BUTUAN DOCTOR’S COLLEGE

JC Aquino Avenue, Butuan City 8600

Student’s Name: Teacher: MA. SABINA B. TEJAMO

Section: Date of Completion:

Strand: ABM 3 Lesson: 4

Subject: BUSINESS MARKETING Score: Teacher Signature:

The learners demonstrate an understanding of the essence of the new

Course Outcome product development, pricing, placing (distribution), and promoting a
product or service.

Topic DEVELOPING THE MARKETING MIX

1. Define a product and difficulties the product, services and
experiences
2. Identify and describe the factors to consider when setting
prices and new product pricing and its general pricing
approaches
Most Essential Learning 3. Discuss the structure of distribution channel, its functions
Competencies: and the nature of supply chain management
4. Define and identify relevant promotional tools, namely,
advertising, sales promotion, personal selling, public
relationships and direct marketing to create awareness and
persuade the target market to buy the product or patronize
the service

The learners shall be able design a new product or service, decide types
Learning Objective/s: of pricing approach, and choose distribution methods and promotion
tools that respond to market trends.

INTRODUCTION:

A marketing mix consists of a combination of factors that a business can control in order to
influence consumers to purchase its products. By strategically manipulating these factors and
continuously optimizing them, businesses can better serve their customers; in turn, boosting
their bottom lines. Marketing mixes are comprised of the four P’s of marketing
— product, price, promotion, and place.

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LESSON 4.1 ESSENCE OF THE NEW PRODUCT DEVELOPMENT, PRICING, PLACING

(DISTRIBUTION) AND PROMOTING A PRODUCT OR SERVICE

The term ‘marketing mix’ first appeared in the article entitled ‘The Concept of Marketing Mix’ (1948)
written by theorist Neil Borden, a professor of marketing and advertising at Harvard Business School.

• He claimed that he was inspired by the research of James W. Culliton who described the
role of marketing managers as ‘mixers of ingredients.

• In 1960, Professor Jerome McCarthy (born in 1928) developed Borden’s theory and kept
four main points, namely the 4 P’s (Product, Price, Place and Promotion) in his book Basic
Marketing: Managerial Approach.

• Marketing Mix basically is combination of various elements, which in their totality,

constitute marketing system of firm.

• According to Philip Kotler “Marketing Mix is the set of controllable variables that the firm
can use to influence the buyer’s response

The constituents of marketing mix are said as marketing mix elements. Elements are also
referred as decision variables.

• Marketing mix consists of mainly four elements, referred to as “4 Ps”

• Each element is also referred as mix, for example, product mix, price mix, promotion mix,
and place mix.
• Each mix contains a set of decisions

MARKETING MIX
A. MARKETING MIX – PRODUCT

WHAT IS PRODUCT?
Product - is anything that can be offered in a
market for attention, acquisition, use, or
consumption that might satisfy a need or want.
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WHAT IS SERVICE?

Service -is a product that consists of activities, benefits or satisfaction that is essentially intangible
and does not result in the ownership of anything.

WHAT IS EXPERIENCE?

Experience – represent what buying the product or service will do for the customer

PRODUCT
• In marketing, a product is anything that can be offered to a market that might satisfy a
want or need. It can be described as a bundle of benefits which a marketer offers to the
consumer for a price.
• Managing the product includes product planning, product development, product design,
product mix, product innovation, standardization and branding.

According to William J. Stanton “Product is a set of tangible and intangible attributes

including packaging, colour, price, manufacturer’s prestige, retailer’s prestige and
manufacturer’s and retailer’s services which buyer may accept as offering satisfaction of
wants and services”.

According to Alderson, W., “Product is a bundle of utilities consisting of various product

features and accompanying services”

8 Step Process Perfects New Product Development

Every entrepreneur knows that productivity is one of the key ingredients for successful product
development. One of the two key processes in Robert’s Rules of Innovation is the NEW PRODUCT
DEVELOPMENT PROCESS. A formalized, NPD process – also referred to and best practice: the Stage
Gate® Process – is a must, from simple to sophisticated.

The New Product Development process is often referred to as The Stage-Gate innovation process,
developed by Dr. Robert G. Cooper as a result of comprehensive research on reasons why products
succeed and why they fail.

When teams collaborate in developing new innovations, having the following eight ingredients mixed
into your team’s new product developmental repertoire will ensure that it’s overall marketability will
happen relatively quick, and accurately – making everyone productive across the board.

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Step 1: Generating

Utilizing basic internal and external SWOT analyses, as well as current marketing trends, one can
distance themselves from the competition by generating ideologies which take affordability, ROI, and
widespread distribution costs into account.

Lean, mean and scalable are the key points to keep in mind. During the NPD process, keep the system
nimble and use flexible discretion over which activities are executed. You may want to develop
multiple versions of your road map scaled to suit different types and risk levels of projects.

Step 2: Screening the Idea

Wichita, possessing more aviation industry than most other states, is seeing many new innovations
stop with Step 2 – screening. Do you go/no go? Set specific criteria for ideas that should be continued
or dropped. Stick to the agreed upon criteria so poor projects can be sent back to the idea-hopper
early on.

Because product development costs are being cut in areas like Wichita, “prescreening product ideas,”
means taking your Top 3 competitors’ new innovations into account, how much market share they’re
chomping up, what benefits end consumers could expect etc. An interesting industry fact: Aviation
industrialists will often compare growth with metals markets; therefore, when Boeing is idle, never
assume that all airplanes are grounded, per se.

Step 3: Testing the Concept

As Gaurav Akrani has said, “Concept testing is done after idea screening.” And it is important to note,
it is different from test marketing.

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Aside from patent research, design due diligence, and other legalities involved with new product
development; knowing where the marketing messages will work best is often the biggest part of
testing the concept. Does the consumer understand, need, or want the product or service?

