1. Marketing essence and main definitions of marketing In classical terms marketing is defined as the performance of business activities that direct the flow of goods and services from producer to consumer or user. The classical definition is oriented to the physical distribution of goods and services and it has several disadvantages or weaknesses: -The role of distribution and marketing channels is overvalued. -Government and non-profit organizations which are frequently engaged in marketing activities are omitted. -The strong impact of marketing by many publics such as stockholders, employees unions or consumer organizations is not considered.The modern definition of marketing: Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services in order to create exchanges, that satisfy individual and organizational objectives. 2. Three eras in the history of marketing evolution the origins of marketing can be traced to people’s earliest use of the exchange process, meaning barter During the industrial revolution the modern system of marketing began, it includes 3 periods: 1. Production-during the initial stage of the industrial revolution output was limited and marketing was devoted to the physical distribution of products. 2. Sales period/era -once a company was able to maximize its production capabilities it hired a sales force to sell it’s inventory. During this stage consumer tastes and needs received little consideration, and the role of advertising and sales people was to make desires of consumers feet the products being manufactured). 3.Marketingperiod: a. Marketing department (as competition grew, supply began to exceed demand , a firm could not survive without marketing activities, so a marketing department was created , it conduced consumer research and advised managers on how to design price, distribute, and promote products. b. marketing company period –this stage integrates consumer research and analysis into all companies efforts. competition is high and sophisticated so the major decisions within one organization are made on the bases of consumer research. 3.Marketing philosophies and their evolution Production concept- according to this approach consumers will desire products that are available and highly affordable , so the management should focus on improvement production and distribution efficiency. Product concept – consumers will want products that offer the post quality, performance and features; and organization should devote energy to make
Transcript
1. Marketing essence and main definitions of marketing
In classical terms marketing is defined as the performance of business activities that direct the flow of goods and services from producer to consumer or user. The classical definition is oriented to the physical distribution of goods and services and it has several disadvantages or weaknesses:
-The role of distribution and marketing channels is overvalued. -Government and non-profit organizations which are frequently engaged in marketing activities are
omitted. -The strong impact of marketing by many publics such as stockholders, employees unions or consumer organizations is not considered.The modern definition of marketing: Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services in order to create exchanges, that satisfy individual and organizational objectives.
2. Three eras in the history of marketing evolution
the origins of marketing can be traced to people’s earliest use of the exchange process, meaning barterDuring the industrial revolution the modern system of marketing began, it includes 3 periods:1. Production-during the initial stage of the industrial revolution output was limited and marketing was devoted to the physical distribution of products. 2. Sales period/era -once a company was able to maximize its production capabilities it hired a sales force to sell it’s inventory. During this stage consumer tastes and needs received little consideration, and the role of advertising and sales people was to make desires of consumers feet the products being manufactured). 3.Marketingperiod: a. Marketing department (as competition grew, supply began to exceed demand , a firm could not survive without marketing activities, so a marketing department was created , it conduced consumer research and advised managers on how to design price, distribute, and promote products. b. marketing company period –this stage integrates consumer research and analysis into all companies efforts. competition is high and sophisticated so the major decisions within one organization are made on the bases of consumer research. 3.Marketing philosophies and their evolution
Production concept- according to this approach consumers will desire products that are available and highly affordable , so the management should focus on improvement production and distribution efficiency. Product concept – consumers will want products that offer the post quality, performance and features; and organization should devote energy to make continuous product improvements. Selling concept – consumers will not buy enough of the organizations products unless it undertakes a large selling and promotion effort. Marketing concept - achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfaction more efficiently and effectively. Societal concept – the organization should determine the needs, wants and interests of target markets and deliver the desired satisfaction more efficiently than competitors but in a way that maintains and improves the consumers and society’s well being. Relationship concept – achieving organizational goals depends on establishing long term relationship with its customers and creating loyal consumers.
4. Domains and specialization of marketing
5. Marketing functions and marketing performersThere are 8 basic functions : 1.marketing management – it includes planing, implementing and controlling the marketing program and individual marketing functions. It evaluates the risks and benefits in decision making. 2. marketing research and analysis – it involves adapting to external factors that affect the success of company and collecting data for solving specific marketing issues. 3.product planning – involves developing and maintaining products, product assortment, product images, brands, packing, and optional features. 4.price planning – involves determining price levels and ranges, pricing techniques, terms of purchase, price adjustments, and the use o price as an active or passive element. 5. promotion planning – involves communicating with customers and general public through advertising, public relations, personal selling and sales promotion. 6. distribution planning – includes establishing relations with distribution general intermediaries physical distribution, inventory management warehousing, transportation, hall selling, retailing 7. consumer analysis – includes evaluation of consumer characteristics, needs and purchases process and also the selection of target segments at which we concentrate marketing efforts. 8.broadering the organization marketing scope –involves deciding on the marketing implementing strategy or marketing approach that a company should use on internal and international markets. Marketing performers. (types). Marketing performers are the organizations or individuals that undertake one or more marketing functions. They include manufacturers/producers and service providers. •Final consumers – family or person who buys goods and services for personal or family use. •Organizational consumers - institutions or organizations that buy goods and services for use in its operations. •Wholesalers (distribuitori angro) – persons or organizations that buy products to resale them to retailers or organizational an final consumers. •Retailers- these are persons and companies whose activities involve the sale of goods and services to final consumers. •Marketing specialists – include firs or persons that concentrate on one specific marketing function.
6. The company’s marketing microenvironment
The company’s microenvironment refers to the company that affect directly it’s ability to serve its customers. Types: 1. suppliers (there are 3 main groups of resources obtained from suppliers: a.fix assets(land,equipment,buildings); b.current assets (raw material that is used for the 1 process); c.labor 2.intermediars a.middleman(retailers,wholesalersb.physical distribution firms (warehouses,transportation firms), c. financial intermediaries(companies with financial resources); 3.customers or consumers - consumer markets or final consumers -resale markets(organizations that buy goods and services in order to resell them for profit), -government markets(government agencies that buy goods and services in order to produce public services or transfer these goods and services to others who need them) -industrial markets (business consumers)4.international markets and consumers (foreign buyers: consumers, , government in foreign market)
Competitors A company make face with the following types of competition: 1.direct – among producers and sellers of similar products. 2.indirect – among goods and services that can be substituted for one another. 3.inter-industrial – among all organizations that compete for the consumer purchasing power. Publics (organisme publice) – may include:1 financial publics(banks,investment funds, stockholders) 2.media publics – (magazines, news papers, radio and TV- stations) 3.government publics(government agencies, local authority) 4.citizan action publics (consumer’s organizations, nonprofit organizations, employees unions (sindicatele)) 5.general publics( general image of the company within a society).
7. The company’s marketing macroenvironmentMacroenvironement of the companies Include the larger societal forces that affect whole microenvironment and indirectly its company. No one business is large or powerful to create important changes in the external environment, thus marketing managers need to adapt to all microenvironment influences. Microenvironment include the following forces/factors: 1.demografic factors (people statistics such as the age, race,ethnicity, and location.Demogr.fact. are very important because the basis for any market are people and they are strongly related to consumers buyer behavior in the marketplace. 2.natrual factors- the company should be concerned about the following problems related to the natural resources: a. The lack of raw materials; b.increased level of pollution c. increased cost of energy d.government intervention in natural resource management 3.economic factors marketing managers must understand and react to the ec. Environment and its changes. The 3 ec.problems of greatest concern to the most marketers are : a.income distribution; b.inflation; c.recession. During recession a company might use the following marketing strategies:
. improve existing products and introduce newones.The goal is to reduce the productivity hours waste, and the cost of materials. .mantin and expand customer services such as sales of replacement parts and other after sale services(warranty) ; .promoting product value. Customers may switch from high quality products to less expensive ones; in this case,companies may try to focus and promote quality, durability of the product and also satisfaction and capacity to save time and money.
4.technological factors – are very important because they may become an effective instrument against recession.New technology that reduces production costs, can be one of the companies most valuable asset. External technologies are important to managers for 2 reasons: a.aquering the technology the company may be able to operate more efficiently or to create a better product.b. a new technology may give a company a strong competitive advantage
5.legal and political factors – these factors include: a.legislation(regulating business) b.the general political climate of the society c.the degree of concentration of political power d.the number and the nature of political organizations e.the activity of public interest groups and regulatory agencies 6.cultural factors – include religion, cultural values and attitudes ,subcultures, role of family and society and the gender problems.
