Marketing Prev Questions Answers

Download as pdf or txt
Download as pdf or txt
You are on page 1of 28

Porter's Five Forces Model

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape
every industry and helps determine an industry's weaknesses and strengths. Michael Porter has
identified five forces that determine the intrinsic long-run attractiveness of a market or market
segment: industry competitors, potential entrants, substitutes, buyers, and suppliers. The threats
these forces pose are as follows:
1. Threat of intense segment rivalry - The first of the Five Forces refers to the number of
competitors and their ability to undercut a company. The larger the number of
competitors, along with the number of equivalent products and services they offer, the
lesser the power of a company.
2. Threat of new entrants - A company's power is also affected by the force of new
entrants into its market. The less time and money it cost for a competitor to enter a
company's market and be an effective competitor, the more an established company's
position could be significantly weakened.
An industry with strong barriers to entry is ideal for existing companies within that
industry since the company would be able to charge higher prices and negotiate better
terms.
3. Threat of suppliers’ growing bargaining power - The next factor in the Porter model
addresses how easily suppliers can drive up the cost of inputs. The fewer suppliers to an
industry, the more a company would depend on a supplier.
As a result, the supplier has more power and can drive up input costs and push for other
advantages in trade.
4. Threat of buyers’ growing bargaining power - The ability that customers have to drive
prices lower or their level of power is one of the Five Forces. It is affected by how many
buyers or customers a company has, how significant each customer is, and how much it
would cost a company to find new customers or markets for its output.
A smaller and more powerful client base means that each customer has more power to
negotiate for lower prices and better deals. A company that has many, smaller,
independent customers will have an easier time charging higher prices to increase
profitability.
5. Threat of substitute products - The last of the Five Forces focuses on substitutes.
Substitute goods or services that can be used in place of a company's products or services
pose a threat. Companies that produce goods or services for which there are no close
substitutes will have more power to increase prices and lock in favorable terms. When
close substitutes are available, customers will have the option to forgo buying a
company's product, and a company's power can be weakened.

Market Leader Strategies


Expand The Total Market Strategy
Market leader firms can normally gain the maximum when the total market expands. The focus
of expanding the total market depends on where the product is in its life cycle. This strategy can
be used when a product is in the maturity stage. For example, the Japanese increased their car
production to enter new countries.
Market leaders can look for new users, new uses, and more usage of its products when the
product is in the maturity stage of the product life cycle. ICICI Bank, for instance, entered into
rural banking and agri-business financing when it felt the heat of competition in the
overcrowded and super-saturated urban market. Maruti Udyog started True Value car
division—used cars certified by Maruti engineers—to expand their market in the rural and
urban markets well.
Defending Market Share Strategy
When the leader tries to expand the total market size, it must also continuously defend its
current business against enemy attacks. For example, Coca-Cola must constantly maintain its
guard against PepsiCo. Similarly, Hero Honda should constantly maintain its guard against
Bajaj, Honda, Suzuki and TVS in the two-wheeler market. In this strategy, the leader firm must
keep its costs down, and its price must be consistent with the value that customers see in the
product.
There are six ways that a market might use to protect its market position:
1. Position defense: Position defense means occupying the most desirable market space in
consumers’ minds, making the brand almost impregnable, as Procter & Gamble has
done with Tide detergent for cleaning, Crest toothpaste for cavity prevention, and
Pampers diapers for dryness.
2. Flanking defense: This strategy both guards the market position of leading brands and
develops some flank market niches to serve as a defensive corner either to protect a weak
front or to establish an invasion base for counterattack, if necessary.
An ideal example is how HUL successfully nourished its first Rs.100 crore Indian-made
brand Vim in a competitive dish wash market. It was able to check the attack of
competitors through product innovation, attractive public campaigns, road shows and
public relations.
3. Pre-emptive defense: This defense strategy maneuver involves the launching of an
offence against an enemy before it starts an offence.
For example, Titan launched more brands and sub-brands to corner the market share of
HMT watches in the early 1990s.
4. Counter offensive defense: This is a strategy of identifying a weakness in an attacker
and aggressively going after that market niche so as to cause the competitor to pull back
its efforts to defend its own territory. When a leader is attacked, he may base his
counterattack in the attacker’s territory.
The attacker has to deploy resources to this territory for defense. When Ceat-tyres
attacked TVS Srichakra in Tamil Nadu markets, TVS decided to expand its coverage to
Ceat-tyre’s hub in the north and west of India through innovative campaigns like road
rallies, road shows and attractive public campaigns.
5. Mobile defense: This strategy involves the leader broadening and expanding its
territories to new market areas by diversifying. The leader takes innovation works in
both these directions.
For instance, a five-star hotel can become a foreign exchange dealer, inbound and
outbound tour operator, flouriest and so on. Such diversification into related areas comes
under mobile defense strategies.
6. Contraction defense: This strategy involves retrenching into areas of strength and is
often used in later stages of a product life cycle or when the firm has been under
considerable attack.
For example, HUL decided to concentrate on its core business areas, that is, soaps and
detergents, and has emerged as the clear leader in the toilet industry.

Market-Challenger Strategies
CHOOSING A GENERAL ATTACK STRATEGY can distinguish five: frontal, flank,
encirclement, bypass, and guerilla attacks.
1. Frontal Attack: The frontal attack is the direct attack, wherein the market challenger
matches with the competitor’s product, price, advertising, and promotion activities. The
market challenger can even cut the price of the product, provided he convinces the
customers that the quality is not compromised and is as good as the high-priced
products.
For Example- Pepsi and Coca-Cola have been “at war” for decades, and both have
captured immense global market share. Both companies have a diverse product
portfolio, and if one brand launches a product, the other one counterattacks with a
similar product. For instance, when Coca-Cola introduced Diet Coke, Pepsi responded
with Diet Pepsi.
2. Flank Attack: The flank attack means, attacking the competitor on its weak points. Here
the market challenger determines the weak areas of the competitor in terms of two
strategic dimensions i.e., Geographic and segmental. The challenger finds the areas
where the competitor is under performing and then push its marketing strategies in that
area. Also, the challenger spots the segments which the competitor left untapped and try
to cover that segment through its products and services.
For Example- Red Bull, the energy drinks company decided to concentrate only on the
energy drinks market that companies like Coca-Cola and Pepsi had neglected.
3. Encirclement Attack: The encirclement attack means, attacking the market leader or a
competitor from all the fronts simultaneously, it is the combination of both the frontal
and the flank attack. Here, the market challenger launches several offensive campaigns
i.e., surrounds the competitor with a varied brand and forcing the competitor to defend
himself from all the sides simultaneously. This strategy is adopted to enjoy the long-term
market dominance.
For Example- The eCommerce market can be an excellent example of the encirclement
attack strategy. eCommerce companies often reduce their profit margins to overthrow
the competition on the basis of turnover. They would try to go all lengths just to capture
the market share and boost their customer base.
4. Bypass Attack: The bypass attack is the indirect attack, wherein the market challenger
does not attack the leader directly, but broaden its market share by attacking the easier
markets. The challengers can bypass the leader by following any of the strategies viz.
Expanding into the untapped markets, diversifying into the unrelated products,
modernizing the existing product with the invention of technology.
For Example- The iPod from Apple company completely bypassed the Walkman from
Sony.
5. Guerrilla Warfare: The Guerrilla warfare is the intermittent attacks imposed by the
challenger to demoralize the competitor by adopting both the conventional and
unconventional means of attack.
For Example- The punch line, “Nothing official about it,” was Pepsi’s counterattack
when Coca-Cola became the official partner of the world cup.

