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How to develop marketing mix //plz help wt are the stretegies related? |
How to develop marketing mix //plz help wt are the stretegies related? New product pricing strategies: Penetration pricing: Offers low price to gain market share - then increases price e.g. Mobilink, Ufone. Price skimming: Where prices are high - usually during introduction e.g. new albums or films on release. Ultimately prices will reduce Product mix pricing strategies: Product line pricing Rationale of a product range e.g. two pack Rs. 50, Four-pack Rs. 95 Optional product-pricing e.g. optional extras - BMW Cars Captive product pricing Products that complement others e.g. Gillette razors (low price) and blades (high price) Product-bundle pricing Sellers combine several products at the same price e.g. software, books, CDs. Price adjustment strategies: Discount & allowance pricing: a.Cash discount: b.Quantity discount: c.Functional discount: d.Seasonal discount: e.Allowance: Distribution channels & logistics management: Distribution channels: Channel 1: Manufacturer 鈥?consumer Channel 2: Manufacturer 鈥?retailer 鈥?consumer Channel 3: Manufacturer 鈥?wholesaler 鈥?retailer 鈥?consumer Channel 4: Manufacturer 鈥?wholesaler 鈥?jobber - retailer 鈥?consumer Channel behavior and organization: Channel design decisions: a.Analyzing consumer service needs. b.Setting the channel objectives and constraints. c.Identifying major alternatives. Retailing and wholesaling: Retailing: All activities involved in selling goods or services directly to final consumers for their personal non-business use. Retailer: Business whose sales come primarily from retailing. Major types of retailers: a.Specialty stores. b.Department stores. c.Supermarkets. d.Superstores. e.Discount stores. f.Off-price retailers. g.Factory outlets. h.Warehouse clubs. Major types of wholesalers: Merchant wholesalers: Independently owned business that takes title to the merchandise it handles. Broker: A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation. Agent: A wholesaler who represents buyers or sellers on a relatively permanent basis, perform only a few functions, and does not take title to goods. Manufacturer鈥檚 sales branches & offices: Wholesaling by sellers or buyers themselves rather than through independent wholesalers. Price The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. Pricing strategies Premium pricing Uses a high price, but gives a good product/service exchange e.g. The Marriott Hotel Penetration pricing Offers low price to gain market share - then increases price e.g. Mobilink, Ufone. Economy pricing Low price e.g. Soups, beans - 鈥榚conomy鈥?brands Price skimming Where prices are high - usually during introduction e.g. new albums or films on release. Ultimately prices will reduce Psychological pricing To get a customer to respond on an emotional, rather than rational basis. e.g. Rs. 999 instead of Rs. 1000 Product line pricing Rationale of a product range e.g. two pack Rs. 50, Four-pack Rs. 95 Pricing variations Off-peak鈥?pricing, early booking discounts, etc Optional product-pricing e.g. optional extras - BMW Cars Captive product pricing Products that complement others e.g. Gillette razors (low price) and blades (high price) Product-bundle pricing Sellers combine several products at the same price e.g. software, books, CDs. Promotional pricing e.g. toothpaste, soups, etc Geographical pricing Different prices for customers in different parts of the world e.g. Include shipping costs Value pricing Usually during difficult economic conditions e.g. Value menus at McDonalds MARKETING CHANNELS AND SUPPLY CHAIN MANAGEMENT 1. Introduction a. Marketing channel decisions are among the most important facing marketing managers. A company鈥檚 channel decisions directly affect every other marketing decision. b. Companies often pay too little attention to their distribution channels. c. Distribution channel decisions often involve long-term commitments to other firms. 2. The Nature of Distribution Channels a. A distribution channel is a set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. Why Are Marketing Intermediaries Used? b. The use of intermediaries results from their greater efficiency in making goods available to target markets. Through their contacts, experience, specialization, and scale of operation, intermediaries usually offer the firm more than it can achieve on its own. c. From the economic system鈥檚 point of view, the role of marketing intermediaries is to transform the assortments of products made by producers into the assortments wanted by consumers. d. Intermediaries play an important role in matching supply and demand. 1). Producers produce narrow assortments, but consumers want broad assortments. 2). Intermediaries buy large quantities of many producers and break them down into the smaller quantities preferred by consumers. Distribution Channel Functions e. A distribution channel moves goods from producers to consumers. It overcomes the major time, place, and possession gaps that separate goods and services from those who would use them. f. Members of the marketing channel perform many key functions. They are: 1). Information gathering and distribution. 2). Promotion. 3). Contact with prospective buyers. 