8. Marketing research: definition, research area and process
Marketing research is the function which links the consumer competition and public to the marketer trough information. This information is used to identify and define marketing opportunities and problems, generate and evaluate marketing actions and improve understanding of marketing as a process. The mission of marketing research department is to obtain, analyse and interpret marketing as other relevant information needed for decision making at all levels of management. These activities need to be carried out in a cost-effective way and with high professional standards. Marketing research has 3 important functions :
1. scanning for opportunities and problems (a good research operation collects and analyses information about customers, competitors, technology, global ec. 2. the risk assessment of future problems (when considering alternative marketing strategies the marketing manager should test them against different situations in order to minimize all future risks)
3. maintaining of current programs(marketing research plays a key role in monitoring the progress of the programs to its objectives)
9. The research plan for collecting information: elaboration and implementation
Marketing research can be conducted in six steps: 1.problem definition – a key to any kind of research is to establish the problem to be addressed. 2.information needs – the marketer researcher needs to establish what kinds are most appropriate to solve the problem. 3.type of research – the company may use 3 types of research : a.exploratory- this type of study obtain preliminary information that will help better to define the problem. b.descriptive – this type of research is used to describe things such as the market potential for a product, demographic data and altitudes of consumers who buy the product. c. causal – this type of research tests hypothesis about cause and effect relationships. 4.data collection – at this stage depending on the time of information the researcher must establish thespecific data sources including the sample (esantion) of people or organizations that are studied. 5. data analysis and conclusions – internal organization or external must analyze the data and draw conclusions that address the stated problem 6.reporting – an report is usually written to communicate the conclusions to the marketing organizations and other relevant groups.
10. Secondary data sources in marketing research
Secondary data sources Secondary information sources are goals that already exist and were not developed for the particular problems being studied. Marketing managers always consult secondary sources before passing to primary data collection because secondary sources are usually less expensive and quiklier to obtain. Secondary data sources can be of 2 types: 1. internal sources – a good place to start collecting information is within the organization. A company may use the following sources: a. past marketing plans – this source made statistical and strategical information such as: pervious marketing strategies, risks that appeared,time needed for achieving the strategy,etc. b.accounting department – collects considerable amount of detailed information on all the company transactions. It includes such information as :the total value of sales, stock inventory, the sales of retailers and wholesalers. c.sales people – this source may give information related to: changes in attitudes and behavior of consumers, attitudes of members in distribution system, information about competitors and also consumer preferences. d.research and development department – this department not only focus on bringing the companies product ideas but may also analyze competitor’s products, costs, technology, and quality. 2.external data sources- this information is collected by external organizations or persons for public use. The most often used external secondary sources are: a.trade associations – this industry organizations often collect information about the member companies, the sales and profits. b.general business publications – newspapers, company activity, strategy, the introduction of new products,and consumer preferences and attitude. c. trade publications – these sources often provide detailed sale and share information; also new products strategies, promotional plans or personal changes. d.academic publications –( old books,articles that you may find in libraries) e.corporate reports (annual companies reports) d. government publications- this sources is most commonly used in international marketing activities
11. Primary data sources in marketing research
Primary data sources – are those that are generated for the particular problem being studied and are obtained by the company itself. Primary data sources may be obtained trough: 1.informal research – it is often useful to collect information trough informal observation(friends,relatives, customers); these sources may not be representatives samples, but such information can help the company to form an hypothesis about the quality of the company’s product or the competitors product of the company’s marketing strategy. 2. qualitative research – usually involves small samples of customers and provides information that does not lead directly to decisions, but may give an important input for other researches.This type of research may be of 2 types: a.focus group – is the best known and most widely used qualitative method.Represent a small group of people typically chosen for their membership in various target groups of interests. The people could be consumers, non-consumers, former consumers, influencers of buying decisions or they may be chosen for their personal characteristics. These people are usually brought together in a room and have a discussion about the topic chosen by the marketing manager and led by an professional moderator. b.observation – not all observational techniques are informal, so a common observational method is to set up a one-way mirror in a supermarket or other retail outlet. In this way, the marketing manager can observe the behaviors of the shoppers in different demographic groups. The researcher might count the different items that are examined, calculate how much time is spent considering a purchase in a product category or evaluate the interactions with a sales person. 3.quantitative research – involves statistical analysis of data in order to provide descriptive results. It is usually applied to a large number of respondents and provides very concrete results that lead directly to conclusions. Quantitative methods may be of 3 types: a. survey – a big portion of many research budgets that is devoted to survey research that is performed by giving questionnaires to people. The two primary issues for the marketer to consider are the sample from which the responses are taken and that can be used. A company may use the following types of survey research: -Personal interview -Phone interview -Mail survey -Internet survey The main criteria for evaluating the survey alternatives are: -Cost – most marketers have a fixed budget for research, so cost considerations are very important. -Control – this refers to how percentage of completed surveys -Time to obtain data. -Flexibility – this characteristic describes how many different kinds of questions can be used. b.experiment – in science,experiment is the only true way to determine the cause and effect relationship.
2 types: - Laboratory experiment – that is run in an artificial environment, such as laboratory, classroom,marketing department(car testing); - Field experiment – that takes place in a realistic environment, where the product is usually used or the process usually happens 12. Qualitative methods of research .qualitative research – usually involves small samples of customers and provides information that does not lead directly to decisions, but may give an important input for other researches.This type of research may be of 2 types: a.focus group – is the best known and most widely used qualitative method.Represent a small group of people typically chosen for their membership in various target groups of interests. The people could be consumers, non-consumers, former consumers, influencers of buying decisions or they may be chosen for their personal characteristics. These people are usually brought together in a room and have a discussion about the topic chosen by the marketing manager and led by an professional moderator. The focus group is often observed on videotape by the marketing group. The moderator usually develops a repot on his conclusions.b.observation – not all observational techniques are informal, so a common observational method is to set up a one-way mirror in a supermarket or other retail outlet. In this way, the marketing manager can observe the behaviors of the shoppers in different demographic groups. The researcher might count the different items that are examined, calculate how much time is spent
considering a purchase in a product category or evaluate the interactions with a sales person.
13. Quantitative methods of research quantitative research – involves statistical analysis of data in order to provide descriptive results. It is usually applied to a large number of respondents and provides very concrete results that lead directly to conclusions. 3 types: a. survey – a big portion of many research budgets that is devoted to survey research that is performed by giving questionnaires to people. The two primary issues for the marketer to consider are the sample from which the responses are taken and that can be used. A company may use the following types of survey research: - Personal interview - Phone interview - Mail survey - Internet survey The main criteria for evaluating the survey alternatives are: - Cost – most marketers have a fixed budget for research, so cost considerations are very important. - Control – this refers to how percentage of completed surveys - Time to obtain data. - Flexibility – this characteristic describes how many different kinds of questions can be used. b.experiment – in science,experiment is the only true way to determine the cause and effect relationship.The purpose of an experiment is to allow the marketing manager to analyze different interactions between variables. Experiments can be of 2 types: - Laboratory experiment – that is run in an artificial environment, such as laboratory, classroom,marketing department(car testing); - Field experiment – that takes place in a realistic environment, where the product is usually used or the process usually happens c.panel (panelul de consumatori)- a set of customers who are enlisted to give responses or to provide data repeatedly over a period of time. The main benefit of this method is the opportunity to observe changes in behavior caused by changes in marketing variables or other external factors. There are several problems with panels.
14. Survey as research method: its approaches and criteria
survey – a big portion of many research budgets that is devoted to survey research that is performed by giving questionnaires to people. The two primary issues for the marketer to consider are the sample from which the responses are taken and that can be used. A company may use the following types of survey research: - Personal interview - Phone interview - Mail survey - Internet survey The main criteria for evaluating the survey alternatives are: - Cost – most marketers have a fixed budget for research, so cost considerations are very important. - Control – this refers to how percentage of completed surveys - Time to obtain data. - Flexibility – this characteristic describes how many different kinds of questions can be used.