Market Follower Strategies


Four follower strategies are as given below: -
1. Counterfeiter: Copies the leader’s product and packages and sells it. E.g., copied music
2. Cloner: Copies the leader’s products as it is as well as name, packaging with slight
variations. e.g., Brand name with slight variation. In this strategy, the product quality
may not be same as the leader. That is what makes the strategy not a correct one but it is
still used.
3. Imitator: Copies some of the things from leader’s product but maintains difference in
packaging, and other factors. E.g., IBM possessed the technology to bring a personal
computer long before Apple or Microsoft.
4. Adaptor: Launches improved products over that of the innovators. The adaptor is not
necessarily a wrong strategy but it is mostly done in the market. Big firms launch similar
products with differentiation and improvements. E.g., – Every company comes out with
a better version of a car than another.

Market-Nicher Strategies
Market niche strategy is defined as a narrow group of customers who are looking for specific
products or benefits. They have clearly defined needs and are ready to pay a higher price for a
specific product (service) or its quality to satisfy them. Consumers in a niche market have
specific preferences or needs that differ from the broader sector. Brands divide almost every
market into subsections according to things like:

• Geographic location
• Psychographic data (interests, attitudes, and values)
• Demographic base (age, income level, gender, education level)
• Quality level (premium, moderate, high, low)
• Price (high, discount, wholesale)
Brand Equity Models
Although marketers agree about basic branding principles, a number of models of brand equity
offer some different perspectives. Here we highlight four of the more-established ones.
1. Brand Asset Valuator (BAV): The Brand Asset Valuator, developed by Young &
Rubicam, focuses on four dimensions of brand equity:
i) Differentiation measures how unique and distinct a brand is compared to
competitors.
ii) Relevance assesses how well the brand meets customer needs.
iii) Energy measures the brand's sense of momentum.
iv) Esteem reflects the brand's reputation and consumer perception,
v) Knowledge gauges brand awareness and recognition.
2. BrandZ Model: The BrandZ model, created by Kantar Millward Brown, combines
financial analysis with consumer research to evaluate brand equity. It assesses a brand's
value by considering its market capitalization and consumer perceptions of its meaning,
difference, and salience. This model provides insights into the financial value and
consumer-driven strength of a brand.
3. Aaker Model: The Aaker model, developed by David Aaker, identifies five dimensions
of brand equity:
i) Brand Awareness measures the extent to which consumers are familiar with the
brand.
ii) Brand Associations involve the thoughts and feelings linked to the brand.
iii) Brand Loyalty reflects the level of customer commitment.
iv) Perceived Quality refers to the customer's perception of the brand's quality.
v) Brand Assets encompass unique and proprietary brand elements.
4. Brand Resonance Model: The Brand Resonance Model, proposed by Kevin Keller,
emphasizes building a strong emotional connection with consumers. It consists of six
steps:
i) Brand Salience (creating brand awareness and identity),
ii) Brand Performance (meeting or exceeding customer expectations),
iii) Brand Imagery (developing strong brand associations and personality),
iv) Brand Judgments (focus on customers' own personal opinions and evaluations.).
v) Brand Feelings (customers' emotional responses and reactions with respect to the
brand)
vi) Brand Resonance (refers to the nature of the relationship customers have with the
brand and the extent to which they feel they're "in sync" "with it.)

Choosing Brand Elements


Brand elements are devices, which can be trademarked, that identify and differentiate the brand.
Most strong brands employ multiple brand elements.
BRAND ELEMENT CHOICE CRITERIA - There are six criteria for choosing brand
elements. The first three—memorable, meaningful, and likable—are “brand building.” The
latter three—transferable, adaptable, and protectable—are “defensive” and help leverage and
preserve brand equity against challenges.
1. Memorability: - Memorable or attention-getting brand elements facilitate the
recognition and recall of a brand during purchase process or consumption. Short brand
names are usually easily memorized & recalled by a large percentage of customers.
For Example: –LG – Life is good
2. Meaningfulness: – Marketers need to ensure that brand elements take on either
“descriptive” or “persuasive” meaning. This could be general information about the
nature of the product category or specific information about the particular attributes or
benefits of the brand. This is important to develop awareness and recognition for the
brand.
Few examples of meaningful brands elements; Fair & lovely Cream, FedEx Courier,
Close-up Tooth Paste
3. Likability: - Brand Elements need to be inherently fun & interesting. They also need to
be visually rich & aesthetically pleasing and appealing to the target customers.
Few examples of likable brand elements; Heineken Packaging, Air India
The above 3 criteria constitute the “Offensive Strategy” that focuses on building brand equity.
That means if the brand elements are memorable, meaningful and likable there are more
chances that they will be recognized by most of the customers which in turn will build brand
equity, reduce the burden on the marketers and thereby reduce the cost of marketing
communications & activities.
4. Transfer-ability: - means the extent to which brand elements can enhance brand equity
to new products of the brand in the line extensions or in other way, can the brand
elements be used to introduce new products in the same or different categories. It also
means that to what extent brand elements are able to improve brand equity across
geographical boundaries and market segments.
For example, “Apple” and “Blackberry” as brand names represent fruits, thus they don’t
restrict brand and product extensions.
5. Adaptability: - is the extent to which brand elements can be adapted over time.
Consumer perceptions, opinions & preferences keep changing over time. Generally, the
more flexible the brand element, the easier it is to update from time to time to
synchronize with consumers preferences and trends. Logos and characters can be given a
(slightly) new look & feel to make them appear more modern and relevant.
For example, Coca -Cola has been consistently updating its logo over the years to
synchronize with the latest trends and opinions.
6. Protect-ability: - means the extent to which brand elements can be protected legally &
competitively. Brand elements need to be chosen in such a way, that they can be
internationally protected by registering with appropriate legal bodies. Marketers also
need to defend their trademarks from unauthorized competitive infringements.
The latter 3 criteria constitute the “Defensive strategy” towards leveraging and maintaining
brand equity. That means if the brand elements are transferable, adaptable and protectable, they
are more likely to leverage and maintain the brand equity.
Brand Asset Valuator
The Brand Asset Valuator (BAV) is a model used to measure and evaluate the strength and
value of a brand. It consists of four key dimensions or brand assets:
1. Differentiation: This dimension measures how distinct and unique a brand is compared
to its competitors. It reflects the brand's ability to stand out and create a strong identity in
the market.
2. Relevance: Relevance refers to how well a brand meets the needs and desires of its target
audience. Brands that are highly relevant resonate with their customers and are
considered important and meaningful in their lives.
3. Esteem: Esteem captures the perceived quality and reputation of a brand. It reflects the
level of admiration, respect, and trust that consumers have for the brand. Brands with
high esteem are often seen as prestigious and reputable.
4. Knowledge: Knowledge represents the awareness and familiarity of a brand among
consumers. It includes both the brand's recognition (being able to identify the brand) and
recall (remembering the brand when prompted). Brands with high knowledge are more
likely to be considered by consumers during their decision-making process.

Devising a Branding Strategy


While devising a branding strategy, a firm may choose to pick existing brand elements
common to other products or line of business or may choose to completely pick up new and
distinctive brand elements. At times, firms use a combination of both.
The firm has 3 choices while devising a branding strategy:
1. Develop new brand elements for new product
2. Apply some of its existing brand elements
3. Use a combination for existing and new brand elements
• Creating a Sub-Brand
While devising a branding strategy, marketers might choose to create altogether a new
brand for the product. At the same time, marketers may combine the new brand with an
already established brand. This helps build a quick association of the new brand and also
helps the new brand to en-cash the equity built by an already established existing brand.
The existing brand which gives birth to the Sub-Brand is the Parent Brand.
E.g., Hershey’s Kisses Candy. Here Kisses Candy in itself is as good as a new brand but
has associations with an already established existing brand in Hershey’s.
• Brand Extension
When the firm uses an established brand to introduce a new product, the strategy is
referred to as Brand Extension.
Brand Extension falls into two categories – Line extension OR Category extension. The
existing brand which gives birth to the Line OR Category Extension is the Parent Brand.
a) Line Extension
Line extension refers to the parent brand covering a new product within the same
product category. The new product in this can be a new flavour, a new colour or
even a new size packet. Importantly, the new product should be in the same
product category.
E.g., Nestle Maggi original product has seen many line extensions. The new
products added to the line fall into the same product category and fulfil the same
need of the customer with some variations.
b) Category Extension
When the parent brand is used to enter a new product category altogether, it is
referred to as a Category Extension.
Example: Victorinox is well known for its high-quality Swiss army knives.
However, the company has used the same brand to enter into different categories
like Watches, Cutlery, Fragrances, Travel Gear, Pens, etc-
Similarly, brands like Honda, BMW are in both 4 and 2-wheeler mobility
business and carry the same brand in both the categories.
• Licensed Product
A product whose brand name has been licensed to other manufacturers to make the
product. In this case, the owner of the brand gets paid a license fee for using the brand.
In turn, the brand owner decides some minimum quality criteria to be met to sell
products under his brand name. E.g., Jeep sells license to manufacture apparels, to
strollers. The product quality should be as per their standard and they should
communicate the Jeep philosophy of ‘Life Without Limits’. In such cases the Licensing
revenue because a metric to track of the parent brand.

Branding Decision
Branding is a critical decision. Due to huge competition companies are creating a brand for
each product.
The following are various brand strategies generally used by the firm.
1. Individual brand name - This policy is followed by many companies. Here each product
of the company is given an independent brand name
For E.g., Hindustan Unilever has established the brand for each product like in bathing
soap line offering Lux, Dove, pears others in hair care, baby product
2. Umbrella/ Blanket Family brand - In this type of branding name of the company is
used in a diverse product category.
For e.g., Tata has followed umbrella branding for diversified products ranging from Tea,
Coffee, Automobiles, Steel, etc.
3. Separate family names for all products - When companies produce a diversified
product, they may go for a separate family name.
4. Company name combined with an individual product name - This is a sub-branding
strategy where the parent brand is used & to this product names are added.
For e.g.- SONY TV, SONY Camera, SONY mobiles, and SONY DVD.
Product Levels
Product Levels represent different layers or dimensions of a product. Here is a brief explanation
of each level:
1. Core Benefit: The core benefit is the fundamental or primary value that customers seek
when purchasing a product. It addresses the basic need or problem that the product aims
to solve. For example, the core benefit of a smartphone is communication and
connectivity.
2. Basic Product: The basic product refers to the basic form or features of a product that
deliver the core benefit. It includes the essential attributes and functionalities required for
the product to fulfill its intended purpose. For a smartphone, the basic product would
include the device itself, its screen, processor, and basic communication capabilities.
3. Expected Product: The expected product represents the set of attributes and features that
customer typically expect from a product in a particular category. It includes the features
that are considered standard or normal in the eyes of customers. In the case of a
smartphone, customers may expect additional features like a camera, internet
connectivity, and access to various apps.
4. Augmented Product: The augmented product refers to additional features, benefits, or
services that go beyond the customer's expectations. These additions aim to provide
extra value and enhance the customer's experience. Examples of augmented product
elements for a smartphone can include extended warranty, customer support, pre-
installed software, or additional accessories.
5. Potential Product: The potential product represents the future possibilities and
innovations that could be added to the product. It includes potential improvements,
advancements, or new features that are not currently available but might be introduced
in the future to meet evolving customer needs and technological advancements.

Product Classifications
Marketers classify products on the basis of durability, tangibility, and use (consumer or
industrial). Each type has an appropriate marketing-mix strategy.
Products fall into three groups according to durability and tangibility:
1. Nondurable goods are tangible goods normally consumed in one or a few uses, such as
beer and shampoo. Because these goods are purchased frequently, the appropriate
strategy is to make them available in many locations, charge only a small markup, and
advertise heavily to induce trial and build preference.
2. Durable goods are tangible goods that normally survive many uses: refrigerators,
machine tools, and clothing. Durable products normally require more personal selling
and service, command a higher margin, and require more seller guarantees.
3. Services are intangible, inseparable, variable, and perishable products that normally
require more quality control, supplier credibility, and adaptability. Examples include
haircuts, legal advice, and appliance repairs.
Consumer-Goods Classification
Consumer goods can be classified into four main categories based on their consumer buying
behavior.
1. Convenience goods: Convenience goods are products that consumers buy frequently
with minimal effort. They are further categorized into:
- Staples: Essential everyday items like bread, milk, and toiletries.
- Impulse goods: Products purchased on the spur of the moment, often due to
appealing packaging or promotional efforts.
- Emergency goods: Items bought during urgent situations, such as medicine or
spare tires.
2. Shopping goods: Shopping goods require more consumer involvement and comparison
before purchase. They can be classified as:
- Homogeneous shopping goods: Products that are similar across different brands,
such as basic household appliances.
- Heterogeneous shopping goods: Products that differ significantly across brands,
like clothing or furniture, where consumers compare features, quality, and price.
3. Specialty goods: Specialty goods are unique or high-end products that consumers are
willing to make special efforts to obtain. Examples include luxury cars, designer
clothing, or rare collectibles. Consumers have strong brand preferences and are less
price-sensitive.
4. Unsought goods: Unsought goods are products that consumers may not actively seek
out or be aware of. These include products like life insurance, funeral services, or certain
medical treatments. Companies often need to use persuasive marketing techniques to
generate demand for these goods.

Product Differentiation
Product Differentiation is a key strategy for companies to create a competitive advantage and
stand out in the market. Here are various dimensions of product differentiation:
• Form: Form differentiation refers to the physical appearance or design of a product.
Companies can differentiate their products by offering unique shapes, sizes, or packaging
that distinguish them from competitors.
• Features: Product features encompass specific functionalities or characteristics that add
value to the product. Offering unique or innovative features can help differentiate a
product and attract customers. These features can include advanced technology,
additional capabilities, or special functionalities.
• Customization: Customization allows customers to tailor the product to their specific
needs or preferences. Offering options for customization or personalization provides a
differentiated experience and enhances customer satisfaction.
• Performance Quality: Performance quality refers to how well a product performs its
intended function. Differentiating a product through superior performance quality, such
as faster speed, higher efficiency, or better overall performance, can attract customers
seeking top-tier products.
• Conformance Quality: Conformance quality relates to the consistency and reliability of
a product in meeting established standards and specifications. Providing products with
superior conformance quality builds customer trust and loyalty.
• Durability: Durability is the ability of a product to withstand wear and tear or maintain
its quality over an extended period. Differentiating a product by offering enhanced
durability can attract customers looking for long-lasting and reliable products.
• Reliability: Reliability refers to the consistency and dependability of a product to
perform as expected. Emphasizing high reliability through rigorous quality control and
testing can differentiate a product and build customer confidence.
• Repairability: Repairability relates to the ease of fixing or servicing a product if issues
arise. Offering products that are easily repairable or providing convenient repair services
can differentiate a brand and enhance customer satisfaction.
• Style: Style encompasses the aesthetic appeal and design elements of a product.
Differentiating through unique and appealing styles can attract customers who prioritize
visual aesthetics and align with their personal preferences.
• Design: Design is the totality of features that affect how a product looks, feels, and
functions in terms of customer requirements.

Product Mix
Product mix, also known as product assortment or product portfolio, refers to the complete set
of products and/or services offered by a firm.
Dimensions of a Product Mix
1. Width - Width, refers to the number of product lines offered by a company.
For example, Kellogg’s product lines consist of: (1) Ready-to-eat cereal, (2) Pastries and
breakfast snacks, (3) Crackers and cookies, and (4) Frozen/Organic/Natural goods.
2. Length - Length refers to the total number of products in a firm’s product mix.
For example, consider a car company with two car product lines (3-series and 5-series).
Within each product line series are three types of cars. In this example, the product
length of the company would be six.
3. Depth - Depth refers to the number of variations within a product line.
For example, continuing with the car company example above, a 3-series product line
may offer several variations such as coupe, sedan, truck, and convertible. In such a case,
the depth of the 3-series product line would be four.
4. Consistency - Consistency refers to how closely related product lines are to each other.

Product Mix Pricing Strategy


A product mix pricing strategy is the tactic of pricing products so that each plays a specific role
within the broader product mix. For any marketing mix product, companies generally opt any
of the product mix pricing strategies, which are as follows:
1. Product Line Pricing - In product line pricing, companies must set the price for the
entire product line.
For example, you may have seen various series of Cars and their price difference based
on the model.
2. Optional Product Pricing - In optional product pricing, organizations combine an
optional product with the main product.
For example, you can purchase an optional ice maker with a refrigerator or optional
alloys with the car.
3. Captive Product Pricing - Captive product pricing refers to setting prices for two
different products simultaneously. However, one is used as the main product while the
other is used with the main product.
For example, Gillette’s razor with its blades and Cameras with films.
4. Two-part pricing - a form of pricing in which consumers are charged both an entry fee
(fixed price) and a usage fee (per-unit price).
For example, when we go to an amusement park, there is a basic entry fee and then the
fees for each ride are separate and the refreshments are also separate.
5. By-Product Pricing - By-Products are often produced with the main products. And, In
By-Product pricing, organizations set up the prices for the by-products to increase the
competitiveness of the main product’s price and reduce the additional cost of disposing
of the by-products.
For example, molasses is a byproduct created by the processing of sugar cane. And
during the COVID-19 pandemic, some alcohol distilleries used byproduct to create hand
sanitizer.
6. Product Bundle Pricing - Product Bundle Pricing is one of the most prominent strategies
these days. Organizations sell various products together in the Product Bundle Pricing
after forming them as a bundle.
For example, at a reasonable price, you may have seen a bundle of a burger, fries, and
soft drinks in McDonald’s.

Line stretching
Line stretching, also known as product line extension or line expansion, is a strategy in which a
company adds new products or variations to an existing product line.
Line stretching involves expanding a product line in three directions:
1. Upward Line Stretching: Upward line stretching occurs when a company introduces
new products or variations at higher price points or with enhanced features and quality.
2. Downward Line Stretching: Downward line stretching involves introducing new
products or variations at lower price points or with stripped-down features to target more
price-sensitive or budget-conscious customers.
3. Two-Way Stretching: Introducing new products into a product line at both the higher
and lower priced ends at the same time.
Setting The Price
Setting the price involves a systematic approach. Here are the steps involved:
1. Selecting the pricing objective:
a. Survival: Setting prices to cover costs and ensure the business's survival.
b. Maximize current profits: Setting prices to maximize short-term profitability.
c. Maximize market share: Setting prices to gain a larger market share.
d. Market skimming price: Setting high initial prices to target early adopters and
maximize revenue.
e. Product quality leader: Setting prices to position the product as a leader in terms
of quality.
2. Determining demand:
a. Assessing price sensitivity: Understanding how customers respond to price
changes.
b. Estimating demand curves: Analyzing the relationship between price and
quantity demanded.
c. Price elasticity of demand: Measuring the responsiveness of demand to price
changes.
3. Estimating cost:
a. Identifying types of costs and levels of production to determine the cost structure.
4. Analyzing competitors' cost, prices, and offers:
a. Assessing competitors' pricing strategies and market positioning.
5. Selecting a pricing method:
a. Markup pricing: Calculating the price based on adding a markup percentage to
the unit cost.
b. Target-return pricing: Determining the price to achieve a desired return on
investment.
c. Perceived-value pricing: Setting prices based on the perceived value of the
product in the eyes of the customer.
d. Value pricing: Pricing based on the value delivered to the customer.
e. Going-rate pricing: Setting prices based on prevailing market prices.
f. Auction-type pricing: Conducting auctions to determine the price.
g. Group pricing: Offering discounts or special prices for specific customer groups.
6. Selecting the final price:
a. Utilizing psychological pricing tactics to influence consumer perception.
b. Implementing gain-and-risk-sharing pricing strategies.

Adapting The Price


Adapting the price involves various strategies to adjust pricing based on different factors. Here
are some ways to adapt the price:
1. Geographical Pricing:
a. Barter: Exchanging goods or services instead of monetary payment.
b. Compensation deal: Offering compensation in the form of additional goods or
services.
c. Buyback arrangement: Agreeing to purchase products back from customers at a
predetermined price.
d. Offset: Adjusting prices based on factors like exchange rates or tariffs.
2. Price Discounts and Allowances:
a. Cash Discount: Offering a reduction in price for immediate payment.
b. Quantity Discount: Providing discounts based on the quantity purchased.
c. Functional Discount: Offering discounts to channel partners for performing
specific functions.
d. Seasonal Discount: Lowering prices during off-peak seasons.
e. Allowance: Granting price reductions for trade-ins or promotional activities.
3. Promotional Pricing:
a. Loss-leader pricing: Setting prices below cost to attract customers and stimulate
sales of other products.
b. Special-event pricing: Offering discounted prices for a limited period or specific
occasion.
c. Cash rebates: Providing a refund or rebate after the purchase.
d. Low-interest financing: Offering financing options with lower interest rates.
e. Longer payment terms: Extending payment periods to make the product more
affordable.
f. Warranties and service contracts: Including additional value-added services or
warranties in the price.
g. Psychological discounting: Using pricing techniques like odd or charm prices to
influence perception.
4. Differentiated Pricing:
a. Customer segment pricing: Setting different prices for different customer groups
based on their willingness to pay.
b. Product-form pricing: Varying prices based on different versions or forms of the
product.
c. Image pricing: Pricing based on the brand image or reputation.
d. Channel pricing: Adjusting prices for different distribution channels.
e. Location pricing: Setting prices based on geographical location or market
demand.
f. Time pricing: Modifying prices based on the time of purchase or seasonality.

Promotional Pricing
Companies can use several pricing techniques to stimulate early purchase:
1. Loss-leader pricing. Supermarkets and department stores often drop the price on well-
known brands to stimulate additional store traffic. This pays if the revenue on the
additional sales compensates for the lower margins on the loss-leader items.
Manufacturers of loss-leader brands typically object because this practice can dilute the
brand image and bring complaints from retailers who charge the list price.
Manufacturers have tried to keep intermediaries from using loss-leader pricing through
lobbying for retail-price-maintenance laws, but these laws have been revoked.
2. Special event pricing. Sellers will establish special prices in certain seasons to draw in
more customers. Every August, there are back-to-school sales.
3. Special customer pricing. Sellers will offer special prices exclusively to certain
customers. Road Runner Sports offers members of its Run America Club “exclusive”
online offers with price discounts twice those for regular customers.
4. Cash rebates. Auto companies and other consumer-goods companies offer cash rebates
to encourage purchase of the manufacturers’ products within a specified time period.
Rebates can help clear inventories without cutting the stated list price.
5. Low-interest financing. Instead of cutting its price, the company can offer customers
low interest financing. Automakers have used no-interest financing to try to attract more
customers.
6. Longer payment terms. Sellers, especially mortgage banks and auto companies, stretch
loans over longer periods and thus lower the monthly payments. Consumers often worry
less about the cost (the interest rate) of a loan, and more about whether they can afford
the monthly payment.
7. Warranties and service contracts. Companies can promote sales by adding a free or
low-cost warranty or service contract.
8. Psychological discounting. This strategy sets an artificially high price and then offers the
product at substantial savings; for example, “Was $359, now $299.” Discounts from
normal prices are a legitimate form of promotional pricing; the Federal Trade
Commission and Better Business Bureaus fight illegal discount tactics.

Differentiated Pricing
The Differential Pricing is a method of charging different prices for the same type of a product,
and for the same number of quantities from different customers based on the product form,
payment terms, time of delivery, customer segment, etc.
The companies can charge different amounts from different customers considering the following
basis:
1. Customer-Segment pricing: Different group of people pays different prices for the same
kind of a product on the basis of a segment they belong to.
E.g., In any government examination, the form fee varies for the general category people
and the other backward class people.
2. Image pricing: The companies can charge different prices for the same kind of a product
on the basis of an image, a product enjoys in a market.
E.g., cosmetics and clothing brands are the best examples.
3. Product-form Pricing: Different prices charged for different variants of the same
product.
E.g., The price of the same type of a car may vary because of different color and add-on
features.
4. Channel pricing: Channels are a good way to differentiate between customers who are
willing to pay more for your products and those who are price-sensitive.
E.g., a fashion shop on a posh shopping street is likely to attract customers who are
willing to pay more than online shoppers.
5. Location Pricing: The companies charge different prices for the same product on the
basis of different locations where it is offered.
E.g., In movie theaters the customer pays different amounts for the different locations
from where they can watch movies.
6. Time pricing: The price of a product varies with the time, such as the price charged is
less in the off-season as compared to the season time. Also, the movie tickets for the
matinee show are less as compared to other show timings.

Mathematical Problems: -
Analyzing Customer Needs and Wants
Consumers may choose the channels they prefer based on price, product assortment, and
convenience, as well as their own shopping goals (economic, social, or experiential). As with
products, segmentation exists, and marketers must be aware that different consumers have
different needs during the purchase process.
Analyzing the customer's desired service output level involves understanding their expectations
and preferences regarding various aspects of the service. Here are some factors to consider-
1. Lot size—The number of units the channel permits a typical customer to purchase on
one occasion. In buying cars for its fleet, Hertz prefers a channel from which it can buy a
large lot size; a household wants a channel that permits a lot size of one.
2. Waiting and delivery time—The average time customers wait for receipt of goods.
Customers increasingly prefer faster delivery channels.
3. Spatial convenience—The degree to which the marketing channel makes it easy for
customers to purchase the product. Toyota offers greater spatial convenience than Lexus
because there are more Toyota dealers, helping customers save on transportation and
search costs in buying and repairing an automobile.
4. Product variety—The assortment provided by the marketing channel. Normally,
customers prefer a greater assortment because more choices increase the chance of
finding what they need, although too many choices can sometimes create a negative
effect.
5. Service backup—Add-on services (credit, delivery, installation, repairs) provided by the
channel. The greater the service backup, the greater the work provided by the channel.

Channel-Design Decisions
Channel design decisions involve analyzing customer preferences, establishing objectives and
constraints, identifying channel alternatives, and evaluating those alternatives. Here is a brief
overview:
1. Analyze customer's desired service output level:
- Consider factors such as lot size, waiting time, spatial convenience, product
variety, and service backup to understand the level of service customers expect
from the channel.
2. Establish objectives and constraints:
- Define the goals and limitations that guide the channel design process. This
includes considering factors such as cost, reach, customer satisfaction, and
control over distribution
3. Identify major channel alternatives:
- Evaluate different options for channel structure and configuration. This includes
determining the number of intermediaries involved in the distribution process.
a. Exclusive distribution:
- Involves using a limited number of intermediaries to distribute products in
specific geographic areas or market segments.
b. Selective distribution:
- Involves using a moderate number of intermediaries to distribute products in
selected locations or to specific customer groups.
c. Intensive distribution:
- Involves using a large number of intermediaries to achieve widespread availability
and market coverage.
4. Evaluate the major alternatives:
- Assess the advantages, disadvantages, costs, and feasibility of each channel
alternative. Consider factors such as the intermediary's capabilities, market reach,
control over distribution, and potential impact on customer experience and
satisfaction.

Channel Management Decisions


Channel management decisions involve selecting channel members, training and motivating
them, and evaluating their performance. Here's a brief overview:
1. Selecting Channel Members:
a. The process of identifying and recruiting suitable intermediaries to be a part of the
channel network.
b. Consider factors such as the intermediary's reputation, capabilities, coverage,
market knowledge, and financial stability.
2. Training & Motivating Channel Members:
a. Provide training programs and support to enhance the intermediary's
understanding of the product, market, and sales techniques.
b. Motivate channel members to achieve desired performance levels using various
sources of power:
i. Coercive power: The ability to enforce compliance through penalties or
punishments.
ii. Reward power: The ability to offer incentives or rewards for desired
behavior.
iii. Legitimate power: The authority granted to channel members based on
their position in the distribution network.
iv. Expert power: The influence gained by channel members due to their
knowledge and expertise.
v. Referent power: The influence channel members have based on their
personal characteristics or relationship with other parties.
3. Evaluating Channel Members:
a. Assess the performance of channel members against predetermined criteria and
objectives.
b. Monitor key performance indicators such as sales volume, market share,
customer satisfaction, and adherence to channel policies.
c. Identify areas for improvement and provide feedback to channel members to
enhance their performance.
4. Modifying Channel Arrangements:
a. Adjust the channel structure, coverage, or composition based on changing market
conditions, consumer preferences, or strategic objectives.
b. This may involve adding or removing intermediaries, changing distribution
territories, or redefining the roles and responsibilities of channel members.

Channel Management Functions

• Gather information about potential and current customers, competitors, and other actors
and forces in the marketing environment.
• Develop and disseminate persuasive communications to stimulate purchasing.
• Negotiate and reach agreements on price and other terms so that transfer of ownership or
possession can be affected.
• Place orders with manufacturers.
• Acquire the funds to finance inventories at different levels in the marketing channel.
• Assume risks connected with carrying out channel work.
• Provide for the successive storage and movement of physical products.
• Provide for buyers’ payment of their bills through banks and other financial institutions.
• Oversee actual transfer of ownership from one organization or person to another.

Channel Integration and Systems


Channel integration and systems involve the coordination and management of marketing
channels to maximize efficiency and effectiveness. Here are the key concepts:
1. Vertical Marketing Systems (VMS):
a. VMS refers to a coordinated channel structure in which the producer, wholesaler,
and retailer work together as a unified system.
b. There are three types of VMS:
i. Corporate VMS: A single company owns multiple levels of the
distribution channel, allowing for greater control and coordination.
ii. Administered VMS: Leadership is established through the size and power
of one dominant channel member who coordinates activities.
iii. Contractual VMS: Independent firms at different levels of the channel
join together through contractual agreements to achieve common goals.
2. Horizontal Marketing Systems:
a. In a horizontal marketing system, companies at the same level of the distribution
channel come together to exploit new market opportunities or achieve economies
of scale.
b. This collaboration can involve joint marketing efforts, shared resources, or even
the merging of companies to create a stronger competitive position.
3. Integrating Multichannel Marketing Systems:
a. With the rise of digital technology and e-commerce, businesses increasingly
employ multiple channels to reach customers.
b. The challenge lies in integrating these various channels (online and offline) to
provide a seamless and consistent customer experience.
c. This integration involves aligning strategies, processes, and customer touchpoints
across channels to create synergy and maximize customer satisfaction.
Conventional Marketing Channel System
A conventional marketing channel consists of an independent producer, wholesaler(s), and
retailer(s). Each is a separate business seeking to maximize its own profits, even if this goal
reduces profit for the system as a whole. No channel member has completed or substantial
control over other members.

Vertical Marketing System


A vertical marketing system, sometimes abbreviated as VMS, is a marketing structure wherein
distribution channels work together to meet consumer needs. In conventional marketing
systems, the producers, wholesalers, and retailers operate independently, which can cause
conflict. For example, the net growth of a retail outlet may come at the expense of the producers
in a traditional marketing system.
There are three types of VMS:

• Corporate VMS - In this channel, members own the marketing intermediaries. It


combines the successive levels of production and distribution under one ownership.
Popularly, we know it as vertical integration. It is possible through forward and
backward integration.
Example-
a. Amul and Asian Paints not only produce the product but also own a number of
retail outlets for distribution and sales.
b. Kroger and Safeway are also two classic examples of Corporate VMS.
c. BATA and TATA also not just produce the products but also sell them through
their retail outlets
• Administered VMS - In this, the channel organizations stay independent, but one
channel member has control over the other business in the supply chain. It coordinates
the production and distribution stages depending on the size and power of one channel
member.
Example-
a. You might have observed that Samsung gets better displays in retail outlets than
other brands. This happens because of their size and reputation too.
b. Big brands like HUL, ITC, Procter& Gamble, etc., command a high level of
cooperation from retailers in terms of display, shelf space, pricing policies, and
promotional schemes.
• Contractual VMS - Channel organizations operating at different stages of production
and distribution come together and work through legal agreements. Basically, it is an
arrangement of a group of independent producers and distributors.
Contractual VMS can take three forms:
1. Wholesaler-Sponsored Voluntary Chains
2. Retailer Owned Cooperatives
3. Franchising
Example
a. KFC, Pizza Hut, Dominos, and McDonald’s are the two most common
examples of Contractual VMS.
Conflict, Cooperation, and Competition
Conflict, cooperation, and competition are important dynamics within marketing channels.
Here's a brief overview:

• Types of Conflict and Competition:


1. Vertical channel conflict: Occurs between different levels of the marketing channel,
such as manufacturers and retailers, due to conflicting goals or interests.
2. Horizontal channel conflict: Arises between intermediaries at the same level of the
distribution channel, such as competing retailers, competing for customers or resources.
3. Multichannel conflict: Occurs when conflicts arise between different channels within a
company's overall distribution strategy, such as conflicts between online and offline
channels.
• Causes of Channel Conflict:
1. Goal incompatibility: When different channel members have conflicting objectives or
priorities.
2. Unclear roles and rights: Lack of clarity regarding the responsibilities and authority of
each channel member.
3. Differences in perception: Varied perspectives and interpretations of market conditions,
consumer behavior, or channel strategies.
4. Intermediaries' dependence on the manufacturer: When intermediaries rely heavily on
the manufacturer for products or support, it can lead to conflicts over control or
dependence.
• Managing Channel Conflict:
1. Diplomacy: Engaging in open communication and negotiation to resolve conflicts and
find mutually beneficial solutions.
2. Mediation: Involves a neutral third-party facilitating discussions between channel
members to reach a resolution.
3. Arbitration: Involves the use of a third-party arbitrator who makes a binding decision to
settle the conflict.
4. Adoption of subordinate goals: Encouraging channel members to prioritize the overall
success of the channel over individual interests.
5. Inclusion in advisory councils or boards of directors: Providing channel members with
a voice and involvement in decision-making processes.

Managing the Channel Conflict


In order to overcome the destructive channel conflict some solutions are listed below:
1. Subordinate Goals: The channel partners must decide a single goal in terms of either
increased market share, survival, profit maximization, high quality, customer
satisfaction, etc. with the intention to avoid conflicts.
2. Exchanging employees: one of the best ways to escape channel conflict is to swap
employees between different levels i.e., two or more persons can shift to a dealer level
from the manufacturer level and from wholesale level to the retailer level on a temporary
basis. By doing so, everyone understands the role and operations of each other thereby
reducing the role ambiguities.
3. Co-optation: Under this, any leader or an expert in another organization is included in
the advisory committee, board of directors, or grievance redressal committees to reduce
the conflicts through their expert opinions.
4. Diplomacy, Mediation and Arbitration: when the conflict becomes critical then
partners have to resort to one of these methods.
a. In Diplomacy, the partners in the conflict send one person from each side to
resolve the conflict.
b. In Mediation, the third person is involved who tries to resolve the conflict
through his skills of conciliation.
c. In Arbitration, when both the parties agree to present their arguments to the
arbitrator and agree to his decision.
5 M of Advertising
Every organization or marketing communication firm handle their advertising in different ways.
In small firms, advertising is handled by executives or account managers in the sales or
marketing department, who works with an advertising agency. A large company often set up its
own advertising department or hire an advertising agency to prepare their advertising programs.
In developing an advertising program, the marketing managers always start by identifying the
target market and the buyer’s intentions. Then they make the five major decisions in developing
an advertising program, called the 5 M’s of Advertising, viz.
1. Mission: what are the objectives of the advertising campaign?
2. Money: how much budget they required to achieve the objectives?
3. Message: what message and message strategy will be followed?
4. Media: what type of media vehicle/s will be used to deliver the message?
5. Measurement: how should be the results of the advertising campaign or programme will
be evaluated?
Mission
A company’s marketing mission is what they wish to accomplish with an advertisement. It
might be to promote a service, build a brand, sell a product or achieve other organizational
goals. It might notify clients about a product’s delivery status, such as whether it’s still in
development.
Advertisements can promote a product even though it has not yet been introduced due to a dual
mission purpose. Advertisements that promote and explain a product serve two purposes: they
describe the product to customers and pique the interest of potential purchasers of the product.
Money
Money refers to all collective advertising budgets. This can be true of the medium employed, the
location of the advertisement, and the demographics targeted by the advertising. This can also
refer to the length of the advertising and the things they promote. Advertising might be more or
less expensive depending on several of these aspects, affecting the final budget.
Message
The medium via which an advertisement talks or conveys its message to the target or potential
audience is referred to as the advertisement’s message. Messages are generated in many ways
inside organizations before they are made available to the present audience. The crucial thing to
remember is that when you change the advertisement source, the message will change. It
indicates that the message will be defined by the medium used because a pictorial message
cannot be broadcast on the radio.
Media
The channel via which advertising is communicated is referred to as media. When deciding
how to deliver advertising, employees of the department analyze the media’s reach, effect, and
frequency as well as the commercial itself.
They also choose the mode of media based on the resources available to the company, such as
the resources available to create and mass-produce the media, if necessary. They pick the media
vehicle and the time of the media vehicle, or how long the media add projects to the audience
after they evaluate these aspects.
Measurement
Measurement is a collection of activities performed after advertising to determine how effective
it was in reaching the target audience and selling the goods. A team can discover the challenges
and improvement potentials that they can achieve using analysis techniques to support
advertisement development. This stage aids in the overall profitability of advertising and can aid
in the future improvement of commercials.

Setting Objectives for Advertising


Setting objectives for advertising considering four primary types: informative advertising,
persuasive advertising, reminder advertising, and reinforcement advertising. These objectives
help guide the creative and strategic direction of advertising campaigns. Here's an overview of
each objective:
1. Informative Advertising: The objective of informative advertising is to provide
information and educate the target audience about a product, its features, benefits, and
usage. It aims to increase awareness and knowledge among potential customers who
may be unfamiliar with the product or its unique attributes. Informative advertising is
commonly used for new product launches or when introducing innovative features or
technologies.
2. Persuasive Advertising: Persuasive advertising aims to influence and persuade
consumers to choose a particular brand over competitors. Its objective is to create a
favorable perception of the product and convince consumers of its superiority, value, or
unique selling proposition (USP). This type of advertising often focuses on emotional
appeals, highlighting the benefits and advantages of the product to drive purchase
decisions.
3. Reminder Advertising: Reminder advertising aims to maintain brand awareness and
reinforce the existing brand image among consumers. Its primary objective is to remind
customers of the brand's presence, maintain top-of-mind awareness, and encourage
repeat purchases. Reminder advertising is particularly effective for established brands
that want to maintain their market position and prevent customers from switching to
competitors.
4. Reinforcement Advertising: Reinforcement advertising is designed to reinforce the
positive associations and experiences that customers have with a brand. Its objective is to
build customer loyalty, strengthen brand identity, and enhance the brand's reputation.
Reinforcement advertising often emphasizes the brand's values, quality, reliability, and
customer satisfaction to solidify relationships with existing customers.
Deciding on the Advertising Budget
FACTORS AFFECTING BUDGET DECISIONS Here are five specific factors to consider
when setting the advertising budget:
1. Stage in the product life cycle—New products typically merit large advertising budgets
to build awareness and to gain consumer trial. Established brands usually are supported
with lower advertising budgets, measured as a ratio to sales.
2. Market share and consumer base—High-market-share brands usually require less
advertising expenditure as a percentage of sales to maintain share. To build share by
increasing market size requires larger expenditures.
3. Competition and clutter—In a market with a large number of competitors and high
advertising spending, a brand must advertise more heavily to be heard. Even simple
clutter from advertisements not directly competitive to the brand creates a need for
heavier advertising.
4. Advertising frequency—The number of repetitions needed to put the brand’s message
across to consumers has an obvious impact on the advertising budget.
5. Product substitutability—Brands in less-differentiated or commodity-like product
classes (beer, soft drinks, banks, and airlines) require heavy advertising to establish a
unique image.