Step 4: Business Analytics

During the New Product Development process, build a system of metrics to monitor progress. Include
input metrics, such as average time in each stage, as well as output metrics that measure the value of
launched products, percentage of new product sales and other figures that provide valuable feedback.
It is important for an organization to be in agreement for these criteria and metrics.

Even if an idea doesn’t turn into product, keep it in the hopper because it can prove to be a valuable
asset for future products and a basis for learning and growth.

Step 5: Beta / Marketability Tests

Arranging private tests groups, launching beta versions, and then forming test panels after the
product or products have been tested will provide you with valuable information allowing last minute
improvements and tweaks. Not to mention helping to generate a small amount of buzz. WordPress is
becoming synonymous with beta testing, and it’s effective; Thousands of programmers contribute
code, millions test it, and finally even more download the completed end-product.

Step 6: Technicalities + Product Development

Provided the technical aspects can be perfected without alterations to post-beta products, heading
towards a smooth step 7 is imminent. According to Akrani, in this step, “The production department
will make plans to produce the product. The marketing department will make plans to distribute the
product. The finance department will provide the finance for introducing the new product”.

As an example; In manufacturing, the process before sending technical specs to machinery involves
printing MSDS sheets, a requirement for retaining an ISO 9001 certification (the organizational
structure, procedures, processes and resources needed to implement quality management.)

In internet jargon, honing the technicalities after beta testing involves final database preparations,
estimation of server resources, and planning automated logistics. Be sure to have your technicalities
in line when moving forward.

Step 7: Commercialize

At this stage, your new product developments have gone mainstream, consumers are purchasing your
good or service, and technical support is consistently monitoring progress. Keeping your distribution
pipelines loaded with products is an integral part of this process too, as one prefers not to give physical
(or perpetual) shelf space to competition. Refreshing advertisements during this stage will keep your
product’s name firmly supplanted into the minds of those in the contemplation stages of purchase.
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Step 8: Post Launch Review and Perfect Pricing

Review the NPD process efficiency and look for continues improvements. Most new products are
introduced with introductory pricing, in which final prices are nailed down after consumers have
‘gotten in’. In this final stage, you’ll gauge overall value relevant to COGS (cost of goods sold), making
sure internal costs aren’t overshadowing new product profits. You continuously differentiate
consumer needs as your products age, forecast profits and improve delivery process whether physical,
or digital, products are being perpetuated.

Remember: The Process Is Loose

The entire new product development process is an ever-evolving testing platform where errors will
be made, designs will get trashed, and loss could be recorded. Having your entire team working in
tight synchronicity will ensure the successful launch of goods or services, even if reinventing your own
wheel. Productivity during product development can be achieved if, and only if, goals are clearly
defined along the way and each process has contingencies clearly outlined on paper.

Customers will choose a product based on their perceived value of it. Satisfaction is the degree to
which the actual use of a product matches the perceived value at the time of the purchase. A customer
is satisfied only if the actual value is the same or exceeds the perceived value. Kotler attributed five
levels to products:
The five product levels are:
1. Core benefit:
The fundamental need or want that
consumers satisfy by consuming the product
or service. For example, the need to process
digital images.
2. Generic product:
A version of the product containing only
those attributes or characteristics absolutely
necessary for it to function. For example, the
need to process digital images could be
satisfied by a generic, low-end, personal
computer using free image processing
software or a processing laboratory.
3. Expected product:
The set of attributes or characteristics that buyers normally expect and agree to when they
purchase a product. For example, the computer is specified to deliver fast image processing
and has a high-resolution, accurate colour screen.
4. Augmented product:
The inclusion of additional features, benefits, attributes or related services that serve to
differentiate the product from its competitors. For example, the computer comes pre-loaded

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with a high-end image processing software for no extra cost or at a deeply discounted,
incremental cost.
5. Potential product:
This includes all the augmentations and transformations a product might undergo in the
future. To ensure future customer loyalty, a business must aim to surprise and delight
customers in the future by continuing to augment products. For example, the customer
receives ongoing image processing software upgrades with new and useful features.

What benefits does the model provide?

Kotler's Five Product Level model provides businesses with a proven method for structuring their
product portfolio to target various customer segments. This enables them to analyze product and
customer profitability (sales and costs) in a structured way. By organizing products according to this
model, a business' sales processes can be aligned to its customer needs and help focus other
operational processes around its customers – such as design and engineering, procurement,
production planning, costing and pricing, logistics, and sales and marketing.

Grouping products into product families that align with customer segments helps modelling and
planning sales, as well as production and new product planning.

Implementing Porter's Five Forces analysis? Questions to consider

• How do our customers view our products?

• How will they shop for our products?
• Can we structure our products into families that align with how our customers value our
products?
• How can the product structure be optimized along common components to make cost and
price structures logical and accessible?

Actions to take / Dos Actions to avoid / Don'ts

• Start with customers. • Don't attempt to shoehorn

• Analyze and segment customers by their customer segments into existing
needs and wants. products and structures.
• Align products into families that align to • Avoid too many customer
customer segments. segments, leading to overly
• Optimize product hierarchies along complex product and cost/price
component and production process structures.
commonalities to help with cost and price
structure management.
• Strategically assess the profitability of
products, product families and customer
segments.

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• Report gaps and opportunities identified by

the product hierarchy.

Related and similar practices to consider

• Product Family Master Planning

Example – Coca – Cola

1. Core Benefit - Quench thirst.
2. Generic Product - Burnt vanilla smelling, black, carbonated, and sweetened
fizzy drink.
3. Expected Product – Cold drink with taste.
4. Augmented Product - Diet-Coke with zero calories.
5. Potential Product - Running competitions. The prizes in these competitions
are often things that, “money can’t buy”, such as celebrity experiences. To
continue to delight customers over time the competition prizes change
frequently.

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Product Life Cycle

The life cycle of a product is associated

with marketing and management
decisions within businesses, and all
products go through five primary
stages:

1. Development
2. Introduction
3. Growth
4. Maturity
5. Decline

Each stage has its costs, opportunities,

and risks, and individual products differ
in how long they remain at any of the life cycle stages.

Development Stage

The product development stage is often referred to as “the valley of death.” At this stage, costs are
accumulating with no corresponding revenue. Some products require years and large capital
investment to develop and then test their effectiveness. Since risk is high, outside funding sources are
limited. While existing companies often fund research and development from revenue generated by
current products, in startup businesses, this stage is generally funded by the entrepreneur from their
own personal resources.

Introduction Stage

The product introduction stage is also called “market pioneering stage” This stage requires huge
investment. The sales revenue may begin to grow along with the market demand but the rate of
growth is slow. Profits may not be available due to low sales volume supplemented by heavy
production and distribution costs. Advertisement expenditure is also heavy. The product quality is
very important to induce trial.

Product Introduction Strategies

Marketing strategies used in introduction stages include:

1. Rapid Skimming - launching the product at a high price and high promotional level
2. Slow Skimming - launching the product at a high price and low promotional level
3. Rapid Penetration - launching the product at a low price with significant promotion
4. Slow Penetration - launching the product at a low price and minimal Promotion
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During the introduction stage, the firm aims to:

• Establish a clear brand identity
• Connect with the right partners to promote the products
• Set up consumer tests, or provide samples or trials to key target markets
• Price the product or service as high as it believes it can sell it, and to reflect the quality level
it is providing
• Being selective (target a set of consumers) to boost demand.

Growth Stage

In this stage, product is accepted by the consumers; the market demand increases and the size of
market grows. Sales increase and so do the profits. Firm may adopt various sales promotional
techniques at consumer level, dealer level and sales force level. Advertisement is done on a large
scale. Prices have to be fixed keeping in mind the competitors pricing.

Product Growth Strategies

Marketing strategies used in the growth stage mainly aim to increase profits. Some of the common
strategies to try are:

• Improving product quality

• Adding new product features or support services to grow market share
• Enter new markets segments
• Keep pricing as high as is reasonable to keep demand and profits high
• Increase distribution channels to cope with growing demand
• Shift the marketing messages from product awareness to product preference
• Skimming product prices if the profits are too low.

Maturity Stage

In this stage,
• sales turnover reaches
• the highest-level Demand reaches saturation point.
• There is intense competition and lot of pressure on pricing.
• Profit margin may reduce
• Additional expenditure may be incurred for product modification and improvement
• Generally, the demand at this stage is stable
• Special sales promotional measures may be adopted to stimulate demand
• Reminder advertisement may be done at this stage

Product Maturity Strategies

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When the firm’s sales are at its peak, its product/ service enters the maturity
stage. The market is saturated, firms may have to find that they need to change the
marketing tactics to prolong the life cycle of products. Common strategies that can help during this
stage are:
• Market Modification - Entering new market segments, redefining target markets, winning
over competitor’s customers, converting non-users
• Product Modification - Adjusting or improving the product’s features, quality, pricing
and differentiating it from other products in the market

Decline Stage

During this stage,

• the sales gradually come down. This happens generally because of competitors’ products
being introduced in the market or change in technology etc.
• The product no longer gets support in the market
• The firm has to further drop the prices
• Expenditure on advertisement is almost negligible
• Consumers feel that the existing product is not as per their wants

Product Decline Strategies

During this stage, sales and profits decline due to changes in consumer preferences, technological
advances and alternatives on the market. The strategies that can be adopted are:

• Reduce promotional expenditure on the products

• Reduce the number of distribution outlets that sell them
• Implement price cuts to get the customers to buy the product
• find another use for the product
• maintain the product and wait for competitors to withdraw from the market first
• harvest the product or service before discontinuing it.

Another option is for the firm to discontinue the product from offering is
either:
• sell the brand to another business
• significantly reduce the price to get rid of all the inventory

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Width: Number of different product lines carried by the company.

Length: Total number of items in the product mix of the company.
Depth: Assortment of size, color and models offered in each item of a product line.
Consistency: It refers to the relationship of various product line either in
their end use, production requirement, distribution channel or other way.

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B. MARKETING MIX – PACKAGING

PACKAGING
• Packaging is the science, art, and technology of enclosing or protecting products for
distribution, storage, sale, and use.
• Packaging also refers to the process of design, evaluation, and production of packages.
• It can be described as a coordinated system of preparing goods for transport, warehousing,
logistics, sale, and end use.
• Packaging can also differentiate one brand of product from another brand.
• Because the product packaging can contain company names, logos and the color scheme of
the company, it helps consumers to identify the product as it sits among the competitor's
products on store shelves.

Purpose of Packaging
a. Physical Distribution - The objects enclosed in the package may require protection
from, among other things, mechanical shock, vibration temperature etc.
b. Barrier Protection – Barrier from oxygen, water vapor, dust, etc., is required for
products.
c. Containment – Small objects are grouped together in one package for reasons of
efficiency.

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d. Information Transmission – Packages and labels communicate how to use, transport,

recycle, or dispose of the package or product.
e. Marketing – The packaging and labels can be used by marketers to encourage potential
buyers to purchase the product.
f. Security –Packages can be made with improved tamper resistance to deter tampering
g. Convenience – Packages can have features that add convenience in distribution,
handling, stacking, display, sale, opening, reclosing, use, dispensing, reuse, recycling,
and ease of disposal.
h. • Portion control – Single serving or single dosage packaging has a precise amount of
contents to control usage.
i. Facilitates Purchase Decision - Packaging may also contain ingredients and nutritional
information about the product
j. Differentiation – A key role of packaging is differentiation

TYPE OF PACKAGING

a. Primary packaging is the material that first envelops the product and holds it. This
usually is the smallest unit of distribution or use and is the package which is in direct
contact with the contents.
b. Secondary packaging is outside the primary packaging, perhaps used to
group primary packages together.
c. Tertiary packaging is used for bulk handling, warehouse storage and
transport shipping

Packaging as a Marketing Tool (Silent Salesman)

Effective packaging can actually help a company attract consumers to their product.
• It can be the tool that sets apart their product in a vast sea of options that the consumer
has at their disposal.
• A good packaging can actually add to the perceived value of a product.
• Packaging is an integral marketing strategy to glamorize a product in order
to attract the consumer’s attention.
• Product packaging works as a silent salesman because consumers often makea
psychological connection with it.
• Packaging may appeal to consumers if it represents something that’s important to them or
symbolizes someone they aspire to be.
• Shoppers who have environmental concerns may choose a product packaged in recycled
materials

Labelling

• Labelling is the display of label in a product.

• A label contains information about a product on its container, packaging, or the product itself.

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• Labelling is any written, electronic, or graphic communications on the packaging or on a

separate but associated label.
• It also has warnings in it.
For e.g. in some products, it is written that the products contain traces of nuts and
should not be consumed by a person who is allergic to nuts.
• Labeling is also an important part of the brand of the product and the company.
• It helps the product stand out in the market, and identifies it as a part of a particular brand.

Importance of Labelling

• Labelling is essential as it helps to identify the product and also grab the attention of a
customer
• It can be combined with packaging and can be used by marketers to encourage potential
buyers to purchase the product.
• Labels communicate how to use, transport, recycle or dispose of the package or product.
• Labelling is also used to exaggerate the product.
• This kind of labeling helps a viewer to differentiate the product from the rest in the shelves of
the market.
• A person can find out about the ingredients of a product. This helps to spread awareness
among the customers about the item they are consuming and labeling also helps to mention
ingredients.
• Labeling is another very important factor in a product. It should show the correct information
about the product. This is all the more important in products such as pharmaceuticals.
• Labeling should also contain information relating to whether the product has harmful
chemicals, especially if it is a product that is meant for children

Product Guarantee and Warranty

• A warranty is a promise by a manufacturer that a certain product is free from defects and that
it will perform optimally as required.
• Warranty is thus a commitment from a manufacturer to its customers that if the product
breaks or if there is any problem in the product, the manufacturer will provide free repair for
the product.
• But the manufacturer does not commit replacement. He commits only repair.
• Warranty is generally given for products which are known to have frequent breakdowns and
are mechanical in nature - Example washing machines
• A guarantee, though similar to a warranty, is an assurance by the manufacturer that a certain
product is of high quality and will withstand the test of time.
• Guarantees are given for products which are sturdy and robust and are unlikely to break down
easily.
• Although guarantees are also given for mechanical product, the mechanical product should be
high value or highly engineered.
▪ Example: Heavy engineering products.

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• Both warranties and guarantees are used to give customers assurance that they are
purchasing quality products that are free from defects.
• It can also be used to enhance a brand's reputation or serve as a competitive differentiator for
the consumer

Example, When Amazon Kindle was launched, it was a completely new concept in the
market and there was a 1-year guarantee on the product. Kindle was known to have
soft screen and its screen breaking was a problem. However, Kindle knew what
percentage of their customers will suffer from this problem. Due to the guarantee in
place, many customers got direct replacement of their Amazon Kindle therefore
motivating more people to adopt Kindle faster. Mont Blanc has lifetime
guarantee of their product. It is so confident about its product, that if anything
happens to the product which is not resolved by the company, they offer free
replacement to the end customer.

Role of Brands

The American Marketing Association defines a brand as “a name, term, sign, symbol, or design, or a
combination of them, intended to identify the goods or services of one seller or group of sellers and
to differentiate them from those of competitors.” Let’s see, in detail, the role of brands and scope of
branding.

A brand is a product or service which help the organization differentiate their products or services
from others. The role of brand is critical for the organization as it translates into loyalty and higher
margins in the long run.

The differentiation of a brand can be:

Related to Product Performance. E.g. Gillette, Sony

• Functional
• Rational
• Tangible
Related to Brand Identity. E.g. Coca-Cola, Gucci, Tommy Hilfiger
• Symbolic
• Emotional
• Intangible

Building a brand helps both the consumer and the manufacturer creating a win-win situation for both
the parties.

Benefits of Brand to the Consumer

• It helps to identify the source of manufacturer of the product and simultaneously assigns a
responsibility towards an organization for the branded product.
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• Experience of customers with products of same brand help them to quickly decide whether
they will want to go with their purchase decision or not making their decision easier.
• Brands bring with them a certain level of quality assurance

Benefits of Brand to the Firm

• For a firm, the brand provides legal protection towards unique features or aspects of the
product.
• Brand loyalty helps organization to retain their existing customers when diversifying from one
line of products to other.
• It provides security of demand and creates barrier for other manufactures to easily tap existing
customers.
• Firms can charge a premium for owning a brand boosting profit on every sale. Product can be
copied, but brand cannot. Once a brand is established, it’s the invaluable asset for an
organization.
• A well-established brand adds towards the overall value of the firm while calculating its net
worth.

Scope of Branding

• A brand is a perceptual entity that is rooted in reality but reflects the perceptions and perhaps
even the idiosyncrasies of consumers.
• Brand is something that resides in the minds of consumers. Therefore, the scope of branding
expands beyond boundaries.

The concept of branding can be applied to:

• Physical Goods – e.g. Parle-G biscuits, Tata Tea, Maruti SX4

• Services – e.g. Indigo Airlines, ICICI Bank
• Stores – e.g. Future Retail, Central, 99 Store, Amazon
• Person – e.g. Sachin Tendulkar, Amitabh Bacchhan
• Place – e.g. Gujrat Tourism, Incredible India
• Organization – e.g. The Rolling Stones
• Idea – e.g abortion rights, freedom of speech

C. MARKETING MIX – PRICE

Price is the amount charged for a product or service. It can be defined as the economic value of
product normally expressed in form of money. It is one of the most important elements in the
marketing mix. Fixing the price of the product is a tricky job.

Many factors like demand for a product, cost involved, consumer’s ability to pay, prices charged by
competitors for similar products, government restrictions etc. have to be kept in mind while fixing the

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price. In fact, pricing is a very crucial decision area as it has its effect on demand for the product and
also on the profitability of the firm.

The price of product should be set in such a way that buyers can pay and company can earn adequate
profits.
In case of price-sensitive customers on one hand and the prestige-sensitive customers on the other
hand, the pricing decisions become vital in marketing.

Price mix includes the decisions regarding:

• Determining manufacturing (variable and fixed) costs the product

• Studying pricing policies and strategies of the close competitors
• Terms of credit to be allowed to customers.
• Deciding on level or margin of profits
• Identifying and analyzing various relevant factors influencing pricing decisions
• Pricing policies/strategies in different stages of product life cycle

The underlying factors that determine a company’s price decisions can be categorized as internal
factors and external factors:

• Internal factors include company’s marketing objectives, marketing mix strategy, and costs
• External factors consist of market environment, demand, competition

PROCEDURE/STEP FOR SETTING PRICE

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Pricing Strategies

Skimming Strategy:
High price is charged for a product initially till the time competitors allow and thereafter
prices may be dropped. The idea is to recover maximum money before the product or
segment attracts more competitors who will lower profits for all concerned. E.g. Apple mobile
phone

Penetration Pricing:
Price is set artificially low to gain market share quickly. This is done when a new product is
being launched. It is understood that prices will be raised once the promotion period is over
and market share objectives are achieved. E.g. Reliance mobile phones

Demand Pricing:
Also called demand-based pricing, or customer-based pricing. This pricing method uses
consumer demand of a product or service as the main element of setting a price for a product
or service. It is affected by consumer demand, based on the perceived value of a product or
service

Psychological Pricing:
This is a common pricing technique used by marketers. A minor difference in prices is a huge
difference for customers. For example, an item whose price is listed as Rs. 199 may be seen
as much cheaper than a product or service priced at Rs. 200.

Competitive Pricing:
Also called the strategic pricing, this is a method that uses the prices set by competitors. More
or less using competitor’s price is considered to price its own products.

Cost-Plus Pricing:
When setting the cost-plus price, the marketer takes the cost of the raw materials and the
cost of production and add them to the overhead costs of a product or service. To this total,
he may add a markup percentage (profit margin) and this total sum is the cost-plus price.

Discount Pricing:
A pricing strategy that offers products and services at a reduced price. Discount prices can
come in the form of seasonal discounts, loyalty rebates etc.

Geographic Pricing:
This pricing strategy is one where different price are charged in different geographical
locations or markets for the t same product or service.

Price Bundling:
This is a strategy used when two or more products or services are priced together as a
package, with a single price
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D. MARKETING MIX – PLACE

Goods are produced to be sold to the consumers, to be made available to the consumers at a place
where they can conveniently make purchase. There is a chain of individuals and institutions like
distributors, wholesalers and retailers who constitute a firm’s distribution network (also called a
channel of distribution).

A channel of distribution is a path traced in the direct or indirect transfer of ownership of a product
as it moves from producers to consumers. Channel is pipeline through which the goods flow on its
way to the consumers.

Distribution channels can be defined as the set of interdependent marketing institutions participating
in the marketing activities involved in the movement the flow of goods or services from the primary
producers to ultimate consumers.

The organization has to decide whether to sell directly to the consumer or through the
distributors/wholesaler/ retailer (Intermediaries

Direct Distribution Channel

• In the direct channel method, the manufacturer directly sell the goods to the customers.
• There is no involvement of intermediaries in this distribution. Hence it is alsocalled “zero level
distribution”.
• The manufacturer distributes their products mainly by setting up retail outlets and internet
selling.
• To adapt this method, the manufacturer has to recruit field sales team and the sales
representatives are responsible for the sales.

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• The companies using direct distribution channel has higher profits than the companies using
indirect distribution channels.
▪ E.g. Dell and travel agents are best examples for this.

Indirect Distribution Channel

Indirect distribution channel may be divided into 3 types according to the usage of intermediaries or
channel methods - one level, two level and three level channels.

In one level channel - manufacturer sells the goods directly to a retailer. Mostly this channel is used
by expensive watches and FMCG products.

In the two-level channel- the manufacturer sells the goods to a wholesaler, the wholesaler to a
retailer and then to the customer. The wholesales purchase large volumes from the manufacturer and
then distribute them to retailers in small volumes. This channel is mainly used to sell soaps, sugar,
cigarette etc.

In the three-level channel- one more level is added to two level channels in the form of agents. This
agent reduces the distance between the manufacturers and wholesaler. This is suitable for very big
companies like Toyota, Pepsi etc.

Place mix ensures that the right products can be made available to the right consumers, in the right
way, at the right time and at the right place, and in the right form.

Channel Management decisions involve:

• Studying geographical concentration of customers

• Analyzing types of distribution channels and channel members
• Selecting suitable channel of distribution.
• Physical distribution including transportation, communication, warehousing, inventory
control, insurance, banking, etc.
• Developing and adopting logistics management for effective distribution of goods.

Importance of Distribution Channels

• Persuading and influencing the prospective buyers to favor a certain product and its maker
personal selling /sales promotion].
• The distribution channels can perform many functions like transportation, storage, selling,
scale of operation and advertising better than the manufacturers.
• Large manufacturing companies can reduce their costs and time required to reach their
products with the help of distribution channels.
• Participate actively in the creation and establishment of market for a new product.
• Providing feedback information
• Offering credit to retailers and consumers.
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Types of Middlemen

1. Wholesalers: They are the people who buy in bulk from the producers and sell in small
quantities to the retailers.
2. Retailers: They are the people who buy in small quantities from the wholesalers and sell to
the ultimate consumers
3. Agents: They are the middlemen who do not take any title to goods. They render all services
required in marketing. They represent either the seller or the buyer and receive commission
for their work.
4. Brokers: Like agents, brokers also represent either the buyer or the seller. They do not
usually have physical control over the goods in which they deal.
Example: share brokers. They get ‘brokerage’ for their work.
5. Dealers: They are the business houses that resell goods.
6. Distributors: They are the same as wholesalers.

Functions of Middlemen

1. Middlemen are the furnishers of valuable information to the producers about consumer behavior,
the changes in tastes and fashions, etc.
2. Middlemen allow the manufacturers to concentrate on production only and relieve them from the
botheration of marketing.
3. Middlemen render financial help to manufacturers.
4. They make available the goods according to the consumers’ needs, fashion, tastes, etc.
5. Middlemen are an important link between the producers and consumers.

Middlemen play a very important role in the business activities and to maintain the
regular chain of supply of goods from the manufacturers to the ultimate consumers. Thus,
the existence of the middlemen is very essential

E. MARKETING MIX – PROMOTION

PROMOTION

If the product is manufactured keeping the consumer needs in mind, is rightly priced and made
available at outlets convenient to them but the consumer is not made aware about its price, features,
availability etc., its marketing effort may not be successful.

• Promotion is an important ingredient of marketing mix as it refers to a process of informing,

persuading and influencing a consumer to make choice of the product to be bought.
• Promotion mix deals with those activities directed to increase sales volume. Itis also known as
market communication.
• Promotion mix involves all those efforts directed to increases sales of products on a
continuous basis.
• It includes providing information to customers, inspiring them to buy, and offering incentives.
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• Market promotion is concerned not only with raising sales volume, but it is also a tool for
establishing long-term relations with the parties involved and is a matter of image, reputation,
and goodwill for the company.
• Promotion is done through means of personal selling, advertising, publicity and sales
promotion to provide information to prospective consumers about the availability,
characteristics and uses of a product.
• It arouses potential consumer’s interest in the product, compare it with competitors’ product
and make choice

INTERGRATED MARKETING COMMUNICATION(IMC)

Integrated Marketing Communications refers to integrating all the methods of brand promotion to
promote a particular product or service among target customers.

According to the American Marketing Association,” Integrated Marketing Communication is a

planning process designed to assure to that all brand contacts received by a customer or prospect for
a product, service, or an organization are relevant to that person & consistent over time. ”“IMC is
planning a systematic way in order to determine the most effective and consistent message for
appropriate target audiences.”

In IMC, all aspects of marketing communication work together for increased sales and maximum cost
effectiveness. It is essential for organizations to promote their brands well among the end users not
only to move ahead of competitors but also survive in the long run.

Brand promotion increases awareness of products and services and eventually increases their sales,
yielding high profits and revenue for the organization.

To understand integrated marketing communication, it is important to understand the meaning of

brand communication; Brand communication is an initiative taken by organizations to make their
products and services popular among the end-users.

Brand communication goes a long way in promoting products and services among target consumers.
The process involves identifying individuals who are best suited to the purchase of products or
services (also called target consumers) and promoting the brand among them through any one of
the components of IMC.

Components of Integrated Marketing Communication (IMC)

1. Advertising
• Advertising is one of the most effective ways of brand promotion. It helps organizations
reach a wider audience within the shortest possible time frame.
• Advertisements in newspaper, television, Radio, billboards help end-users to believe
in the brand and also motivate them to buy the same and remain loyal towards the
brand.
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• Advertisements not only increase the consumption of a particular product/service but

also create brand awareness among customers.
• Marketers need to ensure that the right message reaches the right customers at the
right time.
• Advertising helps create and maintain brand equity. Brand equity is an intangible asset
that results from a favorable image, impressions of differentiation, or consumer
attachment to the company, brand, or trademark.

Aaker defines brand equity as a set of assets and liabilities linked to a brand, its name
and symbol, that add value or subtract from the value provided by a product or
service to a firm and/or to that firms’ customers.

Brand equity translates into greater sales volume, and/or higher margins, thus, greater competitive
advantage.

Brand equity is established and maintained through advertising that focuses on image, product
attributes, service, or other features of the company and its products or services.

Aaker explains further that the assets and liabilities can be grouped under five categories:
1. brand loyalty
2. name awareness
3. perceived quality
4. iv)brand associations in addition to perceived quality and
5. other proprietary brand assets such as patents, trademarks and channel relationships.

2. Direct Marketing

• Direct marketing enables organizations to communicate directly with the end users.
• Various tools for direct marketing are emails, text messages, catalogues, brochures,
promotional letters and so on.
• Through direct marketing, messages reach end-users directly.

3. Sales Promotion

• Brands (Products and services) can also be promoted through discount coupons, loyalty clubs,
membership coupons, incentives, lucrative schemes, attractive packages for loyal customers,
specially designed deals and so on.
• Brands can also be promoted effectively through newspaper inserts, danglers, banners at the
right place, glorifiers, wobblers etc.

4. Interactive/ Internet Marketing

• The newest growing global media channel for communicating and selling directly to customers
is Internet.
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• Internet has many marketing functions such as building demand, conducting transactions,
filling orders, providing customer service and it provides advertisers a cost-effective way of
reaching its customers

Internet has two key features:

1. Individualization: Internet users have control over the amount of information they want to
access and this leads advertisements and promotions that are relevant to the consumers
interactivity.
2. Interactivity: allows users to perceive whatever information they decide to perceive and for a
company it gives the ability for a two-way communication

5. Personal Selling

• Personal selling takes place when marketer or sales representative sells products or services
to clients.
• Personal selling can be defined as “a two-way communication between a potential buyer and
a salesperson that is designed to accomplish at least three tasks: identify the potential
buyer’s needs, match those needs to one or more of the firm’s products or services, convince
the buyer to purchase the product”
• Personal selling is one of the most effective forms of promotion because it allows the
salesperson to approach a customer or a prospect the way they see fit.
• Personal selling goes a long way in strengthening the relationship between the organization
and the end-users.

6. Public Relation

Public relations mean “building good relations with the company’s various publics by obtaining
favorable publicity, building up a good corporate image, and handling or heading off unfavorable
rumors, stories and events”

Public Relations helps in:

• Introducing new products or services.

• Disseminate product features about existing products.
• Celebrating special events to promote the company, product or service.
• Strengthening an advertising campaign or establishing relationships with important
customers and prospects.

7. Sponsorship

Sponsorship as a way to reach customers has been growing rapidly American Marketing Association
(AMA) defines sponsorship as “advertising that seeks to establish a deeper association and integration
between an advertiser and a publisher, often involving coordinated beyond the-banner
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placements”.
Through sponsorship it is possible to gain top-of-mind awareness (TOMA) among customers.
The best place to gain brand awareness is during sports events due to the large media coverage
Sponsorship can strengthen brand image by improving perceptions in order to build, change or
improve brand image.

Mr. Ram is the manager (product development) in a coffee processing company “Modern India Coffee
Ltd”. The company introduced innovative products to cater to changing needs of its customers. Mr.
Ram travelled extensively to feel the pulse of different segments of coffee drinkers. He himself was
very fond of drinking coffee. His friends knew that Ram did not prefer to drink coffee provided in five-
star hotels, because it was expensive and it did not meet Rams expectation of quality. He gave up
drinking coffee during the tours.

Mr. Ram realized that the problem of not getting good coffee was a common problem for coffee
lovers. His scientific mind started to analyze this and Modern India Coffee Ltd. Introduced a new
product ‘coffee tablets’ developed by Mr. Ram. These tablets were so designed that one tablet added
to hot water would produce a cup of coffee without leaving any residue in the cup.

The Company decided to adopt introductory low price for these tablets and planned a national launch.
However, the chairman felt that necessary marketing research should be undertaken before
launching the product

References
1. Marketing Management: The Millennium Edition, Kotler. P, Prentice – Hall
2. Marketing Management: An Asian Perspective - 5th Edition by Philip Kotler,
Kevin Lane Keller, Ang Swee Hoon, Leong Siew Meng, Tan Chin Tiong
3. Ramaswamy V.S. and Namakumari S. Marketing Management – Planning,
Implementation and Control, 5th edition, Macmillan
4. Principles of Marketing, BMS Series, Vipul Prakashan
5. https://marketing-insider.eu/marketing-explained/part-iii-designing-acustomer-
driven-marketing-strategy-and-mix/product-life-cycle-strategies/
6. https://marketinglessons.in/role-of-brands-and-scope-of-branding-philipkotler-
summary/

PRE-TEST: ACTIVITY 1

MULTIPLE CHOICE: READ CAREFULLY AND WRITE THE BEST ANSWER THAT SUPPORT THE GIVEN
QUESTION(S)

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1. Alibaba Group is a massive e-commerce company that operates several different businesses,
including Alibaba.com (the business-to-business marketing platform), TaoBao (the consumer-
to-consumer marketing platform), Tmall.com (the business-to-consumer marketing platform),
and Aliyun (the cloud computing platform). If we think of each of these as a different product
line, then together they measure Alibaba Group’s ___.
a) breadth
b) depth
c) diversity
d) height
e) length

2. Marriott International operates several different hotel chains, including Marriott, Ritz-Carlton,
SpringHill Suites, and Residence Inn. If each hotel chain is a different product line, the number
of different Residence Inn locations represents ___.
a) breadth
b) diversity
c) variability
d) volume
e) depth

3. Apple is adding a new product line, the HomePod, to its product mix. Which of the following
is a reason why Apple might make this change?
a) To meet changing customer preferences
b) To realign company resources
c) To capture new markets
d) To cut losses from a low-margin product line
e) To increase product mix depth

4. The manager of the Dew Drop Inn knows from experience that five to seven last-minute
customers will call after 7pm each evening looking for a room and asking the price. She asks
her staff to offer discounts when the hotel is largely vacant and to quote the standard price
when the hotel is close to full. She knows her service is __________, meaning that if no one
stays in the room, it generates no revenue that evening.
a) intangible
b) inseparable
c) variable
d) perishable
e) heterogeneous

5. Pippa works at a tattoo parlour. Before she begins to ink someone, she asks them a lot of
questions about the tattoo they want. She does this because she knows her service is ___,
which means that, since purchase and consumption are simultaneous, customers cannot
return an unsatisfactory tattoo.
a) inseparable
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b) intangible
c) variable
d) perishable
e) impermeable

6. When you are introducing a new product, ___ help the product gain initial acceptance by
willingly testing unknown products; acceptance by ___ indicates the product has reached a
combined 50% of the population.
a) early adopters; the late majority
b) laggards; innovators
c) the early majority; the late majority
d) innovators; early adopters
e) innovators; the early majority

7. Which of the following is not a factor that speeds diffusion?

a) The new product is clearly better than existing alternative products.
b) The new product is easy to use.
c) The new product is compatible with how consumers solve the relevant need.
d) The new product is widely available.
e) The new product is complicated.

8. The market for Product Category X does not offer many product variations. The few firms in
the product category are using concentrated targeting strategies to pursue innovators and/or
early adopters. Due to high research and development costs, many firms’ profits are close to
zero, or even negative. What product life cycle stage is this product category in?
a) Introduction
b) Growth
c) Maturity
d) Decline
e) Pre-launch

9. LG has added innovative new features, such as a wifi-enabled, LCD touchscreen control panel,
to its SmartThinQ refrigerator. LG may also be considering new distribution channels and price
incentives to maintain their market share. These are strategies that help LG respond to
refrigerators being in the ___ stage.
a) growth
b) introduction
c) maturity
d) decline
e) pre-launch

10. Which of the following is false about the product life cycle curve?
a) The shape of the product life cycle curve can differ for different product categories.
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b) The product life cycle can be used to predict sales for a specific brand.
c) Companies can only make educated guesses about which stage of the product life cycle
their product is in.
d) The product life cycle can lead to a self-fulfilling prophecy.
e) The beginning and end of each stage of the product life cycle can be unclear.

11. When consumers make purchase decisions, they typically:

a) Consider the purchase price.
b) Consider associated costs, such as shipping and downstream fees.
c) Consider product benefits.
d) Consider the relationship between costs and benefits.
e) All of the above.

12. Price elasticity is likely to be high when:

a) There are many available substitute products.
b) Prices are hard to compare.
c) Products are bundled.
d) The price seems fair.
e) All of the above.

13. Imagine Taco Bell is releasing a new product: dessert tacos—essentially crepes filled with
toppings like cinnamon and sugar or chocolate sauce. When considering how to price the new
offering, Taco Bell should consider:
a) Competitors’ pricing for similar offerings.
b) Their corporate pricing objectives.
c) Customer perceptions of value.
d) Their breakeven point.
e) All of the above.

14. UBC student Felix Böck recently developed a way to convert used chopsticks into decorative
items like coasters and wall panels. Because the idea of decorating with other people’s
cleaned, but used chopsticks might take a while to catch on, Felix might want to initially price
items low to build interest. Which pricing strategy would this be?
a) Odd pricing
b) Prestige pricing
c) Price skimming
d) Penetration pricing
e) High-low pricing

15. Last year two recent UBC grads opened up UNIVRS, Vancouver’s first virtual reality gaming
lounge. If UNIVRS set prices high initially to attract the innovator and early adopter crowds,
they would have been using a/an:
a) High/low pricing strategy.
b) EDLP (Every Day Low Pricing) strategy.
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c) Price skimming strategy.

d) Penetration pricing strategy.
e) Odd pricing strategy.

16. Unlike the other 3 Ps (product, price, and promotion), place or distribution does not affect the
rest of the marketing mix.
a) True, distribution decisions are independent from the other Ps.
b) False, distribution decision affect product decisions, but not the other Ps.
c) False, distribution decisions affect promotion decisions, but not the other Ps.
d) False, distribution decisions affect product, price, and promotion decisions.
e) False, distribution decisions affect price and promotion decisions, but not the other P.

17. Channel partners add value in many ways. Which of the following is not one of the ways
channel partners add value?
a) Channel partners reduce the number of contacts needed by producers and consumers.
b) Channel partners transform assortments of goods to meet consumers’ needs.
c) Channel partners prevent conflicts along the supply chain.
d) Channel partners pass information along the supply chain.
e) Channel partners can spread risk along the supply chain.

18. Which of the following is not one of WestJet’s channel partners?

a) American Airlines
b) Air Canada
c) WestJet Vacations
d) Expedia
e) Disney

19. If Mars, Inc. wants to ensure its candy bar product lines, such as M&M, Milky Way, and Twix,
appear in as many locations as possible, they will likely prefer a(n) ___ distribution strategy.
a) intensive
b) selective
c) exclusive
d) extensive
e) differentiated

20. If J. Crew wants to create and maintain a particular image for their clothing brand and tightly
control the supply channel, they will likely prefer a(n) ___ distribution strategy.
a) selective
b) intensive
c) collective
d) extensive
e) exclusive

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21. ___ are special incentives or excitement-building programs that are often used to encourage
consumers to purchase a particular product.
a) Advertisements
b) Personal sales
c) Sales promotions
d) Public relations
e) Direct marketing campaigns

22. What is an IMC campaign?

a) A massive communication strategy that utilizes all five elements of the promotion mix.
b) A coordinated communication strategy that delivers a clear, consistent message across
channels.
c) An advertising blitz that is tied to a major event, such as the Super Bowl or the Academy
Awards.
d) A PR campaign that spins negative press into positive buzz for the brand.
e) A communication campaign that merges paid, owned, and earned media.

23. Kunal recently developed a new software solution that he wants to market to other
businesses. Given the complexity of the product, he wants to focus his promotional efforts on
a method that will allow him to engage in two-way communication with potential clients and
have them really listen to the message, even if it costs more. Which promotional mix element
is a good fit for Kunal’s preferences?
a) Advertising
b) Public relations
c) Direct marketing
d) Personal selling
e) Sales promotions

24. Which of the following is not a key advantage of direct marketing over mass media
advertising?
a) Direct marketing can happen online.
b) Direct marketing allows for more personalization of the message.
c) Direct marketing is more interactive.
d) Direct marketing can be prepared more quickly.
e) Direct marketing is more targeted.

25. When promoting directly to consumers, a company is generally using a:

a) Push strategy – to stimulate interest among members of the supply chain.
b) Nudge strategy – to encourage consumers to make the right choice for themselves.
c) Pull strategy – to get the product into stores by having consumers demand it.
d) Shove strategy – to force consumers to choose the target product.
e) Yank strategy – to have competitors’ products removed from shelves.

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TEST II
1. Define a product and difficulties the product, services and experiences
2. Identify and describe the factors to consider when setting prices and new product pricing and
its general pricing approaches
3. Discuss the structure of distribution channel, its functions and the nature of supply chain
management
4. Define and identify relevant promotional tools, namely, advertising, sales promotion, personal
selling, public relationships and direct marketing to create awareness and persuade the target
market to buy the product or patronize the service

-FIN-

“Proverbs 16:16 says that having wisdom and understanding is better than having silver or gold. Nice and expensive items
can be enjoyable, but there are very few things in life that can never be taken away, will never go out of style, and that
truly make you a better person. An education is one of those things”

GOD BLESS YOU

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