MKM05 – MARKETING MANAGEMENT (MIDTERM)

LESSON 1: CRAFTING THE BRAND POSITIONING

Positioning - The act of designing a company’s offering and image to occupy a distinctive place in the minds of
the target market.

One result of positioning is the successful creation of a customer-focused value proposition, a cogent reason
why the target market should buy a product or service.

Positioning requires that marketers define and communicate similarities and differences between their brand and
its competitors.
• Choose a frame of reference by identifying the target market and relevant competition.
• Identify the optimal points-of-parity and points-of-difference brand associations given that frame of
reference.
• Create a brand mantra summarizing the positioning and essence of the brand.

Choosing a Competitive Frame of References

a. A competitive frame of reference defines which brands a brand competes with —the focus of competitive
analysis.
b. The target market decision helps define competitors.
• Category membership: products or set of products with which a brand competes and that function as
close substitutes.
• Actual and potential competitors may not be obvious, and broad competitive frames can result in
advantageous comparisons.
• An industry is a group of firms offering a product or class of products that are close substitutes for one
another, classified based on:
1. Number of sellers
2. Degree of product differentiation
3. Presence or absence of entry, mobility and exit barriers.
4. Cost structure
5. Degree of vertical integration
6. Degree of globalization
• Competitors are companies that satisfy the same customer need.
• Marketing myopia is near sightedness/a narrow focus where you miss substitutes.

Value proposition - captures the way a product or service’s key benefits provide value to customers by satisfying
their needs.

The company must have the internal resources and commitment to feasibly and profitably create and maintain
the brand association in the minds of consumers. The product design and marketing offering must support the
desired association.

Points-of-difference (PODs) - Attributes/benefits that consumers strongly associate with a brand, positively
evaluate, and believe they could not find to the same extent with a competitive brand.
Three criteria determine whether a brand association can truly function as a point-of-difference:
1. Desirability
2. Deliverability
3. Differentiability
Desirable to consumer. Consumers must see the brand association as personally relevant to them.
Deliverable by the company. The company must have the internal resources and commitment to feasibly and
profitably create and maintain the brand association in the minds of consumers.
Differentiating from competitors. Finally, consumers must see the brand association as distinctive and
superior to relevant competitors.

Points-of-parity (POPs) - Attribute/benefit associations that are not necessarily unique to the brand but may in
fact be shared with other brands.
POP associations come in three basic forms:
1. Category
2. Correlational
3. Competitive
Category points-of-parity are attributes or benefits that consumers view as essential to a legitimate and
credible offering within a certain product or service category. In other words, they represent necessary—but not
sufficient— conditions for brand choice.
Correlational points-of-parity are potentially negative associations that arise from the existence of positive
associations for the brand.
Competitive points-of-parity are associations designed to overcome perceived weaknesses of the brand in
light of competitors’ points-of-difference.

To further focus brand positioning and guide the way their marketers help consumers think about the brand, firms
can define a brand mantra.
Brand mantra is a three- to five-word articulation of the heart and soul of the brand and is closely related to
other branding concepts like “brand essence” and “core brand promise.”

Here are the three key criteria for a brand mantra:

1. Communicate - A good brand mantra should clarify what is unique about the brand. It may also need to
Define the category (or categories) of business for the brand and set brand boundaries.
2. Simplify - An effective brand mantra should be memorable. For that, it should be short, crisp, and vivid
in meaning.
3. Inspire - Ideally, the brand mantra should also stake out ground that is personally meaningful and
relevant to as many employees as possible.

Establishing a Brand Positioning

When a product is new, marketers must inform consumers of the brand’s category membership. Sometimes
consumers may know the category membership but are not convinced the brand is a valid member of the
category. Brands are sometimes affiliated with categories in which they do not hold membership.