15. Market segmentation. Segmentation criteria and requirements for effective segmentation
M arket segmentation,targeting and positioning In it’s original meaning market is a location where buyers and sellers meet to exchange goods and services. To an economist ,a market consist of all the buyers and sellers who transact over some goods or services. To a marketer, it is the set of all actual and potential buyers of a product. Organizations that sell to consumers and industrial markets recognize that they cannot appeal to all buyers in the same way,because there are too numerous and too varied in their needs and preferences.Each company has to identify the parts of the market that it can serve best.But companies have not always practiced these philosophies. Market evolution passed 3 stages : 1.mass-marketing – the company mass produces,mass distributes and mass promotes one product to all buyers.The benefit of mass marketing is that it should lead to the lowest cost and price and create the largest potential market. 2.product variety – during this stage the company produces two or more products that have different features,styles,quality and sizes.Products were designed to offer variety to buyers and not appealing different market segments. 3.target marketing – during this stage the company identifies market segments,selects one or more of them and develops products and marketing mixes for each segment.Todays companies are moving away from mass marketing and product variety market to target market,because it can better help sellers find their marketing opportunities, develop the right product for each target market and adjust their prices, distribution channels and advertising to reach target market efficiently.
Target Marketing requires 3 steps: a)market segmentation - dividing a market into different groups of buyers who may call for separate products and marketing mixes, the company identifies different ways to segment market and develops profile of the resulting market segments. b)market targeting – evaluating each segment’s attractiveness and selecting one or more of the market segment to cover. c)market positioning –setting the competitive positioning for the product in different consumer segments. There is no single way to segment a market.A marketer has to try different segmentation variables along and in combination to find the best way to segment it’s markets. 1)geographic variables – include region,city,size,country,density and climate. 2)demographic variables – include age,gender,income,occupation,education,religion,race,family and family life cycle. 3) physiographic variables – include life style,personality and social class.
American marketers divide modern society into following social classes: a)lower-lowers(– they are usually out of work and they depend on public help or charity for their income,buy only primary goods. b)upper lowersare working but their living standarts are just above poverty.They perform unskilled work for very poor payment.Buy only primary goods(clothes). c)working class - average rate workers that depend on their salaries.Buy primary goods+some additional(cars). d)middle class– average paied consumers that have better living standarts.They buy products that are popular to keep up with the trends.Buy fashion clothes,have some savings,travell. e)upper middlesprimarily concerned with career and they include usually independent business persons and corporate managers.They are the quality market for goods,homes,clothes,cars and furniture.(top managers,very educated,influenced by brands,have investment funds). f)lower uppers– they have obtained high income and wealth through their profesional abilities or business.They usually rise from middle class.They include the new riche who consume products and services that impress others. g)upper uppers– they are the social elite that have well known family backgrounds, they give large sums to charity.They are an attractive market for antiques,homes and vacations.(high incomes,very educated; nu exteorizeaza bogatia;ex.Familia Regala din Romania).
4)Behavioristic variables include: a)purchase occasion(regular or special); b)usage rate(light,medium and heavy user) c)loyalty status(non,light,medium,and strong user)[discount cards]
d)attitude toward the product(positive,negative or indifferent)e.g. tobacco,fast food... e)readiness stage(a consumer may be unaware,aware,interested,desirous and intending to buy)
Marketing segmentation should have the following requirements: 1)Measurability –2)Accessibility- 3)Substantiality –4)Action ability
16. Market targeting and choosing the market-coverage strategy
Marketing Targeting strategies: 1) Undifferentiated –a firm may decide to ignore market segment differences and go after the whole market with one market offer.It focuses on what is common in the needs of consumers and designs a product and a marketing program that appeal to the most buyers.It relies on mass production,mass distribution and mass advertising.It provides post-economies.the narrow product line keeps down production and transportation cost. 2)Differentiated – using this strategy the company decides to target several market segments and designees different offers for each segment,by offering product and marketing variations,it hopes for higher sales and a strong opposition within each market segment. 3)Concentrated - a specially appealing when company's resources are limited,instead of going after a small share of a large market,the company covers a large share of one or few sub-markets(niches).Through this strategy the company achieves a stronger market position in the segments it serves because of its greater reputation it aquires.The company enjoys many operating economies because of specialization in production,distribution and promotion.If the segment is chosen well,the firm can obtain a high rate of return on its investments. b)larger competitors may decide to enter the same segment. * Choosing Market Targeting strategy a company should consider the following factors : 1)the company's resources(when are limited is recommended concentrated marketing strategy). 2)product variability(undifferentiated marketing strategy is recommended for uniform goods such as vegetables,fruits or raw materials). 3)the products stage in the life cycle(when a firm introduces a new product it is practical to launch only one version,so undifferentiated or concentrated marketing strategies make that most sense; in the maturity stage differentiated marketing strategy is recommended.) 4)the marketing variability(if most buyers have the same tastes,buy the same amounts and react the same way to marketing efforts - undifferentiated marketing strategy is appropriate.) 5)competitors marketing strategy(when competitors use segmentation undifferentiated marketing strategy can not be used, but when competitors are using undifferentiated mk str.,a firm may obtain some competitive advantages by using differentiated or concentrated marketing).17. Market positioning. Choosing and implementing positioning strategyMarket positioning.Once a company has decided which segments of the market it will enter it must decide what positions of wants to occupy in these segments. A product’s position is the way the product is defined by consumers on important atributes. The Market Positioning refers to the place the product occupies in consumers minds in comparison with competing products. Consumers are over-load with information about products and services. A product position is the set of perceptions, impressions and feelings that consumers hold for the products. Marketers influence the product positioning when they plan their products competitive advantage and they develop marketing mixes to create the planned positioning. A company may use the following positioning strategies : 1. It can position its products on specific product atributes such as quality. Performance, good price(low), safety,etc. 2. Product can be position on the needs they feel or benefits they offer.(Wash&Go) *the company do not specific anything about price 3. Products can be position for special occasions. ex.Christmas tree,wedding dress 4. Products can be position for specific classes of users. Ex.aparate auditive,pampers,insulina 5.Products can be position against a competitor (nu mentioneaza numele concurentului) 6.Products can be position away from competitors 18. Model of consumer buying behavior Many different factors affect consumer buying behaviour characteristics have to be careful in analysing consumer behaviour. Consumer buying behaviour refers to the buying behaviour of final consumers. Consumers make many buying decisions everyday. Most large companies research consumer buying decisions in great details because they want to answer questions about what consumers buy where they buy, how much they buy, why they buy. The central question for
marketers is how do consumers respond to different marketing efforts the company might use? The company that really understands how consumers respond to different product features, prices and advertising has a great advantage over its competitor. That’s why companies have research the relationship between the marketing stimulus and consumer responses.
19. Factors influencing consumer behavior: cultural factors
Cultural factors – culture is the set of basic values, perceptions, wants and behaviors that are learned from family and other social institutions. Marketers are always trying to identify cultural shifts in order to discover new products that might be wanted. Cultural factors include:- subcultures: nationality, ratio groups, religions and geographic regions. Many subcultures make up important market segments and marketers offer design products and marketers offer design products and marketing programs for each subculture. - social class. Social class is a relatively permanent division in a society whose members share similar values, interests and behaviours. Social class is not determined by a single factor such as income, but it is measured as a combination of occupation, education, life experience, wealth and other variables.
20. Factors influencing consumer behavior: social factors
Social factors – a consumer’s behavior is influenced by the following social factors: 1.Groups = a group consists from two or more people who intent to accomplish some common goals. A person’s behavior is influenced by many small groups,such as:
Membership groups = have direct influence on the consumer behavior and the person belongs to this group
Referent group = serves as direct points of comparison in forming a person’s attitudes and behavior.People or person do not belong to referent group.
Aspiration groups – are the groups at which a person wishes to belong. (e.g.clasele sociale)
Family – family members can strongly influence buyer behavior. The family is the most important consumer buyer organization in society. Marketers are interested in the roles and influence of the house,wife and children on the purchase of different products and services.