4). Matching鈥攂uyers with sellers. 5). Negotiation so ownership can take place. 6). Others include: a). Physical distribution (such as transportation and storage). b). Financing. c). Risk taking. g. The question is not whether these functions must be performed but rather who will perform them. h. If the channel is functioning the way that it should, the work of the channel should be divided so that the various functions can be assigned to the channel members who can perform them most efficiently and effectively to provide satisfactory assortments of goods to target consumers. Number of Channel Levels i. Distribution channels can be described by the number of channel levels involved. A channel level is a layer of middlemen that perform some work in bringing the product and its ownership closer to the final buyer. 1). The number of intermediary levels indicates the length of the channel. 2). These levels can be described as being: a). A direct marketing channel鈥攖here are no intermediary levels between manufacturer and consumer. b). An indirect marketing channel鈥攖here can be numerous and a variety of intermediaries involved in bringing the good or service from the manu- facturer to the consumer or business customer. 3). Business marketing channels are similar in their design except the intermediaries perform functions relative to the business market rather than the consumer market. j. All of the institutions in the channel are connected by several types of flows: 1). Physical flow of products. 2). The flow of ownership. 3). The payment flow. 4). The information flow. 5). The promotion flow. k. These flows can make channels (even if they have only one level) very complex. 3. Channel Behavior and Organization a. Distribution channels are more than simple collections of firms tied together by various flows. They are complex multifaceted behavioral systems. 1). Channel systems do not stand still鈥攏ew types of intermediaries emerge and whole new channel systems evolve. Channel Behavior b. A distribution channel consists of dissimilar firms that have banded together for their common good. c. Each channel is dependent on the others. d. Each channel member plays a role in the channel and specializes in performing one or more functions. e. Ideally, because the success of individual channel members depends on overall channel success, all channel firms should work together smoothly. f. However, disagreements over goals and roles generate conflict. g. Channel conflict occurs as disagreements among marketing channel members on goals and roles鈥攚ho should do what and for what rewards. 1). Horizontal conflict is conflict between firms at the same level of the channel (retailer to retailer, for example). 2). Vertical conflict is conflict between different levels of the same channel (wholesaler to retailer, for example). h. Some conflict can take the form of healthy competition. i. The channel will generally perform better if it includes a firm, agency, or mechanism that has the power to assign roles and manage conflict. Vertical Marketing Systems j. Historically, distribution channels have been loose collections of independent companies, each showing little concern for overall channel performance. k. The conventional distribution channel is a channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole. These channels have lacked strong leadership and have been troubled by damaging conflict and poor performance. l. In contrast is the emergence of vertical marketing systems. A vertical marketing system (VMS) is a distribution channel structure in which producers, wholesalers, and retailers act as a unified system鈥攐ne channel member owns the others, has contracts with them, or has so much power that they all cooperate. The major types include: 1). In a corporate VMS, coordination and conflict management are attained through common ownership at different levels of the channel. 2). In a contractual VMS, coordination and conflict management are attained through contractual agreements among channel members. There are three primary types: a). Wholesaler-sponsored voluntary chains are systems in which wholesalers organize voluntary chains of independent retailers to help them compete with large chain organizations. b). Retailer cooperatives are systems in which retailers organize a new, jointly owned business to carry on wholesaling and possibly production. c). Franchise operations are contractual vertical marketing systems in which a channel member, called a franchiser, links several stages in the production- distribution process. There are several forms of franchises: 1]. Manufacturer-sponsored retailer franchise system (automobile industry). 2]. Manufacturer-sponsored wholesaler franchise system (soft-drink industry). 3]. Service-firm-sponsored retailer franchise system (auto-rental business). 