There are three main ways to convey a brand’s category membership:

1. Announcing category benefits—To reassure consumers that a brand will deliver on the fundamental
reason for using a category, marketers frequently use benefits to announce category membership.
2. Comparing to exemplars—Well-known, noteworthy brands in a category can also help a brand specify
its category Membership.
3. Relying on the product descriptor—The product descriptor that follows the brand name is often a
concise means of conveying category origin.

One common challenge in positioning is that many of the benefits that make up points-of-parity and points-of-
difference are negatively correlated.
Negatively correlated attributes/benefits
• Low price vs. high quality
• Taste vs. low calories
• Powerful vs. safe
• Ubiquitous vs. exclusive
• Varied vs. simple

Monitoring Competition
it is important to regularly research the desirability, deliverability, and differentiability of the brand’s POPs and
PODs in the marketplace to understand how the brand positioning might need to evolve or, in relatively rare
cases, be completely replaced.
In assessing potential threats from competitors, three high-level variables are useful:
1. Share of market—The competitor’s share of the target market.
2. Share of mind—The percentage of customers who named the competitor in responding to the statement
“Name the first company that comes to mind in this industry.”
3. Share of heart—The percentage of customers who named the competitor in responding to the statement
“Name the company from which you would prefer to buy the product.”

Alternative Approaches to Positioning

Rather than outlining specific attributes or benefits, some marketing experts describe positioning a brand as
telling a narrative or story. Companies like the richness and imagination they can derive from thinking of the story
behind a product or service.
The following framework is offered for a brand story:
1. Setting. The time, place, and context
2. Cast. The brand as a character, including its role in the life of the audience, its relationships and
responsibilities, and its history or creation myth.
3. Narrative arc. The way the narrative logic unfolds over time, including actions, desired experiences,
defining events, and the moment of epiphany.
4. Language. The authenticating voice, metaphors, symbols, themes, and leitmotifs.
LESSON 2: CREATING BRAND EQUITY

Brand is a promise between the firm and the consumer. It’s all about creating differences between products.
Marketers need to teach consumers “who” the product is—by giving it a name and other brand elements to
identify it—as well as what the product does and why consumers should care. Branding creates mental structures
that help consumers organize their knowledge about products and services in a way that clarifies their decision
making and, in the process, provides value to the firm.

Brand equity added value endowed to products with consumers. Brand equity may be reflected in the way
consumers think, feel, and act with respect to the brand, as well as in the prices, market share, and profitability
it commands.
1. A brand has positive customer-based brand equity when consumers react more favorably to a product
and the way it is marketed when the brand is identified than when it is not identified.
2. A brand has negative customer-based brand equity if consumers react less favorably to marketing
activity for the brand under the same circumstances.

Brand promise - The marketer’s vision of what the brand must be and do for consumers.

Six criteria for choosing brand elements:

1. Memorable
2. Meaningful
3. Likable
4. Transferable
5. Adaptable
6. Protectable

Brand contact - any information-bearing experience (positive or negative) a customer or prospect has with the
brand, its product category, or its market.

Managing Brand Equity

✓ Brand reinforcement - Requires the brand always be moving forward.
✓ Brand revitalization - Almost any kind starts with the product.

A firm’s branding strategy—often called its brand architecture—reflects the number and nature of both
common and distinctive brand elements. Deciding how to brand new products is especially critical.
Assuming a firm decides to brand its products or services, it must choose which brand names to use. Three
general strategies are popular:
1. Individual or separate family brand names - Consumer packaged-goods companies have a long tradition
of branding different products by different names.
2. Corporate umbrella or company brand name - Many firms, such as Heinz and GE, use their corporate
brand as an umbrella brand across their entire range of products.
3. Sub-brand name - Sub-brands combine two or more of the corporate brand, family brand, or individual
product brand names.
LESSON 3: SETTING PRODUCT STRATEGY

Product Characteristics and Classifications.

Product - anything that can be offered to a market to satisfy a want or need, including physical goods, services,
experiences, events, persons, places, properties, organizations, information, and ideas.

