MARKETING SESSION 2

TOPICS TOPICS

MARKETING MIX (4P’s)

PRODUCT - What is Product / Types of Products

- Product Decisions
- Individual Product decisions
- Product Line decisions / Product Mix decisions
- Branding Decisions
- Packaging & Labeling Decisions

PRICING - What is Price

- Factors to consider when setting price
- Pricing approaches
- Pricing strategies
 Objectives
Objectives
• Identify the various characteristics of products.
• Learn how companies build and manage
product lines and mixes.
• Understand how companies make better
brand decisions.
• Comprehend how packaging and labeling can
be used as marketing tools.
 WhatisisaaProduct
What Product ?
• Goods – can be offered to a market for consumption
• Services – are activities with no ownership
• Experiences – need to be memorable
• Persons
• Places
• Organizations
• Ideas
• Activity
Product Levels
 Product Levels
1. Core benefit : What is the buyer really buying? While designing the product the
company must first define the core, problem solving benefits the customer seeks.

2. Basic product :
Company needs to focus on Designing, features, packaging, quality, brand name

3. Expected product

4. Augmented product:
Company should try to offer additional consumer services & benefits.
Eg : Hotels offering free Airport drop & pick ups

5. Potential Products
 Product Classification
Product • Nondurable
Classifications – Tangible
– Rapidly consumed
• Consumer goods – Example: Milk
• Industrial goods • Durable
– Tangible
– Lasts a long time
– Example: Oven
• Services
– Intangible
– Example: Tax preparation
 Consumer Product
Classifications

Convenience Shopping

Types of
Consumer
Products

Unsought
Specialty
Goods
 Product Classification
• Classified by Shopping Habits :

• Convenience goods : Frequent Immediate Little Efforts

– Staple :Bought on regular basis Eg. Tooth paste Jam

– Impulse :Bought without planning Eg. Chocolates
– Emergency :Bought when need is urgent Eg. Umbrellas

– Shopping goods : compares on quality, price, suitability Eg. Clothing

– Specialty goods : goods with unique characteristics / brand identification /

special purchase efforts

– Unsought goods : consumer does not knows / knows but does not thinks of
buying
Industrial Product Classifications

Materials
Capital
and
Items
Parts Types
of
Industrial
Products

Supplies
and
Services
Industrial Product Classification

- Materials and parts

- Capital items

Installations Equipment

- Supplies and business services

Maintenance and repair

Advisory services
Individual Product Decisions

Product Attributes

Branding

Packaging

Labelling

Product Support Services

Product Attribute Decisions

Quality Features

Design
Product Attribute
Product Decisions
Attributes
Developing a product involves defining the benefits
that will offer. These benefits are communicated &
delivered by product attributes such as :
Quality, Features, Style & Design

Quality : Includes durability, reliability ,precision ,

ease of operation & repair.
Very important positioning tool & has direct impact on
to customer value & satisfaction.
Quality has 2 dimensions : Level & Consistency

Features : product can be offered with varying

features.
basic model, higher end model by adding more
features etc.

Style & design : Another way to add customer value.

Good style & design can attract attention ,improve
product performance & give a stronger competitive
advantage.
 Product Line Decisions

Stretching
Stretching Filling
Filling

Length
Length Product Featuring
Featuring
Line Decisions

Product Mix
Decisions
Width
Width Consistency
Consistency

Length
Length Depth
Depth
 Product Line Decisions
Product Line is a group of products that are closely
related as they :
- function in a similar manner
- sold to same customer groups
- marketed through same types of outlets
- fall within same price range
Eg: Bata produces several lines of athletic shoes &
apparel

Product Line decision involves :

Line Stretching Line Filling Line Featuring

Line Pruning
 Branding Decisions
What is a Brand
A brand is a name , sign, symbol or a
combination of these that helps
identifying the maker /seller of a
product & also helps to differentiate
from those of competitors.

