1. 4.5 The Four P's Product, Price, Promotion and Place

2. Product

3. Product Vocabulary  Product  The end result of the production process sold on the market to satisfy a customer need.

4. Product Vocabulary  Consumer durables Manufactured products that can be re-used and are expected to have a reasonably long life. Manufactured products that can be re-used and are expected to have a reasonably long life.  Industrial goods Products that are purchased by businesses not final consumers. Products that are purchased by businesses not final consumers.

5. Product Life Cycle  The pattern of sales recorded by a product from launch to withdrawal from the market. A classic business error is failing to recognize when a product is in decline as other competitors create new replacement products. A classic business error is failing to recognize when a product is in decline as other competitors create new replacement products.

6. Product Life Cycle  Introduction  Growth  Maturity or Saturation  Decline

7. Characteristics of Product Life Cycle: Introduction  Introduction The product has been launched after development and testing. The product has been launched after development and testing. Sales are typically low and growing slowly. Sales are typically low and growing slowly. Advertising costs are high. Advertising costs are high. Profits not yet realized. Profits not yet realized.

8. Characteristics of Product Life Cycle: Growth  Growth Sales grow significantly if the product is well received in the market place. Sales grow significantly if the product is well received in the market place. This phase does not last forever! This phase does not last forever!

9. Characteristics of Product Life Cycle: Maturity  Maturity or Saturation Sales fail to grow but they do not decline. Sales fail to grow but they do not decline.  Example: Coca-Cola  Can you think of others? Saturation occurs when everyone has the product that needs the product Saturation occurs when everyone has the product that needs the product  Example: cell phones  Can you think of others?

10. Characteristics of Product Life Cycle: Maturity EXTENSION STRATEGIES Marketing plans that extend the maturity stage of a product before a new product is needed. Marketing plans that extend the maturity stage of a product before a new product is needed.  Add new features to the original product  Repackage the product  Discount the price  Rebrand  Develop new markets (export)  New Advertising campaigns  Create new uses

11. Characteristics of Product Life Cycle: Decline  Decline Sales fall steadily, extension strategies were not tried or did not work. Sales fall steadily, extension strategies were not tried or did not work. Product obsolescence Product obsolescence Newer competitors products maybe available Newer competitors products maybe available

12. Benefits/Limitations of Extension StrategyBenefitLimitation Add new features Developed and marketed quickly; lower cost than new product Original product is still aging and customers may not be “buy into” revision Repackage Product Relatively cheap and quickWill realize the product hasn't changed and may feel misled Discount the Price Lower-income consumers can now afford the product and may be offered to different market segments Could affect the brand image negatively. Maybe better to develop a new product to avoid discounting Rebrand Opens new markets, can be presented as a new product. Expensive; is it worthwhile if the product is considered old and dated Sell into new markets Market development can increase sales if the product is not perceived as too old or outdated Product and promotion may need to be redesigned to meet local laws and cultural norms New advertising campaigns Helps keep the product fresh and in front of customers Customers will know that the product has remained unchanged Create new uses May expand use of the product to existing customers or open new markets Customers may not perceive the new use as viable and the product may not be accepted in new markets

13. Why be concerned with product life cycle? 1. Assists with the planning of the marketing mix decisions.  When do we raise/lower prices?  When should we advertise and how much?  When should variations to the product be introduced?

14. Why be concerned with product life cycle? 2. How is cash flow affected?  Cash flow is negative during development and costs are high – nothing sold yet!  At the introduction phase, development costs are over but promotional expenses are high. Factory capacity is not fully utilized.  At maturity, cash flow is likely at its best: sales are high, promotional costs are low, factory capacity is fully utilized.  At decline, cash flow declines due to falling prices and falling sales.

15. Why be concerned with product life cycle? 3. How is profit and investment affected?  Investment: Capital spending is likely to be extensive towards the end of the product life cycle as new replacements products must be developed. This timeline will depend upon R&D required for replacement products.  Profit: High profits will most likely occur during growth and maturity. Profits are likely to fall during decline due to likely pricing pressures from competitors. However, low advertising costs and manufacturing equipment used to produce the product are likely paid for allowing the product to yield some profit.

