance that majority of customers will buy that brand next time as part of their portfolio of favoured brands

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Emphasises a need for managing brand continuity

Managing Brand Continuity

Market Inertia
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Most markets show overall stability
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Change slow - decades / centuries

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Two major implications
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Clear brand leaders well placed re: competitors
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Someone wishing to change market (or position)
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Still requires regular minor changes to stay abreast of changes in consumer taste

Massive investment needed

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Despite normal stability -sudden changes can occur
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Environmental scanning

Multi-dimensional Theory Of Brand Loyalty
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Brand Loyalty As A Hypothetical Construct Brand Loyalty As A Multidimensional Construct
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Measured by several distinct psychological processes Entails multivariate measurements.
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Sheth & Park (1974) - Advances in Consumer Research Volume 1, 1974, pp. 449-459

Multi-dimensional Theory
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Brand Loyalty As A Hypothetical Construct
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positively biased emotive, evaluative and/ or behavioural response tendency toward a branded, labelled or graded alternative or choice by an individual in his capacity as the user, the choice maker, and/or the purchasing agent.

Multi-dimensional Theory

MDT - Behavioural & Cognitive Factors
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No restrictions of repeated overt behaviour
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Consumers may be brand loyal even though never bought the brand
May arise by learning from information, imitative behaviour, generalization and consumption behaviour and not from buying behaviour experiences.

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Consumer may have no evaluative (cognitive / attitudinal) structure underlying loyalty
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Emotive tendencies (affect, fear, respect, compliance, etc.)
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Related to loyalty

MDT - Non Behavioural Level
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Bl can exist at the non behavioural level
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Emotive or evaluative level - for products or services which same consumers never buy
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Biased non-behavioural (non purchase) tendencies –
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E.g. BL to cars, airplanes, boats, etc.

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Specific role consumer performs - loyal as:
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Consumer Buyer (purchasing agent) Decision-maker All three?

Source: Sheth & Park (1974)

Overview – MDT
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Defined as a positively biased tendency that contains three distinct dimensions
1. 2. 3.

Emotive tendency toward the brand The affective (like-dislike) - fear, respect, compliance Value-expressive or ego-defensive attitudes - Katz (1960) Prior experiences with brand Non-experiential or informational services.

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Emotive tendencies learned from
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Evaluative tendency
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Positively biased evaluation on a set of relevant criteria
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The brand's utility to the consumer

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Value-expressive or ego-defensive
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Instrumental, utilitarian, attitudes - Katz (1960) Perceived instrumentality - Rosenberg (1956) /Howard and Sheth (1969)

Overview – MDT...
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Learned by the consumer
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Prior experiences Non-experiential/informational sources.

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Behavioural tendency towards the brand.
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Positively biased responses
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Primarily from buying and consuming experiences
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Procurement, purchase and consumption activities ? Shopping, search, picking up from the shelf, paying, consuming

Overview – MDT...

Thoughts – New Research
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Social Media and Internet
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May be weakening influence of brand loyalty
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Despite importance of brand awareness, growth of search engines can reduce the influence of branding.
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Consumers influenced by products that rank highest in search engines, rather than by traditional brand awareness.

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Social networking having a similar effect
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User generated product reviews, etc
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Salem-Baskin (2011)

Kumar (2011)
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Power of "Advocacy". ? Consumer actively talks and listens to other ?loyal‘ consumers ? Moves back and forth the traditional purchase funnel ? Forms a consideration set -?from listening? ? May change the consideration set ? Narrows choice to 1-2 brands

Thoughts – New Research
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Preference
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If Families are Price Sensitive Then They will be So Regardless of the Product
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Two main factors -sensitivity to price and brand preference
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Consumers who are brand loyal tend to shop by brand rather than price in other categories. Consumers who shop by price will tend to look for bargains in all categories ? Peral (2011)

Thoughts – New Research
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Reinforcement
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Raising brand awareness helps to reinforce brand loyalty
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?Tweens‘ 9 -12 year olds exposed to over 20,000 commercials annually
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difficult for brand messages to stand out.

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Repetition through regular advertising is important
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Reed (2011)

Thoughts – New Research
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Habit
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Consumers make choices based on names and positive brand-associated images
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In retail outlets where consumers face choices for same type of product - strong brand has a clear competitive advantage
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Difficult to copy v. Copycat products??? ? Pekala (2008)

Thoughts – New Research
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Emotional Attachment
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Likely to top whatever market research a consumer does before purchase
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Rely on 'rules of thumb' -leads to a persistent bias in how they think. Consumer cherry-picks to reinforce existing viewpoint, convincing themselves that they were right

?

Smart companies use advocates to spread the word
?

Brands with an emotional connection are placed in the purchase pathway
?

Cunniffe & Sng (2012)

Marketing Mix - Promotion
Sales Promotion Personal Selling Public Relations Advertising & Publicity

Learning Objectives
After studying this chapter, you should be able to: 1. Promotion 2. Advertising & Publicity 3. Sales Promotion 4. Personal Selling 5. Public Relations

Promotion Why ? How?
Why promotion Make prospects/customers understand the product Usefulness, Place of Availability Price Features Offers Etc…

Promotion
Four Techniques of Promotion
They include: • Advertising & Publicity • Sales Promotion • Personal Selling • Public Relations

Sales Promotion
Sales promotion is the short-term incentives to encourage purchases or sales of a product or service Induce buyer to use other than conviction “trial”

Sales Promotion is useful
When
• • • • •

Product is newly introduced Huge Stocks Penetration in desired markets Perishable products To create additional brand loyalty

Sales Promotion
Rapid Growth of Sales Promotion
Factors in the Growth of Sales Promotions
•

•
• •

• •

Product managers are under pressure to increase current sales Companies face more competition Competing brands offer less differentiation Advertising efficiency has declined due to rising costs, clutter, and legal constraints Consumers have become more deal-oriented Large retailers are demanding more deals from suppliers

Sales Promotion
Rapid Growth of Sales Promotion
Factors in the Growth of Sales Promotions

Developing a sales promotion program • Set sales promotion objectives • Select sales promotion tools

Sales Promotion
Sales Promotion Objectives Setting sales promotion objectives include using: • Consumer promotions • Trade promotions • Sales force promotions

Sales Promotion
Sales Promotion Objectives Consumer promotions objectives are to: • Urge short-term customer buying • Enhance long-term customer relationships

Sales Promotion
Sales Promotion Objectives Trade promotions urge retailers to: • Carry new items or more inventory • Buy in advance • Advertise company products • Get more shelf space