Roles and status A person belongs to many groups such as family, organizations etc. The person’s position in each group define in terms of role and status. A role consists of the activities,people are expected to perform according to the person’s around them. Each role carries a status that is the general esteem given to it by society. (ex.membri ai sindicatelor)
21. Factors influencing consumer behaviour: personal factors
Personal factors it includes: 1.age and family life cycle stage .2.Economic situation 3.Occupation 4.Life style (persoane active si pasive) 5.Personality and self-concept
22. Factors influencing consumer behaviour: psychological factorsPsychological factors it includes : 1.Motivation = a reason is a need that is sufficient precissing the person to seek for the satisfaction of the need.Psychologists can develop theories of human motivation.Two of the most popular are the theories of Sigmund Fraid and Abraham Maslow (piramida nevoilor) 2.Perception – the process by which people select,organize and interpret information to form a picture of the world. It is influenced by 3 processes: a)Selective attention – is the tendency for people screen-out most of the information to which they are exposed,this means that marketers have to work especially hard to attract the consumer attention b)Selective distortion – describes the tendency of people to interpret information in a way that will support what they already believe.That means that marketers must try to understand the mind of consumers and how these will affect interpretations of advertising and sales information
c) Selective retention – means that consumers tend to retain information that supports the attitudes 3.Learning – describes changes in an individual’s behavior arising from experience 4.Believes and Attitudes A believe is a discriptive thought that a person has about something.These believes may be based on real knowledge,opinion or faith. An attitude describes a person’s constraint evolution feelings and tendencies toward an object or idea.Attitudes are very difficult to change
23. Buyer-decision process and its importance for marketing
2.Information search- through sources as: -personal sources(family,friends) -commercial sources(advertising, sales people) -public sources ( mass-media) -experimental sources3.Evaluation of alternatives4.Purchase decision- the consumer will buy the most preferred brand, but two factors can come between the purchase intention and purchase decision: -attitudes of others -unexpected situational FACTORS5. Post purchase behavior
24. Marketing concept of product A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It includes physical objects, services, persons places, organizations and ideas. Product planners need to think about the product on 3 levels:1. Core level – It addresses the question what is the buyer really buying. It consists of the problem solving services or benefits the consumer obtains when he buys the product. It answers to the question why?2. Actual product level – It may have 5 characteristics: a) Quality level, b) Features, c) Style, d) Brand name, e) Packaging
3. Augmented level – This level offers additional consumer services and benefits such as:a) After sale serviceb) Deliveryc) Warrantyd) Credit selling
This level is optional.Product classifications:Products can be classified into 3 groups according to the durability or tangibility.1)Non durable goods – goods that are tangible and are normally consumed in one or a few uses.2)Durable goods – tangible goods that normally survive many uses.)3)Services – activities, benefits or satisfactions that are offered for sale. According to the final users products can be:Consumer goods &Industrial goods
Consumer goods – are goods bought by final consumers for personal consumption. Consumer goods include a)Convenience goods – consumer goods that the customer buys frequently, immediately and with a minimum of buying effort. Convenience goods include: a.1.) Staple goods – that are purchased on a regular basis. a.2.) Impulse goods – are purchased with little planning and search effort. These goods are normally placed next to checkout counters. a.3.) Emergency goods – are purchased when the need is urgent b)Shopping goods – consumer goods that the customer, in the process of selection and purchase usually compares on such basis as: Quality, Price, Style and suitability. Shopping goods can be: b.1) Uniform – similar in quality but different in price b.2) Non uniform goods – similar price but different features. c)Specialty goods – goods that have unique characteristics or brand identification d)Unsought goods – goods that the consumer does not know about or knows about but does not think of buying.
Industrial goods – those goods bought by individuals and organizations for use in conducting a business. Industrial goods include:a)Materials and parts – Industrial goods that enter the manufacturer’s product completely.b)Capital items – industrial goods that enter the finished product partially. They include: Installations and accessory equipment. C)Supplies and services – goods that do not enter the finished product at all27. Individual product decisions: product quality and branding
Individual product decisions-Developing a product involves defining the benefits that the product will offer. These benefits are communicated and delivered by tangible product attributes such as: Quality, design, brand, labeling and packaging. 1) Quality is one of the marketer’s positioning tools for the quality tends for the ability of a product to perform it’s functions. The quality can be analyzed from 2 points of view -Actual quality – includes the products durability, ease of use and repair, precision and reliability. -Perceived quality – how well the product satisfies the needs of consumers. The perceived quality is measured in satisfaction.2)Design – considers the appearance of the product but also creates products that are easy, safe, inexpensive to use and service and simple in to produce and
distribute.3)Branding – A brand is a name, term, sign, symbol or design used to identify the goods or services of one producer from those of competitors. A brand consists of: -Brand name – part of a brand that can be vocalized -Brand mark – part of a brand which can be recognized such as: color, symbol, sign, lettering but that is not vocalized. -Trademark – part of a brand that is given legal protection.There are several branding strategies:
1)The company may decide to produce a generic product(no brand, low cost product) or a branding product. 2)A company may use manufacturer’s brand or private brand(a brand name owned by wholesalers or retailers28. Individual product decisions: packaging and labelling, Packaging – includes the activities of designing and producing the container or a product. The package may include: -The product’s immediate container -Secondary package(usually thrown away when the product is about to be used) -Shipping package(deseori consumatorul nu-l vede) that is necessary for storing and shipping the product.Packaging has the following functions:A)Containing and protecting productsB)Promoting productsC)Facilitating storage, use and convenienceD)Facilitating receiving and reducing the environmental damage.Labeling – The label is a part of any packaging. Labeling takes 2 parts: a)persuasive labeling that focuses on promotional – in this case consumer information is secondar b)Informational labeling – Is designed to help consumers make product selections and offers such information as: The instruction, How to use a product, the durability of a product, construction of, components ingredients and other information.
29. Product line decisions: line-length, line-stretching, line-fillingA product item is a specific version of a product that can be designed as a distinct that is offered among an organization’s product. A product line is a group of closely related product items which:•function in a similar manner •are sold to the same customer groups•are marketed through the same types of outlets, or fall within given price rangesProduct Line-Length Decision:1)Dropping items2)Increasing items: - Stretching the line- Filling the lineProduct Line-Stretching – means lengthening a product line by moving either up-market or down-market, making items of higher or lower quality. This can be carried out in order to reach new customers, to enter growing or more profitable market segments , to react to competitors’ initiatives. But such moves may cause image problems: moving to the lower end of a market dilutes a company’s image for quality, while a company at the bottom of a range may not convince dealers and customers that it can produce quality products for the high end.Line-filling- adding further items in that part of a product range which a line already covers. It might be done in order to complete in competitors’ niches, or simply to utilize excess production capacity.
30. Product mix decisions in product policyProduct mix – includes all the products that an organization sells. The product mix decisions are:1)The length of the product mix refers to the total number of items the company produces2)The depth of the product mix refers to how many versions are offered of each product in the line.3)The product bread refers to how many product lines the organization offers.
31. Product Life-cycle strategies
Product life cycle is a concept that provides a way to trace the stages of a product’s acceptance. The product life cycle has 4 stages:1)Introduction stage – The launch of the new product into a market place. The marketing costs in the introduction stage are high because of intense distribution, advertising and production costs.2)Growth stage – in this stage sales typically grow at al increasing rate. Many competitors enter the same market and some large companies may start to acquire small parts. Profits rise quickly on the growth stage and reach their peak. Distribution becomes very important during this stage and also and aggressive advertising is recommended.3)Maturity stage is a period during which sales increase at a decreasing rate. This stage is normally the longest stage of the life cycle. Prices and profits continue to fall. Heavy consumer promotion is required to maintain the market share.4)Decline stage is a long run , drop in sales. The company has to decide when is the moment to delete the product from product line. It reduces all promotional costs
