Quarter 4 Marketing Mix

DEVELOPING THE MARKETING MIX

PRODUCT

PRODUCT/S

ü  Are tangible objects that a company sells to customers for their use or consumption.

ü  Are expected to satisfy the needs and wants of customers (consumers & business buyers)

SERVICES

ü  Tends to be intangible

ü  Directly delivered to the customers by the employees of a company.

EXPERIENCE

It is a product which involves experiential aspects of consumption rather than utilitarian ones. This type of product allows consumer to engage in fantasies, feelings and fun and often carries subjective meaning and characteristics- Hirschman and Holbrook, 1982

LEVELS OF A PRODUCT

ü  Core product

ü  Actual product

ü  Augmented product

1.    Core product- Refers to the benefit that a consumer can gain from using a product. It can be considered the main reason for purchasing a product

2.    Actual product - This corresponds to the tangible characteristics of the product, including its features and packaging

3.    Augmented product- This level refers to the service- based add- ons that customers are entitled to upon purchasing the product

CLASSIFICATION OF PRODUCT

1.    Consumer goods - Are products and services purchased by customers for their use and thus, frequently purchased

2.    Industrial goods - Are purchased by businesses and are used in the creation of a new product that shall be eventually sold to others.

- Also include capital goods, such as heavy equipment, and raw materials that are further processed or modified to become a new product

NEW PRODUCT DEVELOPMENT

ü  Is a process that involves the conceptualization and creation of innovative products that will catch the attention of customers and ensure their loyalty to a particular brand.

1.    Idea generation - In this first stage, the company searches for and surveys new ideas to be used in developing a product.

2.    Idea screening- This is the stage when the ideas generated by the sales of the company and science experts are carefully studied. Only those ideas with potential for a successful sales performance are retained, while those that have a high chance of failure are eliminated.

3.    Concept development & testing - Once an idea for a new product is selected, it is further developed as a concept. It is assumed at this stage that the product has at least a high chance of succeeding in the market. The concept is then expanded and tested with a group of customers. Their feedback serves as the basis for enhancing the concept of the product.

4.    Market and business planning - After the concept of the new product is developed, the next step is to plan how It will be marketed. The target market is concretely identified and characterized, and the profit objectives are planned

5.    Product development - At this stage, the concept is developed into a product prototype. This stage involves the efforts of both the marketing and research departments of companies. It may take months or years to create a product prototype to ensure that it will pass both technical and commercial standards.

6.    Test marketing - Once a product prototype is developed, its marketability is tested with a particular group of customers in a specific location. The reactions of customers towards the product are gathered and analyzed. This will help address any problem concerning the marketability of the product before it is officially introduced to potential customers.

7.    Commercialization - After the product prototype has been tested, the company or firm will make its final decision on launching the product. It can be a soft launch or a full scale launch

During a soft launch the product will be tested with a limited number of customers. Unlike test marketing, it is not only the marketability of the product that is being tested also the usability and features of the product.

A full- scale launch serves as the official launching of the product. It involves the extensive utilization of the components of the 4Ps.

PRODUCT LINE

ü  The products may differ in sizes, variants, or flavors.

ü  Is group of similar products offered by the same company under the same brand.

ü  May differ in specific types but are all under a general class.

PRODUCT LIFE CYCLE

Is defined as the period of time that a product is introduced, sold, and eventually removed from the market.

1.    Introduction - It is the stage when the product is launched in the market.

2.    Growth - This is the stage when the product gains acceptance in the market or for the firm or company to start to increase. This is also the point when a product may be sold under different brands.

3.    Maturity - At this stage, the product has been in the market for a long period and competition has also increased. With this, marketers face the challenge of a possible decline in the sales of the product.

4.    Decline - This is the stage when the profits and sales for the product continue to decrease. Consumers may begin to favor a new product which will eventually prevail in the market.