Branding adds value to a product & is

an important part of any product.
Brand is a complex symbol that conveys up to 6
levels of meanings

1. Attributes 2.Benefits 3.Values

4. Culture 5.Personality 6. User

Benefits
Attributes Value

Levels of
Brand Meaning
Awareness Personality
Brand
Equity

Preference Portfolios
Loyalty
Major Brand Decisions
To
To Brand
Brand or
or Not
Not to
to Brand
Brand
Brand
Brand
No
No Brand
Brand
Brand
Brand Name
Name Selection
Selection
Selection
Selection
Protection
Protection
Brand
Brand Sponsor
Sponsor
Manufacturer’s
Manufacturer’sBrand
Brand
Private
PrivateBrand
Brand Licensed
Licensed Brand
Brand
Brand
Brand Strategy
Strategy
New
NewBrands
Brands
Line/Brand
Line/BrandExtensions
Extensions Multi
Multibrands
brands
Brand
Brand Repositioning
Repositioning
Brand
Brand Repositioning
Repositioning
No
No Brand
BrandRepositioning
Repositioning
1. Brand Decision - To Brand or not to Brand ?

- Advantages of Branding
Loyal set of customers to the seller
Loyalty leads to protection against competitors
Helps sellers to segment the market
Creates right image for the company
Greater acceptance by distributors when launching new products

2. Brand Positioning : Is getting a place in consumer’s mind

Positioning can be done at 3 levels.

Product attribute : lowest level. Easy for competitor to copy.

Desirable benefits what the product would be delivering
Beliefs & Values : Strongest way to position as its packed with
emotions
 3. Brand Name Selection :
Good name adds to products success.
What goes in to successful naming :
- suggest something about the product
-Easy to pronounce ,recognize & remember
-Distinctive Extendable in to other business categories
-Translate easily in to foreign languages
-Capable of registration & legal protection

NAMING APROACHES
1.Names communicate product function
Example : Good Night Boost Walkman Shinex

2. Specialty of the product

Shampoo – Halo Sunsilk Velvette

3. Acronyms
AMUL MRF

4. Use Company name

Bata Cadbury Samsung LG Sony
 4. Brand Sponsorship :

A company has 4 options:

1.Product may be launched as Manufacturer’s brand

2.Manufacturer may sell to reseller who gives it a Private

brand

3.Licensed brands : License names /symbols previously

created by other manufacturers, names of well known
celebrities etc.
Eg : Calvin klein ,Gucci, Armani

4. Co –branding : using established brand names of 2

different companies on the same product
Eg : ICICI - HP credit card
 5. Brand Development
Company has 4 choices when it comes to developing brands:

- Line extension : using a successful brand name to introduce additional

items in given product category.

- Brand extension : using a successful brand name to launch a new or

modified product in a new category.
Nike : Shoes to Apparels

- Multi brands :
Introducing additional brands in the same category.
Eg. HLL has many different brands in its product category. Soaps various
brands.

- New brands : Creating a new brand name when entering a new product
category.
Eg: Titan entered in to branded Jewelry with Tanishq
 6.Managing Brands

1. Companies must build & manage brands carefully.

2.Brand positioning must be continually

communicated to customers.
Advertising campaigns need to be used to create name
recognition, awareness & brand preference.

3.The customer touch points like word of mouth

personal interactions with company people, telephone
interactions company websites etc must convey the
right brand image.

4.Finally companies need to periodically audit their

brands strengths & weaknesses.
 BRAND REPOSITIONING

brands need to be repositioned because of

changing customer preferences

new competitors.

Others may call for completely Re Branding

 Packaging

Immediate Secondary Shipping

Packaging
Packaging

Labeling
Labeling

Identifies Describes Promotes

New Product Development Process
New Product Development Process

Marketing Business
Strategy Analysis

Concept Product
Development Development
and Testing

Idea Test
Screening Marketing

Idea Commercial-
Generation isation
 Test Marketing

Standard Controlled
Major
Types of
Test
Marketing

Simulated
 Product Life Cycle
Sales and
Profits

Sales

Profits

Time
Product Introduction Growth Maturity Decline
Development
Stage
Sales and Profits Over
Losses/ the Product’s Life From
Investments ($) Inception to Demise
PRICING
Price What is Price
Has Many Names

Rent Fare

Tuition Interest

Donation Fee

Monthly Payment
 The Importance of Price
-Price is a direct determinant of profits (or losses)
-Price indirectly affects costs (through quantity
sold)
-Price determines the type of customer and
competition the organization will attract
-Price affects the image of the brand
-A pricing error can nullify all other marketing mix
activities
 Setting the Price
1. Selecting the pricing
objective