32. Internal and external factors influencing prices.
price is the amount of money charged for a product or service. More broadly, price is the sum of the values consumers exchange for the benefits of having or using the product or service.A company's pricing decisions are affected both by internal company factors and by external environmental factors. Internal factors include the company's marketing objectives, marketing mix strategy, costs, and organization. External factors include the nature of the market and demand, competition, and other environmental factors.Internal Factors Affecting Pricing Decisions
Marketing ObjectivesBefore setting price, the company must decide on its strategy for the product. If the company has selected its target market and positioning carefully, then its marketing mix strategy, including price, will be fairly straightforward. For example, if General Motors decides to produce a new sports car to compete with European sports cars in the high-income segment, this decision suggests charging a high price. At the same time, the company may seek additional objectives. The clearer a firm is about its objectives, the easier it is to set price. Examples of common objectives are survival, current profit maximization, market-share maximization, and product-quality leadership.Survival. Companies set survival as their major objective if they are troubled by too much capacity, heavy competition, or changing consumer wants. Current Profit Maximization. Many companies want to set a price that will maximize current profits. Market-Share Leadership. Other companies want to obtain the dominant market share. They believe that the company with the largest market share will enjoy the lowest costs and highest long-run profit. Product-Quality Leadership. A company might decide it wants to have the highest-quality product on the market. This normally calls for charging a high price to cover the cost of high product quality and the high cost of R&D. Marketing Mix StrategyPrice is only one of the marketing mix tools that the company uses to achieve its marketing objectives. Price decisions must be coordinated with product design, distribution, and promotion decisions to form a consistent and effective marketing program. Decisions made for other marketing mix variables may affect pricing decisions. The company often makes its pricing decision first and then bases other marketing mix decisions on the price it wants to chargeCosts set the floor for the price that the company can charge for its product. The company wants to charge a price that both covers all its costs for producing, distributing, and selling the product and delivers a fair rate of return for its effort and risk. A company's costs may be an important element in its pricing strategy. Many companies work to become the "low-cost producers" in their industries.Total costs are the sum of the fixed and variable costs for any given level of production. Management wants to charge a price that will at least cover the total production costs at a given level of production.Organizational ConsiderationsManagement must decide who within the organization should set prices. Companies handle pricing in a variety of ways. In small companies, prices are often set by top management rather than by the marketing or sales department. External Factors Affecting Pricing Decisions Costs set the lower limits of prices, while the market and demand set the upper limit. Both consumer and industrial buyers balance the price of a product or service against the benefits of owning it. Thus, before setting prices, the marketer must understand the relationship between price and demand for its product.Pricing in Different Types of Markets. The seller's pricing freedom varies with different types of markets. Economists recognize four types of markets, each presenting a different pricing challenge.Under pure competition, the market consists of many buyers and sellers trading in a uniform commodity such as wheat, copper, or financial securities. No single buyer or seller has much affect on the going market price.Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. A range of prices occurs because sellers can differentiate their offers to the buyers. Either the physical product can be varied in quality, features, or style, or the accompanying services can be varied. Buyers see differences in sellers' products and will pay different prices. Under oligopolistic competition, the market consists of a few sellers who are highly sensitive to each other's pricing and marketing strategies. The product can be uniform (steel, aluminium) or nonuniform (cars, computers). There are few sellers because it is difficult for new sellers to enter the market. Each seller is alert to competitors' strategies and moves. A pure monopoly consists of one seller. The seller may be a government monopoly (for example, the Postal Service), a
private regulated monopoly (a power company), or a private nonregulated monopoly (Du Pont when it introduced nylon). Pricing is handled differently in each case. A government monopoly can pursue a variety of pricing objectives. Consumer Perceptions of Price and Value. In the end, the consumer will decide whether a product's price is right. When setting prices, the company must consider consumer perceptions of price and the ways these perceptions affect consumers' buying decisions. Pricing decisions, like other marketing mix decisions, must be buyer-oriented.Analysing the Price-Demand Relationship. Each price the company might charge will lead to a different level of demand. Price Elasticity of Demand
33. General pricing approaches: cost-based pricing, buyer-based pricing, competition-based pricing
The price the company charges will be somewhere between one that is too low j to produce a profit and one that is too high to produce any demand. Companies set prices by selecting a general pricing approach that includes one or more of these three sets of factors. We will look at the following approaches: the cost-based approach (cost-plus pricing, breakeven analysis, and target profit pricing), the buyer-based approach (perceived-value pricing), and the competition-based approach (going-rate and sealed-bid pricing).1)Cost-Based Pricing
Cost-Plus PricingThe simplest pricing method is cost-plus pricing—adding a standard markup to the cost of the product. For example, an retailer might pay a manufacturer $20 for a toaster and mark it up to sell at $30.Markup pricing remains popular for many reasons. Breakeven Analysis and Target Profit PricingAnother cost-oriented pricing approach is breakeven pricing, or a variation called target profit pricing. Here, the firm tries to determine the price at which it will break even or make the target profit it is seeking. Target pricing is used by General Motors, which prices its automobiles to achieve a 15 to 20 percent profit on its investment. This pricing method is also used by public utilities, which are constrained to make a fair return on their investment. Target pricing uses the concept of a breakeven chart. A breakeven chart, shows the total cost and total revenue at different levels of sales.
2)Buyer-Based Pricing (demand based)
An increasing number of companies are basing their prices on the product's perceived value. Perceived-value pricing uses the buyers' perceptions of value, not the seller's cost, as the key to pricing. The company uses the nonprice variables in the marketing mix to build up perceived value in the buyers' minds. Price is set to match the perceived value.
Consider the various prices different restaurants charge for the same items. A consumer who wants a cup of coffee and a slice of apple pie may pay $1.25 at a drugstore counter, $2.00 at a family restaurant, $3.50 at a hotel coffee shop, $5.00 for hotel room service, and $7.00 at an elegant restaurant. Each succeeding restaurant can charge more because of the value added by the atmosphere.3)Competition-Based Pricing
Going-Rate PricingIn going-rate pricing, the firm bases its price largely on competitors' prices, with less attention paid to its own costs or demand. The firm might charge the same, more, or less than its major competitors..
Going-rate pricing is quite popular. When demand elasticity is hard to measure, firms feel that the going price represents the collective wisdom of the industry concerning the price that\will yield a fair return. They also feel that holding to the going price will avoid harmful price wars.
Sealed-Bid PricingCompetition-based pricing is also used when firms bid for jobs. Using sealed-bid pricing, a firm bases its price on how it thinks competitors will price rather than on its own costs or demand. The firm wants to win a contract, and winning the contract requires pricing lower than other firms.
Yet the firm cannot set its price below a certain level. It cannot price below cost without harming its position. On the other hand, the higher it sets its price above its costs, the lower its chance of getting the contract.34. New product pricing strategies.Pricing strategies usually change as the product passes through its life cycle. The introductory stage is especially challenging. We can distinguish between pricing a real product innovation that is patent-protected and pricing a product that imitates existing products.
Pricing an Innovative ProductCompanies bringing out an innovative patent-protected product can choose between market-skimming pricing
and market-penetration pricing.Market-Skimming PricingPrice skimming is the strategy of charging the highest possible price for a product
during the introduction stage of its life-cycleMarket skimming makes sense only under certain conditions. First, the product's quality and image must
support its higher price, and enough buyers must want the product at that price. Second, the costs of producing a
small volume cannot be so high that they cancel the advantage of charging more. Finally, competitors should not be able to enter the market easily and undercut the high price.
Market-Penetration pricingPenetration pricing is the strategy of setting a low price for a new product to quickly attract a large number of
buyers and win a large market share. Texas Instruments (TI) is a prime user of market-penetration pricing. TI will build a large plant, set its price as low as possible, win a large market share, realize falling costs, and then cut its price further as costs fall. Warehouse stores and discount retailers also use penetration pricing. They charge low prices to attract high volume; 35. Product mix pricing strategies.
Product mix pricing strategies.• Product line pricing• Optional product pricing• Captive product pricing• By-product pricing• Product bundle pricing• Product line pricing takes into account the cost differences between products in the line, customer evaluation of their features, and competitors’ prices• Optional product pricing takes into account optional or accessory products along with the main product. Captive product pricing involves products that must be used along with the main product• Two-part pricing is where the price is broken into: -Fixed fee- Variable usage fee.By-product pricing refers to products with little or no value produced as a result of the main product. Producers will seek little or no profit other than the cost to cover storage and delivery.Product bundle pricing combines several products at a reduced price
36. Price adjustment strategies.
Companies usually adjust their basic prices to account for various customer differences and changing situations. We will look at the following adjustment strategies: discount pricing and allowances, discriminatory pricing, psychological pricing, promotional pricing, and geographical pricing.Discount Pricing and AllowancesMost companies will adjust their basic price to reward customers for certain responses, such as early payment of bills, volume purchases, and buying off-season. These price adjustments—called discounts and allowances—are described below.Cash Discounts- is a price reduction to buyers who pay their bills promptly. A typical example is "2/10, net 30," which means that although payment is due within 30 days, the buyer can deduct 2 % if the bill is paid within ten. The discount must be granted to all buyers meeting these terms. Such discounts are customary in many industries and help to improve the sellers' cash situation and reduce bad debts and credit-collection costs.Quantity Discounts-is a price reduction to buyers who buy large volumes. These savings include lower selling, inventory, and transportation expenses. Discounts provide an incentive to the customer to buy more from a given seller rather than buying from many sources.Functional Discounts-is offered by the seller to trade channel members who perform certain functions such as selling, storing, and record keeping. Manufacturers may offer different functional discounts to different trade channels because of the varying services they perform, but manufacturers must offer the same functional discounts within each trade channel.Seasonal Discounts-iS a price reduction to buyers who buy merchandise or services out of season. Seasonal discounts allow the seller to keep production steady during an entire year. Allowances-are other types of reductions from the list price. For example, trade-in allowances are price reductions given for turning in an old item when buying a new one. Trade-in allowances are most common in the automobile industry and are also given for some other durable goods. Promotional allowances are payments or price reductions to reward dealers for participating in advertising and sales-support programs.Discriminatory PricingCompanies will often adjust their basic prices to allow for differences in customers, products, and locations. In discriminatory pricing, the company sells a product or service at two or more prices, even though the difference in prices is not based on differences in costs. Discriminatory pricing takes several forms:
Customer-segment pricing. Here, different customers pay different prices for the same product or service. Museums, for example, will charge a lower admission for students and senior citizens.