MARKETING STRATEGIES FOR SERVICE FIRMS

1.    Selecting and training employees

2.    Associating effective customer service with employee motivation

3.    Delivering high – quality service

4.    Building a strong and loyal customer base

PRICING

PRICE

The set amount customers have to pay to purchase a product.

PRICING APPROACHES

Ø  Cost -based pricing – the fixed and variable costs are determined as the basis of the selling price

·   Fixed costs are expenses that firms cannot do away with regardless of production volumes, such as water bills, electricity bills, and rent.

·   Variable costs are direct expenses on materials and labor that are utilized in the production.

·   Mark up is then added based on the target sales volume after which the company determines the price.

·   Sales forecast- estimates the number of goods that can be sold within a specified period and the accompanying costs and the predicted profits

·   Demand forecast estimates the market demand for a good in the future

·   Break-even point or the state when a company revenue equal the expenses, can also be determined based on the fixed and variable costs.

Ø  Perceived value pricing- the prices of products are set based on the customer’s perceived value or the value that the customer feels he or she will attain from the good.

Ø  Competitive pricing – the price of goods is based on the prices of competing goods.

FACTORS SETTING THE PRICE OF A PRODUCT

Ø  Marketing objectives- these are the goals that companies set as part of their marketing strategy in promoting their goods to customers. Ex. “to increase company sales by 30% at the end of the year”.

Ø  Research and development costs- some companies invest in R&D in the conceptualization of their goods

Ø  Market structure- a uniform price is set for all sellers. (monopoly, oligopoly)

Ø  Elasticity of demand- the relationship between consumer demand and the changes in the price of goods.

·   Elastic demand – the consumers respond to a change in price (usually on non-basic necessities)

·   Inelastic demand – the consumers do not respond much to a change in price (basic necessities)

·   Perfectly elastic demand – there is a slight change in price that might compel a shift in customer preference

·   Perfectly inelastic demand- goods that experienced increased prices but can still elicit the same demand from consumers. Most of the goods under this category have no available substitutes.

Ø  Law- serves to restrict, reinforce, or simply monitor the prices set by sellers on their goods.

PRICING SCHEMES 

ü  Product- bundle pricing – individual products are put together to create one whole bundle or set which is then offered to customers. A variation of this pricing scheme is called by-product pricing—it utilizes the by-product and is priced along with or separate from the main product.

ü  Main or captive product pricing – the main product is charged with a lower price but additional charges apply. Another form of this pricing is optional pricing in which additional charges are paid to avail of added features of the product.

ü  Product line pricing- involves the separation of goods and their variations into categories by creating price gaps to emphasize differences in quality.

PRICING SCHEMES FOR NEW PRODUCTS

ü  Market penetration pricing - a low initial price is set to attract customers, improve sales, and eventually eliminate competition. It is based on the law of demand which states that a lower price will result in higher demand.

ü  Market skimming – involves setting a high price for a product to gain as much profit as possible before the number of competitors offering the same product increases.

PLACE

At the end of this lesson, the students will be able to:

discuss the meaning of channel of distribution;

identify the two main types of channel of distribution;

describe retailing and the different types of retailers; and

discuss wholesaling and the types of wholesalers.

The third "P" in the marketing mix is place or the channel of distribution. All products intended consumers for their personally consumption as well as those for industrial and production purposes need a channel of distribution. Establishing an excellent channel of distribution ensures that the product will reach the target customers. Distribution entails the use of marketing intermediaries who are people or organizations responsible for linking the producers or manufacturers to consumers. They may also interact with other intermediaries in bringing products and services to consumers.

Marketing intermediaries are necessary because of the expertise they can provide in distributing the products to the final customers. While employing intermediaries entails additional costs to the producer or manufacturer, their accessibility to target customers provides greater efficiency for customers to compare one product or brand to another without having to go directly to the manufacturer itself.