Sales Promotion
Sales Promotion Objectives Sales force promotion objectives include getting: • More sales force support for new or current products • Salespeople to sign up new accounts

Sales Promotion
Major Sales Promotion Tools
• • •

Consumer promotion tools Trade promotion tools Business promotion tools

Sales Promotion
Major Sales Promotion Tools
Consumer Promotion Tools
•
• • • • •

Samples Coupons Cash refunds Price packs Premiums Advertising specialties

• •

• • • •

Patronage rewards Point of purchase displays Demonstrations Contests Sweepstakes Games

Sales Promotion
Major Sales Promotion Tools
Consumer Promotion Tools Price packs offer consumers savings off the regular price of a product Premiums are goods offered either free or at low cost to buy a product Advertising specialties are useful articles imprinted with the advertiser‘s name, logo, or message that are given as gifts to consumers

Sales Promotion
Major Sales Promotion Tools
Consumer Promotion Tools Samples offer a trial amount of a product Coupons are certificates that give buyers a saving when they purchase specified products Cash refunds are similar to coupons except that the price reduction occurs after the purchase

Sales Promotion
Major Sales Promotion Tools
Consumer Promotion Tools Patronage rewards are cash or other awards offered for the regular use of a certain company‘s products or services Point-of-purchase promotions include displays and demonstrations that take place at the point of sales

Sales Promotion
Major Sales Promotion Tools
Consumer Promotion Tools
Contests, sweepstakes, and games give consumers the chance to win something, such as cash, trips, or goods, by luck or through extra effort • Contests require an entry by a consumer • Sweepstakes require consumers to submit their names for a drawing • Games present consumers with something that may or may not help them win a prize

Sales Promotion
Major Sales Promotion Tools
Trade Promotion Tools

Trade promotion tools persuade resellers to: • Carry a brand • Give the brand more shelf space • Promote the brand in advertising • Push the brand to consumers

Sales Promotion
Major Sales Promotion Tools
Trade Promotion Tools

Trade promotion tools include: • Discount • Allowance • Free goods • Specialty advertising

Sales Promotion
Major Sales Promotion Tools
Business Promotion Tools Business promotion tools are used to: • Generate leads • Stimulate purchases • Reward customers • Motivate salespeople • Conventions and trade shows • Sales contests

Sales Promotion
Major Sales Promotion Tools
Business Promotion Tools Conventions and trade shows are effective ways to reach many customers not reached with the regular sales force Sales contests are effective in motivating salespeople or dealers to increase performance over a given period

Sales Promotion
Developing the Sales Promotion Program
• • • • •

Size of the incentive Conditions for participation Promote and distribute the program Length of the program Evaluation of the program

Sales Promotion
Sales promotion is important in special segment products and services where it is inevitable to give a product demo, description, importance etc… Take the story of EUREKA FORBES

Personal Selling
The Nature of Personal Selling
Examples of people who do the selling include: • Salespeople • Sales representatives • District managers • Account executives • Sales engineers • Agents • Account development reps

Personal Selling
The Nature of Personal Selling Salespeople can include an order taker such as someone standing behind the counter or an order getter whose position demands more creative selling and relationship building

Personal Selling
The Role of the Sales Force Personal selling is the interpersonal part of the promotion mix and can include: • Face-to-face communication • Telephone communication • Video or Web conferencing

Personal Selling
The Role of the Sales Force Salespeople can be more effective than advertising • Learn about customer problems and adjust the marketing offer and presentation accordingly to meet the special needs of each customer

Personal Selling
The Role of the Sales Force Salespeople are an effective link between the company and its customers to produce customer value and company profit by: • Representing the company to customers • Representing customers to the company

Personal Selling
Managing the Sales Force
Sales force management is the analysis, planning, implementation, and control of sales force activities and includes: • Designing the sales force strategy and structure • Recruiting • Selecting • Training • Compensating • Supervising • Evaluating

Personal Selling
Managing the Sales Force
Sales Force Structure
• • • •

Territorial sales force structure Product sales force structure Customer sales force structure Complex sales force structure

Personal Selling
Managing the Sales Force
Sales Force Structure Territorial sales force structure refers to a structure where each salesperson is assigned an exclusive geographic area and sells the company‘s full line of products and services to all customers in that territory
• • • •

Defines salesperson‘s job Fixes accountability Lowers sales expenses Improves relationship building and selling effectiveness

Personal Selling
Managing the Sales Force
Sales Force Structure

Product sales force structure refers to a structure where each salesperson sells along product lines • Improves product knowledge • Can lead to territorial conflicts

Personal Selling
Managing the Sales Force
Sales Force Structure

Customer sales force structure refers to a structure where each salesperson sells along customer or industry lines • Improves customer relationships

Personal Selling
Managing the Sales Force
Sales Force Structure

Complex sales force structure refers to a structure where a wide variety of products is sold to many types of customers over a broad geographic area and combines several types of sales force structures

Personal Selling
Managing the Sales Force
Sales Force Size

Salespeople are one of the company‘s most productive and expensive assets Increases in sales force size can increase sales and costs

Personal Selling
Managing the Sales Force
Other Sales Force Strategy and Structure Issues
•

•

Outside and inside sales forces Team selling

Personal Selling
Managing the Sales Force
Other Sales Force Strategy and Structure Issues

Outside salespeople call on customers in the field Inside salespeople conduct business from their offices

Personal Selling
Managing the Sales Force
Other Sales Force Strategy and Structure Issues

Inside salespeople provide support for the outside salespeople • Technical sales support people • Sales assistants

Personal Selling
Managing the Sales Force
Other Sales Force Strategy and Structure Issues
Team selling is used to service large complex accounts and can include experts from:
• • • • •

•
•

Sales Marketing Technical R&D Engineering Operations Finance

Personal Selling
Managing the Sales Force
Other Sales Force Strategy and Structure Issues
Some challenges of team selling • Customers used to working with one salesperson may become confused or overwhelmed • Salespeople used to working alone can have difficulties working with and trusting teams • Evaluating individual contributions can lead to compensation issues

Personal Selling
Recruiting and Selecting Salespeople
Issues in recruiting and selecting include: Careful selection • Increases sales performance Poor selection • Increases recruiting and training costs
• •

Lost sales Disrupts customer relationships

Personal Selling
Compensating Salespeople Compensation is made up of: • Fixed amounts • Variable amounts • Expenses • Fringe benefits

