CHAPTER 11
CREATING PRODUCTS AND PRICING
STRATEGIES TO MEET CUSTOMERS’ NEEDS
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A few examples …
Marketing vs the marketing concept
• Marketing: Identifying the needs of customers
and providing goods and services that meet
expectations.
• Marketing concept:
• Focusing on the needs and wants of customers
• Integrating all of the business’ activities
Value and satisfaction
• Value: The ratio of benefits for the customers
to the sacrifices necessary to obtain those
benefits.
– What does value mean today? In the past?
• Satisfaction: meeting expectations
– Establishing long-term, mutually satisfying buyerseller relationships.
Relationship marketing and Customer
lifetime value
• Customer relationship management (CRM):
– Using information about customers to create
marketing strategies that develop and sustain
desirable customer relationships.
• Customer lifetime value:
– A combination of purchase frequency, average
value of purchases, and brand-switching patterns
over the entire span of a customer’s relationship
with a company.
Exercise: What is your value to the following
businesses?
• Hairdresser?
• Mobile company?
• Engen?
• Stellenbosch University?
Should these businesses/organisations have a
relationship with you?
Do you want a relationship?
Therefore…
Creating a marketing strategy
• A well-crafted marketing strategy focuses on a
number of key concepts (such as):
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Environmental scanning – PESTLE? (Chapter 1)
Competitive advantage
Segmenting the market
Defining the target market
Objectives
Development of the marketing mix (traditionally
the 4 Ps)he ability of a good or service to satisfy a
human need.
Competitive advantage
• Your business’ differential advantage.
• A set of unique features of a business and its products
that are perceived by the target market as significant
and superior to those of the competitors.
• Different bases: Cost, Product differentiation, Service
differentiation, Niche.
Market segment vs Target market
• Segmentation: Provides the foundation by identifying
distinct consumer groups.
• Targeting: Picks the best segments to pursue based
on strategy. Target markets are just selected clusters
from broader segmentation.
The marketing mix
• Every target market requires an unique marketing
mix.
• 4, 5, 6 or 7 P’s (elements)?
• Each element should be individually managed.
• Are certain elements more important than others?
(1) Product
• Different elements to consider (amongst others):
– Branding (including brand name)
– Packaging
– Colors
– Warranty
– Accessories
– Service program
(2) Pricing
• Based on the demand for the product and the cost of
producing the product.
• Also consider the actual product (luxury products
necessitate a higher price)
• Introductory price used to attract customers.
• Combination: start with a higher price, then lower it.
(3) Place (distribution)
• Creating the channel by which a product flows from
the producer to the consumer.
• Many elements to consider (amongst others):
– Physical location
– Inventory systems
– How many stores?
– Luxury vs staple products
(4) Promotion
• Ways to convince the customer to purchase a
product:
– Personal selling
– Traditional advertising
– Public relations
– Sales promotion
– Social media
– E-commerce
Buying behaviour: (page 423-427)
• Not prescribed
Market segmentation
• You cannot target the entire market, therefore subdividing the market in smaller segments.
• Number of key bases/forms pf customer market
segmentation:
– Demographic
– Geographic
– Psychographic
– Benefit
– Volume
Bases of market segmentation
What is a product?
Classification of consumer products
Classification of business products
• Installations
• Accessories
• Component parts and materials
• Raw materials
• Supplies
• Services
Creating products that deliver value (p 437)
• Not prescribed
The product life cycle (PLC)
PLC as a management tool
PRICING
• Not prescribed
Pricing strategies
• Number of strategies can be used to determine the
price of the product.
– Price skimming
– Penetration pricing
– Leader pricing
– Pricing of services
– Bundling
– Odd-even pricing
– Prestige pricing
Trends in developing products and pricing
(p 448)
• Not prescribed