Product-form pricing. Here, different versions of the product are priced differently but not according to differences in their costs. Black & Decker prices its most expensive iron at $54.98, which is $12 more than its next most expensive iron.
Location pricing. Here, different locations are priced differently even though the cost of offering each location is the same.
Time pricing. Here, prices are varied seasonally, by the month, by the day, and even by the hour. Public utilities vary their prices to commercial users by time of day and weekend versus weekday. The telephone company offers lower "off-peak" charges, and resorts give seasonal discounts.
Psychological PricingPrice says something about the product. For example, many consumers use price to judge quality. A $100 bottle of perfume may contain only $3 worth of scent, but some people are willing to pay $100 because the price indicates something special.-odd pricing, multiple unit pricing,prestige pricing,price liningPromotional PricingWith promotional pricing, companies will temporarily price their products below list price—and sometimes even below cost. Promotional pricing takes several forms. Supermarkets and department stores will price a few products as loss leaders to attract customers to the store in the hope that they will buy other items at normal markups.
37. Price changes as a marketing tool
• In the global marketing mix, pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. As one of the four “Ps” in the marketing mix, pricing is the only revenue generating element.Price will always vary from market to market, and global brands must be prepared to deal with external influences such as trade tariffs, and political and economic shifts in the target country.
Changes in PricingPricing is the process of determining what a company will receive in exchange for its products. In the global marketing mix, pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. As one of the four “Ps” in the marketing mix, pricing is the only revenue generating element. The goal of pricing in global marketing strategies falls under three criteria:1. Achieving the financial goals of the company and generating profits2. Matching the realities of the marketplace and consumer buying trends3. Support a product's positioning so that it is consistent with product, promotion and placement
General Factors Affecting PriceLike national marketing, pricing in global marketing is affected by the other variables of the marketing mix. Price in global marketing strategies can be influenced by distribution channels, promotional tactics, and the quality of the product. For instance, if distribution is exclusive, then prices are likely to be higher. High prices will also be needed to cover high costs of manufacturing, or extensive advertising and promotional campaigns. If manufacturing costs go up due to the rise in price of some raw material, then prices will need to rise as well.
INITIATING PRICE CHANGES In some cases, the company may find it desirable to initiate either a price cut or a price increase. In both cases, it must anticipate possible buyer and competitor reactions.
Initiating Price CutS.Several situations may lead a firm to consider cutting its price. One such circumstance is excess capacity. In this case, the firm needs more business and cannot get it through increased sales effort, product improvement, or other measures. It may drop its "follow-the-leader pricing"—charging about the same price as its leading competitor—and aggressively cut prices to boost sales. But as the airline, construction equipment, fast-food, and other industries have learned in recent years, cutting prices in an industry loaded with excess capacity may lead to price wars as competitors try to hold on to market share. A company may also cut prices in a drive to dominate the market through lower costs. Either the company starts with lower costs than its competitors, or it cuts prices in the hope of gaining market share that will further cut costs through larger volume. Bausch & Lomb used an aggressive low-cost, low-price strategy to become an early leader in the competitive soft contact lens market. Initiating Price Increases A successful price increase can greatly increase profits. For example, if the company's profit margin is 3 percent of sales, a 1 percent price increase will increase profits by 33 percent if sales volume is unaffected. A major factor in price increases is cost inflation. Rising costs squeeze profit margins and lead companies to pass cost increases along to customers. Another factor leading to price increases is overdemand: When a company cannot supply all its customers' needs, it can raise its prices, ration products to customers, or both.
38. The nature and functions of distribution channels.-Most producers use middlemen to bring their products to market. They try to forge a distribution channel. A distribution channel is the set of firms and individuals that take title, or assist in transferring title, to a good or service as it moves from the producer to the consumer or industrial user.Why Are Middlemen Used?
Why do producers give some of the selling job to middlemen? This means giving up some control over how and to whom products are sold. The use of middlemen largely boils down to their greater efficiency in making goods available to target markets. Through their contacts, experience, specialization, and scales of operation, middlemen usually offer a firm more than it can achieve on its own.
.Distribution Channel FunctionsA distribution channel moves goods from producers to consumers. It overcomes the major time, place, and possession gaps that separate goods and services from those who would use them. Members of the marketing channel perform many key functions:Research—gathering information needed for planning and aiding exchangePromotion—developing and spreading persuasive communications about an offerContact—finding and communicating with prospective buyersMatching—shaping and fitting the offer to the buyer's needs, including such activities as manufacturing, grading, assembling, and packagingNegotiation—reaching an agreement on price and other terms of an offer so that ownership or possession can be transferredPhysical distribution—transporting and storing goodsFinancing—acquiring and using funds to cover the costs of the channel workRisk taking—assuming the risks of carrying out the channel workThe first five functions help to complete transactions; the last three help fulfill the completed transactions.Number of Channel LevelsDistribution channels can be described by the number of channel levels. Each layer of middlemen that performs some work in bringing the product and its ownership closer to the final buyer is a channel level. Because the producer and the final consumer both perform some work, they are part of every channel.
Channel 1, called a direct-marketing channel, has no intermediary levels. It consists of a manufacturer selling directly to consumers. Channel 2 contains one middleman level. In consumer markets, this level is typically a retailer. Channel 3 contains two middleman levels. In consumer markets, these levels are typically a wholesaler and a retailer. This Channel 4 contains three middleman levels. In the meatpacking industry, for example, jobbers usually come between wholesalers and retailers.
41. Distribution channel management decisions.
Evaluating the Major Channel Alternatives
Suppose a producer has identified several possible channels and wants to select the one that will best satisfy the firm's long-run objectives. Each alternative should be evaluated against economic, control, and adaptive criteria.
Using economic criteria, a company compares the likely profitability of different channel alternatives. It estimates the sales that each channel would produce and the costs of selling different volumes through each channel. The company must also consider control issues. Using middlemen usually means giving them some control over the marketing of the product, and some middlemen take more control than others. Other things being equal, the company prefers to keep as much control as possible. Finally, the company must apply adaptive criteria. Channels often involve long-term commitments to other firms, making it hard to adapt the channel to the changing marketing environment. The company wants to keep the channel as flexible as possible. Thus, to be considered, a channel involving a long commitment should be greatly superior on economic or control grounds.
39. Distribution channel behaviour and channel organization.- are more than simple collections of firms tied together by various flows. They are complex behavioural systems in which people and companies interact to accomplish individual, company, and channel goals, Some channel systems consist of only informal interactions among loosely organized firms; others consist of formal interactions guided by strong organizational structures. And channel systems do not stand still—new types of middlemen surface and whole new channel systems evolve. Here we will look at channel behaviour and at how members organize to do the work of the channel.
Channel BehaviorA distribution channel is made up of dissimilar firms that have banded together for their common good. Each channel member is dependent on the others, Each channel member plays a role in the channel and specializes in performing one or more functions. The channel will be most effective when each member is assigned the tasks it can do best.But individual channel members rarely take such a broad view. They are usually more concerned with their own short-run goals and their dealings with those firms closest to them in the channel. Cooperating to achieve overall channel goals sometimes means giving up individual company goals.
Channel Organization-Historically, distribution channels have been loose collections of independent companies, each showing little concern for overall channel performance. These conventional distribution channels have lacked strong leadership and have been troubled by damaging conflict and poor performance.
Growth of Vertical Marketing Systems
One of the biggest recent channel developments has been the vertical marketing systems that have emerged to challenge conventional marketing channels.
A conventional distribution channel consists of one or more independent producers, wholesalers, and retailers. Each is a separate business seeking to maximize its own profits, even at the expense of profits for the system as a whole. No channel member has much control over the other members, and there are no formal means for assigning roles and resolving channel conflict.
By contrast, a vertical marketing system (VMS) consists of producers, wholesalers, and retailers acting as a unified system. Either one channel member owns the others, has contracts with them, or wields so much power that they all cooperate. The vertical marketing system can be dominated by the producer, wholesaler, or retailer.