A channel of distribution is classified according to distribution intensity or the extent of using the different marketing intermediaries for a product to reach its target customers. A distribution entity has three levels: intensive, selective, and exclusive. It is intensive when a product needs many intermediaries. It is selective when there are few intermediaries needed. It is exclusive when only one intermediary is needed.

 There are two main marketing or distribution channels—retailers and wholesalers. The conventional or typical channel of distribution starts when the product goes to the wholesaler from the manufacturer. Then, the wholesaler distributes the product to the retailers, and retailers will finally sell the product to the consumers. Manufacturers, wholesalers, and retailers act independently of each other, which results in the tendency to maximize their own individual profits at the expense of the overall profits of the market.

RETAILING

Retailing, as defined by the American Marketing Association, refers to all activities involving the sale of goods or services directly to the final consumers. Individuals engaged in retailing are collectively called retailers.

Retailers get their goods from wholesalers and resell them to consumers usually in smaller quantities. In the channel of distribution, retailers are the link between the wholesalers and the consumers. Thus, retailers maintain a good relationship with customers to ensure healthy patronage and offset the purchase cost of products.

Retailers usually display their goods in their stores or shops and mostly rely on advertisements to promote their products. However, retailers can only cater to customers in a limited area.

Retailing as Part of Philippine Culture: Sari-sari stores

Sari-sari stores are small retail shops found in neighborhoods that cater to the residents of a particular community. The word sari-sari is a Filipino term that means "variety." Sari-sari stores are also found in the streets where retailing is less formal and the products offered are limited.

Retailing is an important part of Filipino culture. Many low-income families prefer buying goods from sari-sari stores not only because of accessibility but also because they can avail of the products on credit (utang). Sari-sari stores usually carry basic necessities, such as canned goods, instant noodles, candies, soft drinks, basic toiletries, cooking ingredients, and others. Sari-sari stores also offer goods per piece (tingi) and most of them are packed in sachets which are manageable purchases for those buying on credit.

According to a survey made by Nielsen in 2014, there are about a million sari-sari stores in the Philippines. They usually carry around 200 products in stock and more than half are food products. Maggi Magic Sarap and Milo are the top food brands, while Surf and Coca-Cola are the top non-food and beverage brands that most sari-sari stores usually provide customers.

Marketers can gain valuable insights by understanding how sari-sari store owners choose the products they carry. Also, sari-sari stores are proof that despite a lack of proper promotional tools, a business can still attract customers. Finally, it is important to ensure the constant availability of products to guarantee continual profit.

Retailing as a Business

Retailing is also an important part of formally established and widely-recognized businesses. Compared to the sari-sari store, these businesses offer customers a wider range of products and brands to choose from. These businesses may also offer retailing services either in physical stores or online media. Retailing can be performed as a formal business in supermarkets, drugstores, department stores, convenience stores, hypermarkets, and non-store retailing.

Supermarkets are the most common form of retailing because there is a low manpower requirement for maintenance and high efficiency in providing the product to customers. Supermarkets utilize a self-service approach where customers locate, compare, and obtain the goods they need and collect them all in their push carts before heading to the counter for payment. The goods are displayed on shelves, freezers, and gondolas which are free-standing blocks of shelves used to display goods. Sign boards indicating the category are placed on shelves so customers can easily locate the products they need.

Drugstores are composed of pharmacies that are found in supermarkets or malls, or as stand-alone stores convenient locations. They sell prescription and over-the-counter drugs as well as personal products, food and beverages, and beauty products. Some malls or supermarkets that have drugstores are SM MallS, Ayala Malls, and Puregold. The largest drugstore chains in the country are Mercury Drug and Watson's.

Department stores. These refer to large stores that offer a variety of products that are organized into departments or areas, such as clothes for men, women, or kids, pieces of jewelry, home appliances, fashion accessories, bags, shoes, toys, and kitchenware. Department stores are usually located in malls. Some famous malls that have department stores are SM Malls and Ayala Malls, while there are also stand-alone department stores such as Rustan's, H&M, and Uniqlo.