Personal Selling
Compensating Salespeople
Fixed amounts, usually a salary, give the salesperson some stable income Variable amounts can include commission or bonus based on sales performance; rewards the salesperson for greater effort and success

Personal Selling
Compensating Salespeople
Companies are moving from high commission plans that may drive salespeople to make short-term grabs for business and not develop long-term customer relationships Companies are moving to compensation plans that reward salespeople for building customer relationships and growing longterm value with each customer

Personal Selling
Supervising and Motivating Salespeople The goal of supervision is to help salespeople work smart by doing the right things in the right ways The goal of motivation is to encourage salespeople to work hard and energetically toward sales force goals

Personal Selling
Supervising and Motivating Salespeople
Sales force automation systems are computerized. Digitalized sales force operations let salespeople work more effectively anywhere, anytime, providing improved: • Time management • Customer service • Lower sales costs • Higher sales performance

Personal Selling
Supervising and Motivating Salespeople Sales morale and performance can be increased through: • Organizational climate • Sales quotas • Positive incentives

Personal Selling
Supervising and Motivating Salespeople Organizational climate describes the feeling that salespeople have about their opportunities, value, and rewards for good performance

Personal Selling
Supervising and Motivating Salespeople Sales quotas are standards stating the amount salespeople should sell and how sales should be divided among the company‘s products

Personal Selling
Supervising and Motivating Salespeople Positive incentives include: • Sales meetings that can provide social occasions to meet management and discuss opportunities and challenges • Sales contests to motivate the sales force to make additional effort

Personal Selling
Evaluating Salespeople and Sales Force Performance
• • •

Sales reports Call reports Expense reports

The Personal Selling Process

The goal of the personal selling process is to get new customers and obtain orders from them

The Personal Selling Process
Steps in the Personal Selling Process
1. 2. 3. 4. 5. 6. 7.

Prospecting and qualifying Pre-approach Approach Presentation and demonstration Handling objections Closing Follow-up

The Personal Selling Process
Steps in the Personal Selling Process Prospecting identifies qualified potential customers through referrals from:
• • • •

Customers Suppliers Dealers Internet

The Personal Selling Process
Steps in the Personal Selling Process Qualifying is identifying good customers and screening out poor ones by looking at:
• • • • •

Financial ability Volume of business Needs Location Growth potential

The Personal Selling Process
Steps in the Personal Selling Process Pre-approach is the process of learning as much as possible about a prospect, including needs, who is involved in the buying, and the characteristics and styles of the buyers

The Personal Selling Process
Steps in the Personal Selling Process
In the pre-approach stage, the salesperson sets call objectives and the best approach Objectives Qualify the prospect Gather information Make an immediate sale Approaches Personal visit Phone call Letter

• • •

• • •

The Personal Selling Process
Steps in the Personal Selling Process Approach is the process where the salesperson meets and greets the buyer and gets the relationship off to a good start, and involves the salesperson‘s:
•

•
•

Appearance Opening lines Follow-up remarks

The Personal Selling Process
Steps in the Personal Selling Process Opening lines should be positive, build goodwill, and be followed by key questions to learn about the customer‘s needs or by showing a display or sample to attract the buyer‘s attention and curiosity The most important attribute is for the salesperson to: Listen

The Personal Selling Process
Steps in the Personal Selling Process
Presentation is when the salesperson tells the product story to the buyer, presenting customer benefits and showing how the product solves the customer‘s problems Need-satisfaction approach: Buyers want solutions, and salespeople should listen and respond with the right products and services to solve customer problems

The Personal Selling Process
Steps in the Personal Selling Process Buyers dislike salespeople that are: • Pushy • Late • Deceitful • Disorganized • Unprepared

The Personal Selling Process
Steps in the Personal Selling Process Buyers appreciate salespeople that are: • Good listeners • Empathetic • Honest • Dependable • Thorough • Follow-up types

The Personal Selling Process
Steps in the Personal Selling Process
Handling objections is the process where salespeople resolve problems that are logical, psychological, or unspoken
When handling objections from buyers, salespeople should: • Be positive • Seek out hidden objections • Ask the buyers to clarify any objections • Take objections as opportunities to provide more information • Turn objections into reasons for buying

The Personal Selling Process
Steps in the Personal Selling Process Closing is the process where salespeople should recognize signals from the buyer, including physical actions, comments, and questions to close the sale

The Personal Selling Process
Steps in the Personal Selling Process
Closing techniques can include: • Asking for the order • Reviewing points of agreement • Offering to help write up the order • Asking if the buyer wants this model or another one • Making note that the buyer will lose out if the order is not placed now • Offering incentives to buy, including lower price or additional quantity

The Personal Selling Process
Personal Selling and Customer Relationship Management Personal selling is a transaction-oriented approach to close a specific sale with a specific customer, with the longterm goal to develop a mutually profitable relationship

The Personal Selling Process
Personal Selling and Customer Relationship Management
Attributes of a favorable supplier include the ability to: • Deliver a coordinated set of products and services to many locations • Work with customer teams and improve products and processes • Listen to customers and understand their needs

The Personal Selling Process
Advantages Gives full attention, personal touch Wider Acceptance of Product Direct handling of queries Follow up action and persuasion possible Where advertising is not ethically permitted, like pharma sector

? ? ?

?

?

The Personal Selling Process
Limitations
• • • • • •

Costly Field Control is difficult & Expensive Training specialized job Coverage of prospective customers limited General Resistance of customers Too much push factor

Public Relations

Public Relations
Public Relations is defined as deserving, acquiring and retaining a favourable reputation in the market place It aims at Creating & maintaining favourable public opinion about company’s
? ? ? ?

?

Product People Policies And Plans

Public Relations
Any group that has an actual or potential interest or impact on campany’s ability to achieve its objective

Public relations don not help in promoting the product directly but can help make the company acceptance in market and thus infulence product purchase
TAKE the case of Coke Pesticide Case

Public Relations usefulness
?

?
?

Acceptance of Company as a specialist in a product Acceptance of company regarding its policy towardS
Employees (Maruti & Bajaj Pune Employee Strike)

?
?

Attracting Expert Man power & Capital
ENRON Case

?
?

Acceptance of new product
“It’s a TATA Product”

Public Relations Tools
?

?
?

House Magazines Publications – Inhouse and external EVENTS – Sponsorships of Social Events etc
Traffic Safety Week or Police Charitable Event etc

?
?

PRESS RELEASE -LIC warning spurious policy rewards

?
? ?

Public Meetings & Press Conference – Social Service Activities – Graden Adoption etc Identity Association – Mascot, Logo on every item from stationary to t shirts for employees.

Public Relations Evaluation
?

PR Evaluation is difficult but in recent times ? Total Media Exposure ? Awareness Level ? Change in attitude ? Acceptance of Public Issue Can be used to assess the PR level of a company

Types of Promotion
Advertising Public Relations

Promotion Mix

Sales Promotion

Personal Selling

Advertising

Advertising is paid, nonpersonal communication regarding goods, services, organizations, people, places, and ideas that is transmitted through various media by business firms, government and other nonprofit organizations, and individuals who are identified in the advertising message as the sponsor. The message is generally controlled by the sponsor.

Public Relations

Public relations includes any communication to foster a favorable image for goods, services, organizations, people, places, and ideas among their publics—such as consumers, investors, government, channel members, employees, and the general public. It may be nonpersonal, personal, paid or nonpaid, and sponsor controlled or not controlled.
Publicity is the form of public relations that entails nonpersonal communication passed on via various media but not paid for an identified sponsor. Wording and placement of publicity messages are generally media controlled.

Advertising Vs Publicity
?

?

? ?

? ?

?

First Party Advertising less Credibility Expensive Certain Position and Timing Can be repeated Use of color slogans, models, ill possible Media gives preference to Ads

?

?

? ?

?

?

3rd Party Consumers Believe on News Items Economical or Free Fight with higher news value items and positional priorities Cannot be repeated. Infomercial

Developing an Advertising Plan
2. Assigning Responsibility 3. Establishing Budget 4. Developing Themes 5. Selecting Media

1. Setting Objectives

9. Evaluating Success or Failure

Feedback

8. Considering Cooperative Efforts

7. Timing Advertisements

6. Creating Advertisements

Advertising Plan: Setting Objectives
An organization‘s advertising goals can be divided into demand or image types, with image-oriented ads being part of public relations.

1. Setting Objectives

Demand-Oriented Ads • Inform • Persuade • Remind

Image-Oriented Ads • Develop image • Maintain image • Generate primary demand • Generate selective demand

Advertising Plan: Setting Objectives
1. Reckoning or Creating Awareness – (NPD, New Features, etc) 2. Reminder – Frequency for top of mind 3. Reassurance – Yehi hai right choice baby Hamara Bajaj 4. Reasoning for Comprehension – Feature Price, & Reasons to buy 5. Reputation – Corporate Ad ?Tata Steel?

1. Setting Objectives

Advertising Plan: Assigning Responsibility
2. Assigning Responsibility 1. Setting Objectives

In assigning responsibility, a firm can rely on internal personnel doing marketing functions, use an in-house ad department, or hire an outside ad agency.
Benefits of Ad Agency

Benefits of In-House Ad Dept. • Full knowledge of product/firm • Complete confidentiality • Control of costs and budgets

• Provides ad-related services • Market and consumer research • Product planning • Public relations

Advertising Plan: Budgeting
2. Assigning Responsibility 3. Establishing Budget

1. Setting Objectives

Budget types • Percentage-of-sales • Competitive parity • All-you-can-afford • Return on Investment • Objective-and-task

The firm establishes a budget after considering various requirements such as types of ads, medium, frequency, and campaign goals.

Advertising Plan: Developing Themes
2. Assigning Responsibility 3. Establishing Budget

1. Setting Objectives

4. Developing Themes

The advertising theme is the overall appeal of the ad campaign. A good or service appeal centers on the item and its attributes; a consumer appeal describes a product‘s benefits rather than features; and institutional ads project an image.

Advertising Plan: Selecting Media
2. Assigning Responsibility 3. Establishing Budget 4. Developing Themes 5. Selecting Media

1. Setting Objectives

Media selections include

• Newspapers
• TV/Radio • Direct Mail • Magazines • Internet • Outdoor

Advertising Plan: Creating Ads
2. Assigning Responsibility 3. Establishing Budget 4. Developing Themes 5. Selecting Media 6. Creating Advertisements

1. Setting Objectives

Key Decisions • Determine message, content, and devise ads • Outline promotion schedule • Specify medium for ads • Determine message type and frequency

Advertising Plan: Timing
2. Assigning Responsibility 3. Establishing Budget 4. Developing Themes 5. Selecting Media 6. Creating Advertisements

1. Setting Objectives

Timing includes how often and when ads run.

7. Timing Advertisements

Advertising Plan: Cooperative Efforts
2. Assigning Responsibility 3. Establishing Budget 4. Developing Themes 5. Selecting Media 6. Creating Advertisements

1. Setting Objectives

Cooperative ads can provide prestige and shared costs, and increase revenues. 8. Considering Cooperative Efforts 7. Timing Advertisements

Advertising Plan: Evaluation
2. Assigning Responsibility 3. Establishing Budget 4. Developing Themes

1. Setting Objectives

9. Evaluating Success or Failure

Evaluating success or failure includes measuring the goals achieved. Carefully established campaign goals are more easily evaluated and assessed.
8. Considering Cooperative Efforts 7. Timing Advertisements

5. Selecting Media

6. Creating Advertisements

Feedback

Types of Media
Newspapers TV/Radio Direct Mail Magazines Outdoor Internet
?

?

Media advantages and disadvantages must be weighed carefully—and consider the goals of the campaign, the item advertised, the audience sought, and the cost per viewer. What are the long-term goals?

Advertising Effectiveness
1.

2.

3.

4.

Expert Opinion Method – Feedback from experts Test Advertising – The Advertising is shown to a test group and responses asked Shopudit – Willing retailers asked to study demand patterns after release of AD and response measured. Consumer Panels – A consumer panel of segment is set and responses taken to AD

Media Considerations (1)
Selecting media is just one part of reaching long-term campaign goals. Considerations include costs, reach, waste, message permanence, persuasive impact, narrowcasting, frequency, clutter, lead time, and media innovations.
?

?

?

Advertising media costs are outlays for media time or space and are related to ad length or size, and media attributes. Reach refers to the number of viewers, readers, or listeners in a medium‘s audience. Waste is the medium‘s audience that is not in advertisers target audience.

Media Considerations (2)
?

?

?

?

?

?

Message permanence refers to the number of exposures one ad generates and how long it is available to the public Persuasive impact is the ability of a medium to stimulate consumers. Narrowcasting presents advertising messages to limited and well-defined audiences. Frequency refers to how often a medium can be used. Clutter involves the number of ads in a medium. Lead time is the period required by a medium for placing an ad.

Color Black &
White

Circulation and passalong rates matter!

Online Advertising
?

?

?

Predictions for online advertising in 2000 varied from $5.4 billion to a less optimistic amount of $3.9 billion. Online advertising is less than 2.3 percent of total ad spending via all media. Problems with Web advertising include ? No system to compare and rate Web ad results with traditional measurement tools. ? Too broad a range of Web sites and users. ? Limited knowledge about what ?works‘, when, and why.

Ethical Issues and Advertising
? ?

?

?

In 1996, the U.S. liquor industry repealed its self-imposed ban on radio and TV advertising. Because national TV networks and most cable networks still ban liquor ads, the industry‘s media buyers often bypass networks and purchase time directly from local station affiliates or cable systems. If beer is a dominant product in TV advertising, should liquor be discriminated against? What type of a policy should be developed to accept or reject hard liquor advertising in your market?

The Relationship Between Public Relations and Other Elements of Promotion Mix
Public Relations An ad from the Members Only apparel firm dealing with the problems of drug abuse Advertising

This institutional ad involves both public relations and advertising.

Public Relations

An AT&T salesperson visiting a local high Personal school and encouraging students not to drop out Selling This community-service gesture involves both public relations and personal selling.
Sales Safeway sponsoring an ?Eat Like a Champion? promotion in 1,500 food stores ?to persuade kids to Promotion eat five servings a day of healthy foods.? Participating schools got a kit with soccer stars‘ bookmarks, trading cards, & recipes on the back. Public Relations Public Relations A report on the local news about health issues related to cigarette smoking This news report involves publicity— the nonpaid, mass media, nonsponsored form of public relations.

Publicity

Developing a Public Relations Plan
2. Assigning Responsibility 1. Setting Objectives

3. Outlining Types of Public Relations

4. Selecting Media

7. Evaluating Success or Failure
Feedback

6. Timing Messages

5. Creating Messages

Public Relations Plan: Setting Objectives
An organization‘s public relations goals are image-oriented. Some goals include: ? Gain placement for news releases 1. Setting Objectives ? Have media report on accomplishments ? Present the viewpoint desired ? Coordinate publicity with advertising ? Gain increased media coverage

? Sustain favorable publicity
? Gain favorable public opinion ? Defuse impact of negative incidents ? Appropriately handle emergency situations

Public Relations Plan: Assigning Responsibility
2. Assigning Responsibility 1. Setting Objectives

In assigning responsibility, a firm can rely on its existing personnel, an in-house public relations department, or an in-house publicity department. Or, it may hire an outside ad agency to handle PR, or it may hire a specialized PR firm with extensive, customized, resources and expertise.

Public Relations Plan: Outlining Types
2. Assigning Responsibility 1. Setting Objectives 3. Outlining Types of Public Relations
Types of Publicity • News publicity • Business features articles • Service feature articles • Finance releases • Product releases • Pictorial releases • Video news releases • Background editorial • Emergency publicity

Public Relations Plan: Selecting Media
2. Assigning Responsibility 1. Setting Objectives 3. Outlining Types of Public Relations

Types of media • • • • • • Newspapers TV Magazines and Journals Radio Business publications Internet

4. Selecting Media

Public Relations Plan: Creating Messages
2. Assigning Responsibility 3. Outlining Types of Public Relations

1. Setting Objectives

Message points:
• It should be newsworthy & easy to read, view, hear, or use • Professional standards are established and followed • Use clear language • Effectively discuss positive & negative facts • Have ?point person? available

4. Selecting Media

5. Creating Messages

Public Relations Plan: Timing Messages
2. Assigning Responsibility 3. Outlining Types of Public Relations

1. Setting Objectives

PR precedes new product introductions; ongoing PR should be spaced through year; and firms must handle emergencies immediately. 6. Timing Messages

4. Selecting Media

5. Creating Messages

Public Relations Plan: Evaluation
2. Assigning Responsibility 1. Setting Objectives

3. Outlining types of Public Relations

PR may be evaluated based on image surveys, and the quantity and quality of media coverage. 7. Evaluating Success or Failure 6. Timing Messages

4. Selecting Media

5. Creating Messages

Feedback

Ethical Issues and Public Relations
?

?

?

?

The independent media regularly provides extensive coverage regarding the poor public relations used regarding the mishandling of defective tires and other related issues. Could many of those problems been avoided if appropriate public relations had been employed? Will the companies involved recover to regain their profitable positions in the market place? What specific strategies does the text address that would have solved the firms‘ PR problems?

Revenue Element of M Mix

PRICING

Pricing
?

?

?

You pay rent for your apartment, tuition for your education, and a fee to your dentist or physician. The airline, railways, taxi and bus companies charge you a fare; the local utilities call their price a rate; and the local bank charges you interest for the money you borrow. The guest lecturer is paid an honorarium and the government official takes a bribe to pass a file which was his job anyway.
224

Price brings in the revenues
?

?

This is the only element in the marketing mix that brings in the revenues. All the rest are costs Price communicates the value positioning of the product.

225

Pricing
A firm must set a price for the first time when It develops a new product It introduces its regular product into a new distribution channel or geographical area It enters bids on new contract work ( as in Industrial Sale )
226

? ?

?

Pricing
A company must set its price in relation to the value delivered and perceived by the customer

227

Price = Cost + Profit

228

Price = Raw Materials + Direct Cost + Fixed Cost + Profit

Prime Cost = Raw Materials + Direct Cost

Selling Price - Prime Cost = Contribution Contribution = Fixed Cost = BE Break Even
229

If unit selling price is Rs.100 and prime cost is Rs.60 per unit and the fixed cost for month are Rs.100000/- Let us see the P/L at various levels of production

A No of Units Produced 1000 2000 2500 3500 5000

B Toto Rev @ Rs.100 pu 100000 200000 250000 350000 500000

C Total prime cost @rs.60 60000 120000 150000 210000 300000

D=B-C Contributi on 40000 80000 100000 140000 200000

E = D-1Lac P/L (-)60000 (-) 20000 BE point (+) 40000 (+)100000

230

Figure 11-1:

Factors Affecting Price Decisions

Factors to Consider When Setting Price
Internal Factors
Marketing objectives Marketing mix strategies Costs Organizational considerations
11- 232
?

?

Market positioning influences strategy Other pricing objectives:
? ?

? ?

Survival Current profit maximization Market share leadership Product quality leadership Partial or full cost recovery Social pricing

?

