Introduction to Business

Marketing Mix
Module Learning Outcomes

Explain how organizations use the marketing mix to market to their target
customers

14.1: Explain common product marketing strategies and how organizations use them
14.2: Explain how organizations use integrated marketing communication (IMC) to su
pport their marketing strategies
14.3: Explain common product distribution strategies and how organizations use the
m
14.4: Explain common pricing strategies and how organizations use them
Product
Learning Outcomes: Product

14.1: Explain common product marketing strategies and how

organizations use them
14.1.1: Describe common consumer product categories
14.1.2: Explain the elements and benefits of branding
14.1.3: Describe common branding strategies
14.1.4: Describe the product life cycle
14.1.5: Explain marketing considerations through the product life cycle
14.1.6: Explain the stages of the new-product development process
Product Marketing

• Product is the core of the marketing

mix and defines what will be priced,
promoted, and distributed.

• If you are able to create and deliver a

product that provides exceptional
value to your target customer, the
rest of the marketing mix is easier to
manage.
What is a Product?

A product is a bundle of attributes (features, functions, benefits, and uses)

that a person receives in an exchange. The term “product” refers to
anything offered by a firm to provide customer satisfaction, tangible or
intangible.
Consumer Product Categories

Consumer products are often classified into four groups related to different
kinds of buying decisions:
1. Convenience: inexpensive and requires minimum amount of effort on the part
of the consumer. Examples: bread, pain reliever, power cords
2. Shopping: usually more expensive and are purchased occasionally. Examples:
shoes, microwaves
3. Specialty: from the consumer’s perspective, these products are so unique that
it is worth it to go to great lengths to procure them. Examples: highly
differentiated, custom goods
4. Unsought products: products that the consumer never plans or hopes to buy.
Examples: funeral plots, pest-control
What is a brand?

• An identifier: a name, sign, symbol, design, or term that identifies an

offering
• A promise: a promise of what a company or offering will provide
• An asset: a reputation in the marketplace that can drive premium prices
and customer preference
• A set of perceptions: the sum total of everything individuals believe
and experience about a product, service, or organization
• A “mind share”: the unique position a company or offering holds in the
customer’s mind
Tangible and Intangible Elements

Brands are a combination of tangible and intangible elements:

• Visual design elements: logo, color, typography, images, taglines,

packaging, etc.
• Distinctive product features: quality, design sensibility, personality,
etc.
• Intangible aspects of a customer’s experience with a product or
company: reputation, customer experience, etc.
Brands Creates Market Perceptions

• Attributes: specific product features

• Benefits: attributes translate into functional and emotional benefits
• Values: company values and operational principles
• Culture: cultural elements of the company and brand
• Personality: strong brands often project a distinctive personality
• User: brands may suggest the
types of consumers who buy
and use the product
Brands Create Value
For the customer: brands help
simplify consumer choices.

For product and service providers:

branding helps create loyalty.

For the retailer: branding helps

retailers differentiate themselves
from one another and build
customer loyalty around the unique
experiences they provide.
Common Branding Strategies

• Branded house: Apple, BMW

• House of brands: Tang, Kool Aid

• Private label or store branding: Safeway Organics

• “No brand” branding: Yellow Cap

• Personal and organizational

• Place branding: Las Vegas

Other Branding Strategies

Co-branding is an arrangement in which two

established brands collaborate to offer a single
product or service that carries both brand names.
Example: Fiat and toy maker Mattel making the
Fiat “Barbie”

Brand licensing is the process of leasing or

renting the right to use a brand in association with
a product or set of products within a defined
market, geography, or territory.