Product Levels: The Customer-Value Hierarchy

1. The fundamental level is the core benefit: the service or benefit the customer is really buying. A hotel
guest is buying rest and sleep.
2. The second level, the marketer must turn the core benefit into a basic product. Thus, a hotel room
includes a bed, bathroom, towels, desk, dresser, and closet.
3. The third level, the marketer prepares an expected product, a set of attributes and conditions buyers
normally expect when they purchase this product. Hotel guests minimally expect a clean bed, fresh
towels, working lamps, and a relative degree of quiet.
4. The fourth level, the marketer prepares an augmented product that exceeds customer expectations.
In developed countries, brand positioning and competition take place at this level.
5. The fifth level stands the potential product, which encompasses all the possible augmentations and
transformations the product or offering might undergo in the future. Here companies search for new ways
to satisfy customers and distinguish their offering.

Product Classifications
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.
They 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.
✓ The consumer usually purchases convenience goods frequently, immediately, and with minimal effort.
Examples include soft drinks, soaps, and newspapers. Staples are convenience goods consumers
purchase on a regular basis. A buyer might routinely purchase Heinz ketchup, Crest toothpaste, and Ritz
crackers.
✓ Impulse goods are purchased without any planning or search effort, like candy bars and magazines.
✓ Emergency goods are purchased when a need is urgent umbrellas during a rainstorm, boots and
shovels during the first winter snow.
Shopping goods are those the consumer characteristically compares on such bases as suitability, quality, price,
and style. Examples include furniture, clothing, and major appliances.
✓ Homogeneous shopping goods are similar in quality but different enough in price to justify shopping
comparisons.
✓ Heterogeneous shopping goods differ in product features and services that may be more important
than price.
Specialty goods have unique characteristics or brand identification for which enough buyers are willing to make
a special purchasing effort. Examples include cars, audio-video components, and men’s suits.
Unsought goods are those the consumer does not know about or normally think of buying, such as smoke
detectors. Other classic examples are life insurance, cemetery plots, and gravestones.

Materials and parts are goods that enter the manufacturer’s product completely. They fall into two classes: raw
materials and manufactured materials and parts.
• Raw materials in turn fall into two major groups:
✓ Farm products (wheat, cotton, livestock, fruits, and vegetables)
Natural products (fish, lumber, crude petroleum, iron ore)
• Manufactured materials and parts fall into two categories: component materials (iron, yarn, cement,
wires) and component parts (small motors, tires, castings).
✓ Component materials are usually fabricated further—big iron is made into steel, and yarn
is woven into cloth. The standardized nature of component materials usually makes price
and supplier reliability key purchase factors.
✓ Component parts enter the finished product with no further change in form, as when
small motors are put into vacuum cleaners and tires are put on automobiles.
5. Capital items are long-lasting goods that facilitate developing or managing the finished product.
✓ Installations consist of buildings (factories, offices) and heavy equipment (generators, drill presses,
mainframe computers, elevators).
 ✓ Equipment includes portable factory equipment and tools (hand tools, lift trucks) and office equipment
(desktop computers, desks). These types of equipment don’t become part of a finished product.
6. Supplies and business services are short-term goods and services that facilitate developing or managing
the finished product. Supplies are of two kinds:
✓ Maintenance and repair items (paint, nails, brooms)
Operating supplies (lubricants, coal, writing paper, pencils). Together, they go under the name of MRO goods.
Business services include maintenance and repair services (window cleaning, copier repair) and business
advisory services (legal, management consulting, advertising).

