Principles of Marketing

Principles of Marketing Prof. univ. dr. Smaranda COSMA Lect. univ. dr. Marius BOTA Facultatea de Business Universitatea Babeş-Bolyai

Principles of Marketing Chapter 3Developing marketing mix Product, Price, Place, Promotion

Selective references • Armstrong, G., Harker, M., Kotler, Ph, Brennan, R., Marketing: An Introduction, Pearson Education Limited, Edinburgh Gate, 2009. (google books) + video cases • Baker M.J., Saren, M., Marketing Theory: A Student Case, Sage Publications Inc., London, 2010. (google books) • Cosma, S., Bota, M., Bazele marketingului, Editura Alma Mater, Cluj-Napoca, 2004. • Kotler, Ph., Keller, K.L., Marketing Management, 13th edition, Prentice Hall, 2011. • Kotler, Ph., Armstrong, G., Wong, V., Saunders, J. A., Principles of marketing, Pearson Education Limited, Edinburgh Gate, 2008. (google books) • Ph. Kotler, Managementul marketingului, ediţia a 4-a, Editura Teora, Bucureşti, 2004. • N. Paina s.a, Bazele marketingului , Editura Presa Universitara Clujeana, Cluj-Napoca, 2002.

Chapter 3 Marketing mix • Represents a combination (mixing) of some variables, designed to meet the changes in marketing environment. • Marketing mix variables are considered as internal variables, with which managers take decisions and provide control.

Marketing mix • Marketing mix concept was introduced in 1964 by Prof. Neil Borden, including the following 12 elements:product, advertising, brand, sales promotion, packaging, product presentation, price, after- sales services, distribution, logistics, personal selling and marketing research. • In the same year, Prof. Jerome McCarthy, simplifies Borden's model synthesising it into the 4P: • Product, Price, Place & Promotion

4P Product Price Place Promotion 4C Customer Cost Comodity in acquisition Communication „4P” versus „4C”

Product • According to the classical concept, the product is viewed as an amount of tangible attributes and features, physical and chemical together in an identifiable form. • In the marketing concept, the product represents all tangible and intangible elements that trigger the demand expressed by the consumer on the market and that must be designed in a system concept integrating the whole ambience of the object that surrounds him, consisting of a wide range of intangible, symbolic, informational elements.

The product is built from a set of features that are grouped as follows: • Observed features including: • Physical characteristics: shape, color etc. • Functional features: the ability to perform certain functions • Services offered by product: delivery time, payment terms, after - sales service, information of exploitation; • Symbolic features: brand, prestige, freedom.

Any product meets: • Basic function, which reflects the consumer's purchase motivation • Secondary functionwhich gives additional benefits

Products classification From marketing concept point of view 3 criteria are relevant for product classification: • Nature of the product; • To whom are addressed; • Durability of the product.

Products classification From the nature of the product point of view: • Goods:are tangible products • Services:are intangible, inseparable and perishable

From the recipient of the product point of view: 1. Consumer-goods, which includes: • Staples - purchase on a regular basis • Impulse goods - sweets, chewing gum • Emergency goods - umbrella during a rainstorm • Shopping goods - look, quality, price • Homogeneous products: similar in quality, but different in price • Heterogeneous products: product features are more important (furniture) • Specialty goods - electronic equipment, perfumes • Unsought goods - specialty journals,encyclopaedias, life insurance

From the recipient of the product point of view: 2. Industrial goods: bought by organizations. • Materials and parts: enter the manufacturer’s product completely; • Capital items: enter the finish product partly – installations and accessory equipment; • Suppliers and services: do not enter the finished product at all – typing paper, pencils etc.

From the durability of the product point of view: • Durable goods – survive many uses; • Nondurable goods – are consumed in one or a few uses.

Competitive differentiation and positioning of the marketing offer Offer differentiation is the act of designing a set of meaningful differencesto distinguish the company's offering from competitor's offerings.

Differentiation – potential competitive advantage of the company Product mix levels • Expected productconsists of the core product plus the minimum conditions expected when customers purchase product. • Augmented productconsists of additional benefits that allows differentiation of the same kind of goods in a competitive market. • Potential product includes all the features that might be useful to consumers, warning them about possible evolution of the product.

Potential product Augmented product Expected product Core benefit Product mix levels

Differentiation tools • Products:features, performance, conformance, durability, reliability, maintenance etc. • Services:delivery, installation of the product, customer training, consulting services etc. • Personnel:competence, courtesy, credibility etc. • Image: identity – symbols, written and audio/ visual media, atmosphere, notoriety

Offer positioning Positioning– the act of designing company’s offer so that it occupies a distinct and valued place in the target customers’ minds.