Line Extension and Brand Extension: line

extensions introduce a new variety of offering
within the same product category. Brand
extensions move an existing brand name into a
new product category.
Five Stages of a Product Life Cycle

Stage 0: Product development

Stage 1: Market introduction
Stage 2: Growth
Stage 3: Maturity
Stage 4: Decline
Product Life Cycle
Common Characteristics Stages 0, 1, and 2
Stage Number Stage Characteristics

Stage 0: Product Development 1. Investment is made

2. Sales have not begun
3. New product ideas are generated,
operationalized, and tested

Stage 1: Market Introduction 1. Costs are very high

2. Slow sales volume to start
3. Little or no competition
4. Demand has to be created
5. Customers have to be prompted to try to
product
6. Makes little money at this stage

Stage 2: Growth 1. Costs reduced due to economic scale

2. Sales volume increases significantly
3. Profitability begins to rise
4. Public awareness increases
5. Competition begins to increase with a few
new players in establishing market
6. Increased competition leads to price
decreases
Common Characteristics Stages 3 and 4
Stage Number Stage Characteristics

Stage 3: Maturity 1. Costs are lowered as a result of increasing

production volume and experience curve
effects
2. Sales volume peaks and market saturation
is reached
3. new competitors enter the market
4. Prices tend to drop due to the proliferation
of competing products
5. Brand differentiation and feature
diversification is emphasized to maintain or
increase market share
6. Profits decline

Stage 4: Decline 1. Costs increase due to some loss in

economies of scale
2. Sales volume decline
3. Prices and profitability diminish
4. Profits become more a challenge of
production/distribution efficiency than
increased sales
Marketing Through the Product Cycle
Marketing Introduction Stage: think of this stage as the product launch.
This stage requires a significant marketing budget. The market is not yet
aware of the product or its benefits.

Marketing Growth Stage: marketers must now differentiate their product

from the incoming competition, emphasizing key features that appeal to
target customers.

Marketing Maturity Stage: growth has plateaued. Marketers usually focus

on niche markets, using promotional strategies to to capture new share in
these markets.

Marketing Decline Stage: marketing spend is reduced for products in this

life cycle stage. Often the marketer’s focus at this stage is to transition
customers to newer products that have more favorable economics.
The New-Product Development Process

Phase I
• Stage 1: Generating New Product Ideas
• Stage 2: Screen Product Ideas
• Stage 3: Concept Development and Testing
Phase II
• Stage 4: Business Case Analysis
• Stage 5: Technical and Marketing Development
Phase III
• Stage 6: Test Marketing
• Stage 7: Launch
Business Case Analysis

Before companies make a significant investment in a product’s

development, they need to be sure that it will bring a sufficient return, by
asking:
• What is the market opportunity for this product?
• What are the costs to bring the product to market?
• What are the costs through the product life cycle?
• Where does the product fit in the product portfolio and how will it impact existing
product sales?
• How does this product impact the brand?
• How does this product impact other corporate objectives such as social
responsibility?
Promotion
Learning Outcomes: Promotion

14.2: Explain how organizations use integrated marketing

communication (IMC) to support their marketing strategies
14.2.1: Explain integrated marketing communication (IMC)
14.2.2: Explain the promotion mix
14.2.3: Describe common marketing communication methods, including
their advantages and disadvantages
14.2.4: Explain how organizations use IMC to support their marketing
strategies
Integrated Marketing Communication

Marketing communication includes all the messages, media, and activities

used by an organization to communicate with the market and help persuade
target audiences to accept its messages and take action accordingly.

Integrated marketing communication (IMC) brings together a variety of

different communication tools to deliver a common message and make a
desired impact on a customer’s perceptions and behavior.

IMC coordinates marketing communication across different communication

methods and makes marketing communication more efficient and effective
because it relies on multiple communication methods and consumer touch
points to deliver consistent messages.
The Promotion Mix
Marketing Communication Methods

Seven common marketing communication methods are:

• Advertising
• Public relations
• Personal selling
• Sales promotion
• Direct marketing
• Digital marketing
• Social media marketing
Advertising

Advertising is any paid form of communication from an identified sponsor

or source that draws attention to ideas, goods, services or the sponsor
itself.
Public Relations
The purpose of public relations
is to create goodwill between an
organization (or the things it
promotes) and the “public” or
target segments it is trying to
reach.

