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Principles of Organisation
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CHAPTER 11: Marketing
• Creating and Pricing Products• Identifying Target Market• Creating New Products• Product Differentiation• Pricing Strategy
Good Marketing is No Accident
1-2
Starbucks plans to ensure its marketing successes in countries around the world.
What is Marketing?
1-3
Marketing is an organizational function and a set of processes for creating, communicating, and delivering value
to customers and for managing customer relationships in ways that benefit the
organization and its stakeholders.
What is Marketing Management?
1-4
Marketing management is theart and science
of choosing target markets and getting, keeping, and growing
customers throughcreating, delivering, and communicating
superior customer value.
What is Marketed?
1-5
GoodsGoods
ServicesServices
Events & ExperiencesEvents & Experiences
PersonsPersons
Places & PropertiesPlaces & Properties
OrganizationsOrganizations
InformationInformation
IdeasIdeas
Key Customer Markets
1-6
Consumer Markets
Business Markets
Global Markets
Nonprofit/ Government Markets
Definitions
Consumer Buying BehaviorBuying behavior of individuals and households that buy products for personal consumption.
Consumer MarketAll individuals/households who buy products for personal consumption.
Target MarketFocuses all marketing decisions on the
specific group of people you want to reach.
Undifferentiated Targeting
Concentrated Targeting
Multi-Segment Targeting
Market is as one group with no individual segments.Eg: Newspaper
Select a particular market niche/small on which marketing effort is targeted.Eg: AirAsia focuses on low fare.
Need to focus on two or more well defined market segments and want to develop different strategies.Eg:
Differentiated Targeting
Market coverage strategy to several market segments & divide into different groups. Eg: Shoes(Size,Colors, Design)
Segmentation Variables
Dividing the total market into smaller parts.
Market is heterogeneous/dissimilar.
By segmentation, heterogeneous market is converted into homogeneous components.
Basis for segmentation
Geographic Basis.
Demographic Basis.
Psychographic Basis.
DEMOGRAPHIC
GEOGRAPHIC
PSYCHOGRAPHIC
• Age and life cycle• Gender• Income and occupation• Generation (Baby boomer, • Gen X, Gen Y)• Education
• Activities• Interest• Opinions• Attitudes• Values
• Region : continent, country, state, or neighborhood• Size of metropolitan area• Population Density• Climate
• Product/Service • Price • Promotion • Place • People • Politics • Public Relations
• Probe • Partition • Prioritize • Position • Profit • Plan • Performance • Positive
Implementation
15 P’s of Marketing Mix
Product
Product: “what to make, how to package it, what brand name to use, and what image to project”
EXAMPLE: Pink Gildan t-shirt, Made in China, tie-dye swirl print
Price
Price: “reflects what customers are willing & able to pay”
EXAMPLE: UnderArmor hoods are $50 – customers are willing to pay more for this high quality product
Place
Place: “how/where a product will be distributed”
EXAMPLE: Florida Oranges arrive via delivery truck and are displayed at Harris Teeter for sale.
Promotion
Promotion: “deals with how potential customers will be told about the new product”
EXAMPLE: Keebler cookies are on sale with coupon “buy TWO packages & save $1.00”
People
The right people to support the company’s products and/or service.
EXAMPLE: Excellent customer service personnel who can provide support with clearly known expectations, such as hours of operation and average response time, is key to maintaining a high level of customer satisfaction.
Process
Solid procedures and policies that are in place.
EXAMPLE:
Customers want to understand more than just your product; they also want to focus on the shape and form your business will take.
Physical Evidence
The way your product, service, and everything about your company, appears from the outside.
EXAMPLE: size, shape, color, material, UPC bar code, and label of the packaging. This should be customer tested and updated when needed.
Classification of Consumer Products
Consumer Products
Convenience Products
Shopping Products
SpecialtyProducts
UnsoughtProducts
Convenience:
Inexpensive, little shopping effort, regularly buy products, no prior planning. Eg: coke, mineral water, chicken
Shopping:
Homogeneous prod is familiar where customers look for lower price brand.
Heterogeneous prod different where customers have trouble comparing the products
Specialty:
Status-conscious advertising, expensive products.
Unsought:
Customers not having intention of buying unless marketer do aggressive marketing. Eg: Insurance
Market Targeting
Product Differentiation
To differentiate the product from other products on the basis of features.
Product differentiation is used to avoid competition.The objective of differentiation is to develop a position that potential customers see as unique The objective of differentiation is to develop a position that potential customers see as unique
Marketing Concept
The marketing concept:“states that to make a profit a business must focus all efforts on satisfying the needs & wants
of the customer”
Break-Even Analysis and Target Profit
Pricing• BE= Fixed Costs/Contribution (SP-VC)• Example - Meal - SP = $20, VC = $8• Fixed costs are $2400 a day• BE=$2400/$12 = 200• Need to sell 200 meals @ $20 to break-even• VC = 40%, contribution = 60%• BE = $2400/.6 = $4000
New Product Pricing
1. Market-skimming pricing
Setting a high price for a new product to skim maximum
revenues layer by layer from the segments willing to pay the high price: the company makes fewer but more profitable sales
The conditions:
1. A sufficient number of buyers have a high current demand;
2. The unit costs of producing a small volume are not so high that they cancel
the advantage of charging what the traffic will bear;
3. The high initial price does not attract more competitors to market;
4. The high price communicates the image of a superior product.
2. Market-penetration pricing
New Product Pricing
Setting a low price for a new product in order to attract a large number of buyers and a large market share.