Chapter Thirteen
Dimensions of
Marketing Strategy
McGraw-Hill/Irwin
Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved.
The Marketing Mix
Maintaining the right marketing mix that
satisfies the target market and creates longterm relationships with customers
Did You Know?
Domino’s Pizza delivery drivers cover 9 million
miles a year delivering 400 million pizzas.2
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Product Strategy
Product development
Classification
Mix
Life cycle
Identification
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Developing New Products
New Idea Screening
Business Analysis
Product Development
Test Marketing
Commercialization
Did You Know?
In 2001, Microsoft planned to
spend $4 billion on R&D.
Source: Rebecca Buckman, “Window into the future,” Wall Street Journal, June 25, 2001, p. R19.
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Classifying Products
Consumer Products
Business Products
Convenience products
Shopping products
Specialty products
Raw materials
Major equipment
Accessory equipment
Component parts
Processed materials
Industrial services
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Product Line and Product Mix
Product Line
Product Mix
Closely related products
that are treated as a unit
because of similar
marketing strategy,
production, or end-use
considerations
All of the products
offered by an
organization
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Colgate-Palmolive’s Product Mix and
Product Lines
Source: “Our Products,” Colgate-Palmolive (n.d.), www.colgate.com/app/Colgate/US/Corp/Products.cvsp (accessed
June 5, 2004).
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Product Life Cycle
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Identifying Products
Branding
The process of naming and identifying
products; can use a brand mark or trademark
Packaging
The external container that holds and describes
the product
Labeling
The presentation of important information on a
package
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
The 10 Bottled Water Brands
For each of the top 10 bottled water brands, discuss potential competitive
advantages.
Rank:
Brand (Marketer)
U.D. Market
Ad Spending
Share
($ mil)
1
Aquafina (PepsiCo)
15.1%
$33.9
2
Dasani (Coca-cola Co.)
13.8%
$20.4
3
Poland Spring (Nestle)
11.5%
$4.0
4
Arrowhead (Nestle)
6.8%
$7.1
5
Crystal Geyser (Roxanne)
6.0%
$1.0
6
Aberfoyle (Nestle)
4.5%
$0.0
7
Deer Park (Nestle)
4.1%
$3.1
8
Ozarka (Nestle)
3.9%
$2.4
9
Ice Mountain (Nestle)
3.9%
$3.0
10
Zephyrhillis (Nestle)
2.9%
$1.9
Source: Advertising Age Fact Pack 2004 Edition, p. 23.
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Categories of Brands
Manufacturer Brands
Kellogg’s, Ford, Sony
Private Distributor Brands
Kenmore appliances (Sears)
Generic Brands
peanut butter, dog food, kitty litter
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Packaging Functions
Protection
Economy
Convenience
Promotion
Did You Know?
While shopping, the average time a
consumer looks at a package is 2.5
seconds.
Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
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Labeling
The content of labeling, often required by law,
may include:
Ingredients or content
Nutrition facts (calories, fat, etc.)
Care instructions
Suggestions or use (such as recipes)
The manufacturer’s address and toll-free number
Web site
Other useful information
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Product Quality
The degree to which a good, service, or
idea meets the demands and requirements
of customers
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Pricing Strategy
Four Common Pricing Objectives:
Maximize profits and sales
Boost market share
Maintain the status quo
Survival
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Pricing Strategies
New Product Pricing
Price skimming
Penetration pricing
Psychological Pricing
Odd/Even
Prestige pricing
Price Discounting
Quantity discounts
Seasonal discount
Promotional discounts
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Price vs. Non-Price Competition
For the following products, indicate whether they are
sold using price competition or non-price
competition and defend your selection:
Toyota Hybrid Prius
Hyundai Sonata
Porsche Cayenne SUV
Estee Lauder Electric Intense Lipcreme
Avon Brilliant Moisture Lip Color
Louis Vuitton’s Murakami Handbags
Olay Complete Moisturizing Lotion
Toshiba Widescreen Televisions
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Distribution Strategy
Marketing Channels
Retailers (Wal-Mart, Sears)
Wholesalers (food brokers to restaurants)
E-tailers (Amazon.com)
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Supply Chain Management
Long-term partnerships among channel
members to reduce costs, waste, and
unnecessary movement through the
channel to satisfy customers
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Channels for Consumer Products
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Channels for Business Products
More than half of all business products are
sold through direct marketing channels
Other business products may be distributed
through channels employing wholesaling
intermediaries
Industrial distributors
Manufacturer’s agents
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Intensity of Market Coverage
Intensive distribution
Makes a product available in as many outlets as
possible
Selective distribution
Uses only a small proportion of all available outlets to
expose products
Exclusive distribution
Exists when a manufacturer gives a middleman the
sole right to sell a product in a defined geographic
territory
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Physical Distribution
Physical distribution includes all the
activities necessary to move products from
producers to customers
Inventory control
Transportation
Warehousing
Materials handling
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Importance of Distribution in a
Marketing Strategy
Distribution decisions are the least flexible
marketing decisions
Use committed resources
Establish contractual relationships
Are bound by time
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The Promotion Mix
A strong promotion program results from the
careful selection and blending of:
Advertising
Personal selling
Publicity
Sales promotion
Integrated marketing communications
The process of coordinating the promotion mix
elements and synchronizing promotion as a unified
effort
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Advertising
A paid form of non-personal
communication transmitted through a mass
medium
Advertising campaign
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Advertising Media
Print media
Electronic media
Newspapers
Magazines
Direct mail
Outdoor (billboards)
Television
Radio
Cyber ads
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
U.S. Advertising Expenditures in
Millions of Dollars
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Internet Advertising
Total revenues from advertising, paid
content, and e-commerce on mobile
devices in the U.S. is projected to grow
from $100 million today to $3.3 billion in
2005
Source: “E-MONEY,” American Demographics, June, 2001, p. 32.