Convenience stores. These are retail stores that carry a limited number of goods, such as basic food items, personal care products, office supplies, over-the-counter drugs, and commonly purchased items. They are strategically located where supermarkets are not readily accessible and where there is customer traffic. The most popular convenience stores are 7-Eleven and Ministop (now Uncle Johns) which are open 24/7.

Kantar Worldpanel, an international consumer monitoring company, conducted a study in 2015 and found that convenience stores are the fastest-growing retail channels in the Philippines. Their survey of 3,000 Filipino homes in urban and rural areas in the country reveals that 18.5% of Filipino households are now buying from convenience stores. That is 2% higher than in 2014.

Hypermarkets are huge superstores that offer a greater variety of products. They are bigger and more spacious than supermarkets. Shopping malls put hypermarkets as satellite branches, typically in locations with high consumer traffic or at other towns, to target more customers and promote their brands.

Non-store retailing. This approach in retailing involves the selling of goods in other media aside from a physical store. One of the common forms is online retailing. Sellers can now set up online stores where they can offer their goods for sale. Customers, then, can choose among the products, order them online, and even request personal customizations before purchase. Since they have no physical stores, online retailers usually offer a delivery service that is either free of charge or paid upon delivery. Pick-ups or meet-ups are sometimes offered as an option as well. The most common products sold online are apparel, shoes, bags, accessories, books, kitchenware, gadgets, food, and grocery items.

Wholesaling

Wholesaling includes all activities involved in selling products to merchandisers or producers for business use. Merchandisers buy goods from wholesalers and then resell those to customers. Many wholesalers are classified as middlemen who purchase goods from producers or manufacturers and sell them to retailers or directly to consumers. They carry a wider assortment of products which are offered cheaper when bought in bulk. There are two types of wholesalers: merchant and full-service wholesalers.

Merchant wholesalers buy goods in bulk from producers and then resell them to retailers with a mark-up. They are sometimes referred to as distributors. Meanwhile, full-service wholesalers provide a wide range of services to their customers such as recruitment of salespeople, conducting inventory, and delivery of goods. They have a higher income than merchant wholesalers, but the cost of their operations is also higher because of the wide range of services they provide to customers.

There are four types of full-service wholesalers:

1. General merchandise wholesalers offer a wide variety of goods. Their products include non-perishable goods, such as cosmetics, laundry detergents, and cigarettes.

2. Limited line wholesalers provide an assortment of goods that are limited to a few specific product lines but offer a broad selection of items. For example, a hardware store might offer products related to automotive repair, electric machinery, and plumbing, among others.

3. Specialty line wholesalers are comprised only of a single product line but offer extensive customer service for the products. A rack jobber is a type of specialty line wholesaler who maintains the displays and stock of goods in retail stores. They usually handle non-food items such as cosmetics, books, magazines, etc.

4. Brokers and agents are also considered wholesalers. Brokers facilitate the purchase and sale of goods between buyers and sellers, acting as a third party in transactions. On the other hand, an agent acts on behalf of one transacting party. In general, they negotiate the price, terms and conditions, and other aspects of the transaction between manufacturers and customers. They, also ensure a fair or advantageous purchase or sale of goods for the firm they represent.

Both retailers and wholesalers are effective channels of distribution which assist in ensuring that products reach end-users or consumers.

PROMOTION

At the end of this lesson, the students will be able to:

·   identify and discuss the elements of promotion;

·   discuss relevant promotional tool; discuss advertising, its objectives and various styles;

·   discuss how effective promotion impacts product performance and sales; and

·       evaluate how companies conduct promotion.

The last P in the marketing mix is promotion, which is also called marketing communication. This comprises the activities done to increase the target customers' knowledge of the product. The promotions that a company will undertake depend on the budget it sets aside, and there are several ways to set a promotional budget.

The first is to allocate a set percentage of the sales or the net profits. Although this practice is fairly common and makes sense on paper, some marketing practitioners criticize it because it is generally difficult to accurately predict sales and profits. An inaccurate prediction may mean that the predetermined promotional budget is either too big or too small.

A second method for setting a promotional budget is by examining a competitor's budget, Don adjusting the budget to be less than, equal to, or more than theirs. However, while this method ensures that spending will be at similar pace to the competitor's, it also means that their practices will restrict the pacing of the company.

Another method is to plan out the different tasks and types of promotions to be done within a certain timeframe and setting the budget according to the requirements of those tasks. This is the most sophisticated approach to setting a promotional budget as it lays out the specific objectives of a promotional campaign and the methods to be used to achieve those objectives.

The right combination of methods for setting a budget and adjusting them according to the situation can be the deciding factor in whether a promotional campaign succeeds.

Advertising

Generally speaking, advertising is a nonpersonal form of communication meant to bring a product or service to the attention of potential or current customers. More formally, the American Marketing Association define it as the "placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms, nonprofit organizations, government agencies, and individuals who seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas."

It is the most expressive among the promotion types because it relies heavily on visuals, color, words, and sound. Well-executed advertisements are remembered for a long time, and the product being advertised enjoys strong brand recall. When using advertising, it is important to understand the company's advertising objectives. A company cannot launch an advertising campaign without a clear grasp of its objectives.

Reach is the percentage of the target market who is exposed to a particular advertisement, while frequency is the number of times the target audience is exposed to the message. Impact is the value of the exposure to the target audience.

Pricing for print ads can vary greatly depending on factors such as size, color, and the popularity of the publication selling the ad space. Billboards also depend on size and location.

Many billboards are placed strategically along expressways and highways. In addition to outdoor advertising such as billboards, tarpaulins, and ads on buses and taxis, companies may also opt for indoor advertising in malls, restaurants, bars, airports, and even restrooms.

An alternative to print ads is advertising on the Internet. Companies may buy ad space on existing websites, and/or create their own and use this as a communication arm. Websites offer some flexibility and creativity. Aside from advertising, websites may be used as online stores as well as repositories of information such as events, new product offerings, and job vacancies. It is also an avenue for customer service.

In marketing, there are two types of websites. The first type is the intermediary website which acts as a gateway to different content. Common examples are social network sites like Facebook, Twitter, and Linkedin. The second is the destination site which provides information on specific subjects, products, and services. Examples include travel companies, manufacturer websites, and the like.

The objectives of advertising are:

1. to inform - advertising is a tool for informing target customers about a new product, a new feature, or an added benefit of a product;

2. to persuade - the ultimate goal of advertising is to persuade customers to buy a product:

3. to compare - one of the best ways of comparing one brand to another is through the use of advertisements; and

4. to remind - advertising helps in brand recall and reminds customers about the product from time to time.

Advertising messages can be expressed through the following execution styles:

1. Lifestyle. This shows how a product fits a certain lifestyle. Sanitary napkins like Modess, Whisper, and Kotex usually execute their ads using lifestyle as a theme.

2. Slice of Life. This depicts scenarios where the product is used in normal, day-to-day settings. Examples are detergent ads like Tide, Surf, Ariel, and Breeze. Laundry detergents like Ariel choose ordinary people in their commercials which often depict a typical day for a housewife, who is washing clothes.

3. Fantasy. This style typically depicts idealized or even exaggerated effects of the product/-service in question, allowing the customer to fantasize about such a scenario.

4. Mood. This style attempts to build a mood or thematic atmosphere (such as love, beauty, extravagance, etc.) around a product or service. Perfume ads are known to utilize this style.

5. Musical. This style expresses the message of the ad through music which may be an existing song adapted and licensed for use in the ad or a jingle composed specifically for the ad.