2. Determining demand

3. Estimating costs

4. Analyzing competitors’
costs, prices, and offers

5. Selecting a pricing
method

6. Selecting final price

Factors Affecting Price

Internal Factors

Pricing
Decisions

External Factors
 Internal Factors

1.Marketing Objectives
Survival
Current Profit Maximisation
Market Share Leadership
Product Quality Leadership

2.Marketing Mix Strategy

3.Cost
Fixed Cost Variable Cost

4. Organisational Considerations
 External Factors
1.Market
Pure Competition
- many buyers/sellers trading in same commodities
Monopolistic Competition
- many buyers/sellers trading over range of price
Oligopolistic Competition
- few sellers who are highly sensitive to prices
Pure Monopoly
- only one seller

2.Demand 3. Competition

3.Other Factors
Economic Factors
Government Influence
Reseller / Distributor
Pricing Approaches
 Cost-Plus Pricing

Increased Minimise
Certainty Price
Competition
Key
Reasons for
Cost-Plus
Popularity

Perceived
Fairness
 Cost-Plus Pricing
Selling price is determined by adding a fixed amount,
usually a percentage, to the (total) cost of the product

Most commonly used pricing method (e.g., groceries

and clothing)

Example: If a product costs Rs 4.60 to produce and

selling price is Rs 6.35, the mark up on cost is 38%
and markup on price is 28%.
 Value-Based Pricing

Cost-Based Pricing Value-Based Pricing

Product START Customer

Cost Value

Price Price

Value Cost

Customers Product
Competition-Based Pricing

Costs

? ?
?? ? Bid / Tender
?

Contract
Pricing Strategies
 New Product Pricing Strategies
• SKIMMING STRATEGY
• Price initially set very high and reduced over time

• When Appropriate
1. Demand is likely to be price inelastic
2. There are different price-market segments
3. The offering is unique enough to be protected from competition by patent,
copyright, or trade secret
4. Production or marketing costs are unknown
5. A capacity constraint in producing the product or providing the service exists
6. An organization wants to generate funds quickly
7. There is a realistic perceived value in the product or service
 Penetration Pricing Strategy

Price is initially set low to gain a foothold in the market

When Appropriate :

-Demand is likely to be price elastic

-The offering is not unique or protected by patents,
copyrights,
-Competitors are expected to enter market quickly
-There are no distinct and separate price-market
segments
-There is a possibility of large savings in production and
marketing costs if a large sales volume can be
generated
-The organization’s major objective is to obtain a large
market share
Product Mix Pricing Strategies

Product Line Pricing

Setting Price Steps Between Product Line Items

Captive-Product Pricing
Pricing Products That Must Be Used With The Main Product

Product-Bundle Pricing
Pricing Bundles Of Products Sold Together

Optional-Product Pricing
Pricing Optional Products Sold With The Main Product

By-Product Pricing
Pricing Low-Value By-Products To Get Rid of Them
 Adjustment Strategies - I

Price
Price Adjustment
Adjustment Strategies
Strategies

Discount
Discount Segmented
Segmented

Psychological
Psychological

Cash
Cash Customer
Customer
Quantity
Quantity Product
Product Form
Form
Seasonal
Seasonal Location
Location
Functional
Functional Time
Time
Allowances
Allowances
Adjustment Strategies - II

Promotional

International

More

Value
Price
Adjustment
Strategies

Geographical
 Price Changes
Initiating Initiating
Price Cuts Price Increases

Issues in Price Change Strategies

Competitor
Buyer Reactions
Reactions
 Assessment & Response to
Competitor Pricing

No Hold current price

Has Competitor
Cut Price? monitor competitor
prices
Yes
Will lower price
negatively affect No
our share Reduce Price
and profits
Yes Raise Perceived
No
Can/should Quality
Effective action
be taken? Yes Improve Quality
& increase price

Launch low-price
‘fighting brand”
Responding to Competitor Price
Changes- Example
Hold our price
Has competitor No at present level;
cut his price? continue to watch
competitor’s
No No price
Yes

Is the price Is it likely to be How much has

likely to a permanent his price been
significantly Yes Yes
hurt our sales? price cut? cut?

By less than 2% By 2-4% By more than 4%

Include a Drop price by Drop price to
cents-off coupon half of the competitor’s
for the next competitor’s price
purchase price cut