Each type uses a different means for setting up leadership and power in the channel. In a corporate VMS, coordination and conflict management are attained through common ownership at different levels of the channel. In a contractual VMS, they are attained through contractual agreements among channel members. In an administered VMS, leadership is assumed by one or a few dominant channel members.
1. Corporate VMS. A corporate VMS combines successive stages of production and distribution under single ownership. For example, Sears obtains over 50 percent of its goods from companies that it partly or wholly owns. Sherwin-Williams makes paint but also owns and operates two thousand retail outlets, Giant Food Stores operates an ice-making facility, a soft-drink bottling operation, an ice cream making plant, and a bakery that supplies Giant stores with everything from bagels to birthday cakes. In such corporate systems, cooperation and conflict management are handled through regular organizational channels.
2. Contractual VMS. A contractual VMS consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than they could achieve alone. Contractual VMSs have expanded rapidly in recent years. There are three types of contractual VMSs.
Retailer cooperatives are systems in which retailers organize a new, jointly owned business to carry on wholesaling and possibly productionIn franchise organizations, a channel member called a franchiser links several stages in the production-distribution process. Franchising has been the fastest-growing retailing form in recent years. There are three forms of franchises:-manufacturer-sponsored retailer franchise system -manufacturer-sponsored wholesaler franchise system, -service firm-sponsored retailer franchise system. 3. Administered VMS. An
administered VMS coordinates successive stages of production and distribution—not through common ownership or contractual ties but through the size and power of one of the parties. Manufacturers of a top brand can obtain strong trade cooperation and support from resellers. Thus, General Electric, Procter & Gamble, Kraft, and Campbell Soup can command unusual cooperation from resellers regarding displays, shelf space, promotions, and price policies.
Types of MiddlemenA firm should identify the types of middlemen available to carry on its channel work. For example, suppose a
manufacturer of test equipment has developed an audio device that detects poor mechanical connections in any machine with moving parts. Company executives feel that this product would have a market in all industries where electric, combustion, or steam engines are made or used. This market would include such industries as aviation, automobile, railroad, food canning, construction, and oil. The company's current salesforce is small, and the problem is how best to reach these different industries. The following channel alternatives might emerge from management discussion:
Company salesforce. Expand the company's direct salesforce. Assign salespeople to territories and have them contact all prospects in the area. Or develop separate company salesforces for different industries.
Manufacturer's agency. Hire manufacturer's agencies—independent firms whose salesforces handle related products from many companies—in different regions or industries to sell the new test equipment.
Industrial distributors. Find distributors in the different regions or industries who will buy and carry the new line. Give them exclusive distribution, good margins, product training, and promotional support.
-Evaluating the Major Channel Alternatives
Designing a channel system requires:Analyzing consumer needs; Setting channel objectives;Identifying major channel alternatives;EvaluationDesigning a marketing channel starts with finding out what target customers want from the channel.In terms of: Targeted levels of customer service;What segments to serve; Best channels to sue;Minimizing the cost of meeting customer service requirements
Objectives are influenced by: Nature of the company; Marketing intermediaries;Competitors;Environment;
Identifying Major Alternatives In terms of:• Types of intermediaries• Number of intermediaries• Responsibilities of each channel memberIdentifying Major AlternativesTypes of intermediaries refers to channel members available to carry out channel work. Examples include: Company sales force;Manufacturer’s agency; Industrial distributors;Identifying Major AlternativesCompany sales force strategies:• Expand direct sales force• Assign outside salespeople to territories• Develop a separate sales force • TelesalesIdentifying Major Alternatives
Manufacturer’s agencies are independent firms whose sales forces handle related products from many companies in different regions or industries
42. Physical distribution decisions in marketing
We are now ready to look at physical distribution—how companies store, handle, and move goods so that they will be available to customers at the right time and place. Here, we will consider the nature, objectives, systems, and organizational aspects of physical distribution.1. Nature of Physical DistributionPhysical distribution involves planning, implementing, and controlling the physical flow of materials and final goods from points of origin to points of use order to meet the needs of customers at a profit. The major physical distribution cost is transportation, followed by inventory carrying, warehousing, and order processing/customer service.2. The Physical Distribution ObjectiveMany companies state their objective as getting the right goods to the right places at the right time for the least cost. Unfortunately, no physical distribution system can both maximize customer service and minimize distribution costs. Maximum customer service implies large inventories, the best transportation, and many warehouses—all of which raise distribution costs.
3. Order Processing
Physical distribution begins with a customer order. The order department prepares invoices and sends them to various departments. Items out of stock are back-ordered. Shipped items are accompanied by shipping and billing documents, with copies going to various departments.
4. Warehousing
Every company has to store its goods while they wait to be sold. A storage function is needed because production and consumption cycles rarely match. For example, Snapper, Toro, and other lawn mower makers must produce all year long and store up their product for the heavy spring and summer buying season. The storage function overcomes differences in needed quantities and timing.A company must decide on the best number of stocking locations. The more stocking locations, the more quickly goods can be delivered to customers. However, warehousing costs go up. In making its decision about the number of its stocking locations, the company must balance the level of customer service against distribution costs.
5. Inventory
Inventory levels also affect customer satisfaction. Marketers would like their companies to carry enough stock to fill all customer orders right away. However, it costs too much for a company to carry this much inventory.
6. Transportation
Marketers need to take an interest in their company's transportation decisions. The choice of transportation carriers affects the pricing of the products, delivery performance, and condition of the goods when they arrive—all of which will affect customer satisfaction.
7. Choosing Transportation ModesIn choosing a transportation mode for a product, shippers consider as many as five criteria-
rail,truck,water,pipeline,air. if a shipper needs speed, air and truck are the prime choices. If the goal is low cost, then water and pipeline might be best. Trucks appear to offer the most advantages—a fact that explains their growing share of the transportation market.
8. Organizational Responsibility for Physical Distribution
We see that decisions on warehousing, inventory, and transportation require much coordination. A growing number of companies have set up permanent committees made up of managers responsible for different physical distribution activities. These committees meet often to set policies for improving overall distribution efficiency. Some companies even have a vice-president of physical distribution who reports to the marketing vice-president, the manufacturing vice-president, or even the president43. Advertising as a promotion tool in marketing
Advertising is any paid form of non personal presentation and promotion of ideas, goods, or services by an identified sponsor. Organizations handle advertising in different ways. In small companies, advertising might be handled by someone in the sales department.Setting Objectives
The first step in developing an advertising program is to set advertising objectives. These objectives should be based on past decisions about the target market, positioning, and marketing mix.
An advertising objective is a specific communication task to be accomplished with a specific target audience during a specific period of time. Advertising objectives can be classified as to whether their aim is to inform, persuade, or remind. Informative advertising is used heavily when introducing a new product category and when the objective is to build primary demand.. Persuasive advertising becomes more important as competition increases and a company's objective is to build selective demand.Some persuasive advertising has become comparison advertising, which compares one brand directly or indirectly with one or more other brands.
Reminder advertising is important for mature products—it keeps consumers thinking about the product. Expensive Coca-Cola ads on television are designed to remind people about Coca-Cola, not to inform or persuade them.Budget DecisionAfter determining its advertising objectives, the company can next set its advertising budget for each product. The role of advertising is to affect demand for a product: The company wants to spend the amount needed to achieve the sales goal Four commonly used methods for setting the advertising budget were discussed in the question No 1. Message DecisionA large advertising budget does not guarantee a successful advertising campaign. No matter how big the budget, advertising can succeed only if messages gain attention and communicate well. Good advertising messages are especially important in today's costly and cluttered advertising environment. Message GenerationCreative people have different ways to find advertising message ideas.