6. Technical/Scientific evidence. This style uses technical knowledge or scientific evidence to assert the superiority of the product over its competitors. This is most commonly used in ads for personal care products, such as soap, toothpaste, and medicine.

7. Testimonial. This style features an individual or group of people giving positive feedback on the product, attesting to the high quality of the product. These endorsers may or may not be celebrities.

Personal Selling

Personal selling is a face-to-face technique wherein the salesperson uses his or her persuasive skills to convince a customer to buy a particular good or service. Personal selling is effective in many ways. Good salespersons can effectively boost sales by building strong and binding relationships with customers who value the time and effort they put into promoting a product. Many doctors rely on medical representatives who build lasting friendships with them. They endorse the brands from medical representatives who respond to their needs. Personal selling requires excellent communication skills and flexibility from the salesforce because of the direct interaction between the buyer and the seller. The salesforce represents the company and the products it offers to the customers, thereby requiring the right approach to potential customers.

The salesforce should be knowledgeable about the product and should be able to answer all pertinent questions that customers may ask about it. They should be more than willing to clarify any objections during product demonstrations. Customers may approach the salesforce or vice versa. Either way, sales personnel should handle their customers well. The objective is to build lasting relationships with customers by offering quality customer service.

Sales Promotion

Sales promotions consist of sales activities which help increase the sales of a product or service. Sales promotion often provides a quick response. There are two types of sales promotion: consumer schemes and trade promotions.

Sales promotions intended for customers are called consumer schemes. A discount coupon elicits a response by giving an incentive to purchase the product within a specified period. Customers take advantage of this opportunity to save a few pesos. However, sales promotion is good only in the short run. A strong brand recall is more effectively achieved through advertising. Furthermore, needs are still the biggest determining factor in making a purchase. Despite discounts, coupons, and other types of sales promotions, if a product is not on the customer's priority list, they will not buy it.

Other types of consumer schemes include cash coupons and rebates, which are common in supermarkets, and patronage rewards, which are popular in department stores. One of the most popular patronage rewards is that used by SM and National Bookstore. Frequent shoppers earn points for every purchase and may avail of rebates on accumulated points.

Contests and raffles are also popular means of promotion. Supermarkets and car dealers use this type of promotion. Free samples may be used to introduce a product to potential new users Products may also be bundled with freebies such as keychains, mugs, t-shirts, and the like. Many paper products like bond paper or pad paper come with free eco-friendly bags for customers who buy in bulk.

Trade promotions include freebies, incentives, commissions, and discounts given to wholesalers, retailers, and distributors. They are given to add more stocks and increase visibility on store shelves.

Public Relations

Public relations is the practice of communicating with the media and the general public to establish a strong relationship between a target audience and an organization, company, or individual. Public relations also create and maintain a positive image of that organization, company, or individual. While public relations goes hand-in-hand with advertising, it is different in that although it may indirectly result in increased sales, its primary goal is to ensure that public opinion of the organization, company, or individual in question remains positive. Furthermore, while advertisements are usually paid for, public relations activities generally are not. Practitioners engage in public relations through several varied tools and techniques, including press releases, newsletters, social media, attendance at public events, and participating in or even hosting charitable events.

Direct Marketing

Direct marketing is a form of marketing and advertising in which a company communicates and interacts with its target audience directly, without "middlemen" or intermediary entities, such as retailers, distributors, or wholesalers. It may be done through several methods, such as door-to-door marketing, physical mail, email, telemarketing, coupons, direct-response TV (e.g., infomercials), and kiosk marketing. It is often characterized by a call to action, such as inviting potential customers to call a specific phone number or to click a link to subscribe. While it can be difficult to specifically and accurately measure the effectiveness of general marketing and advertising, the call-to-action feature of direct marketing gives marketers an immediate and easy way to measure the effectiveness of their direct marketing campaign. However, since it is often unsolicited, if it is done too aggressively or in excess, it may backfire and negatively affect the reputation of the company.