3). In an administered VMS, leadership is assumed by one or a few dominant channel members. General Electric, Kraft, and Wal-Mart are examples. Horizontal Marketing Systems m. Horizontal marketing systems are where two or more companies at one level join together to follow a new marketing opportunity. By working together, they can combine their capital, production capabilities, or marketing resources to accomplish more than if they were working alone. Hybrid Marketing Systems n. Hybrid marketing systems are multi-channel distribution systems in which a single firm sets up two or more marketing channels to reach one or more customer segments. More and more firms are adopting this concept. With each new channel, the marketer using this technique expands sales and market coverage and gains opportunities to tailor channels to the specific needs of diverse consumer segments. However, disadvantages do occur: 1). These systems are harder to control. 2). Conflict can occur as more levels are added. Changing Channel Organization o. Changes in technology and the explosive growth of direct and online marketing are having a profound impact on the nature and design of marketing channels. 1). One major trend is toward disintermediation鈥攁 big term with a clear message and important consequences. 2). Disintermediation means that, more and more, product and service producers are bypassing intermediaries and going directly to final buyers, or that radical new types of channel intermediaries are emerging to displace traditional ones. 3). This presents both problems and opportunities. a). Traditional intermediaries must find new ways to add value in the supply chain. b). They must be prepared to deal with conflict from traditional channels. c). Inefficiencies must be avoided. 4. Channel Design Decisions a. In designing marketing channels, manufacturers struggle between what is ideal and what is practical. The problems can be complex (building a new channel from scratch) or simple (getting a few intermediaries to carry your line). b. Channel systems evolve to meet market opportunities. c. Several steps are followed to design channels: 1). Analyzing consumer service needs. 2). Setting channel objectives and constraints. 3). Identifying major channel alternatives. 4). Evaluating the alternatives. Analyzing Customer Service Needs d. The first step is to analyze customer service needs. e. To design an effective channel, the designer must know the service levels desired by customers (i.e., customer value delivery systems). The company must balance consumer-service needs against the feasibility and costs of meeting those needs and consumer price preferences. f. Example questions to consider are: 1). Do consumers want to buy from nearby or are distant centralized locations better? 2). Would consumers rather buy in person or is some other method such as telephone (mail or Internet) acceptable? 3). Do they want breadth of assortment or do they prefer specialization? 4). Do they want add-on services such as delivery, credit, repairs, or installation, or will they obtain these elsewhere? Setting Channel Objectives and Constraints g. The second step is to set the channel objectives and constraints. h. Channel objectives should be stated in terms of the desired service level of target consumers. Usually the company can identify different segments that want different levels of service. i. The objectives are influenced by: 1). Company characteristics (size and financial situation would have an effect). 2). Product characteristics (perishable products would need different arrangement). 3). Intermediaries鈥?characteristics (find those willing and able to perform needed tasks). 4). Competitors鈥?channels (be near your competition). 5). Environmental channels (economic and legal constraints have effects). Identifying Major Alternatives j. The next step is to identify the major alternatives available. Concerns are: 1). The types of middlemen. Look at the company salesforce, manufacturer鈥檚 agency, and industrial distributors to give you options on how to distribute the good or service. 2). The number of middlemen. Alternative strategies are: a). Intensive distribution鈥攖he product is stocked in as many outlets as possible (candy, gum, etc.). b). Exclusive distribution鈥攇iving a limited number of dealers the ex- clusive right to distribute the company鈥檚 products in their territories (prestige automobiles). c). Selective distribution鈥攖he use of more than one, but fewer than all of the intermediaries who are willing to carry the company鈥檚 products (television, furniture, etc.). 3). Responsibilities of channel members. Each of the following needs to be addressed: a). Price policies. b). Conditions of sale. c). Territorial rights. d). Specific services to be performed by each party. Evaluating the Major Alternatives k. The final step is to evaluate the major channel alternatives. Each alternative should be evaluated against the following criteria: 1). Economic criteria (a company compares the likely profitability of different channel alternatives). 2). Control issues (how should control be distributed and to whom). 3). Adaptive criteria (examine flexibility versus long-term commitment). Designing International Distribution Channels l. International marketers face many additional complexities in designing their channels. Each country may have different rules and traditions and the firm must be willing to adapt (this area will be addressed in more detail in Chapter 15). 