Chapter Five

5.Managing marketing mix elements

5.1 . Product Strategies
defining a product?
 physical objectives
 Service events
 Person
 Place
 Organization
 Ideas
 or mixed of the above

What are services?

o Intangible
o Inseparable
5.1.2. product and service classification
-Broad category: Consumer and industrial goods classification
Consumers goods classification:
Convenient goods:
• Frequently and immediately purchase
• With minimum effort- example Tobacco
Shopping goods :
• Comparison goods
• Less Frequently than convenient goods
Specialty goods:
• Unique characteristics
• High price
• Loyalty consumers can not accept substitutes
Unsought goods:
• consumers do not normally think of buying
• example new products
B. Industrial goods classification
I. Material and parts
-Raw materials
-Manufacturing materials,
-manufactured parts
II. Capital items
-Installation /generator/
-Equipment /computers/

III. Supplies and services/stationaries/

-Operating supplies and services
-short lasting good
-Straight re- buy
Which classification will be the part of final goods?
how to categories in to different class?
5.1.3. Product and service decision
I. Individual product decision
-Product and service attributes/quality, feature/
-product design and style /branding, packaging, labeling/

II. Product line decision

-Grouping products
-on product line length/ numbers of items in the product line/

III. Product mix decision

Product mix width-numbers of different product lines
Product mix length-the numbers of items in each product line
Product line depth-the numbers of version under each line
Consistence of Product mix- the relatedness of the mix with end
use
What are the determinate factors to decide up on the above?
 5.1.4.Alternative Strategies for
Product Life Cycle Stages
I. Introduction Stage
-Low sale, consumers’ low looking and knowhow
-High costs of promotion
 Strategies
a. Rapid-skimming strategy (high price/high promotion).
b. Slow-skimming strategy (high price/low promotion).
c. Rapid-penetration strategy (low price/high promotion).
d. Slow-penetration strategy (low price/low promotion).
 Conti…
II. Growth Stage
-Sale growth fast,
-begin profit and Completion,
-needs strategic improvement
 Strategies
a. Improve service quality and add new service features and
elements
b. Pursue new target markets
c. Use new channels of distribution
d. Lower prices to attract more price-sensitive customers
e. Shift some advertising emphasis away from building awareness to
creating desire and action
 Conti…
III. Maturity Stage
-Profits go stable and maximum
-Persuasive promotion
-Demand curves cave increasingly elastic
 Strategies
a. Market-modification strategy
b. Product-modification strategy
c. Marketing-mix modification strategy

IV. Decline Stage

-Down ward slop
-Products should be replaced
Strategies
a. Reduce costs and milk the company
b. Sell off or get out of the business
 5.1.5. Alternative Strategies
by Industry Position
g A ranking of a brand, product, or company, in terms of its
sales volume relative to the sales volume of its competitors
in the same market or industry.
I. Market Leaders
a. Expand the size of the total market
b. Protect market share
c. Expand market share
II. Market Challengers
d. Take on or attack the market leader
 Conti…

III. Market Followers

a. Shy away from any attacks on market leaders

IV. Market Nichers

b. Specialize in a particular market segment
 5.1.6. Standardization versus Customization

A. Standardization
-Creating one strategy for all target market
- Not consider individual target
market/countries environmental factors
difference
- It is process of standardizing the marketing mix
elements
- Global market apply standardization/Extension
• Principle " All Business is same/local."
 B. Customization
• It is adaptation; the opponent of
standardization
• Consider all environmental factors in
each target market/countries
• The marketing mixes to various target
market/countries is not identical;
• it is according to needs of different
target market/countries
Majorly, What to be standardized/ customize?

• Components-Companies can standardize

the basic components of all of their products
• Packaging-Slight changes in packaging can
help companies to standardize their product
offers globally.
• Quantity-Companies sell their standardized
product in different quantities.
 Moreover, it may consists the products’
Attributes, Brand, labeling, and Quality
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 5.1.7. Branding, Packaging and Labeling
• Branding- process of putting a manufacturer’s
name, signature or picture of a product. Perhaps,
the most distinctive skill of professional
marketers is their ability to create, maintain,
protect and enhance brands.
• A brand is a name, term, sign, symbol or design or
a combination of them, intended to identify the
goods or services from those of competitors.”
• A brand is essentially a seller’s promise to
consistently deliver a specific set of features,
benefits, and services to the buyers
 Brands
• Is a bundle of images and experiences in the
customer’s mind
• A promise made by a particular company
about a particular product
• A quality certification
• Differentiation between competing products
• The sum of impressions about a brand is the
Brand Image