Unlike advertising, public relations

does not pay for attention and
publicity. Although organizations
earn rather than pay for the PR
attention they receive, they may
spend significant resources on the
activities, events, and people who
generate this attention.
Personal Selling

Personal selling uses in-person interaction to sell products and services.

Personal selling puts and emphasis on face-to-face interaction,
understanding the customer’s needs, and demonstrating how the product
or service provides value.
Sales Promotion

Sales promotions are marketing activities that aim to temporarily boost

sales of a product or service by adding to the basic value offered. Examples
of this include but are not limited to:
• Coupons
• Sweepstakes or contests
• Premiums
• Rebates
• Samples
• Loyalty programs
• Point of purchase displays
Direct Marketing

• Direct marketing aims to sell products or

services directly to consumers rather than
going through retailers.

• Catalogues, telemarketing, mailed

brochures, or promotional materials and
television home shopping channels are all
common traditional direct marketing tools.

• Email and mobile marketing are two next-

generation direct marketing channels.
Digital Marketing

Digital marketing is an umbrella term for using digital tools to promote and
market products, services, organizations and brands.

Email and mobile marketing overlaps with direct marketing.

Other essential tools in the digital marketing tool kit: Web sites, content
marketing, search-engine optimization (SEO), and social media marketing.
Social Media Marketing

Social media are distinctive for their networking capabilities: they allow
people to reach and interact with one another through interconnected
networks.

This “social” phenomena changes the power dynamic in marketing: no

longer is the marketer the central gatekeeper for all communication about
a product, service, brand, or organization.

Social media allows for organic dialogue and activity to happen directly
between individuals, unmediated by a company.
Class Discussion: Marketing to You

Which method of marketing do you most see or respond to?

• Advertising
• Public relations
• Personal selling
• Sales promotion
• Direct marketing
• Digital marketing
• Social media marketing
Using IMC to Support Marketing Strategies

To aid in the planning process, marketing managers often use a campaign

approach. A campaign is a planned, coordinated series of marketing
communication efforts built around a single theme or idea and designed to
reach a particular goal.

Organizations may conduct many types of IMC campaigns, and several may
be run concurrently.

The IMC approach takes a central theme and pushes that message through
appropriate communication channels.
Practice Question 1

Integrated marketing communication (IMC) involves bringing together

multiple communication tools to deliver a common message and make a
desired impact on:
A. increasing sales revenue
B. the marketing mix
C. competitor’s claims and assertions
D. customer’s perceptions and behavior
Practice Question 2

The objective of marketing communication is to communicate, compete,

and:
A. clarify
B. convince
C. convey
D. correlate
Practice Question 3

Which of these common marketing communication methods has the biggest

advantage regarding customizing the marketing message to a specific
target audience?
A. direct marketing
B. personal selling
C. advertising
D. public relations
Place
Learning Outcomes: Place

14.3: Explain common product distribution strategies and how

organizations use them
14.3.1: List the characteristics and flows of a distribution channel
14.3.2: Describe the channel partners that support distribution channels
14.3.3: Explain the role of wholesale intermediaries
14.3.4: Describe the different types of retailer’s businesses use to distribute
products
14.3.5: Differentiate between supply chains and distribution channels
Channels of Distribution

The Channel of Distribution (also called the marketing channel) is sets of

interdependent organizations involved in the process of making a product or
service available for use or consumption, as well as providing a payment
mechanism for the provider.

The channel consists of organizations, some under the control of the

producer and some outside the producer’s control.

The channel management process is continuous and requires monitoring

and reappraisal.

