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Marketing Mix – Introduction to 4 Ps Part 1 – Product
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Needs & wants Products Value & satisfaction Exchange transaction Market Marketing Marketing is a process by which people obtain what they need and want through creating, offering, and exchanging products and value with others. Need: things that are necessary for living. Examples include the need for food, clothing, warmth and safety. Wants: things that are not necessary but we desire or wish for. Examples include luxury goods, race car.
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Marketing Concept Matching the customer needs and wants with company’s capability to meet and satisfy them. Matching Company capabilities Customer needs & wants
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Marketing Mix Marketing Mix Product Price Promotion Place Marketing mix are the techniques used by marketing people to apply the marketing concept in order to match the products with customers’ wants.
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Marketing Mix – Components
Product Quality Features Brand name Packaging After-sale service Warranty Price List price Discounts Allowances Credit terms Payment period Promotion Advertising Personal selling Sales promotion Public relations Place Outlets Channels Coverage Logistics Teacher explains to students the 4 major components of marketing mix, i.e. 4Ps.
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The Use of Marketing Mix
The company chooses the product to meet the identified need of the target customers. Set the price that is acceptable to both the customers and the company. Make the target customers aware of the existence of the product. Use the right distribution channel to make the product available to customers
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Product Anything (goods or services) that can be offered to satisfy the needs or wants of the customers. Teacher can ask students to give any examples of product (goods such as car, mobile phone, services such as tourism industry, bank services etc.)
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Product Strategy Quality Design Features Brand name Packaging
After-sale service Warranty Teacher introduce the elements included in Product Strategy.
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Product Strategy Quality Design Feature
Good quality indicates the product is reliable and able to perform its intended function. Customers may compare the quality of a product/service with different brands in the market and make their buying decision. Design The idea generation and concept development of a product can help attracting customers. Feature A function which is capable of satisfying consumers’ need and is therefore seen as a benefit of owning it.
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Activity 1 – What do you feel about these brands?
Describe the following car brands with the descriptions provided. Rolls Royce Luxury Cheap Sporty Ferrari Good design Good quality Volvo Smart Speed Students may have different feelings about the brands. Teacher only requires to discuss with students the concept and importance of quality, design and features of a product which lead to product differentiation. Safety Toyota Comfortable Practical
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Product Strategy Product Variety
There are various types of products produced (or services rendered) by a company. Each company has a product that is distinguishable in some way from its competitors. Therefore, it is able to make profits from product differentiation.
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Activity 2 – Debate vs Students are divided into two groups.
Compare the product strategy of the two largest smartphone manufacturers: Apple & Samsung Electronics. Apple: only one type of smartphone i.e. iphone Samsung: produce different types of smartphone such as Note series and S series and from low-end to high-end. Which one you think is successful? There is no definite answer. Students are free to discuss and share their option and views? The focus of the discussion is whether variety of products is good or not for a brand. Benefits of uniqueness of product include: Competitive advantage occurs when an organisation acquires or develops a product or attributes of products that allow it to outperform its competitors. Economies of scale: the cost saving that enterprises obtain due to size, throughput, or scale of operation, with cost per unit of output generally decreasing with increasing scale. Benefits of Product Variety include: 1. Satisfies a wide range of consumer tastes. 2. Successful product improvement by one firm encourages other firms to improve or imitate, which will end up with more options for customers. vs
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Product Strategy Brand name Packaging After-sale service Warranty
Exclusively identifies the product from others. Improve the company prestige of products and expand the market share. Packaging Good packaging can attract customers’ attention and stimulate customers to buy. After-sale service Not just warranty but also consultation and support service after sale. Warranty Guarantee for repairs and maintenance for a specified period. E.g. 3-year warranty on electronic products.
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The End
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Marketing Mix – Introduction to 4 Ps Part 2 – Price & Promotion
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Price Price is the amount of money a customer pays for the product.
It is determined by a number of factors including market share, competition, costs etc.