Not-for-profit objectives:
? ?

Product quality leadership:
Four Seasons starts with very high quality service, then charges a price to match.

Factors to Consider When Setting Price
Internal Factors
Marketing objectives Marketing mix strategies Costs Organizational considerations
11- 234

?

?

?

Pricing must be carefully coordinated with the other marketing mix elements Target costing is often used to support product positioning strategies based on price Nonprice positioning can also be used

Swatch used target costing to manage costs carefully and create a watch offering the right blend of fashion and functions at a price consumers would pay.

Factors to Consider When Setting Price
Internal Factors
Marketing objectives Marketing mix strategies Costs Organizational considerations
11- 236

?

Types of costs:
? ? ?

Variable Fixed Total costs

?

?

How costs vary at different production levels will influence price-setting Experience (learning) curve effects on price

Factors to Consider When Setting Price
Internal Factors
Marketing objectives Marketing mix strategies Costs Organizational considerations
11- 237

?

Who sets the price?
?

?

Small companies: CEO or top management Large companies: Divisional or product line managers

?

?

Price negotiation is common in industrial settings Some industries have pricing departments

Factors to Consider When Setting Price
External Factors
Nature of market and demand Competitors’ costs, prices, and offers Other environmental elements
11- 238

?

Types of markets
? ? ? ?

Pure competition Monopolistic competition Oligopolistic competition Pure monopoly

?

?

Consumer perceptions of price and value Price-demand relationship
? ?

Demand curve Price elasticity of demand

Demand curves sometimes slope upward— Gibson learned that its high-quality guitars didn’t sell as well at lower prices

Factors to Consider When Setting Price
External Factors
Nature of market and demand Competitors’ costs, prices, and offers Other environmental elements
11- 240
?

?

Consider competitors‘ costs, prices, and possible reactions when developing a pricing strategy Pricing strategy influences the nature of competition
?

?

Low-price low-margin strategies inhibit competition High-price high-margin strategies attract competition

?

Benchmarking costs against the competition is recommended

PC marketing has become extremely price competitive. Knowledge of competitive prices, offers, and costs is key to pricing strategy.

Factors to Consider When Setting Price
External Factors
Nature of market and demand Competitors’ costs, prices, and offers Other environmental elements
11- 242

?

Economic conditions
? ?

Affect production costs Affect buyer perceptions of price and value

?

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Reseller reactions to prices must be considered Government may limit or restrict pricing options Social considerations may be taken into account

Figure 11-5:

Major Considerations in Setting Price

Pricing Methods – Cost based
?

Cost-Based Pricing: Cost-Plus Pricing
?

?
?

Adding a standard markup to cost Ignores demand and competition Popular pricing technique because:
? ? ?

It simplifies the pricing process Price competition may be minimized It is perceived as fairer to both buyers and sellers

11- 244

General Pricing Approaches
Cost-Based Pricing Example
Variable costs: $20
Expected sales: 100,000 units

Fixed costs: $ 500,000
Desired Sales Markup: 20%

Variable Cost + Fixed Costs/Unit Sales = Unit Cost

$20 + $500,000/100,000 = $25 per unit
Unit Cost/(1 – Desired Return on Sales) = Markup Price

$25 / (1 - .20) = $31.25
11- 245

General Pricing Approaches
?

Cost-Based Pricing: Break-Even Analysis and

Target Profit Pricing
?

?

?

Break-even charts show total cost and total revenues at different levels of unit volume. The intersection of the total revenue and total cost curves is the break-even point. Companies wishing to make a profit must exceed the break-even unit volume.

11- 246

Pricing Methods – Value Based
?

Value-Based Pricing:
?

? ?

Uses buyers‘ perceptions of value rather than seller‘s costs to set price. Measuring perceived value can be difficult. Consumer attitudes toward price and quality have shifted during the last decade.
?

Introduction of less expensive versions of established brands has become common.

11- 247

Perceived value reflects more than just the functional benefits of a product. The pen at left costs $185.00

General Pricing Approaches
?

Value-Based Pricing:
?

Business-to-business firms seek to retain pricing power
?

Value-added strategies can help Everyday low pricing (EDLP) vs. high-low pricing

?

Value pricing at the retail level
?

11- 249

Pricing Methods – Competition Based
? ? ? ?

Competition-Based Pricing: Price Leader Pricing Market Share Pricing Discount Pricing
? ?

?

Also called going-rate pricing May price at the same level, above, or below the competition Bidding for jobs is another variation of competition-based pricing Sealed bid pricing 11- 250

Marketing related methods
?

Moral Pricing – Charity organisations

?

? ? ?

Pricing Point / Psychological Pricing – Gimmick Bata Pricing Promotional Pricing – Hotels off season pricing Penetration Pricing – Introduction/ Relaunch Skimming the cream – Value based customer undettered by pricing.

11- 251

Pricing policy (Factors )
? ? ?

?

? ?

Selecting the pricing objective Determining demand Estimating costs Analyzing competitors – costs, prices, offers Selecting a pricing method Selecting the final price
252

The pricing objective
The company first decides where it wants to position its market offering. The objective could be :? Survival ? Maximize current profit ? Maximize market share ? Maximize market skimming ? Product - quality leadership

253

Determining Demand
Each price will lead to a different level of demand and have a different impact on a company‘s marketing objectives. Demand and price are inversely related i.e. Higher the price, lower the demand Company needs to consider :? Price sensitivity 254 ? Price elasticity of demand

What influences price sensitivity?
? ?

? ?

Shared cost ( part of cost is borne by other party ) Sunk investment (product used is required as a complement to earlier purchase ) Inventory effect ( buyers can not store the product ) Items bought more frequently ( more sensitive ) / infrequently ( less sensitive )

? ? ? ? ?

?

Unique value effect ( quality , prestige or exclusiveness ) Substitute awareness by buyers Difficult comparison by buyers End benefit ( expenditure small part of total income ) Total expenditure ( purchase cost is insignificant compared to the cost of end product ) Low – cost items (less sensitive ) / high cost items ( more sensitive )

255

What is price elasticity?
?

?

This determines the changes in demand with unit change in price If there is little or no change in demand, it is said to be price

inelastic.
?

If there is significant change in demand, then it is said to be price

elastic.

256

Demand is likely to be less elastic when
? ?

?

?

There are few or no substitutes Buyers readily do not notice the higher price Buyers are slow to change their buying habits Buyers think that the higher prices are justified
257

Price Quality Strategies
quality

Super value

High value

Premium

Good value

Medium value

Overcharging

Economy

False economy
Price

Rip off
258

Estimating costs
? ? ?