Message Evaluation and SelectionThe advertiser must evaluate the possible messages. The appeals used in messages should have three characteristics. First, they should be meaningful, pointing out benefits that make theproduct more desirable or interesting to consumers. Second, appeals should be distinctive—they should tell how the product is better than competing brands. Finally, they must be believable. Message ExecutionThe impact of the message depends not only on what is said but also on how it is said—its message execution. The advertiser has to put the message across in a way that wins the target market's attention and interest.The creative people must find a style, tone, words, and format for executing the message. Any message can be presented in different execution styles, such as the following:1. Slice-of-life. This style shows one or more people using the product in a normal setting. A family seated at the dinner table might talk about a new biscuit brand.2. Life style. This style shows how a product fits in with a life style. For example, a National Dairy Board ad shows women exercising and talks about how milk adds to a healthy, active life style.3. Fantasy. This style creates a fantasy around the product or its use. For instance, Revlon's first ad for Jontue showed a barefoot woman wearing a chiffon dress and coming out of an old French barn, crossing a meadow, meeting a handsome young man on a white horse, and riding away with him.4. Mood or image. This style builds a mood or image around the product, such as beauty, love, or serenity. No claim is made about the product except through suggestion. Many coffee ads create moods.5. Musical. This style shows one or more people or cartoon characters singing a bout the product. Many cola ads
have used this format.6. Personality symbol. This style creates a character that represents the product. The character might be animated
(the Jolly Green Giant, Cap'n Crunch, Garfield the Cat) or real (the Marlboro man, Morris the 9-Lives Cat).7. Technical expertise. This style shows the company's expertise in making the product. Thus, Hills Brothers shows
one of its buyers carefully selecting coffee beans, and Gallo tells about its many years of winemaking.8. Scientific evidence. This style presents survey or scientific evidence that the brand is better or better liked than one
or more other brands. For years, Crest toothpaste has used scientific evidence to convince buyers that Crest is better than other brands at fighting cavities.
9. Testimonial evidence. This style features a highly believable or likable source endorsing the product. It could be a celebrity like Bill Cosby (Jell-O Pudding, Kodak film) or ordinary people saying how much they like a given product.
.
44. Sales promotion as a promotion tool in marketing
Advertising is joined by two other mass-promotion tools—sales promotion and public relations. Sales promotion consists of short-term incentives to encourage purchase or sales of a product or service. Sales promotion includes a wide variety of promotion tools designed to stimulate earlier or stronger market response It includes consumer promotion—samples, coupons, rebates, prices-off, premiums, contests, trading stamps, demonstrations; trade promotion—buying allowances, free goods, merchandise allowances, cooperative advertising, push money, dealer sales contests; and salesforce promotion— bonuses; contests, sales rallies.Sales promotions are usually used together with advertising or personal selling. Consumer promotions must usually be advertised and can add excite-ment and pulling power to ads. Trade and salesforce promotions support the firm's personal selling process. Setting Sales-Promotion Objectives
. Sellers may use consumer promotions to increase short-term sales or to help build long-term market share. The objective may be to entice consumers to try a new product, lure consumers away from competitors' products, get consumers to "load up" on a mature product, or hold and reward loyal customers
Selecting Sales-Promotion ToolsConsumer-Promotion ToolsThe main consumer-promotion tools include samples, coupons, cash refunds, price packs, premiums, patronage rewards, point-of-purchase displays and demonstrations, and contests, sweepstakes, and games.
Samples are offers of a trial amount of a product. Some samples are free; for others, the company charges a small amount to offset its cost.
Coupons are certificates that give buyers savings when they purchase specified products. Coupons can be mailed, included with other products, or placed in ads
Cash refund offers are like coupons except that the price reduction occurs after the purchase rather than at the retail outlet.
Price packs) offer consumers savings off the regular price of a product. The reduced prices are marked by the producer directly on the label or package
Premiums are goods offered either free or at low cost as an incentive to buy a product. Patronage rewards are cash or other awards for the regular use of a certain company's products or services.
Point-of-purchase (POP) promotions include displays and demonstrations that take place at the point of purchase or sale. Contests, sweepstakes, and games give consumers the chance to win something—such as cash, trips, or goods—by luck or through extra effort. A contest calls for consumers to submit an entry—a jingle, guess, suggestion—to be judged by a panel that will select the best entries. A sweepstakes calls for consumers to submit their names for a drawing. Trade-Promotion ToolsTrade promotion can persuade retailers or wholesalers to carry a brand, give it shelf space, promote it in advertising, and push it to consumers. Shelf space is so scarce these days that manufacturers often have to offer price-offs, allowances, buy-back guarantees, or free goods to get on the shelf and, once there, to stay on it.
Manufacturers use several trade-promotion tools. Many of the tools used for consumer promotions—contests, premiums, displays—can also be used as trade promotions. Or the manufacturer may offer a straight discount off the list price on each case purchased during a stated period of time (also called, price-off, off-invoice, or off-list). The offer encourages dealers to buy in quantity or to carry a new item. Dealers can use the discount for immediate profit, to advertising, or for price reductions to their customers.
Manufacturers may also offer an allowance (usually so much off per case) in return for the retailer's agreement to feature the manufacturer's products in some way. An advertising allowance compensates retailers for advertising the product. A display allowance compensates them for using special displays.
Manufacturers may offer free goods, which are extra cases of merchandise to middlemen who buy a certain quantity or who feature a certain flavour or size. They may offer push money—cash or gifts to dealers or their salesforce to "push" the manufacturer's goods. Manufacturers may give retailers free specialty advertising items that carry the company's name, such as pens, pencils calendars, paperweights, matchbooks, memo pads, ashtrays, and yardsticks.
Many companies and trade associations organize conventions and trade shows to promote their products. Firms selling to the industry show their products at the trade show. Vendors get many benefits, such as finding new sales leads, contacting customers, introducing new products, meeting new customers, and selling more to present customers.
45. Public relations as a promotion tool in marketing Another major mass-promotion tool is public relations—building good relations with the company's various publics by obtaining favourable publicity, building up a good "corporate image," and handling or heading off unfavourable rumours, stories, and events. The old name for marketing public relations was publicity, which was seen simply as activities to promote a company or its products by planting news about it in media not paid for by the sponsor. Public relations is a much broader concept that includes publicity and many other activities. Public relations departments use many different tools:Press relations: Placing newsworthy information into the news media to attract attention to a person, product, or service.Product publicity: Publicizing specific products.Corporate communications: Creating internal and external communications to promote understanding of the firm or institution.Lobbying: Dealing with legislators and government officials to promote or defeat legislation and regulationCounselling: Advising management about public issues and company positions and image.Public relations is used to promote products, people, places, ideas, activities, organizations, and even nations. Despite its potential strengths, public relations is often described as a marketing stepchild because of its limited and scattered use. Major Public Relations ToolsPublic relations professionals use several tools: - news PR professionals find or create favourable news about a company and its products or people. Sometimes news stories occur naturally, and sometimes the PR person can suggest events or activities that will create news.- Speeches can also create product and company publicity.-special events, ranging from news conferences, press tours, grand openings, and fireworks displays to laser shows, hot-air balloon releases, multimedia presentations, and star-studded spectaculars that will reach and interest target publics.
46. Personal selling as a promotion tool: major sales force management decisions
The people who do the selling go by many names: salespeople, sales representatives, account executives, sales consultants, sales engineers, field representatives, agents, district managers, and marketing representatives. Selling is one of the oldest professions in the world..Salesforce management is the analysis, planning, implementation, and control of salesforce activities. It includes setting salesforce objectives, designing salesforce strategy, and recruiting, selecting, training, supervising, and evaluating the firm's salespeople.
SETTING SALESFORCE OBJECTIVESCompanies set different objectives for their salesforces. IBM's salespeople are to "sell, install, and upgrade" customer computer equipment; AT&T salespeople should "develop, sell, and protect" accounts. Salespeople usually perform one or more of many tasks. They find and develop new customers and communicate information about the company's products and services. They sell products by approaching customers, presenting their products, answering objections, and closing sales with customers. In addition, salespeople provide services to customers, carry out market research and intelligence work, and fill out sales call reports.
DESIGNING SALESFORCE STRATEGY
Salesforce Strategy
A sales team (such as a company executive, a salesperson, and a sales engineer) can make a sales presentation to a buying group.
In conference selling, a salesperson brings resource people from the company to meet with one or more buyers to discuss problems and opportunities.
In seminar selling, a company team conducts an educational seminar for technical people in a customer company about state-of-the-art developments.Salesforce StructureThe company must also decide how to structure its salesforce. This decision is simple if the company sells one product line to one industry with customers in many locations; here, the company would use a territorial salesforce structure. If the company sells many products to many types of customers, it might need a product salesforce structure or a customer salesforce structure.
Salesforce SizeOnce the company has set its strategy and structure, it is ready to consider salesforce size. Salespeople
constitute one of the company's most productive— and most expensive—assets. Therefore, increasing their number will increase both sales and costs.
Salesforce Compensation
To attract needed salespeople, a company must have an attractive compensation plan. These plans vary greatly, both by industry and by companies within the same industry.
![[chorus] Amen Amen Amen [end Chorus]](https://static.documents.pub/doc/80x56/56815dc0550346895dcbead0/chorus-amen-amen-amen-end-chorus.jpg)