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Top 10 Product Categories for Advertising
Spending in the United States for the year 2003
Product Category
Advertising
Spending ($mil)
Automotive – Factory
$8,938
Auto Dealerships – Local
$4,953
Autos – Dealer Association
$4,320
Department Stores
$4,070
Motion Pictures
$3,468
Restaurant – Quick Service
$3,442
Prescription Drugs – Human
$3,226
Telephone Services – Wireless
$2,307
Direct Response Products
$1,757
Furniture Stores
$1,402
Source: “U.S. Advertising Spending Rose More than 5% in 2003, Nielson Media
Research press release, February 19, 2004, available at http://www.nielsenmedia.com
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Ten Leading National Advertisers
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Personal Selling
Direct, two-way communication with
buyers and potential buyers
A six-step process:
Did You Know?
A typical sales call on an
Prospecting
industrial customer can cost
Approaching
between $200 and $300 per
call
Presenting
Handling objections
Closing – asking for the order
Following up
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Publicity
Non-personal communication transmitted
through mass media but not paid for
directly by the firm
Presented in news story form
Describes what a firm is doing, what products
it is launching, or other newsworthy
information
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Sales Promotion
Direct inducements offering added value or some
other incentive for buyers to enter into an exchange
Store displays
Premiums
Sampling and demonstrations
Coupons
Consumer contests and sweepstakes
Refunds
Trade shows
Did You Know?
Annually, 248 billion
cents-off coupons are
distributed, but less
than 2% are
redeemed
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Push and Pull Strategies
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Objectives of Promotions
Stimulate demand
Stabilize sales
Inform, remind, and reinforce customers
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Promotional Positioning
The use of promotion to create and
maintain an image of a product in the
buyer’s mind
A natural result of market segmentation
Assists in product differentiation
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Average Salary for Sales and
Marketing Executives, 2003
Total
Compensation
Base
Salary
Bonus Plus
Commissions
Executive
$144,653
$95,170
$49,483
Top Performer
$153,417
$87,342
$66,075
Mid-level Performer
$92,337
$58,546
$33,791
Low-level Performer
$63,775
$44,289
$19,486
$111,135
$70,588
$40,547
Average of all Positions
Source: Galea, Christine. “the 2004 compensation Survey,” Sales & Marketing Management,
May 2004, table p.29.
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Solve the Dilemma
1. Design a marketing strategy for the new
product line.
2. Critique your marketing strategy in terms
of its strengths and weaknesses.
3. What are your suggestions for
implementation of the marketing
strategy?
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Explore Your Career Options
Do you think the role of
marketing will continue to be
important in the face of
increasing technological
advances?
Should professionals such as
doctors, lawyers, and dentists
utilize marketing in the same
way that manufacturing and
retail firms do?
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Additional Discussion Questions
and Exercises
1. Research and development is the process of
identifying new ideas and technologies that can
be developed into new products.
Where do these new ideas come from?
2. Assume you have the opportunity to buy a
company that markets a product.
Which stage of the life cycle of that product would
offer you the greatest opportunity for profits? Why?
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Additional Discussion Questions
and Exercises
3. What is the difference between a “brand mark”
and a “trademark”?
4. What are the advantages of businesses using
coupons and/or contests and sweepstakes for
sales promotion purposes?
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Chapter 13 Quiz
1. In the introductory stage of a product’s life, buyers may
be charged the highest possible price for the product.
This pricing approach is called
a.
b.
c.
d.
penetrating pricing
psychological pricing
price skimming.
break-even point.
2. Branding may include
a.
b.
c.
d.
the brand name.
the brand mark
the trade mark
all of the above.
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Chapter 13 Quiz
3. Products that are purchased after the consumer has
compared competitive products are
a.
b.
c.
d.
convenience products.
shopping products.
specialty products.
a product line.
4. Intermediaries who sell products to ultimate consumers
for home and household use rather than for resale or for
use in producing other products are
a.
b.
c.
d.
wholesalers.
retailers.
merchant middlemen
agent middlemen.
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved
Multiple Choice Questions
about the Video
1. One way that Hotel Monaco sets itself apart is by
offering guests a(n) ______ as a temporary pet
companion during their stay.
a.
b.
c.
d.
dog
cat
goldfish
bird
2. According to Business Week readers, after price and
location, _______ is very important in a hotel service.
a.
b.
c.
d.
room quality
food quality
bed quality
Web site quality
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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved