First day Takeaway
“Principles of Marketing”
MKT-201
Mohammad Shahidul Islam, PhD., MM.
Assistant Professor of Marketing
Brac Business School
Brac University
Marketing: Creating Customer Value and Engagement
“ We see our customers as invited guests to a party, and we are the
host. It’s our job every day to make every important aspect of the
customer experience a little better.”--JeJeff Bezos is known for his
consistent acknowledgment of his customers. (CEO, Amazon)
So then, what is Marketing?
Marketing is a process by which companies create value for customers
and build strong customer relationships in order to capture value from
customers in return.
So, then how to create and capture Customer
Value? (Marketing Process)
1. Understanding the market place and customer needs and wants
2. Designing customer values-driven marketing strategy
3. Constructing integrated marketing program that delivers superior
value
4. Building profitable relationships and create customer delight
5. Capture value from customer in returns
Capture value from customers to create profits and customer equity
Customer Needs, Wants, and Demands
• NEEDS = The essential things to survive
• WANTS = To fulfill that needs
• DEMANDS = Wants backed by buying power
Market offerings and Marketing myopia
• Market offerings are some combination of products, services,
information, or experiences offered to a market to satisfy a need or
want
• Marketing myopia is focusing only on existing wants and losing sights
of underlying consumers needs
Customer Value and Satisfaction
Exchanges and Relationships
• Exchange is the act of obtaining a desired object from someone by
offering something in return
• Marketing actions try to create, maintain, and grow desirable
exchange relationships
Changing the Marketing Landscape
• The digital age
• Not-for-profit
• Rapid Globalization
• Sustainable Marketing
YouTube
Consumer Markets and Buyer
Behavior
Consumer buyers’ behavior is the buying behavior of final
consumers---individuals and households that buy goods and
services for personal consumption.
Consumer markets are made up of all the individuals and
households that buy or acquire goods and services for personal
consumptions
Video:
https://www.youtube.com/watch?v=v1q1nnPCcKw
Highlights: What you buy, why you buy?
The Model of Buyer Behavior
THE ENVIRONMENT
Marketing stimuli:
 Product, price, place, promotion
Other:
 Economic, technological
 Social
 Cultural
1
BUYERS’ BLACK BOX
 Buyers’ characteristics
 Buyers’ decision process
BUYERS’ RESPONSES
 Buyers’ attitude and preferences
 Purchase behavior what the buyers’ buy when, where, and
how much
 Brand engagement and relationship
2
Characteristics Affecting
Consumer Behavior
CULTURAL FACTOR
Factors influencing Consumer behavior
→ (1) CULTURAL
 Culture
 Subculture
 Social class
→ (2) SOCIAL
 Groups and social networks
 Family
 Roles and status
→ (3) PERSONAL
 Age and life cycle stage
 Occupation
 Economic situation
 Lifestyle
 Personality and self-concept
3
↓

→ (4) PSYCHOLOGICAL
 Motivation
 Perception
 Learning
 Beliefs and attitude
↓
Buyers
Highlights: marketers cannot really control these factors, but
must take them into account, why?
(1) Cultural Factors
Culture is the set of basic values, perceptions, wants, and
behaviors learned by a member of society from family and
other important institutions
Highlights: important for marketers to try and spot cultural
shifts, why?
Subcultures are groups of people within a culture with shared
value systems based on common life experience and situation
4
Social classes are society’s relatively permanent and ordered
divisions whose members share similar values, interests and
behavior. They are measured as a combination of occupation,
income, education, wealth, and other variables.
Highlights: some social systems do not allow movement—
examples?
Major Bangladeshi Social Class
 Upper Class
 Middle Class
 Working Class
 Lower Class
Highlights: why are marketers interested in social class of
consumers?
Video: Summary of today:
https://www.youtube.com/watch?v=yTQKLDM1sac
MINI TEST LAST WEEK
https://forms.gle/SiZBQ7Bye4xh83yb8
5
Consumer Markets and Buyer
Behavior-PART-1
Consumer buyers’ behavior is the buying behavior of final
consumers---individuals and households that buy goods and
services for personal consumption.
Consumer markets are made up of all the individuals and
households that buy or acquire goods and services for personal
consumptions
Video:
https://www.youtube.com/watch?v=v1q1nnPCcKw
Highlights: What you buy, why you buy?
The Model of Buyer Behavior
THE ENVIRONMENT
Marketing stimuli:
 Product, price, place, promotion
Other:
 Economic, technological
 Social
 Cultural
1
BUYERS’ BLACK BOX
 Buyers’ characteristics
 Buyers’ decision process
BUYERS’ RESPONSES
 Buyers’ attitude and preferences
 Purchase behavior what the buyers’ buy when, where, and
how much
 Brand engagement and relationship
2
Characteristics Affecting
Consumer Behavior
CULTURAL FACTOR
Factors influencing Consumer behavior
→ (1) CULTURAL
 Culture
 Subculture
 Social class
→ (2) SOCIAL
 Groups and social networks
 Family
 Roles and status
→ (3) PERSONAL
 Age and life cycle stage
 Occupation
 Economic situation
 Lifestyle
 Personality and self-concept
3
↓

→ (4) PSYCHOLOGICAL
 Motivation
 Perception
 Learning
 Beliefs and attitude
↓
Buyers
Highlights: marketers cannot really control these factors, but
must take them into account, why?
(1) Cultural Factors
Culture is the set of basic values, perceptions, wants, and
behaviors learned by a member of society from family and
other important institutions
Highlights: important for marketers to try and spot cultural
shifts, why?
Subcultures are groups of people within a culture with shared
value systems based on common life experience and situation
4
Social classes are society’s relatively permanent and ordered
divisions whose members share similar values, interests and
behavior. They are measured as a combination of occupation,
income, education, wealth, and other variables.
Highlights: some social systems do not allow movement—
examples?
Major Bangladeshi Social Class
 Upper Class
 Middle Class
 Working Class
 Lower Class
Highlights: why are marketers interested in social class of
consumers?
Video: Summary of today:
https://www.youtube.com/watch?v=yTQKLDM1sac
MINI TEST LAST WEEK
https://forms.gle/SiZBQ7Bye4xh83yb8
5
Consumer Markets and Buyer
Behavior-PART-2
→ (2) SOCIAL Factor
 Groups and social networks
 Family
 Roles and status
 Groups and social networks
Highlights: What groups are you a member of? What are your
aspirational groups?
Membership groups
Aspirational groups
Reference Groups
Groups with direct
influence and to
which a person
belongs
Groups an individual
wishes to belong to
Groups that form a
comparison or
reference in forming
attitude or behavior
Membership groups: a social body or organization to which
people belong as members, especially when they feel that the
group has formally or informally accepted them into its ranks.
Such groups, which include clubs, societies, cliques, teams, and
political parties, often explicitly distinguish between individuals
who belong to the group and those who do not.
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Aspirational groups: a reference group that an individual aspires
to join. An aspirational group may be an actual group
characterized by interaction and interpersonal structures (e.g., a
professional association, a sports team) or an aggregation of
individuals who are thought to possess one or more shared
similarities (e.g., the rich, intellectuals)
Reference Groups: a group or social aggregate that individuals
use as a standard or frame of reference when selecting and
appraising their own abilities, attitudes, or beliefs. Reference
groups include formal and informal groups that the individual
identifies with and admires, statistical aggregations of
noninteracting individuals, imaginary groups, and even groups
that deny the individual membership.
Highlights: Groups influence tends to be strongest when the
product is visible to others the buyer respects
Others
 Online special networks
 Buzz marketing
 Social media sites
 Virtual worlds
 Word of mouth
 Opinion leaders
Highlights: How can marketers use these networks?
7
Family is the most important consumer-buying organization in
society
Roles and status can be defined by a person’s position in a
group
Highlights: Do you use any brands because they are what your
parents use?
→ (3) PERSONAL
 Age and life cycle stage
 Occupation
 Economic situation
 Lifestyle
 Personality and self-concept
Age and life-cycle segmentation is a demographic strategy of
segmentation where a product-market is divided into segments
depending on the age so that the company can more accurately
target its offerings to the needs and wants of life’s each stage of
interest to it. Thus, a company can develop various products and
various marketing approaches for school-going children,
teenagers, varsity students, newly married couples, old married
couples, mature adults, senior citizens, and the like.
Occupation affects the goods and services bought by consumers
Economic situations include trends in
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Spending
Personal
income
Savings
Interest rates
Lifestyle is a persons’ pattern of living as expressed in his or her
psychographics (Psychographics are the attitudes, interests,
personality, values, opinions, and lifestyle of your target
market.)
Highlights: Psychographics measure a consumer’s
 Activities
 Interests
 Opinions
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Personality refers to the unique psychological characteristic
that distinguish a person or groups
Highlights: Name a brand that has a personality
Brand and personality traits
A company's brand personality elicits an emotional response in
a specific consumer segment, with the intention of inciting
positive actions that benefit the firm. There are five main types
of brand personalities with common traits. They are excitement,
sincerity, ruggedness, competence, and sophistication.
Customers are more likely to purchase a brand if its personality
is similar to their own.
 Sincerity
 Excitement
 Competence
 Sophistication
 Ruggedness
10
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→ (4) PSYCHOLOGICAL
 Motivation
 Perception
 Learning
 Beliefs and attitude
A motive (or drive) is a need that is sufficiently pressing to direct
the person to seek satisfaction of the need. Motivation research
refers to qualitative research designed to probe consumers’
hidden, subconscious motivations
Highlights: Most consumers do not know or cannot describe
why they act like they do
12
Perception is the process by which people select, organize, and
interest information to form a meaningful picture of the world
Perceptual process
Selective attention is the tendency for people to screen out the
most of the information to which they are exposed
Selective distortion is the tendency for people to interpret
information in a way that will support what they already believe
13
Selective retention is the tendency to remember good points
made about a brand they favor and forget good points about
competing brands
Highlights: On average we are exposed to 3000 to 5000 ad
messages daily
A belief is a descriptive thought that a person has about
something based on
 Knowledge
 Opinion
 Faith
Highlights: What if a belief about a brand is wrong?
An attitude describes a parsons’ relatively consistent evaluation,
feelings, and tendencies towards an object or idea
Finally
https://www.youtube.com/watch?v=PSLpdM6EYTQ
14
Business Markets and Business buyer
behavior
What is B2B marketing?
B2B marketing is any marketing strategy that aims to attract other
businesses. B2B stands for "business to business," which is when
businesses are your primary customers. If you sell products or
services to other businesses or organizations, this is considered
B2B sales, in which case you will want to use B2B marketing
tactics to generate leads.
Business buyer behavior refers to the buying behavior of
organizations that buy goods and services for use in the
production of other products and services that are sold, rented, or
supplied to others. It also includes the behavior of retailing and
wholesaling firms that acquire goods to resell or rent to others at
a profit
In the business buying process, business buyers determine
which products and services their organizations need to purchase
and then find, evaluate, and choose among alternative suppliers
and brands. Business-to-business (B-to-B) marketers must do
their best to understand business markets and business buyer
behavior. Then, like businesses that sell to final buyers, they must
engage business customers and build profitable relationships with
them by creating superior customer value.
In some ways, business markets are similar to consumer
markets. Both involve people who assume buying roles and make
purchase decisions to satisfy needs. However, business markets
differ in many ways from consumer markets. The main
differences are in market structure and demand, the nature of the
buying unit, and the types of decisions and the decision process
involved.
The business market is huge. In fact, business markets involve
far more dollars and items than do consumer markets. For
example, think about the large number of business transactions
involved in the production and sale of a single set of Goodyear
tires. Various suppliers sell Goodyear the rubber, steel,
equipment, and other goods that it needs toproduce tires.
Goodyear then sells the finished tires to retailers, which in turn
sell them to consumers. Thus, many sets of business purchases
were made for only one set of consumer purchases. In addition,
Goodyear sells tires as original equipment to manufacturers that
install them on new vehicles and as replacement tires to
companies that maintain their own fleets of company cars, trucks,
or other vehicles.
Business Markets and Business
buyer behavior-Part 2
Business markets are similar to consumer markets. Both
involve people who assume buying roles and make
purchase decisions to satisfy needs. However, business
markets differ in many ways from consumer markets.
The main differences are in market structure and demand,
the nature of the buying unit, and the types of decisions
and the decision process involved.
Business Markets and Business
Buyer Behavior
Business buyer behavior refers to the buying behavior of
the organizations that buy goods and services for use in
the production of other products and services that are
sold, rented, or supplied to others.
The business buying process is the process where
business buyers determine which products and
services are needed to purchase, and then find,
evaluate, and choose among alternative brands.
Business Markets
Nature of the Buying Unit
Business buyers usually face more complex buying
decisions than do consumer buyers. Compared with
consumer purchases, a business purchase usually
involves:
• More decision participants
• More professional purchasing effort
• More buyer and seller interaction
The Business Buying Process
Stages of Business Buying Behavior
The Business Buying Process
Problem recognition occurs when someone in the
company recognizes a problem or need.
• Internal stimuli
• Need for new product or production equipment
• External stimuli
• Idea from a trade show or advertising
The Business Buying Process
General need description describes the characteristics
and quantity of the needed item.
Product specification describes the technical criteria.
Value analysis is an approach to cost reduction where
components are studied to determine if they can be
redesigned, standardized, or made with less costly
methods of production.
The Business Buying Process
Supplier search involves compiling a list of qualified
suppliers to find the best vendors.
Proposal solicitation is the process of requesting
proposals from qualified suppliers.
Supplier selection is when the buying center creates
a list of desired supplier attributes and negotiates
with preferred suppliers for favorable terms and
conditions.
The Business Buying Process
Order-routine specifications includes the final order
with the chosen supplier and lists all of the
specifications and terms of the purchase.
Performance review involves a critique of supplier
performance to the order-routine specifications.
E-Procurement and Online Purchasing
• Online purchasing
• Company-buying
sites
• Extranets
E-Procurement and Online Purchasing
• Advantages
• Access to new suppliers
• Lowers costs
• Speeds order processing and delivery
• Enhances information sharing
• Improves sales
• Facilitates service and support
• Disadvantages
• Erodes relationships as buyers search for new
suppliers
Institutional and Government Markets
Institutional markets consist of schools, hospitals,
nursing homes, and prisons that provide goods
and services to people in their care.
• Characteristics
• Low budgets
• Captive patrons
Institutional and Government Markets
Government markets tend to favor domestic suppliers,
require them to submit bids, and normally award the
contract to the lowest bidder.
• Affected by environmental factors
• Non-economic factors considered
• Minority firms
• Depressed firms
• Small businesses
Customer-Driven Marketing Strategy: Creating
Value for Target Customers
Class-1
Designing a Customer-Driven Market Strategy
Market segmentation is the process that companies use
to divide large heterogeneous markets into small
markets that can be reached more efficiently and
effectively with products and services that match their
unique needs.
Market targeting (targeting) is the process of evaluating
each market segment’s attractiveness and selecting one
or more segments to enter.
1
Market Segment and understanding target ones
https://www.youtube.com/watch?v=c716vv8kU-w
Differentiation and Positioning
Differentiation involves actually differentiating the
market offering to create superior customer value.
Positioning consists of arranging for a market offering to
occupy a clear, distinctive, and desirable place relative to
competing products in the minds of target consumers.
Product Positioning
Product position is the way the product is defined by
consumers on important attributes—the place the
product occupies in consumers’ minds relative to
competing products.
• Perceptions
• Impressions
• Feelings
2
Choosing a Differentiation and Positioning Strategy
• Identifying a set of possible competitive advantages to
build a position
• Choosing the right competitive advantages
• Selecting an overall positioning strategy
Competitive advantage is an advantage over competitors
gained by offering consumers greater value, either
through lower prices or by providing more benefits that
justify higher prices.
Identifying Possible Value Differences and Competitive
Advantages
Identifying a set of possible competitive advantages to
build a position by providing superior value from:
 Product differentiation
 Service differentiation
3
 Channel differentiation
 People differentiation
 Image differentiation
Developing a Positioning Statement
A statement that summarizes company or brand
positioning using this form:
 target segment and need
 brand
 concept
 point of difference
“To busy multi-taskers who need help remembering
things, Evernote is a digital content management
application that makes it easy to capture and remember
moments and ideas from your everyday life using your
computer, phone, tablet and the Web”
4
Delivering the chosen position
• A company must take steps to deliver and
communicate the desired position to target consumers.
• Designing the marketing mix involves working out the
tactical details of the positioning strategy.
• The company must hire good service people, develop
good retailer relation, develop sales and advertising and
communicate its’ superior service to the customers.
Choosing the positioning
implementing the position.
is
Brainstorming
https://www.youtube.com/watch?v=mFcPit-A7-4
5
often
easier
than
What is the first step in target marketing?
1. Market positioning
2. Market segmentation
3. Target marketing
4. None of the above
Which of the following steps of target marketing takes into account competitiors’
offerings to the market?
1. Market positioning
2. Market segmentation
3. Market targeting
4. All of the above
Finally
https://www.youtube.com/watch?v=nU_oV0N414A&list=RDLVyasB9Oi41AQ
6
Attractive market segments
&
Market targeting strategy
An Overview
ATTRACTIVE MARKETING SEGMENT
An attractive marketing segment offers a small business the best
return on its investment in marketing resources. Businesses carry out
market research to identify segments that offer the potential for longterm revenue and profit growth. For a small business, a niche sector
may prove more attractive than a large sector where it would face
greater competition.
CONSIDERATIONS
Businesses take into account a number of factors when they are
evaluating market attractiveness. The strongest indicators are the size
of the segment in terms of numbers of customers or sales volume, the
growth rate and the level of competition. Businesses must then
calculate the market share they could expect to gain for a given level of
marketing expenditure.
CHARACTERISTICS
Attractive market segments include several aspects. The segment
should be easy to identify and measure in terms of the type and number
of customers involved. It should be accessible so that marketing teams
can communicate easily with the target market. There should be
meaningful gaps in the market that a company’s products meet, and the
1
segment should provide a substantial return for the marketing effort
required.
COMPETITION
Competitive strength is an important factor influencing marketing
attractiveness. Large, high-growth segments may look attractive, but
small businesses may find it difficult to compete with the large number
of existing suppliers. New market entrants would have to make a major
investment in marketing, particularly if customer loyalty was also high.
In smaller niche segments, competitors are likely to be fewer because
the costs and rewards for specialization are less attractive.
FIT
An attractive market segment provides a good fit between a
company’s capabilities and product range and customers’ needs.
Companies with a good fit succeed by offering superior value to
customers in the segment. Small businesses may only find the optimum
fit in a limited number of market segments. They should therefore focus
their marketing resources on a single segment.
GROWTH
Small businesses can grow in their chosen market segments by
increasing the range of specialized products they offer to existing
customers in the segment or customizing their products further to meet
the specific needs of new prospects in the same segment.
2
Market Targeting Strategies
UNDIFFERENTIATED (OR MASS) MARKETING
Mass marketing is the process of appealing to an entire market
rather than one targeted group. The marketing technique uses mass
distribution and mass media to reach the widest audience possible. Mass
marketing aims to advertise to the highest number of potential
customers. The technique is largely popular among big corporations and
is quite literally the polar opposite of niche marketing. Mass marketing
markets to everyone and commonly focuses on selling “must-have”
products at a lower price to achieve a higher number of sales and to
obtain maximum brand exposure.
For example: Telecom operators make use of mass marketing campaigns
because telecommunication services are being used by a huge number
of people. Additionally, several FMCG (Fast-moving consumer goods)
products like soaps and detergents use mass marketing. Body
deodorants, as well as many personal hygiene products, use this
marketing strategy as they are used by a big market segment.
Coca-Cola is another good example of mass marketing. Its television
advertisements can be seen in winter holidays as well which has been
designed to appeal simply to everyone. Since Coca Cola is a product
which spans various niches in terms of popularity; its mass marketing
campaign has proved to be very effective and successful over time.
3
DIFFERENTIATED MARKETING
Differentiated marketing, or segmented marketing, is deployed
when the company settles on one market segment or a few market
segments that provide the best opportunities for them. Each segment is
targeted with special offer designed to appeal specifically to the buyers
of that market. Creating a stronger position within one segment would
normally lead to higher sales, more repeat purchase behavior and higher
satisfaction from the customers. All of this comes at a higher cost than
undifferentiated marketing as each segment will require a different
product bundle and this lowers the chance for economies of scale.
Promotion cost also grow with the growing number of campaigns.
For example, a business selling organic dog food is looking to target a
specific type of person – a health conscious, animal loving and ecofriendly individual.
CONCENTRATED MARKETING OR NICHE MARKETING
A concentrated marketing is a type of marketing strategy where the
organizations’ marketing efforts are focused to a welldefined market segment. If you have a small business and limited
resources then concentrated marketing will be a good strategy to
achieve your desired business objectives with in a specific market
segments. This type of marketing requires to customize its marketing
strategy for defined market segment better than its competitors. Due to
this reason companies have to conduct competitors’ analysis to find out
strengths and weaknesses of existing and potential competitors.
For example
There are different forms of concentrated marketing, for example,
specialized home furniture provider and well-designed housewares
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shops. Other examples of concentrated marketing strategy are Rolls
Royce and Ford which have targeted the well-defined segment for its
luxury products. In this approach one marketing mix is developed for
instance, in the watch market, Rolex watches concentrated on luxury
segment.
The Spirit of Rolls-Royce Episode 2: Abdulla and the Ghost
https://www.youtube.com/watch?v=vXhzx_UaMxM
INDIVIDUAL MARKETING is sometimes referred to as “mass
customization” or “one-to-one marketing.” With this approach,
companies offer consumers a product created to their individual
specifications. “Individual marketing is a promotional tool for separate
entities.” It is also called personalized marketing. It includes- flexibility in
any company or organization a brand’s ability to alter its pattern of
behavior for an individual customer making a suitable marketing policy
thinking about the wants and requirements of each individual taking
small, tiny steps through the way for making the customer familiar with
the products.
LOCAL MARKETING is a targeting strategy focused expressly on a
small, clearly defined neighborhood or geographic area. Organizations
using this technique strive to generate a strong local presence, and
targets may include any person or organization within that small area.
Coca-Cola and Food Moments (Bangladesh)
https://www.youtube.com/watch?v=FnrvjYeY3Vk
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PRINCIPLES OF MARKETING
Product and Services
Strategy
What is a Product?
• Anything that can be offered to a market for
attention, acquisition, use or consumption.
• Satisfies a want or a need.
• Includes:
• Physical Products
• Services
• Persons
• Places
• Organizations
• Ideas
• Combinations of the above
Augmented
Product
Levels of Product
Installation
Packaging
Brand
Name
Delivery
& Credit
Quality
Level
Features
Core
Benefit
or
Service
AfterSale
Service
Design
Warranty
Actual
Product
Core
Product
https://www.youtube.com/watch?v=DXjzQWnB
Product Classifications
Consumer Products
Convenience Products
Shopping Products
> Buy frequently & immediately
> Low priced
> Many purchase locations
> Includes:
• Staple goods
• Impulse goods
• Emergency goods
> Buy less frequently
> Gather product information
> Fewer purchase locations
> Compare for:
• Suitability & Quality
• Price & Style
Specialty Products
Unsought Products
> Special purchase efforts
> Unique characteristics
> Brand identification
> Few purchase locations
> New innovations
> Products consumers don’t
want to think about
> Require much advertising &
personal selling
Product Classifications
Industrial Products
Materials
and
Parts
Capital
Items
Supplies
and
Services
Product Classifications
Other Marketable Entities
• Marketed to create, maintain, or change the attitudes or
behavior toward the following:
• Organizations - Profit (businesses) and
nonprofit (schools and
churches).
• Person - Political and sports figures,
entertainers, doctors and lawyers.
• Place Business sites and tourism.
• Social Reduce smoking, clean air,
conservation.
Individual Product Decisions
Product Attributes
Branding
Packaging
Labeling
Product Support Services
Product Attribute
Decisions
Quality
Features
Design
https://www.youtube.com/watch?v=JKIAOZZritk
Brands
Consistency
Quality & Value
Attributes
Advantages
of
Brand Names
Identification
Association
Brand
Equity
Loyalty
Credibility
Awareness
Major Brand Decisions
Brand Name Selection
Selection
Protection
Brand Sponsor
Manufacturer’s Brand
Private Brand
Licensed Brand
Co-branding
Brand Strategy
Line Extensions
Brand Extensions
Multibrands
New Brands
Brand Strategy
Brand Name
Product Category
Existing
New
Existing
Line
Extension
Brand
Extension
New
Multibrands
New
Brands
Brand Strategy
• Line Extension
• Existing brand names extended to new forms, sizes,
and flavors of an existing product category.
• Brand Extension
• Existing brand names extended to new product
categories.
• Multibrands
• New brand names introduced in the same product
category.
• New Brands
• New brand names in new product categories.
Packaging
Competitive
Advantages
Sales
Tasks
Packaging
Product
Safety
Identifies
Labeling
Promotes
Describes
Product - Support Services
Companies should design its support services to
profitably meet the needs of target customers.
How?
• Step 1. Survey customers to determine satisfaction with
current services and any desired new services.
• Step 2. Assess costs of providing desired services.
• Step 3. Develop a package of services to delight
customers and yield profits.
Product Line Decisions
Product Line Length
Number of Items in the Product Line
Stretching
Filling
Lengthen beyond
current range
Lengthen within
current range
Downward
Upward
Product Mix Decisions
Consistency
Width - number of
different product
lines
Length - total
number of items
within the lines
Depth - number
of versions of
each product
Product Mix all the product
lines offered
Characteristics of Services
Intangibility
Can’t be seen, tasted, felt, heard,
or smelled before purchase.
Inseparability
Can’t be separated from service
providers.
Variability
Perishability
Quality depends on who provides
them and when, where and how.
Can’t be stored for later sale or use.
The Service-Quality Chain
Internal Service Quality
Health Service
Profits and Growth
Satisfied and Loyal
Customers
Satisfied and
Productive Service
Employees
Greater Service
Value
Marketing Strategies for Service
Firms
• Managing Service Differentiation
• Develop offer, delivery and image with competitive
advantages.
• Managing Service Quality
• Empower employees
• Become “Customer obsessed”
• Develop high service quality standards
• Watch service performance closely
• Managing Service Productivity
• Train current or new employees
• Increase quantity by decreasing quality
• Utilize technology
Developing New Products
New product development is the development
of original products, product improvements, product
modifications and new brands through the firm’s own
product development efforts. New products are essential
for the continuation of the company. New products
aren’t easy to find.
There are eight major steps in the product development
process.
1. Idea generation: the systematic search for newproduct ideas. Ideas can be found via internal
sources, but also external idea sources. These can be
distributors, suppliers, but also
competitors. Crowdsourcing means inviting broad
communities of people – customers, employees,
independent scientists and researchers and even the
public at large – into the new-product innovation
process.
2. Idea screening: screening new-product ideas to spot
good ideas and drop poor ones as soon as possible.
3. Concept development and testing. Product
concept is a detailed version of the new product idea
stated in meaningful consumer terms. Concept
testing means testing new product concepts with a
group of target consumers to find out if the concepts
have strong consumer appeal.
4. Marketing strategy development: designing an
initial marketing strategy for a new product based on
the product concept. It consists of three parts:
describing the target market and value proposition,
outlining the budgets and lastly describing the longterm marketing mix strategy.
5. Business analysis is a review of the sales, cost and
profit projections for a new product to find out
whether these factors satisfy the company’s
objectives.
6. Product development: developing the product
concept into a physical product to ensure that the
product idea can be turned into a workable market
offering.
Business ideas
https://www.youtube.com/watch?v=YzCNXa8OrVU
7. Test marketing: the stage of new product
development in which the product and its proposed
marketing programme are tested in realistic market
settings. This can be done in both controlled test
markets and simulated test markets.
8. Commercialisation: introducing a new product into
the market.
Telemedicine in Ghana: changing healthcare one life at a time
https://www.youtube.com/watch?v=dD9cJ2Kbfp0
Music Products
https://www.youtube.com/watch?v=R4AbzwYOmNE
Managing New Product
Development
Reels
https://www.youtube.com/watch?v=p5IRBnvtLDs
1. Customer-centred new product development: new
product development must be customer centered. When
looking for and developing new products, companies
often rely too heavily on technical research in their R&D
laboratories. But like everything else in marketing,
successful new product development begins with a
thorough understanding of what consumers need and
value. Customer-centered new product development
focuses on finding new ways to solve customer problems
and create more customer-satisfying experiences.
2. To get their new products to market more quickly,
many companies use a team-based new product
development approach. Under this approach, company
departments work closely together in cross-functional
teams, overlapping the steps in the product development
process to save time and increase effectiveness. Instead
of passing the new product from department to
department, the company assembles a team of people
from various departments that stays with the new
product from start to finish. Such teams usually include
people from the marketing, finance, design,
manufacturing, and legal departments and even supplier
and customer companies. In the sequential process, a
bottleneck at one phase can seriously slow an entire
project. In the team-based approach, however, if one
area hits snags, it works to resolve them while the team
moves on.
3. Systematic New Product Development
Finally, the new product development process should be
holistic and systematic rather than compartmentalized
and haphazard. Otherwise, few new ideas will surface,
and many good ideas will sputter and die. To avoid these
problems, a company can install an innovation
management system to collect, review, evaluate, and
manage new product ideas. The company can appoint a
respected senior person to be its innovation manager.
It can set up web-based idea management software and
encourage all company stakeholders—employees,
suppliers, distributors, dealers—to become involved in
finding and developing new products. It can assign a
cross-functional innovation management committee to
evaluate proposed new product ideas and help bring
good ideas to market. It can also create recognition
programs to reward those who contribute the best ideas.
Bangladesh Business ideas
https://www.youtube.com/watch?v=E1eGEWgqn2c
Product Life Cycle Strategies
The product life cycle (PLC) is the course of product’s
sales and profits over its lifetime. It involves five distinct
stages:
1. Product development: development of the idea
without any sales.
2. Introduction: slow sales growth when the product is
introduced.
3. Growth: period of rapid acceptance.
4. Maturity: period of sale slowdown because of
acceptance by most potential buyers.
5. Decline: the period when sales fall and the profit
drops.
The PLC concept can also be applied to styles, fashions
and fads. A style is a basic and distinctive mode of
expression. Fashion is a currently accepted or popular
style in a given field. Fad is temporary period of
unusually high sales driven by consumer enthusiasm and
immediate product or brand popularity. Companies must
continually innovate to keep up with the cycle. There are
different strategies for each stage.
The introduction stage is the PLC stage in which a new
product is first distributed and made available for
purchase. Profits are generally low and the initial
strategy must be consistent with product positioning.
The growth stage is the stage in which a product’s sales
start climbing quickly. Profits increase and the firm faces
a trade-off between high market share and high current
profit.
In the maturity stage, products sales are growing slowly
or level off. The company tries to increase consumption
by finding new consumers, also known as modifying the
market. The company might also try to modify the
product by changing characteristics.
In the decline stage, the product’s sales are declining or
dropping to zero. Management might decide to maintain
the brand, reposition it or drop a product from the line.
When introducing product in international markets, it
must be decided which products to offer in which
countries and how these product should be adapted.
Packaging issues can be subtle, from translating issues to
different meanings of logos.
Managing New Product
Development
1. Customer-centered new product development: new
product development must be customer centered. When
looking for and developing new products, companies
often rely too heavily on technical research in their R&D
laboratories. But like everything else in marketing,
successful new product development begins with a
thorough understanding of what consumers need and
value. Customer-centered new product development
focuses on finding new ways to solve customer problems
and create more customer-satisfying experiences.
2. To get their new products to market more quickly,
many companies use a team-based new product
development approach. Under this approach, company
departments work closely together in cross-functional
teams, overlapping the steps in the product development
process to save time and increase effectiveness. Instead
of passing the new product from department to
department, the company assembles a team of people
from various departments that stays with the new
product from start to finish. Such teams usually include
people from the marketing, finance, design,
manufacturing, and legal departments and even supplier
and customer companies. In the sequential process, a
bottleneck at one phase can seriously slow an entire
project. In the team-based approach, however, if one
area hits snags, it works to resolve them while the team
moves on.
3. Systematic New Product Development
Finally, the new product development process should be
holistic and systematic rather than compartmentalized
and haphazard. Otherwise, few new ideas will surface,
and many good ideas will sputter and die. To avoid these
problems, a company can install an innovation
management system to collect, review, evaluate, and
manage new product ideas. The company can appoint a
respected senior person to be its innovation manager.
It can set up web-based idea management software and
encourage all company stakeholders—employees,
suppliers, distributors, dealers—to become involved in
finding and developing new products. It can assign a
cross-functional innovation management committee to
evaluate proposed new product ideas and help bring
good ideas to market. It can also create recognition
programs to reward those who contribute the best ideas.
New Product Development Showcase - YouTube
Developing A New Food Product: The Art + Technique Of Food Science YouTube
Product Life Cycle Strategies
The product life cycle (PLC) is the course of product’s
sales and profits over its lifetime. It involves five distinct
stages:
1. Product development: development of the idea
without any sales.
2. Introduction: slow sales growth when the product is
introduced.
3. Growth: period of rapid acceptance.
4. Maturity: period of sale slowdown because of
acceptance by most potential buyers.
5. Decline: the period when sales fall and the profit
drops.
The PLC concept can also be applied to styles, fashions
and fads. A style is a basic and distinctive mode of
expression. Fashion is a currently accepted or popular
style in a given field. Fad is temporary period of
unusually high sales driven by consumer enthusiasm and
immediate product or brand popularity. Companies must
continually innovate to keep up with the cycle. There are
different strategies for each stage.
The introduction stage is the PLC stage in which a new
product is first distributed and made available for
purchase. Profits are generally low and the initial
strategy must be consistent with product positioning.
The growth stage is the stage in which a product’s sales
start climbing quickly. Profits increase and the firm faces
a trade-off between high market share and high current
profit.
In the maturity stage, products sales are growing slowly
or level off. The company tries to increase consumption
by finding new consumers, also known as modifying the
market. The company might also try to modify the
product by changing characteristics.
In the decline stage, the product’s sales are declining or
dropping to zero. Management might decide to maintain
the brand, reposition it or drop a product from the line.
When introducing product in international markets, it
must be decided which products to offer in which
countries and how these product should be adapted.
Packaging issues can be subtle, from translating issues to
different meanings of logos.
https://www.youtube.com/watch?v=Vp_Ndyq_p2g
Chapter Ten
Pricing:
Understanding and Capturing
Customer Value
Copyright © 2009 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 1
Pricing Concepts
Understanding and
Capturing Customer Value
Topic Outline
• What Is a Price?
• Customer Perceptions of Value
• Company and Product Costs
• Other Internal and External
Considerations Affecting Price
Decisions
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 2
What Is a Price?
Price is the amount of money charged for a
product or service. It is the sum of all the
values that consumers give up in order to
gain the benefits of having or using a
product or service.
Price is the only element in the marketing mix
that produces revenue; all other elements
represent costs
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 3
Factors to Consider When Setting
Prices
Customer Perceptions of Value
• Understanding how much value
consumers place on the benefits they
receive from the product and setting a
price that captures that value
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 4
Factors to Consider When Setting
Prices
Customer Perceptions of Value
Value-based pricing uses the buyers’
perceptions of value, not the sellers
cost, as the key to pricing. Price is
considered before the marketing
program is set.
• Value-based pricing is customer driven
• Cost-based pricing is product driven
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 5
Factors to Consider When
Setting Prices
Customer Perceptions of Value
Value-based pricing
Good-value pricing
Value-added pricing
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 6
Factors to Consider When
Setting Prices
Customer Perceptions of Value
Good-value pricing offers the right
combination of quality and good service to
fair price
Existing brands are being redesigned to offer
more quality for a given price or the same
quality for less price
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 7
Factors to Consider When
Setting Prices
Customer Perceptions of Value
Everyday low pricing (EDLP) involves
charging a constant everyday low price with
few or no temporary price discounts
High-low pricing involves charging higher
prices on an everyday basis but running
frequent promotions to lower prices
temporarily on selected items
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 8
Factors to Consider
When Setting Prices
Customer Perceptions of Value
Value-added pricing attaches value-added
features and services to differentiate offers,
support higher prices, and build pricing
power
Pricing power is the ability to escape price
competition and to justify higher prices and
margins without losing market share
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 9
Factors to Consider
When Setting Prices
Company and Product Costs
Cost-based pricing involves setting prices
based on the costs for producing,
distributing, and selling the product plus a
fair rate of return for its effort and risk
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 10
Factors to Consider When
Setting Prices
Company and Product Costs
Cost-based pricing adds a standard markup to
the cost of the product
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 11
Factors to Consider When
Setting Prices
Company and Product Costs
Types of costs
Fixed
costs
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Variable
costs
Total
costs
Chapter 10 - slide 12
Factors to Consider
When Setting Prices
Company and Product Costs
Fixed costs are the costs that do not vary with
production or sales level
• Rent
• Heat
• Interest
• Executive salaries
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 13
Factors to Consider When
Setting Prices
Company and Product Costs
Variable costs are the costs that vary with the
level of production
• Packaging
• Raw materials
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 14
Factors to Consider
When Setting Prices
Company and Product Costs
Total costs are the sum of the fixed and
variable costs for any given level of
production
Average cost is the cost associated with a
given level of output
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 15
Factors to Consider When
Setting Prices
Costs as a Function of Production Experience
• Experience or learning curve is when
average cost falls as production
increases because fixed costs are
spread over more units
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 16
Factors to Consider When
Setting Prices
Cost-Plus Pricing
• Cost-plus pricing adds a standard markup
to the cost of the product
• Benefits
– Sellers are certain about costs
– Prices are similar in industry and price competition is
minimized
– Consumers feel it is fair
• Disadvantages
– Ignores demand and competitor prices
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 17
Factors to Consider
When Setting Prices
Break-Even Analysis and Target Profit
Pricing
Break-even pricing is the price at which total
costs are equal to total revenue and there is
no profit
Target profit pricing is the price at which the
firm will break even or make the profit it’s
seeking
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 18
Factors to Consider When
Setting Prices
Other Internal and External
Considerations
• Customer perceptions of value set the
upper limit for prices, and costs set the
lower limit
• Companies must consider internal and
external factors when setting prices
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 19
Factors to Consider
When Setting Prices
Other Internal and External
Considerations
Target costing starts with an ideal selling price
based on consumer value considerations
and then targets costs that will ensure that
the price is met
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 20
Factors to Consider When
Setting Prices
Other Internal and External
Considerations
Organizational considerations include:
• Who should set the price
• Who can influence the prices
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 21
Factors to Consider When
Setting Prices
Other Internal and External
Considerations
The Market and Demand
• Before setting prices, the marketer must
understand the relationship between
price and demand for its products
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 22
Factors to Consider When
Setting Prices
Other Internal and External
Consideration
The Market and Demand
Pure competition
Monopolistic competition
Oligopolistic competition
Pure monopoly
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 23
Factors to Consider When
Setting Prices
Other Internal and External
Considerations
The demand curve shows the number of units
the market will buy in a given period at
different prices
• Normally, demand and price are inversely
related
• Higher price = lower demand
• For prestige (luxury) goods, higher price can
equal higher demand when consumers
perceive higher prices as higher quality
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 24
Factors to Consider When Setting
Prices
Other Internal and External
Considerations
Price elasticity of demand illustrates the response of
demand to a change in price
Inelastic demand occurs when demand hardly changes when there
is a small change in price
Elastic demand occurs when demand changes greatly for a small
change in price
Price elasticity of demand = % change in quantity demand
% change in price
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 25
Factors to Consider When Setting
Prices
Other Internal and External Considerations
Competitor's Strategies
• Comparison of offering in terms of
customer value
• Strength of competitors
• Competition pricing strategies
• Customer price sensitivity
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 26
Factors to Consider
When Setting Prices
Other Internal and External
Consideration
Economic conditions
Reseller’s response to price
Government
Social concerns
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 10 - slide 27