Marketing-Product, Price, and Promotion

9Chapter

© 2004 by Nelson, a division of Thomson Canada Limited.

2 © 2004 by Nelson, a division of Thomson Canada Limited.

Learning Goals

1. What is a product, and how is it classified?

2. How does branding distinguish a product from its competitors?

3. How do organizations create new products?

4. What are the stages of the product life cycle?

3 © 2004 by Nelson, a division of Thomson Canada Limited.

Learning Goals (cont’d)

5. What is the role of pricing in marketing?

6. How are product prices determined?

7. What are the goals of promotional strategy?

8. What is the promotional mix, and what are its elements?

9. What are the types of advertising?

4 © 2004 by Nelson, a division of Thomson Canada Limited.

Learning Goals (cont’d)

10.What are the advertising media, and how are they selected?

11.How does public relations fit into the promotional mix?

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Learning Goal 1

What is a product, and how is it classified?

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Product:

in marketing, any good or service, along with its perceived attributes and benefits, that creates value for the customer

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Tangible & Intangible Attributes Create Product Value

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Types of Products

Consumer

Product

Effort

Required

Examples

•Unsought No effort Life insurance

New products

•Convenience Little or minimum Soft drinks

Bread, milk

•Shopping Considerable Automobiles

Homes

•Specialty Maximum Jewelry

Rare collectables

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Business or Industrial Products

• Capital products– large, expensive, long life span

• Expense items– installations– accessories– component parts and materials– raw materials– supplies– services

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Learning Goal 2

How does branding distinguish a product from its competitors?

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Branding:

a company’s product identifier that distinguishes the company’s products from those of competitors

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Brand equity:

the value of company and brand names

Master brand:

a brand so dominant that consumers think of it immediately when a product is mentioned

Brand loyalty:

a consumer’s preference for a particular brand

Branding (cont’d)

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Benefits of Branding

1. Product Identification– brands allow marketers to distinguish

their products from all others

2. Repeat Sales– developing brand loyalty

3. New Product Sales– brand equity fuels sales of new

products

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Learning Goal 3

How do organizations create new products?

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New Product Development Process

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Learning Goal 4

What are the stages of the product life cycle?

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Product Life Cycle:

the pattern of sales and profits over time for a product or product category

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Stages of the Life Cycle

1. Introduction– profits are usually small or negative

2. Growth– profits reach a peak at the end of this

phase

3. Maturity– profits begin to decline

4. Decline– sales and profits fall, possibly death

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Product Life Cycle

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Learning Goal 5

What is the role of pricing in marketing?

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Price

• Indicates value• Helps position a product in the

marketplace• Is the means for earning a fair return

on investment• If price is too high, the product won’t

sell, and the firm will lose money• If price is too low, the firm may lose

money even if the product sells well

22 © 2004 by Nelson, a division of Thomson Canada Limited.

Pricing Objectives

• Maximizing profits– obtain the largest possible profit from the

product

• Target return on investment– pricing based on desired rate of return

on investment

• Value pricing– a high quality product, at fair price, with

good service

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Learning Goal 6

How are product prices determined?

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Determining Price

1. Markup Pricinga percentage is added to the product cost to determine price

2. Breakeven Analysisdetermine the number of units needed to be sold at a given price to cover costs, with additional sales resulting in profit

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Learning Goal 7

What are the goals of promotional strategy?

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Promotion:

the attempt by marketers to inform, persuade, or remind consumers and industrial users to engage in the exchange process

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Goals of Promotion

• Create awareness

• Get consumers to try products

• Provide information

• Keep loyal customers

• Increase amount and frequency of use

• Identify target customers

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Learning Goal 8

What is the promotional mix, and what are its elements?

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Promotional Mix:

the combination of advertising, personal selling, sales promotion, and public relations used to promote a product

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Promotional Mix

• Advertising– any paid form of nonpersonal advertising

• Personal selling– face-to-face

• Sales promotion– includes coupons, free samples,

demonstrations

• Public relations

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Learning Goal 9

What are the types of advertising?

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Advertising:

any paid form of nonpersonal promotion by an identified sponsor

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Types of Advertising

• Product advertising– promotes a specific good or service

• Comparative advertising– company’s product compared with another

• Reminder advertising– keeping the product name in the public’s mind

• Institutional advertising– promotes a company’s image

• Advocacy advertising– grassroots lobbying

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Learning Goal 10

What are the advertising media, and how are they selected?

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Advertising Media:

the channels through which advertising is carried to prospective customers

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Advertising Media

• Newspapers

• Magazines

• Radio

• Television (local and network)

• Outdoor

• Direct mail

• Internet

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Selection of Advertising Media

• Cost of the medium

• Audience reach– audience selectivity

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Advertising Agency

Functions:– creative services– media services– research – merchandising– campaign designing and planning

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Learning Goal 11

How does public relations fit into the promotional mix?

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Public Relations:

any communication or activity designed to win goodwill or prestige for a company or person

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Public Relations

• Publicity– information about the company or

product that appears in the news media not paid for by the company

• New Product– introducing new products and services

• Event Sponsorship– press coverage to reinforce brand

identification

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Factors Affecting Promotional Mix

• Nature of product– determines media use

• Market characteristics– determines extent of advertising

• Available funds– determines use and amount of

advertising

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Learning Goal 12

What are important trends in promotion?

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Trends in Promotion

• Building immediate brand recognition

• Growth of Internet auctions

• Growth of Web advertising