5. Channel Management Decisions a. Once the company has decided on the best channel design, it must make some channel management decisions. Selecting Channel Members b. The first decision that must be reached is to select the channel members. The fact is that some manufacturers vary in their ability to attract qualified intermediaries. At the other extreme is the manufacturer with whom everyone wants to work. The best approach is to determine what characteristics are necessary, and be able to distinguish the better intermediaries. Motivating Channel Members c. Once selected, intermediaries must be continuously motivated to do their best. They must not only sell through them but to them as well. Positive and negative measures are possible鈥攑ositive is preferred. 1). Many companies are now developing partner relationship management (PRM) systems to coordinate their whole-channel efforts. Evaluating Channel Members d. Finally, the producer must regularly check on the intermediary鈥檚 performance against set standards. Periodic requalification is advised. Be sensitive to the needs of dealers and they will be sensitive to the firm鈥檚 needs as well. 6. Public Policy and Distribution Decisions a. For the most part, companies are free to develop whatever channel arrangements suit them. b. Most channel law deals with the mutual rights and duties of the channel members once they have formed a relationship. c. The Clayton Act of 1914 uses its scope to examine issues of exclusive distribution, exclusive dealing, and exclusive territorial arrangements. Exclusive dealing is legal as long as it does not substantially lessen competition or tend to create a monopoly (and as long as both parties enter into the arrangement voluntarily). d. Producers of a strong brand sometimes sell it to dealers only if the dealers will take some or all the rest of the line. This is called full-line forcing. The Clayton Act applies the same standards to these tying agreements as in 鈥渃鈥?above. e. Producers are free to select their dealers, but their right to terminate dealers is somewhat restricted and they must 鈥渟how cause.鈥?br /> 7. Marketing Logistics and Supply Chain Management a. In today鈥檚 global marketplace, selling a product is sometimes easier than getting it to the customers. b. Physical distribution and logistics effectiveness will have a major impact on both the consumer鈥檚 satisfaction and company costs. Nature and Importance of Marketing Logistics c. Marketing logistics (physical distribution) involves the tasks of planning, implementing, and controlling the physical flow of materials and final goods from points of origin to points of use to meet the needs of customers at a profit. 1). Modern thinking is to design a system by starting with the customer and working back to the point of origin. The reverse was true in the past. a). Marketing logistics not only addresses outbound distribution but also inbound distribution and reverse distribution. b). That is, it involves supply chain management鈥攎anaging value added flows of materials, final goods, and related information between suppliers, the company, resellers, and final users. 2). There is greater emphasis on logistics because: a). Customer service and satisfaction have become the cornerstones of marketing and competitive strategy. b). Logistics is a major cost element. c). The explosion in product variety has created a need for improved logistics. d). Improvements in information technology have created opportunities for major gains in distribution efficiency. Goals of the Logistics System d. Some companies state their logistics objective as providing maximum customer service at the least cost. This is a very difficult (if not impossible) objective to obtain. Therefore, the goal of the marketing logistics system should be to provide a targeted level of customer service at the least cost. The objective is to maximize profits, not sales. Major Logistics Functions e. The major decisions include the following: 1). Order processing. Physical distribution begins with a customer order. Once received, they must be quickly and accurately processed. Everyone benefits when this system works well. 2). Warehousing. A storage function is needed because production and con- sumption levels rarely match. A company must decide how many and what types of warehouses it needs, and where they will be located. a). A storage warehouse stores goods for moderate to long periods. b). A distribution center is a large and highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible. 3). Inventory. Inventory decisions involve knowing when and how much to order. The goal is to maintain the delicate balance between carrying too much and too little. When to order and how much to order are questions to be answered. Order-processing and inventory-carrying costs must be analyzed. a). Under a just-in-time system, only a small amount of inventory is carried, but quick re-order turnaround is essential. b). Though sometimes complicated, the JIT system can save needed resources. 4). Transportation. The choice of transportation carriers affects the pricing of products, delivery performance, and condition of the goods when they arrive. All of these will affect customer satisfaction. Five basic choices are: a). Rail. b). Truck. c). Water. d). Pipeline. e). Air. f. Shippers are increasingly using intermodal transportation (which combines two or more shipping modes of transportation). Examples of multimode systems are referred to as piggyback (rail and trucks), fishyback (water and trucks), trainship (water and rail), and airtruck (air and truck). g. The transportation mode selected depends on several criteria: 1). Speed. (door-to-door delivery time) 2). Dependability. (meeting schedules on time) 3). Capability. (ability to handle various products) 4). Cost. (per ton-mile) 5). Others. Integrated Supply Chain Management h. Integrated supply chain management is the logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system. 1). In most companies, responsibility for various logistics activities is assigned to many different functional units. The goal should be to harmonize all the decisions to improve customer service and reduce costs. In some companies a new department, a department of logistics, has been formed. 2). Since the success of each channel member somewhat depends on other channel members, the members of the channel must be willing to work with one another to insure maximum effectiveness. a). One attempt to do this is the creation of cross-functional, cross-company teams. b). Others use shared projects as means of improving performance. c). Information-sharing and continuous inventory replenishment systems also help to alleviate problems. d). Many companies today are outsourcing their logistics to third-party logistics (3PL) providers. Companies use third-party logistics providers for several reasons: 1]. Because getting the product to market is their main focus, these providers can often do it more efficiently and at a lower cost than clients whose strengths lie elsewhere. 2]. Outsourcing logistics frees a company to focus more intensely on its core business. 3]. Integrated logistics companies understand increasingly complex logistics environments. This can be especially helpful to companies attempting to expand their global market coverage. RETAILING AND WHOLESALING 1. Retailing a. Retailing includes all the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use. b. A retailer is a business whose sales come primarily from retailing. 1). Manufacturers, wholesalers, and retailers can all do retailing. However, most retailing is done by retailers. 2). Retailing can be done in stores (store retailing) or out of a store (non-store retailing). 3). Nonstore retailing (direct mail, catalogs, telephone, TV home shopping shows, home and office parties, door-to-door contact, vending machines, the Internet, and other direct approaches). Types of Retailers c. Retail stores come in all shapes and sizes. They can be classified by the amount of service that they offer, the breadth and depth of their product lines, the relative prices that they charge, and the form of retail organization (control of outlets). d. Different products require different amounts of service and customer preferences vary. e. Retailers can offer three levels of service: 1). Self-service retailers are retailers that provide few or no services to shoppers. Shoppers perform their own locate-compare-select processes. a). Self-service is the basis of all discount operations. b). It is typically used by sellers of convenience goods and nationally branded, fast-moving shopping goods. 2). Limited-service retailers are retailers that provide only a limited number of services to shoppers. a). They carry more shopping goods about which consumers need information. b). Their increased operating costs result in higher prices. 3). Full-service retailers are retailers that provide a full range of services to shoppers. a). These stores usually carry more specialty goods and slower-moving items. b). Personnel assists customers in the buying process. c). They provide many services which result in higher operating costs that are usually passed on to the customer as higher prices. f. Retailers can also be classified based on the length and breadth of their product assortments. g. Specialty stores carry narrow product lines with a deep assortment within that line. These stores seem to be flourishing because of the increasing use of market seg- mentation, market targeting, and product specialization. h. Department stores are retail organizations that carry a wide variety of product lines such as clothing, home furnishings, and household goods. Each line is operated as a separate department managed by specialist buyers or merchandisers. 1). Since department stores have lost ground in recent years to more focused retailers, the organization form is attempting a comeback by opening sub- urban stores and 鈥渂argain basements.鈥?br /> 2). Other stores have opened specialty 鈥渂outiques鈥?to attract upscale buyers. 3). Service remains a key differentiation factor. i. Supermarkets are large, low-cost, low-margin, high-volume, self-service stores that carry a wide variety of food, laundry, and household products. 1). Supermarkets are the most frequently shopped retail store. 2). The following factors have contributed to slow growth: a). Slower population growth. b). Increased competition from convenience stores. c). Discount food stores. d). Increased 鈥渆ating out鈥?by consumers. 3). Differentiation occurs to attract upscale consumers (adding a gourmet deli) and catering to downscale cost conscious consumers (discounting and reducing costly services). Source(s): sharing knowledge is the best thing rgds! |
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