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Pricing Strategy Pricing is important as it will affect the followings of the company: Product positioning. Market share. Profitability. Product positioning: whether the company would like to be a market leader on high-end products (charging higher price) or low-end products (charging lower price). Market share: should a company want to gain market share, a low price should be charged (see price penetration in next slide). Profitability: charge a higher price can lead to a higher profit. They are inter-related. E.g. a company wants to gain market share is willing to make little profit by charging lower price than its competitors and differentiate its product in different position from its competitors.
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Pricing Strategy Economy Pricing Price Penetration Price Skimming
Always set at a low price. E.g. supermarkets often have economy brands for household products. Price Penetration Set at artificially low price in order to gain market share, then increase the price when target market share is achieved. E.g. desk-top printer. Price Skimming Set at a high price when the product is less price sensitive. It will attract new competitors into the market, and then the price will fall due to increased supply and competition. E.g. high-tech products, medical products. Premium Pricing Always set at a high price. It is used where there is a unique brand such as for luxury products.
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Activity 1 Which pricing strategy may best fit the following products?
New model of digital camera Famous brand handbag Toilet paper Telephone service fee
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New model of digital camera
Activity 1 – Answer Pricing Strategy Products Economy Pricing Toilet paper Price Penetration Telephone service fee Price Skimming New model of digital camera Premium Pricing Famous brand handbag
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Price Setting Marketers have to determine prices to customers because it will affect the sales volume. The price setting issues include: List Price The price regularly quoted to customers. Usually printed on the price tags, catalogs etc. Discounts & allowances Reductions to a list/basic price of goods or services Include: quantity discount; seasonal discounts; cash discounts; promotional discounts etc. Credit terms & payment period Allow customers to pay later e.g. 30-day credit period.
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Promotion All means of communications that a marketer may use in the market to communicate that the product attributes / benefits to customers and persuade them to buy the product. The four major methods promotions (or known as promotion mix): Advertising Personal selling Sales promotion Public relations Advertising: through mass media such as advertisement on newspaper or television to attract/encourage potential buyers to buy the product. Personal selling: through direct contact such as face-to-face communication, personal correspondence, or personal telephone conversation to promote the product and persuade customers to buy. E.g. the use of a sales team. Sales promotion: through the use coupons, product samples, and rebates etc. to attract/encourage potential buyers to buy the product. Public relations: according to Public Relations Society of America “public relations is a strategic communication process that builds mutually beneficial relationships between organizations and their publics.” E.g. arrange a press conference.
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Objectives of Promotion
To create awareness To inform about a feature or benefit To support sales increases To create an image
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Advertising In mass media such as radio, TV, newspaper, Internet,
street, etc. Teacher introduces the most widely used mass media for promotion.
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Personal Selling Face-to-face Tele-marketing
Face-to-face selling is a method of which a salesperson contacts prospective customers directly to promote the product and persuade them to buy. Telemarketing is a method of which a salesperson contacts prospective customers either over the phone or arrange a subsequent face to face appointment over the phone to promote the product and persuade them to buy.
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Sales Promotion Free samples Discount coupons
Free gifts with company logo/product ABC Co A free sample is a small portion of food or other products (for example, beauty products) given to consumers in shopping malls or supermarkets to let them know the existence of the product and try out before purchasing it. A discount coupon is a ticket, leaflet or document that customers can enjoy a lower price (discount) when purchasing a product. A free gift with company logo/product is given to customers in order to enhance the product awareness.
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Public Relations Publics relations are where the communication is not direct delivery but by the following methods: Press conference/release Exhibition/Trade show Brand Ambassador (star power) Sponsorship Word of mouth (internet forum) A press conference is an event held by the company to introduce its new product to the mass media. Exhibition/trade show is a promotion of the products in a booth where customers can buy or ask for information. Brand ambassador is through an appointment of a public known person such as an artist to promote its products or services. Sponsorship is financial or resources support to an event, activity, person, or organisation in order to enhance the company image. Word of mouth is any apparently informal communication about the product by users.
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Activity 2 Can you give examples of different public relations promotion methods for any brands? Students are free to answers. It is good to show some examples to students for their reference such as the press conference organized by Apple for its new model of iphone, an artist being the brand ambassador of a company’s product and the sponsor of a concert by an insurance company.