10-14
 Packaging
• Consumer Packaged Goods when the packaging is
designed to protect or contain the product during
shipping
• Eco-Packaging because package designers must
address environmental issues
• Offers communication- that provides consumers with
a basis for making a purchase decision
• In case of a shampoo bottle, for example, packaging
is concerned with the materials used to build and
shape the bottle, the color of the bottle and the
places specified for different parts of labeling etc.
10-15
Product Packaging and Labeling

Protection

Climate
Transport & Handling
Buyer's slow usage rate
Lack of storage facilites

Promotion Legal Constraints

Merchandising ( income level, shopping habits) Recycling of Packaging

Minimum breakage / theft (Duales System, Eco-Emballage)
Ease of handling Regulations on consumer info.
Multilingual Labels to Convey an International (Origin, weight, ingredients)
Image (Zara, Hollywood Chewing Gum)
10-16
 Labeling
• Provides consumers with various types of information
• It is done on the product packaging and its manufacturer
• It is often made part of the product package but, if necessary, the
information can also be printed on the product itself.
• For example, labeling presents information about the content in the
package (i.e., the actual product including accessories etc.), features,
price, name of manufacturer, date of production, expiry date, weight,
usage instructions and suggestions regarding storing or disposing of the
product etc.
•
Regulations differ by country regarding various products
– Health warnings on tobacco products
– American Automobile Labeling Act clarifies the country of origin, and final
assembly point
– European Union requires labels on all food products that include ingredients
from genetically modified crops
10-17
 PACKAGING LABELING
Meanin An art of developing an Educating customers to help them in
g appropriate package for making a buying decision. In addition,
wrapping or enclosing the it is done to fulfill legal requirements.
product to keep it safe from
contamination and damage
and to facilitate its storage,
transportation and usage.

Objecti Store, protect, preserve the Communicate with customers

ve product and create brand
identity

Focus
Product presentation Product description

Design
Innovative and attractive Simple and formal
 Product Warranties
• Express Warranty is a written guarantee that
assures the buyer is getting what they paid for
or provides a remedy in case of a product
failure
• Warranties can be used as a competitive tool

• Replace warranties
• Maintenance/repairs warranties

10-19
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 5.2.Meaning of Price
• In the narrowest sense, price is the amount of money
charged for a product or service.
• Broadly stating, price is the sum of all values that
consumers exchange for the benefits of having or
using the product or service
• Price is the only element in marketing mix that
produces revenue, all other elements represent costs.
• Price is also one of the most flexible elements of the
marketing mix.
• Mostly, prices are not revised often enough to reflect
market changes
 5.2.1. Significance of Price
• A price influences wages, rent, interest, and profits.
• Price is a basic regulator of the economic system
because it influences the allocation of the factors of
production: labor, land, capital, and entrepreneurship.
• As an allocator of resources, price determines what
will be produced (supply) and who will get the goods
and services produced (demand).
• A product’s price is a major determinant of the
market demand for it.
• Price affects a firm’s competitive position and its
market share. As a result, price has a considerable
bearing on a company’s revenues and net profits
 Conti…
• Majority of consumers are somewhat sensitive to
price but are also concerned with other factors, such
as brand image, store location, service, quality, and
value.
• Consumers with one or more of the following
attributes are likely to be price sensitive: low income
level; small house; large family; and member of a
minority group.
• Price is also important as a component of value. For
someone, the higher price indicates to better quality
and assume better value in goods and services
5.2.2. Pricing factors
what are the factors affecting the price decision?
A. Costs ( both fixed and variable costs)
- Cost of promotion - cost of distribution
- Cost of production
B. Economic conditions
 Per-capital income
 Spending pattern
 Demand size
C. Government factors
-Profit Margin regulation
-Subsidiaries provided by government
-Tax concession
-Price floors and price ceilings
D . Competition
E. Product differentiation
F. Exchange rate
G. Market objective
H. Marketing mix strategy
I. Organizational consideration

Other factors
• Inflation
• The consumers perception of price and value
• interest rate

How these factors affect the price decision ?

5.2.3. General pricing approach
 The cost based pricing
 The Demand based pricing
 The buyer based pricing /value based/
 Competition based pricing