16. Product Life Cycle Phase PricePromotionPlaceProduct Introduction May be high compared to competitors (skimming) or low (penetration) High levels of informative advertising to make consumers aware of the product’s arrival to market Restricted outlets – possibly high-class outlets if a skimming strategy is adopted Basic model Growth If successful, initial penetration pricing strategy could now lead to rising prices Consumers need to be convinced to make repeat purchases – brand identification will help to establish consumer loyalty Growing numbers of outlets in areas indicated by strength of consumer demand Planning of product improvements and developments to maintain consumer appeal Maturity Competitors likely to be entering market – there will be a need to keep prices at competitive levels Brand imaging continues – growing need to stress the positive differences with competitor’s products Highest geographical range of outlets as possible – developing new types of outlets where possible New models, colors, accessories, etc… as part of extension strategies Decline Lower prices to sell off stock – or if the product has a small “cult” following, prices could even rise Advertising likely to be very limited – may just be used to inform of lower prices Eliminate unprofitable outlets for the product Prepare to replace with other products – slowly withdraw from certain markets

17. Product Life Cycle Graph Sales Time IntroductionGrowthMaturity Decline

18. Product Life Cycle Graph Sales Time IntroductionGrowthMaturityDecline Cash Sales

19. Boston Matrix  A method of analyzing a product portfolio in terms of market share and market growth. The size of the circle indicates market share size. The size of the circle indicates market share size. High Market Growth% Low High Low Market Share % A D B C

20. Low market growth- High market share  Product ACASH COW Well established product in a mature market. Sales are high; promotional costs low. Cash is “milked” from this product. Well established product in a mature market. Sales are high; promotional costs low. Cash is “milked” from this product. High Market Growth% Low High Low Market Share % A D B C

21. High market growth- High market share  Product BSTAR Successful product in a growing market. Sales are high; promotional costs high to reinforce brand. Could become a CASH COW. Successful product in a growing market. Sales are high; promotional costs high to reinforce brand. Could become a CASH COW. High Market Growth% Low High Low Market Share % A D B C

22. High market growth- Low market share  Product CPROBLEM CHILD Consuming resources without much return. If new product, it will need heavy promotion. Positive – it is in a growing market; Negative – product may need to be dropped Consuming resources without much return. If new product, it will need heavy promotion. Positive – it is in a growing market; Negative – product may need to be dropped High Market Growth% Low High Low Market Share % A D B C

23. Low market growth- Low market share  Product DDOG Consuming resources without much return. If new product, it will need heavy promotion. Positive – it is in a growing market; Negative – product may need to be dropped Consuming resources without much return. If new product, it will need heavy promotion. Positive – it is in a growing market; Negative – product may need to be dropped High Market Growth% Low High Low Market Share % A D B C

24. Analyzing the Boston Matrix Building: Support problem child products; finance can be obtained from the cash cows. Holding: Continue support of stars so high sales growth and market position can be maintained. Milking: Take the cash generated from cash cows to invest in other products in the portfolio. Divesting: Identify the dogs and stop production; carefully evaluate the impact of this decision.

25. Pros & Cons of the Boston Matrix On its own, it cannot predict product success or failure. On its own, it cannot predict product success or failure. It is only a planning tool and criticized for its simplicity. It is only a planning tool and criticized for its simplicity. It assumes higher rates of profit are related to high market shares – this may not be true! It assumes higher rates of profit are related to high market shares – this may not be true!

26. Product VS Branding Product is a general term used to describe what is being sold – a computer. Branding is the name or symbol that distinguishes one manufacturers product from another – MacintoshCompaq Hewlett-PackardDell Gateway

27. Branding can… Influence marketing Influence marketing Create a perception in customers minds – positive or negative Create a perception in customers minds – positive or negative Give products a unique identity Give products a unique identity If successful, charge premium prices If successful, charge premium prices Be EXPENSIVE and take years to develop Be EXPENSIVE and take years to develop Not be guaranteed to be successful Not be guaranteed to be successful

28. Branding Vocabulary Brand An identifying symbol, name, image or trademark that distinguishes a product from its competitors Brand awareness The extent to which a brand is recognized by potential customers and is associated with a particular product.

29. Branding Vocabulary Brand development Measures the infiltration of a product’s sales usually expressed per thousand people Measures the infiltration of a product’s sales usually expressed per thousand people If 100 people in 1000 buy a product, it has a brand development of 10 If 100 people in 1000 buy a product, it has a brand development of 10 Brand loyalty The faithfulness of consumers to a particular brand as shown by their repeat purchases irrespective of the marketing pressure from competing brands. Brand value (or Brand equity) The premium that a brand has because customers are willing to pay more for it than they would for a non-branded generic product.

30. Branding is important because.... Promotes instant recognition of the company and product. Promotes instant recognition of the company and product. Differentiates the company and its products from rivals particularly when products when products are difficult to differentiate like milk or gasoline. Differentiates the company and its products from rivals particularly when products when products are difficult to differentiate like milk or gasoline. Aids in employee motivation. Aids in employee motivation. Generates referrals from customers. Generates referrals from customers. Customers know what to expect from the company and its products. Customers know what to expect from the company and its products. An emotional attachment can develop between the brand and customers increasing loyalty. An emotional attachment can develop between the brand and customers increasing loyalty. Increases the value of the business above the value of its physical assets (brand equity). Increases the value of the business above the value of its physical assets (brand equity).

31. Types of Brands Types of Brands include: Family Branding Family Branding Product Branding Product Branding Company or corporate branding Company or corporate branding Own-label Branding Own-label Branding Manufacturer's Brands Manufacturer's Brands

32. Types of Brands - Family Selling several related products under one brand name – aka umbrella branding Examples: Mars BarExamples: Mars Bar The original product has been joined with Mars ice cream, Mars muffins, and Mars energy drinkThe original product has been joined with Mars ice cream, Mars muffins, and Mars energy drink Benefits: Marketing economies of scale; makes new product launches easierBenefits: Marketing economies of scale; makes new product launches easier Limitations: Poor quality of one product under the brand may damage them all.Limitations: Poor quality of one product under the brand may damage them all.

33. Types of Brands - Product Each individual product has its own unique identify and brand image- aka individual branding Examples: Proctor & GambleExamples: Proctor & Gamble Head & Shoulders, Pampers and Duracell are all separate brandsHead & Shoulders, Pampers and Duracell are all separate brands Benefits: Each product is perceived on its own and is unconnected with the parent company.Benefits: Each product is perceived on its own and is unconnected with the parent company. Limitations: Loses the positive image of a strong company brand.Limitations: Loses the positive image of a strong company brand.

34. Types of Brands - Company The company name is applied to the products and the becomes the brand- aka corporate branding Examples: Disney ProductsExamples: Disney Products Movies, clothing, and toysMovies, clothing, and toys Benefits: Like family branding – but now applies to ALL products produced under the company's brand name.Benefits: Like family branding – but now applies to ALL products produced under the company's brand name. Limitations: Poor quality of one product may damage image of the company.Limitations: Poor quality of one product may damage image of the company.

35. Types of Brands – Own Label Retailers create their own brand name and identify for a range of products- aka store brands Examples: WalmartExamples: Walmart Sam's Choice, Faded Glory, Metro 7Sam's Choice, Faded Glory, Metro 7 Benefits: Often cheaper than name-brand, each label appeals to a different customer, little spent on advertising.Benefits: Often cheaper than name-brand, each label appeals to a different customer, little spent on advertising. Limitations: Customers often perceive products to have a lower quality image.Limitations: Customers often perceive products to have a lower quality image.

36. Types of Brands – Manufacturer's Producers of the product establish the brand image for the products, often under the company name. Examples: Levi's Benefits: Successful branding establishes a unique personality for the product; often customers will pay a premium price Limitations: The brand has to be constantly promoted and defended.

37. Packaging....Why is it important? Protection – The main purpose of packaging is to protect the product from damage. Attracting customers – The package must attract the consumer in the store....lots of research is completed to determine what is appealing to customers. Promotion and information – The package may contain directions, nutritional information, warnings, or special offers. Differentiation and brand support – Helps distinguish your product from others within a display. It may contain the color scheme of your brand. Evaluation: Packaging needs to be integrated into your marketing mix. Product packaging contributes substantially to the waste disposal problem.

38. Price

39. Price is the amount paid by consumers for a product.

40. What else does PRICE say? Determines the degree of value added to “bought-in” components. Bought-InPieces purchased from other manufacturers to create a whole product. Influences the revenue and profit of a business due to impacting demand for a product. Reflects the marketing objectives of the business. Establishes the psychological image and identify of a product.

41. Factors in determining price 1. Costs of production 2. Competitive conditions in the market 3. Competitors’ prices 4. Marketing objectives 5. Price elasticity of demand What? (Measures the responsiveness of demand following a change in price.) 6. Whether it is a new or existing product

42. Pricing Strategies Cost-Based Pricing Firms determine the costs of producing and supplying a product and then ADD money on top of this calculated costs to determine the selling price. Cost-Plus PricingAdding a fixed mark-up for profit to the cost of the item. This method is popular with retailers. They take the cost of the item and add a mark up percentage to determine selling price. Cost of bought-in materials: $40 50% markup on cost = $20Selling price= $60

43. Pricing Strategies Market-Based Pricing Pricing set based upon the marketing objectives of the company. Penetration PricingSetting a low price supported bystrong promotion in order to achieve high volume in sales. This occurs when firms are trying to obtain market share. If successful, the price can increase later. Examples: Snack foods

44. Pricing Strategies (Market-Based Continued) Market SkimmingA high price is charged for a new product that has little or no competition. This strategy is used to maximize short-term profits until competitors enter the market and to project an exclusive image. Examples: Pharmaceuticals, Technology products

45. Pricing Strategies (Market-Based Continued) Psychological Pricing Setting prices that take advantage of a customer's perception of value of the product. Common for prices to be set below the key price to make the product appear cheaper than it is: $999 instead of $1001; $1.99 instead of $2.01 Prices are set to coincide with market perception of the product even if the product has a low production cost. Setting the price too low would create a perception of a cheap product. Setting the price too high could alienate buyers. Examples: Can you give an example?

46. Pricing Strategies (Market-Based Continued) Loss Leader Product sold at a very low price to encourage consumers to buy other products. Commonly done in the grocery industry. Examples: Milk, bread, soda, or chips are sold at a very low price – perhaps at a loss – to entice buyers into the store –Selling computer printers below cost or giving them away for free so expensive ink cartridges can be sold.

47. Pricing Strategies (Market-Based Continued)  Price Discrimination  Charging different groups of consumers different prices for the same goods or services.  Examples: Airline tickets, bus fare, train tickets, movie theatre tickets, restaurant meals, grocery discounts. Senior citizen discounts, children’s prices vs adult prices

48.  Promotional Pricing  Special low prices used to gain market share or sell off excess stock – includes “buy one get one free” offers.  Widely used pricing strategy to stimulate sales for limited periods of time usually during low product demand periods or to promote the opening of a new store. Pricing Strategies (Market-Based Continued)

49.  Price Leadership  When one business sets a price for its products and other firms in the market set the same or similar price....they “follow suit”  Examples: Walmart, McDonalds, Southwest Airlines

50.  Predatory Pricing  Deliberately setting prices so low that competitors are forced out of the market.  This pricing strategy is typically illegal in most countries but difficult to prove. Pricing Strategies (Market-Based Continued)

51. Promotion

52.  The use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public relations to inform consumers and persuade consumers to buy. Advertising – TV ads, print ads, billboards Sales promotion – sales, coupons, loyalty programs Direct mail – mass mailings Trade fairs – booths at trade fairs (Southern Home Show) Sponsorship – NASCAR, tennis players, golfers, TV shows paid to display or promote a particular product Public relations – controlled publicity and advertising

53. Why do we PROMOTE?  Increase sales by increasing consumer demand  Remind consumer of exiting products and why they are special  Attract new buyers (Dominos try something new) http://www.youtube.com/watch?v=sADwVQuu6LAhttp://www.youtube.com/watch?v=sADwVQuu6LA  Demonstrate the superior quality of product as compared to its competitors – often occurs after a product has been updated (I’m a Mac advertising campaign) http://www.youtube.com/watch?v=C5z0Ia5jDt4http://www.youtube.com/watch?v=C5z0Ia5jDt4  Create or reinforce the brand image (Coke adds life) http://www.youtube.com/watch?v=t4-li4wch90http://www.youtube.com/watch?v=t4-li4wch90  Correct misleading reports about the product or the business and reassure consumers after a “scare” or “accident” bp oil spill http://www.youtube.com/watch?v=_AwD_7yNzKohttp://www.youtube.com/watch?v=_AwD_7yNzKo  Develop or adapt the public image rather than the product (Proud Sponsor of Moms) http://www.youtube.com/watch?v=IzOdLE4n8AAhttp://www.youtube.com/watch?v=IzOdLE4n8AA  Encourage stocking by retailers

54. Promotion Types  Above-the-line promotion Purchasing communication with the consumer – AKA – advertising  Below-the-line promotion Short-term incentives to encourage consumers to purchase the product Above-the-line Below-the-line Promotions that are visual & auditory TV Ads, billboards, radio, print ads Promotions that are tactile Samples, coupons, loyalty programs, games, price deals

55. Above-the-line Promotion  Advertising Communicating information about a product or business through the media such as radio, TV, newspapers, magazines, or billboards. Informative Provide information to potential customers like, price, features, technical specifications, or where to purchase NCAA Athletes class action http://www.youtube.com/watch?v=6sMo_shyuVMhttp://www.youtube.com/watch?v=6sMo_shyuVM Persuasive Trying to create a distinct image or brand identity Anti-Smoking Campaign Anti-Smoking Campaign

56. Which media to use?  Cost TV and radio can be expensive to purchase and produce. Print media can be less expensive  Profile of the target audience What is the best media to reach your audience?  Type of product message to deliver Written forms are best for detailed information about a product  Link between the marketing mix and advertising media. Are they consistent and sending a similar message?  The law and other barriers Are there bans on certain types of advertising? (Tobacco, alcohol, adult imagery or language) Volkswagen Commercial – Bollocks (language) Banned in UK https://www.youtube.com/watch?v=Ow0a06gsiF4https://www.youtube.com/watch?v=Ow0a06gsiF4

57. Below-the-line Promotion  Sales promotions are used to generate short-term gains in sales. –Sales or price deals – a temporary reduction in price –Loyalty programs – airline miles, points earned to redeem for other products and gifts –Coupons –Point-of-sale displays – aisle interrupters, dump-bins –BOGOF – buy one, get one free offers –Games and competitions McDonalds http://www.youtube.com/watch?v=O024RSoPeJAhttp://www.youtube.com/watch?v=O024RSoPeJA –Public relations Dawn http://www.youtube.com/watch?v=1JRE8dlmUxshttp://www.youtube.com/watch?v=1JRE8dlmUxs –Sponsorships Coke & Special Olympics Coke & Special Olympics http://www.youtube.com/watch?v=jKdIfp9_04s http://www.youtube.com/watch?v=jKdIfp9_04s What could be a LIMITATION of each strategy?

58. Promotional Mix  The promotional mix is the combination of promotional techniques that a firm uses to communicate the benefits of its product to customers. –They must send a consistent message to be successful.

59. Promotional Mix  The combination of promotional techniques that are used to communicate the benefits of the product to the consumer Decide on the image of the product Develop a profile of the target market Decide on the messages to communicate Set an appropriate budget Decide how the messages should be communicated Establish how the success of the promotional mix is to be assessed Execute the promotional plan Measure its success

60. Promotional Mix  How would you address the promotional mix for a product at each of the stages in the Product Life Cycle? –Introduction –Growth –Maturity –Decline (assuming no extension strategy)

61. Promotional Mix – Social Media  Technology has transformed the ways business promote their products. BenefitsLimitations Improved audience reach- per unit cost of reaching customers has been reduced. Lack of Skill- large businesses have dedicated teams monitoring social media. Small firms may have inexperienced personnel. Targeted marketing – Social networking sites enable “smart” marketing....reaching your target market by monitoring site users personal interests. Time investment – Setting up a social media account is quick and easy. Updating the site is an investment of time a company may not have which could lead to unresponsiveness to customers. Interactivity – Businesses can use social networking to interact with their customers. Negative Feedback – Customers can use social media to provide negative feedback in a public forum. Performance metrics – Promotional services can measure demographic information and site traffic providing information for promotional decisions. Performance metrics – Social media does not lend itself to measurability as some other forms of electronic tracking. Speed of transmission – Feedback to customers can be accomplished quickly, live updates, product recalls, etc... can make the company feel responsive and attract more customers. Security Issues – Not everyone is comfortable with social media and customers may be concerned with protection of private information. This cannot be your only form of contact with customers.

62. Promotional Mix  Viral Marketing –The use of social media sites or text messages to increase brand awareness or sell products. A customer pass on a positive word mouth message about a product they like 3 times But a product they don't like – 11 times! Social marketers try to “influencers” who will pass on a positive message.

63. Promotional Mix  Guerrilla Marketing –An conventional way of performing marketing activities on a very low budget. RISKS: –Unconventional advertising techniques may not appeal to conventional customers. –Not done well, it may not get noticed at all. –It could tarnish or damage the brand. Graffiti and your next step could be jail.

64. Place (Distribution)

65. PLACE  How should products pass from the manufacturer to the final customer?  Channel of distribution: the chain of intermediaries a product passes through from producer to final consumer

66. Distribution Channel is Important  Consumers need easy access to the firm’s product where they can see it, touch it, buy it, return it.  Manufacturers need distribution that provides a wide market coverage.  Retailers need to mark-up the product to cover the costs of sales.

67. Developing a Channel strategy Should the product be sold directly to the consumer? Should the product be sold through retailers? How many intermediaries? Where should the product be sold? Should electronic distribution be used? How much will it cost to stock products on store or warehouse shelves? How well the distribution channel support other components of the marketing mix?

68. Factors influencing the channel  Industrial products tend to be sold more directly to its customers than durable goods.  Geographic area of target market – where are my customers? The wider area, the more likely intermediaries will be needed.  Level of service expected from customers.  Technical complexity of the product.  Unit value of the product (the more expensive the more likely to be sold as individual units and direct sales)….think airplanes  Number of customers (the more customers the larger the need for wide distribution and intermediaries)… think toilet paper

69. Direct Selling  Manufacturer to Consumer Note: The customer is not considered part of the supply chain. ManufacturerConsumer (Or Service provider) Product/Service

70. Single-Intermediary Channel  Manufacturer to a Retailer to a Customer Note: The customer is not considered part of the supply chain. Manufacturer Retailer Consumer

71. Two-Intermediary Channel  Manufacturer to Wholesaler to Retailer to a Customer Note: The customer is not considered part of the supply chain. Manufacturer Warehouse Retailer Consumer

72. Benefits & Drawbacks  Give an example of each type and discuss benefits and drawbacks:  Direct-Selling  Single-Intermediary  Two-Intermediaries