Channels should have certain distribution objectives guiding their activities

Channel Flows
Channel flows reflect the many
linkages that tie channel members
and other agencies together in
distribution of goods and services.
Five important flows are:
• product flow
• negotiation flow
• ownership flow
• information flow
• promotion flow
Channel Flows Continued

1. Product flow: the movement of the physical product from the manufacturer
through all the parties who take physical possession of the product until it
reaches the ultimate consumer
2. Negotiation flow: the institutions that are associated with the actual
exchange processes
3. Ownership flow: the movement of title through the channel
4. Information flow: the individuals who participate in the flow of information
either up or down the channel
5. Promotion flow: the flow of persuasive communication in the form of
advertising, personal selling, sales promotion, and public relations
Five Flows
Channel Partners

While channels can be very complex, there is a common set of channel

structures that can be identified in most transactions.

Each channel structure includes different organizations. Generally, the

organizations that collectively support the distribution channel are referred
to as channel partners.
Marketing Channels for Consumer
Products
Types of Channels
Direct channel: simplest channel, the producer sells straight to the consumer.

Retail channel: companies that focus on selling directly to consumers. The

difference between the direct channel and the retail channel is that the retailer
does not produce the product.

Wholesale channel: to a consumer, the wholesaler channel looks a lot like the
retail channel. The wholesaler is primarily engaged in buying and usually storing
and physically handling goods in large quantities and then reselling them.

Agent channel: includes on additional intermediary. Agents and brokers are

different from wholesalers in that they do not take title to the merchandise.
They do not own the merchandise because they neither buy nor sell. The
brokers bring the buyer and seller together to negotiate the terms of the
transaction.
Role of Wholesale Intermediaries

Intermediaries act as a link in the distribution process but the role they fill is
broader than simply connecting the different channel partners.

Wholesalers, often called “merchant wholesalers” help move goods between

producers and retailers.

Functions that a merchant retailer fulfills:

• Purchasing
• Warehousing and Transportation
• Grading and Packaging
• Risk Bearing
• Marketing
• Distribution
Retailers that Distribute Products
Retailing involves all activities required to market consumer goods and
services to ultimate consumers who are purchasing for individual or family
need.

Beyond the distinction in the products they provide, there are structural
differences among retailers that influence their strategies and results. One of
the reasons the retail industry is so large and powerful is its diversity.
Types of retailers:
• Department stores
• Chain stores
• Supermarkets
• Discount retailers
• Warehouse retailers
• Franchises
• Malls and shopping centers
• Online retailing
• Catalogue retailing
• Non-store retailing
Supply Chains and Distribution Channels

A supply chain is the system through which an organization acquires raw

materials, produces products, and delivers the products and services.

On their way from producers to end users and consumers, products pass
through a series of marketing entities known as the distribution channel.

Distribution channels:
• reduce the number of transactions
• ease the flow of goods
The Functions of Distribution Channels
Supply Chain vs. Marketing Channels

The supply chain and marketing channels can be differentiated in the

following ways:

1. The supply chain is broader than marketing channels

2. Marketing channels are purely customer facing
3. Marketing channels are part of the marketing mix
Class Discussion: Peanut Butter Supply Chain

Here is a supply chain for

peanut butter. How would a
diagram of a marketing channel
be similar? Different?
Price
Learning Outcomes: Price

14.4: Explain common pricing strategies and how organizations use

them
14.4.1: Explain pricing from the customer’s viewpoint
14.4.2: Describe the objectives businesses hope to achieve with product
pricing
14.4.3: Explain the cost-plus pricing method
14.4.4: Explain the methods businesses use for discounts and allowances
Customer Value and Price

Whether a customer is the ultimate user of the finished product or a business

that purchases components of the finished product, the customer seeks to
satisfy a need through the purchase of a particular product. The customer’s
preference is to pay as little as possible and to receive the best value for their
money.