Major Media Medium


1. Newspapers
2. Televisions
3. Direct Mail
4. Radio
5. Magazines
6. Outdoor
7. Yellow Pages
8. Newsletters
9. Brochures
10. Telephone
11. Internet

Choosing Among Major Media Types


When selecting among major media types, media planners take into account various factors.
These factors include target audience media habits, product characteristics, message
requirements, and cost considerations. Let's explore each factor:
1. Target Audience Media Habits: Understanding the media habits of the target audience
is crucial for effective media selection. Media planners analyze demographic,
psychographic, and behavioral data to determine which media channels are most
frequently used by the target audience. This information helps in identifying the media
types that have the highest potential to reach and engage the desired audience.
2. Product Characteristics: Product characteristics play a significant role in media
selection. Media planners consider factors such as the product's nature, complexity, and
usage patterns. For instance, if the product requires detailed explanation or
demonstration, visual media like television or online videos might be more suitable. If
the product has a niche target audience, specialized media channels may be more
effective in reaching that specific segment.
3. Message Requirements: The message requirements of the advertising campaign also
influence media selection. Media planners consider the content and format of the
message to determine which media types are most suitable. For instance, if the message
requires extensive storytelling or visual impact, print or audio-visual media may be
preferred. If the message requires interactivity or real-time engagement, digital and social
media platforms could be more appropriate.
4. Cost Considerations: Media planners must also consider the cost implications
associated with different media types. Media rates, production costs, and other
associated expenses vary across different media channels. Planners need to assess the
available budget and allocate resources effectively to maximize the reach and impact of
the advertising campaign.

Sales Promotion
Sales promotion, a key ingredient in marketing campaigns, consists of a collection of incentive
tools, mostly short term, designed to stimulate quicker or greater purchase of particular products
or services by consumers or the trade.
In using sales promotion, a company must establish its objectives, select the tools, develop the
program, pretest the program, implement and control it, and evaluate the results.
1. Establishing Objectives: The first step in making sales promotion decisions is to
establish clear objectives. These objectives should be specific, measurable, achievable,
relevant, and time-bound (SMART). Objectives could include increasing sales volume,
attracting new customers, increasing brand awareness, encouraging repeat purchases, or
boosting overall market share.
2. Selecting Consumer Promotion Tools: The next step is to select consumer promotion
tools that will effectively reach and engage the target audience. Consumer promotion
tools include techniques such as discounts, coupons, rebates, samples, contests, loyalty
programs, and product demonstrations. The selection of these tools should be based on
the target market's preferences, behaviors, and motivations.
3. Selecting Trade Promotion Tools: Trade promotion tools are aimed at stimulating
demand within the distribution channel and encouraging retailers or wholesalers to stock
and promote the product. These tools may include trade discounts, point-of-purchase
displays, co-operative advertising, trade shows, or sales training programs. The selection
of trade promotion tools should consider the needs and preferences of intermediaries in
the distribution channel.
4. Selecting Business and Sales Force Promotion Tools: Business and sales force
promotion tools are designed to motivate and support the sales team and other business
partners. These tools may include sales contests, incentives, bonuses, training programs,
conferences, or recognition programs. The selection of these tools should align with the
objectives and requirements of the sales force and other business partners.
5. Developing the Program: Once the promotion tools have been selected, the next step is
to develop a comprehensive program that integrates these tools into a cohesive strategy.
This involves determining the timing, duration, budget, and allocation of resources for
each promotion tool. It also includes developing clear guidelines and procedures for
implementing the program effectively.
6. Implementing and Evaluating the Program: After developing the program, it is
important to implement it according to the established guidelines. This involves
coordinating and executing the various promotion activities, monitoring their progress,
and making any necessary adjustments along the way. Additionally, it is crucial to
evaluate the program's effectiveness against the established objectives, using appropriate
metrics and feedback mechanisms.

Major Consumer Promotion Tools


1. Samples: Offer of a free amount of a product or service delivered door -to-door, sent in
the mail, picked up in a store, attached to another product, or featured in an advertising
offer.
2. Coupons: Certificates entitling the bearer to a stated saving on the purchase of a specific
product: mailed, enclosed in other products or attached to them, or inserted in magazine
and newspaper ads.
3. Cash Refund Offers (rebates): Provide a price reduction after purchase rather than at
the retail shop: Consumer sends a specified “proof of purchase” to the manufacturer who
“refunds” part of the purchase price by mail.
4. Price Packs (cents-off deals): Offers to consumers of savings off the regular price of a
product, flagged on the label or package. A reduced-price pack is a single package sold at
a reduced price (such as two for the price of one). A banded pack is two related products
banded together (such as a toothbrush and toothpaste).
5. Premiums (gifts): Merchandise offered at a relatively low cost or free as an incentive to
purchase a particular product. A with-pack premium accompanies the product inside or
on the package. A free in-the-mail premium is mailed to consumers who send in a proof
of purchase, such as a box top or UPC code. A self-liquidating premium is sold below its
normal retail price to consumers who request it.
6. Frequency Programs: Programs providing rewards related to the consumer’s frequency
and intensity in purchasing the company’s products or services.
7. Prizes (contests, sweepstakes, games): Prizes are offers of the chance to win cash, trips,
or merchandise as a result of purchasing something. A contest calls for consumers to
submit an entry to be examined by a panel of judges who will select the best entries. A
sweepstakes asks consumers to submit their names in a drawing. A game presents
consumers with something every time they buy—bingo numbers, missing letters—which
might help them win a prize.
8. Patronage Awards: Values in cash or in other forms that are proportional to patronage
of a certain vendor or group of vendors.
9. Free Trials: Inviting prospective purchasers to try the product without cost in the hope
that they will buy.
10. Product Warranties: Explicit or implicit promises by sellers that the product will
perform as specified or that the seller will fix it or refund the customer’s money during a
specified period.
11. Tie-in Promotions: Two or more brands or companies team up on coupons, refunds,
and contests to increase pulling power.
12. Cross-Promotions: Using one brand to advertise another noncompeting brand.
13. Point-of-Purchase (P-O-P) Displays and Demonstrations: P-O-P displays and
demonstrations take place at the point of purchase or sale.

Major Trade Promotion Tools


1. Price-Off (off-invoice or off-list): A straight discount off the list price on each case
purchased during a stated time period.
2. Allowance: An amount offered in return for the retailer’s agreeing to feature the
manufacturer’s products in some way. An advertising allowance compensates retailers
for advertising the manufacturer’s product. A display allowance comp ensates them for
carrying a special product display.
3. Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain
quantity or who feature a certain flavor or size.

You might also like