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The End
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Marketing Mix – Introduction to 4 Ps Part 3 – Place
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Place Place represents the location where a product is sold.
It is often referred to as the distribution channel a company chose to deliver the product. Include physical store and virtual stores (e.g. internet).
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Physical Distribution
Activities involved in transporting products from the Manufacturer to the consumer which include: Mode of transport Warehousing & storage Order processing Inventory control Mode of transport: the means of delivery e.g. by air, sea or land. Warehousing & storage: the location and size of warehouse which facilitate the delivery of goods. Order processing: the process of picking, packing and delivery of the goods to customers. Inventory control: the supervision of supply, storage and accessibility of items in order to ensure an adequate supply to customers.
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Distribution Channels
Distribution channels are the routes through which the goods flow from the manufacturer to the customer. Types of distribution: Direct vs Indirect Direct distribution: Manufacturer Consumer Agent Indirect distribution: Teacher explains the difference between direct and indirect distribution is the involvement of intermediary (agent) such as wholesaler and retailer between manufacturer and customer. Manufacturer Wholesaler Retailer Consumer
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Channel intermediaries - Wholesalers
A wholesaler buys large amounts of goods from a manufacturers and then sells them to retailers. Provides storage facilities. Acting as an agent between manufacturers and consumers. Wholesaler takes some of the marketing responsibility e.g. sales force (sales team), promotions etc. Storage: factories and retail stores often have limited storage space, because space costs money. Wholesaler can provide warehouse to facilitate storage for both parties. Agent: can reduces contact cost between manufacturers and consumers because the manufacturer does not require to maintain a sales team by itself. Moreover, an independent agent is usually more experienced than in-house representatives and need less management and direction from the manufacturer.
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Channel intermediaries - Retailer
Retailer is a business that sells goods to the consumers who has stronger personal relationship with the consumer. holds a variety of products. promotes and sells products. Retailer sells goods to consumers, as opposed to wholesaler who normally sells goods to another businesses (retailers).
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Product Life Cycle A sequence of stages to describe the life of a commercial product from introduction, growth, maturity and decline. This sequence is known as the product life cycle. Extended learning: slide 9-14
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Impact of Product Life Cycle on Marketing Mix
Introduction Stage (the manufacturer seeks to build up the awareness of the product and develop the market): Product branding and design starts to establish, company may register the patent for their product. Pricing strategy may be low penetration in order to build the market share, or use high skim pricing to recover development costs (e.g. high-tech products). Promotion cost is high in order to build up the awareness of the product. Placing is selective as the company commences implementation of the distribution plan.
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Impact of Product Life Cycle on Marketing Mix
Growth Stage (a period of rapid revenue growth with increase in the market share): Product brand is maintained and additional support and improvement of quality are required. Pricing strategy is maintained at high level as the company enjoys increasing demand during this stage. Promotion cost is increased in order to keep the customers’ awareness. Placing is started to increase the distribution channels.
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Impact of Product Life Cycle on Marketing Mix
Maturity Stage (most profitable but competition appears): Product features is enhanced in order to differentiate the product from competitors. Price may be reduced in response to the competition. Promotion cost is increased to emphasize the product differentiation. Placing is more intensive to compete in the market and incentive may be provided to resellers in order to avoid losing sales channel.
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Impact of Product Life Cycle on Marketing Mix
Decline Stage (sales decline as market because saturated): Product is no longer be interesting by the consumer which production should be reduced and new product should be developed. Price may be even lower to sell out the remaining inventory. Promotion cost is decreased and switched to promote another new product. Placing strategy is to reduce the distribution channel as some channels are not profitable anymore.
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Activity State and explain the following items are in which stage of the product life cycle. 3D LED HD TV VCD Google glasses – Head-mounted display, HMD Smartphone
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Activity – Answer Introduction Growth Maturity Decline
Teacher can also use the same type of products to illustrate different stages in product life cycle. For example: Introduction (Google glasses – Head-mounted display, HMD), Growth (3D LED HD TV), Maturity (LCD HD TV), Decline (LCD TV).
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The End
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