Other pricing strategies

I. New product pricing strategies
-Skimming and penetration
II. Product mix pricing strategies
- product line pricing strategies
-Optimal product pricing strategies : optional or accessory products
-captive product pricing strategies (complementary products)
-By- product pricing strategies
III. Price adjustment strategies
Discount and allowances
 Discount- some amount of money to be deducted from the listed price
 Cash Discount-for early payment
 Quantity Discount-for bulk amount purchase
 Functional Discount- for duty accomplishment
 Seasonal Discount- when Purchasing in the given time
 Allowances- Promotional/additional money
Segmented pricing/price discrimination- Selling a product
at different price
Psychological pricing/odd pricing- consider the psychology
of price, not simply the economics example-99.98 birr
Promotional pricing – setting least price for temporarily
Geographical pricing- setting different price based on the
geographical differences
 Marketing Mix: Setting Pricing Policy
Steps
1. Setting the pricing objective
2. Determining demand
3. Estimating costs
4. Analyzing the competition:
• costs, price, and offers
5. Selecting a pricing method
6. Selecting the final price
 5.2.4.Promotional Pricing
• Loss-leader pricing – price below cost
• Special event pricing- limited time sales price
• Cash rebate- sell for list price but offer allowance via cash back
• Low interest financing - Maintain list price; attract more buyers
via lower monthly interest payment;
• Longer payment terms- Maintain list price; attract more buyers
via lower monthly payment
• Warranties & service contracts - Maintain list price; attract
more buyers by reducing their perceived risk
• Buy one get one free
• Free component part- free razor, pay for blades
 How to Avoid Raising Prices
• Shrink amount of product
• Less expensive ingredients
• Remove features
• Remove/reduce services
• Less expensive packaging
• Create new, economy brands
 5.2.6. Factors Affecting Price Sensitivity
• Perceived substitutes (if many, high price Sensitivity)
• Unique value effect (if less unique, high price Sensitivity)
• Switching cost (if less cost, high price Sensitivity)
• Difficult comparison effect (if less difficult, high price Sensitivity)
• Price-quality effect (if P &Q gap less, high price
Sensitivity)
• Fairness effect (if fair, low price Sensitivity)
5.3. Marketing communication & promotion
5.3.1. What is marketing communication?
The integrated marketing communication
 Integrating various communication channels and
promotional tools to create good coordinated images
 Able to avoid sending different massage from different
company’s information sources
 Similar massages from different promotional mix officers
to segmented markets
 5.3.2. Marketing Promotion Mix
 Promotional mixes
• 1. Advertising: Paid form of non-personal presentation
-It is used to:
 Informative : used when launching a new product, or for an updated or re
launched product. The objective is to develop initial demand
 Persuasive : is to increase the demand for an existing good. It is the most
challnged one
 Reminder: is to reinforces previous promotional information
• 2. Sales Promotions: Short-term incentive to encourage trial or purchase
• 3. Public Relations: Protect and/or promote the firm’s image/products
 News
 Written material
 Special events
 4. Personal Selling: Personal presentations

-Direct Marketing: Direct communications. Goal: immediate response

-Marketing through internet, telephone
5.3.3. The communication process
Sender → encoding → massages → decoding → Receiver
↑ ↓ ↓
↑ Noise ↓
Feedback←-----------------------------------------------------------Response
Elements in the Communications Process

• Sender
– encoding
• Message/Media
• Noise
• Receiver
– decoding
• Response
– feedback
– Purchase

What is Effective communication?

 Designing the Message

• Message content
– rational, emotional and/or moral appeals
• Message structure
– draw conclusions, argument
• Message format
– Layout, words, sounds, body language
• Message source
– expertise, trustworthiness, matching
 Individual assignment (20%)
You are required to consider Marketing mixes and do your ind. Asignment
-Due date for Submission: 5 days before final Examinatio n
Points to be considered
•Watch the television Advertisements and categorize them as informative,
persuasive and reminding
• Visit some organizations and discuss on how the price is set, what are the
factors considered in price setting?
•Mark “” on the appropriate choices of Marketing Channels
S. Types of Marketing Channels
No Factors determining the channel choice.
Short Channel Long Channel

1 If there is:
Large number of Customers
2 High geographical market concentration
3 low order size
4 Easily Perishable products
5 High technical nature of a product
6 High extent of intermediaries’ availability
7 The company’s High desire for controlling
8 Good ability of management of the company
9 Better Financial resources of the company
Major Media: Advantages/Disadvantages

• Broadcast/ air transmition

– Adv-appeals to senses, large audience
– Disadv-high cost, high clutter, fleeting exposure
• Direct Mail
– Adv-audience selectivity, flexibility, personalization
– Disadv-relative high cost, “junk mail” image
• Newspapers:
– Adv-flexible, local coverage, believable, accepted
– Disadv-short-life, poor reproduction quality
Major Media: Advantages/Disadvantages

• Magazines
– Adv-high geographic and demographic selectivity, credible,
prestigious, high quality reproduction, long-life
– Disadv-long ad purchase lead time, waste circulation, no
guarantee of position
• Outdoor
– Adv-flexible, high repeat exposure, low cost, low message
competition
– Disadv-little audience selectivity, creative limitations
 5.3.4.Message Execution
• 1. Testimonial evidence, scientific evidence- a
celebrity/company officials/typical consumer
endorsing a product
• 2. Technical expertise- use of experts
• 3. Personality symbol- use of celebrities
• 4. Musical- message conveyed through songs
 Cont’d
• 5. Mood/Image- builds mood or image of
love, peace/ beauty
• 6. Fantasy/hope- creates a fantasy for the
viewer built around the use of the product
• 7. Lifestyle- how well the product fits with
lifestyle
• 8. Slice of life- depict people in normal
settings