?
?

Fixed costs Variable costs Learning curve Activity based costing Target costing

259

Pricing methods
? ? ?

?
? ?

Markup pricing Target return pricing Perceived value pricing Value pricing Going rate pricing Sealed bid pricing

Psychological pricing
?

?

It is used to lessen the impact of the actual pricing in the consumers mind It is used as a surrogate to indicate the product quality or esteem

261

New methods of Pricing
? ?

Group Pricing Gain and Risk sharing pricing

262

Geographical Pricing
? ?

Different pricing at different locations Could be in terms of barter, countertrade and foreign currency

263

Discounts and Allowances
? ? ?

?
? ?

Early payment Off – season Bulk purchase Retail discount Cash discount Trade in allowance
264

Promotional Pricing
? ? ? ? ? ?

?

Loss leader pricing Special event pricing Cash rebate Low interest financing Longer payment terms Warranties and service contracts Psychological discounting
265

Discriminatory Pricing
? ? ?

?
?

Customer segment Product form Image pricing Location pricing Time pricing

266

Preconditions
? ?

?

?

?

Market must be segment able The lower price segment should not be able to resell the product to the higher price segment The competitors must not be able to undersell the firm in the higher price segment Should not breed customer resentment and ill will Price discrimination should not be illegal
267

Product Mix Pricing
? ? ?

?
? ?

Product line pricing Optional feature pricing Captive product pricing Two part pricing Byproduct pricing Product bundling pricing
268

Initiating Price cuts
? ? ?

Excess plant capacity Competition Aggressive pricing

269

Initiating price increases
? ? ?

?

When demand exceeds supply When costs go up Govt. policies Reduce/remove discounts and rebates

270

Indirect price increases
? ?

? ? ? ?

?

Shrinking pack size for same price Substituting less expensive raw materials Reducing product features Removing product services Using less expensive packaging material Reducing the no. of packs and sizes offered Creating new economy brands 271

Reaction to price changes
? ?

Customer reaction Competitor reaction

272

Responding to competitor price changes
? ? ?

?
?

Maintain price Maintain price and add value Reduce price Increase price and quality Launch a low price fighter

Mechanism of price agreement
?

Product Pricing Stabilizing

Buyers perception price band

Buyers perception and price band

Overlap Zone Equilibrium Point

Assignment ?

?

Describe the pricing strategy of McDonalds and KFC? Describe the Pricing Strategy of Pizza Hut and Domino‘s?
? ?

Products, Pricing and resultant effect of pricing strategy in sales.

?

Describe 1 Value based product and Cost based product ?

Credit Policy

Reasons for credit requirement
?

Industrial Goods Transaction Cycle
?

GIN – Acc – Bill/Invoice – Payment

? ?

Credit as part of Price vs competition Distribution Policy
?

Distributor - Wholesaler – Retailer

Types of Credit
?

Direct Credit –
?

Seller Buyer Good Faith Agreement

?

Credit thru Bank –
?

Bank as an agent
International trade- Letter of Credit Buyer LC fav Seller – Sellers bank – Payment 2 seller –LC – collects Buyers Bank

?

Credit against LC—
? ?

Credit & Cost of Capital
? ? ?

?

Blockage of Money thru Credit Additional Capital – Interest – Cost of Capital Price to adjust / include these cost

Factors –Offering Credit
? ? ?

Credit worthiness of buyer Competition Volume of Business

Calculating cost of credit
? ?
? ?

Debtors Avg Coll Period Highest Amt of Money Blocked ?Period?
(Total Outstanding Debtors / Avg Monthly Sales)*30 20 L / 8L = 2.5 * 30 = 75 days

Controlling the credit
? ? ?

?
? ?

Credit on routine Adv on Special Interest on delayed payment Lower Price on smaller credit / no credit Efficient Follow Up Holding back supplies Deposit Method

Assignment
?

Study and report a detailed credit system of an FMCG Manufacturer ?

Distribution

What is a Distribution ?
?

This is a set of interdependent organizations involved in the process of making a product or service available for use or consumption

Intermediaries involved in this process
?

?

Agents – acting on behalf of buyer or seller but do not take title of the goods Facilitators – transporters, C&Fs, banks,

Advantages of a distribution system
? ? ?

?

Key external resource Takes years to build Significant corporate commitment to a large no. of firms Commitment to a set of policies that nourishes long term relationships

Why would a manufacturer not like to do his own distribution?
?

?

?

Lacks the financial resources to do direct marketing Cannot have the infrastructure to make the product widely available and near the customer Trading profits could be less than manufacturing profits

Manufactures typically produce a large quantity of a limited variety of goods
Consumers usually desire a small quantity of a wide variety of goods

Single Channel Multi Channel

If all manufacturers tried to reach all consumers
M1 C1

M2

C2

M3

C3

If they tried to go through an intermediary
M1

C1

M2

D1

C2

M3

C3

Distribution Channels
?

Are intermediaries or middlemen
?

?

?

? ?

Exist because producers cannot reach all their consumers Multiply reach and provide efficiency to the marketing process Facilitate smooth flow and create time, place and possession utilities Have the core competence and reach Provide contact, experience, specialisation and scales of operation

Channel functions
?

?

?

?

Gathers information on customers, competitors and other external market data Develop and disseminate persuasive communication to stimulate purchases Agreement on price and other terms so that transfer of ownership can be effected Placing orders with manufacturers

Channel functions (cont‘d)
?

? ?

?

?

Acquire funds to finance inventories and credit in the market Assume responsibility of all risks of the trade Successive storage and movement of products Helps buyers in getting their payments through with the banks Oversee actual transfer of ownership

Types of Channels
?

?

?

Sales: motivates buyers, shares information between company and its consumers, negotiates fair bargains for consumers and finances the transactions Delivery channel meant only for physical part of the distribution Service channel – performs after sales service
Channel members…
Tata McGraw Hill Publishing 296

SDM- Ch 8

Listing of Channel Members
? ? ?

?
? ?

?
?

Company own sales team C&FAs and CSAs Distributors, dealers, stockists, value-added re-sellers Agents and brokers Franchisees Electronic channels Wholesalers Retailers
Tata McGraw Hill Publishing 297

SDM- Ch 8

C&FAs / C&SAs
?

?

?

? ?