To increase the value, the business can increase the perceived benefits or
reduce the perceived costs.
Pricing Strategies
1. Profit-oriented pricing
2. Competitor-oriented pricing
3. Customer-oriented pricing
Profit Oriented Pricing

• Focus on finances of business and product

profit = revenue - price
• Price per product is set higher than the total cost of producing and selling
cost
• Ensures company makes a profit on each sale

Risks
• Customers don’t care about a company’s costs, if the product fails to deliver value,
it will be difficult to generate sales
• Competitors can undercut pricing
• Limits pricing flexibility
Competitive Oriented Pricing

• Price based on competitors’ costs

• Price either to indicate that the company believes its product provides
greater value or lower to be a low-price solution
• Simple way to price products

Risks
• Does not fully take into account the value of the product to the customer
• Might be priced too low for the value it provides, or too high
Customer Oriented Pricing

Customer uses several criteria to decide how much they are willing to
spend in order to satisfy that need.

The company seeks to charge the highest price that supports the value
received by the customer.

Customer oriented pricing requires an analysis of the customer and the

market. The company must understand the buyer persona, the value that
the buyer is seeking, and the degree to which the product meets customer
need.

Today’s marketing tends to favor customer-oriented pricing because

it prioritizes the customer and the customer’s perception of value.
Cost-Plus/Gross Margin Pricing
• A particular gross margin is selected that will produce a desirable
profit level
• Gross margin is the difference between how much the goods cost
and the actual price for which it sells.
• Is designated by a percent of net sales
• Company does not have to forecast general business conditions
or customer demand
• Consumers find fair, since the price they pay is related to the cost
of producing the item

Risks
• Inflexibility
• Does not take into account consumers’ perceptions of a product’s value
Markup

A markup is the calculation of the difference between cost and selling

price of merchandise in stock for a particular department or item.

Example:
A tie costs $14.50
It is sold for $25.23
The markup is $10.73
($25.23 - $14.50)
Discounting Strategies

• Quantity discounts are reductions in

base price given for buying some
predetermined quantity of
merchandise.
• Seasonal discounts are price
reductions given for out-of-season
merchandise.
• Cash discounts are reductions on
base price given to customers paying
cash or within some short period of
time.
• Trade discounts are given to
middlemen to encourage them to stock
and give preferred treatment to an
organization’s product.
More Discounting Strategies

• Personal allowances (rewards to

salespeople) are given to encourage
middlemen to aggressively promote
the organization’s product.
• Trade-in allowances (cars) reduce
the base price of a product or service
and are often used to help the seller
negotiate the best price with the
buyer.
• Price bundling (cable package)
groups similar or complementary
products and charges a total price that
is lower than if they were sold
separately.
Practice Question 4

Why does the customer’s view of price include the value equation?
A. Price is the most important factor in a consumer’s decision to buy.
B. Price is relative—consumers look for the best value for their money.
C. The value equation subtracts perceived discounts from the price.
D. The value equation divides cost by benefit in order to derive a fair price.
Practice Question 5

Which of the three objectives businesses use pricing to achieve uses the
Price-Value Equation?
A. customer objective
B. competitive objective
C. profit objective
D. revenue objective
Practice Question 6

If the prevailing gross margin goal for the shoe department at Nordstrom is
65%, what would be retail price be of a pair costing $75.00?
A. $150.00
B. $220.00
C. $500.00
D. $115.00
Practice Question 7

When Adobe Software combines 20+ applications into “Creative Cloud” for
one price, which method are they using?
A. quantity discount
B. trade discount
C. seasonal discount
D. price bundling
Class Discussion: Marketing Mix

You are a marketing consultant who helps companies get the word out about
their products and services. What marketing communications method
(advertising, direct marketing, personal selling, sales promotion, digital
marketing, and public relations) would you advise your clients to utilize for
the following:
• New Laundry Detergent
• Local Tree Service
• Home furnishings
• Wine club
• Business software
Quick Review

• How do organizations use common product marketing strategies?

• How do organizations use common pricing strategies?
• How do organizations use common product distribution strategies?
• How do organizations use integrated marketing communication (IMC) to
support their marketing strategies?