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Decision Stages in Promotion Planning
• 1. Set objectives and define target market
• 2. Determine budget
• 3. Determine creative strategy
– intended positioning
– give direction for message creation
• 4. Develop message
– focus on benefits and image
• 5. Select media and transmit massages
• 6. Evaluate effectiveness
 Budgeting for promotion
Conditions/ factors for budgeting
• Rule of thumb
– Percentage of sales
– What the competition does
• Objective-task method
– Set Objectives -- sales volume, share, etc.
– Assess necessary functions to be performed
– Define specific goals for advertising
5.4. Place and development of channel system
5.4.1. basic concepts of supply chain and marketing
channels
-How can you define supply chain and marketing channels?
The nature of marketing channel
-The most powerful element
-Activities: moving storing , the legal, targeting
-The company channel decision directly affects every other
marketing decision.

WHAT DETERMINE THE NATURE OF MARKETING CHANNEL?

 Intermediaries
Intermediary is a business firm that renders
services related directly to the sale and/or
purchase of a product as it flows from producer
to consumer.
There may be ownership title transferring or
not transferring
Types of intermediaries
Agents, sale representatives, wholesalers,
retailers
Retailing/ Wholesaling Marketing Decisions

1. Target market/ segment

– must profile the customer segments you seek
– marketing research is critical to determine effectiveness
2. Product assortment and procurement
– match target market’s expectations
– breadth and depth
– must develop a differentiation strategy
3. Services offered
– what service mix do you offer?
 Retailing Marketing Decisions-
Conti…
4. Store atmosphere
– layout, mood, music, scents, lighting, image, texture,
5. Promotion decision
– tools must fit image, must match target market
6. Place decision
– “location, location, location,”
7. Price decision
– must be based on target market and store image
 5.4.2. Logistics and Marketing Channels

I. Distribution- involves getting the product to where it

is needed in the most effective and efficient manner.
II. Supply chain management (a more integrated
approach) has replaced simple distribution in the
most effective/efficient channels
 Market Logistics
• It Involves planning, implementing and controlling the
physical flow of goods to points that meet customer
requirements -- at a profit
• Logistics costs are not necessarily maximized by asking
each logistics manager to minimize his or her costs
– rail is less expensive than air, but is much slower which may
increase costs of stock-outs or perishable goods
– cheap shipping containers may cost less but increase
damaged goods
 Market Logistics Decisions

1. Order processing
– key is to reduce the elapsed time between order receipt,
fulfillment and payment
2. Warehousing
– key is to reduce total warehousing costs without incurring
stock-outs
3. Inventory
– higher levels of service require greater inventory and/or
better logistics management
4. Transportation
5.4.3. The roles of marketing channels
What are the role played by the channel?

Major channels of distribution

• Consumer goods and business goods channels
-A channel consisting only of producer and final
customer, with no intermediaries providing
assistance, is called direct distribution.
-In contrast, a channel of producer, final
customer, and at least one level of
intermediaries represents indirect distribution
 Distribution of Consumer goods
• Producer consumer
• Producer retailer consumer
• Producer wholesaler retailer consumer
• Producer agent retailer consumer
• Producer agent wholesaler retailer
consumer
 Four Examples of Basic Channels of Distribution for
Consumer Products
Manufacturer or producer

Del Procter &

Citibank Nissan
Monte Gamble

Wholesaler Wholesaler

Wholesaler

Retailer Retailer Retailer

Consumer
 Distribution of business goods
1.Producer – user
2.Producer – industrial distributor – user
3.Producer – agent – user
4.Producer – agent – industrial distributor –
user
 NB- user=use for business purpose
Distribution for services
• Producer – consumer
• Producer – agent – consumer
 Channel Management Decisions
• Selecting Channel Members
• Managing and Motivating Channel Members:
• Evaluating Channel Members
 5.4.4. actors Affecting Channel Choice
Market Considerations:
• Types of market
• Number of potential customers
• Geographic concentration of the market
• Order size

Product Considerations:
• Unit value
• Perishability
• Technical nature of a product
 Conti…
Intermediary considerations:
• Services provided by intermediaries
• Availability of desired intermediary
• Producers may not want to add other policies

Company Considerations
• Desire for channel control
• Service provided by seller
• Ability of management
• Financial resources
 Channel design decision
What are the steps to follow to design the channel?
 Analyzing consumers‘ and business’s needs
 Setting channel objectives
 Identifying major channel alternatives
 Evaluating/examining the major alternatives
 Select and monitor

 what market value the channel will add?

 Time value
 Place value
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