Offer positioning involves 3 steps: • Identification and selection of features and attributes that can create differences between offer of the company and competitors • Evaluation and selection of the most important differences that can be promoted to the selected attributes and features • Communication positioning

Positioning errors: • Underpositioning – lack or ineffectiveness of communication • Overpositioning - narrow picture of the company’s supply • Confused positioning –frequent changes in positioning • Doubtful positioning – lack of credibility

Idea generation Idea screening Market evaluation and performance Product development Market testing Commercialization Process of new products development Steps of new products development process

Idea generation External sources Internal sources • C&D • Design, Engineering, Production, Supplier Departments • Marketing • Market research • Sales force • Serviciul clienţi • Top Management • Others: Employees’ suggestions • Competitors • Clients • Specialists – design companies, consulting, advertising agency, marketing agencies • Others: business partners, research environment of universities

Idea screening • Factors regarding the product • Factors concerning the company • Market factors • Financial factors

Market evaluation and performance-market investigation and marketing analysis, financial projecting and cost estimation - • Concept development • Concept testing • Market evaluation and designing of business plan • Economical analysis: turnover forecast, necessary investments, costs and profit projection

Product development- total effort of a team - • Inputs for new product designing and development • Market study and consumer behavior • Company objective • C&D department • Product policy • Supplying • Logistics and raw materials • Engineering • Production planning • Added services • Marketing consultancy: product test,consumer tests etc.

Market testing- commercial risk decreasing - • Reliable forecast of future sales • Determine costs of necessary marketing operations • Testing entire marketing mix • Practice in manufacturing, delivering and sailing

Product commercialization • Establish market-entry timingWhen? • Defining geographical strategyWhere? • Choosing distribution channelsHow? – To whom? • Consumer adoption process

Adoption and commercialization • Innovators- 2,5% • Early adopters- 13,5% • Early majority- 34% • Late majority- 34% • Laggards- 16%

Product life cycle Period of time between product appearing on the market and product eliminating of manufacturing.

Sales Profit per unit Sales Profit per unit 0 Time Introduction GrowthMaturityDecline Product life cycle

INTRODUCTION Features of Introduction: The objective is to create awareness and stimulating product trial. • slow start of sales ; • reduced benefits, even negative in the beginning; • relatively high price • weak competition, the product is not known; • segment of consumers - innovators.

INTRODUCTION Marketing strategies and policies: • Standard, basic product; • Cost-oriented price; • Selective distribution; • Promotion tools: informing advertising, strong sales force to persuade consumers.

GROWTH Features of Growth: The objective is to maximize competitive position and to increase brand preference • sales are growing fast; • benefits are increasing; • unit cost is average • competition is weak to mediumbuyers – mostly early adopters

GROWTH Marketing strategies and policies: • Product: product line expansion; • Price decrease, market penetration prices; • Intensive distribution; • Promotion tools: increasing awareness, product image creation, sales promotion.

MATURITY Objectives of maturity: Maturity in growth Stable maturity Maturity in decline • Maximise profit • Defending market share • Increase costumer loyalty.

MATURITY Features of maturity: • highest sales in stable mature; • highest benefits in maturity in decline; • unit cost is the lowest; • competition is very strong; • buyers are majority

MATURITY Marketing strategies and policies: • Product: differentiation and rejuvenation; • Price: adapted to the main competitors; • Intensive to selective distribution; • Promotion tools: reminder advertising, image building and increasing loyalty.

DECLINE Main features: Decline objectives are: Reduce expenditures Harvesting/Milking the brand • declining sales; • benefits are declining; • production and marketing costs decrease; • competition is in decline; • product is required only traditional customers (laggards).

DECLINE Marketing strategies and policies: • Product: removal from manufacturing; • Price: continuous decrease; • Distribution: selective, în restrângere; • Promotion actions: reduce to minimum.

Price– marketing mix component - Price – only component that brings revenues

Price - definition - • Price is an amount of money that customer accepts and is willing to pay the seller in exchange for purchased products. • The size of the price reflected the amount that a client is able and willing to "sacrifice" to meet a particular need or desire.

Price particularities: 1. Price is a mobile and flexible element of marketing mix • price can be changed easily • effect of price change is usually immediate and measurable

Internal conditions of company Technical and organisational level of production Production costs Transport, distribution, commercialisation Quality of company management Particularities of national economy Balance of power in the market State pricing policy International regulations and restrictions 2.Price is a result of endogenous and exogenous factors interaction Endogen Exogen

Price can vary between 2 limits: • lower limit corresponding to the production and marketing costs and ensure a minimum profit margin. • upper limit determined by the product acceptability

3.The price is considered a measure of adaptability of the company to a highly dynamic competitive environment4. Company must obtain an interaction, interdependence between pricing and policies of product, distribution and promotion – in marketing strategy.

Objectives related to profit Objectives related to sales Pricing objectives

Objectives related to profit • survival • Production overcapacity • Strong competition on the market • Changing consumer wants • maximum current profit

Theoretically, the maximum profit point (considered as a function of II grade and with the graphical representation of a parabola) is where the first derivative is zero Curent profitmaximization (demand equation) (total cost equation) where: q – quantity; p – price; TC – total cost; FC – fixed cost; VC – variable cost; TR– total revenue; π – profit; a,b,c – positive parameters.

Objectives related to sales • Sales maximisation • Total revenues maximisation • Maximization of market advantages

Principles of Marketing