C&FA: carrying and forwarding agent and C&SA: carrying and selling agent – both are on contract with a company Both are transporters who work between the company and its distributors Collect products from the company, store in a central location, break bulk and despatch to distributors against indents Goods belong to the company C&SA also sells the goods on behalf of the company but remits proceeds after sale

Distributors, Dealers, Stockists, Agents
? ?

?
? ?

? ?

Name denotes the extent of re-distribution done by them Distributors invest in the products – buy products from the company Are on commission, margins or mark-up May or may not get credit – but extend credit Distributors cover the markets as per a beat plan. All others merely finance the business. Distributors could be exclusive for a company Agents bring buyer and seller together

Wholesalers
? ?

? ?

?

?

Operate out of the main markets Deal with a number of company products of their choice Are not on contract with any company Sell to other wholesalers, retailers and institutions Negotiate about 15 days credit from company distributors – also provide credit to their customers Operate on high volumes and low margins

Retailers
? ?

?

?

? ?

The final contact with consumers Operate out of their shops and sell a large assortment and variety of goods Located closest to consumers Buy from company, distributors or wholesalers Highest margins in the network Provide personalised services to their customers

Industrial Products
Customers may also direct from company sales force
Producer Producer

Agent/middleman

Industrial Distributor

Industrial Distributor

Industrial Customer

Industrial Customer

Consumer Products
Retailers may also direct from company sales force
Producer Producer Producer

Distributor

Distributor

Wholesaler

Retailer

Retailer

Retailer

Customer / consumer
SDM- Ch 8

Customer/ Consumer
Tata McGraw Hill Publishing

Customer/ Consumer
303

Patterns of Distribution
?

?

?

Determines the intensity of the distribution Intensity decides the service level provided Types of distribution intensity:
? ? ?

Intensive Selective Exclusive

Distribution Intensity
?

?

?

Intensive: distribution through every reasonable outlet available – FMCG Selective: multiple, but not all outlets in the market – pharma, frozen food Exclusive: may be only one outlet in a market - car dealers

Intensive Distribution
?

?

Strategy is to make sure that the product is available in as many outlets as possible Preferred for consumer, pharmaceutical products and automobile spares

Selective Distribution
?

?

?

A few select outlets will be permitted to keep the products Outlets selected in line with the image the company wants to project Preferred for high value products
?

Tanishque jewelry

?

Keeps distribution costs lower

Exclusive Distribution
?

?

?

Highly selective choice of outlets – may be even one outlet in an entire market Could include outlets set up by companies – Titan, Bata Producer wants a close watch and control on the distribution of his products.
Channel strategy…

Distribution Channel Strategy
?

?

Derived from the corporate strategy and the marketing strategy Steps for designing the distribution strategy are:
? ? ? ?

?
?

Defining customer service levels Distribution objectives and steps Structure of the network required Policy and procedure to be followed Key performance indicators Critical success factors

Customer Service Levels
?

?

?

?

Defined by the nature of the industry, the products, competition and market shares. Affordability also decides the service level It should at least match competition. Customer expectations have no limit
Tata McGraw Hill Publishing 310

SDM- Ch 8

Distribution Objectives
?

?

Influenced by the customer expectations Defines the extent of time, place and possession utility which the customer can expect out of the channel network

Set of activities….

Set of Activities
?

?

Manner in which the company and its marketing channels go about achieving the customer service levels Some of these steps could be:
? ? ? ?

?
?

Sales forecasts Despatch plans Market coverage beat plans Journey plans for service engineers Collection of sales proceeds Carrying out promotional activities

?

The company also decides as to who is to perform which task

Distribution Organization
?

? ?

? ?

Extent of company support and outsourcing to be decided Budget for the cost of the distribution effort Select suitable channel partners – C&FAs, and distributors Setting clear objectives for the partners Agree on level of financial commitments by the channel partners.
Policy and procedure..

Policy & Procedure
?

?

Define policy and implementation guidelines through Operating Manuals Policy guidelines include
? ? ?

?
?

Code of conduct for channel members System for redressal of complaints Any additional subsidies etc Handling institutional business Service policy for engineering products
KPIs….

Key Performance Indicators
?

For measurement of effectiveness. Some of these could be:
?

? ? ? ? ?

Consistent achievement of targets by product groups, periods and territories Achievement of market shares Achievement of profitability Zero complaints from customers No stock returns Ability to handle emergencies and sudden spurts in demand

Key Performance Indicators
?

For measurement of effectiveness. Some of these could be:
?

?
?

? ?

Balanced sales achievement during a period – no period end skews Market coverage with ready stocks Excellent management of accounts receivables Minimize losses on account of stock-outs Minimize damages to products
Tata McGraw Hill Publishing

SDM- Ch 8

CSFs…

316

Critical Success Factors
?

?

The distribution strategy also needs the support and encouragement of top management to succeed Some of the CSFs could be:
?

? ? ? ? ? ?

Clear, transparent and unambiguous policy and procedure Serious commitment of the channel partners Fairness in dealings Clearly defined customer service policy High level of integrity Equitable distribution at times of shortage Timely compensation of channel partners

Key Learnings
?

?

?

?

Companies use distribution channels to reach their large customer base The channel members could be nominated like distributors or freelance like retailers Distribution channels provide the time, place and possession utility for consumers for the company products Distribution channels could be sales, service or delivery focused

Key Learnings
?

?

?

Companies could also choose the intensity of distribution based on their products and distribution objectives Distribution could be intensive, selective or exclusive The distribution strategy takes care of service levels, objectives, activities, organisation to deliver the service, measurement of performance and critical success factors

Channel management
? ? ?

Selecting channel members Training channel members Motivating channel members

Managing channel members
? ? ?

?
?

Coercive Reward Legitimate Expert Referent

Channel modification
?

?

?

? ?

With time channels need to change along with product as it get older in the PLC Introduction – boutiques, company showrooms Growth – chain stores, departmental stores Maturity – Mass merchandisers Decline – ?sales stores‘, discount stores

Adding channels
Advantages ? Increased market coverage ? Lower channel costs ? More customised selling Disadvantages ? Increases selling costs ? Increases channel control ? Breeds channel conflict

Cost of Distribution
? ? ?

?

Commission Paid to Middle Agencies Transportation Cost Packing Involved Insurance Cost

Vending Machines
?

?

In order to reduce the cost of Admin & provide advtg of location. Unmanned Distribution Channels
?

?

Airports, Malls, etc Not popular in India

? ?

?

Lack of Education Handling, Currency formats, Apprehension of Quality



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