Product Differentiation
1. Form – Many products can be differentiated in form—the size, shape, or physical structure of a product.
2. Features – Most products can be offered with varying features that supplement their basic function.
3. Performance Quality – Most products occupy one of four performance levels: low, average, high, or
superior. Performance quality is the level at which the product’s primary characteristics operate.
4. Conformance Quality – Buyers expect a high conformance quality, the degree to which all produced
units are identical and meet promised specifications.
5. Durability – a measure of the product’s expected operating life under natural or stressful conditions, is
a valued attribute for vehicles, kitchen appliances, and other durable goods.
6. Reliability – Buyers normally will pay a premium for more reliable products. Reliability is a measure of
the probability that a product will not malfunction or fail within a specified time period.
7. Repairability – measures the ease of fixing a product when it malfunctions or fails. Ideal repairability
would exist if users could fix the product themselves with little cost in money or time.
8. Style – describes the product’s look and feel to the buyer and creates distinctiveness that is hard to copy.
9. Customization – customized products and marketing allow firms to be highly relevant and differentiating
by finding out exactly what a person wants—and doesn’t want—and delivering on that.

Services Differentiation
The main service differentiators are ordering ease, delivery, installation, customer training, customer consulting,
maintenance and repair, and returns.

1. Ordering Ease – describes how easy it is for the customer to place an order with the company.
2. Delivery – refers to how well the product or service is brought to the customer, including speed, accuracy,
and care throughout the process.
3. Installation – refers to the work done to make a product operational in its planned location.
4. Customer Training – helps the customer’s employees use the vendor’s equipment properly and
efficiently.
5. Customer Consulting – includes data, information systems, and advice services the seller offers to
buyers.
6. Maintenance and Repair – programs help customers keep purchased products in good working order.
These services are critical in business-to-business settings.
7. Returns – A nuisance to customers, manufacturers, retailers, and distributors alike, product returns are
also an unavoidable reality of doing business, especially in online purchases. Free shipping, growing
more popular, makes it easier for customers to try out an item, but it also increases the likelihood of
returns. Controllable returns result from problems or errors made by the seller or customer and can mostly
be eliminated with improved handling or storage, better packaging, and improved transportation and
forward logistics by the seller or its supply chain partners. Uncontrollable returns result from the need for
customers to see, try, or experience products in person to determine suitability and can’t be eliminated
by the company in the short run.
LESSON 4: DESIGNING AND MANAGING INTEGRATED MARKETING CHANNELS

Marketing channels - Sets of interdependent organizations participating in the process of making a product or
service available for use or consumption.

Intermediaries: merchants, agents, and facilitators

Most producers do not sell their goods directly to the final users; between them stands a set of intermediaries
performing a variety of functions.

1. Intermediaries - constitute a marketing channel (also called a trade channel or distribution channel).
2. Merchants - some intermediaries—such as wholesalers and retailers—buy, take title to, and resell the
merchandise.
3. Agents - brokers, manufacturers’ representatives, sales agents—search for customers and may
negotiate on the producer’s behalf but do not take title to the goods.
4. Facilitators - transportation companies, independent warehouses, banks, advertising agencies—assist
in the distribution process but neither take title to goods nor negotiate purchases or sales.

Push strategy - uses the manufacturer’s sales force, trade promotion money, or other means to induce
intermediaries to carry, promote, and sell the product to end users.

Pull strategy - the manufacturer uses advertising, promotion, and other forms of communication to persuade
consumers to demand the product from intermediaries, thus inducing the intermediaries to order it.

The Role of Marketing Channels

The producer and the final customer are part of every channel. We will use the number of intermediary levels to
designate the length of a channel.

Zero-level channel, also called a direct marketing channel, consists of a manufacturer selling directly to the final
customer.
The major examples are mail order, online selling, TV selling, telemarketing, door-to-door sales, home parties,
and manufacturer-owned stores. A one-level channel contains one selling intermediary, such as a retailer. A two-
level channel contains two intermediaries, typically a wholesaler and a retailer, and a three-level channel contains
three.

Reverse-flow intermediaries include manufacturers’ redemption centers, community groups, trash-collection

specialists, recycling centers, trash-recycling brokers, and central processing warehousing.

Channels normally describe a forward movement of products from source to user, but reverse-flow channels are
also important:
(1) to reuse products or containers (such as refillable chemical-carrying drums)
(2) to refurbish products for resale (such as circuit boards or computers)
(3) to recycle products, and
(4) to dispose of products and packaging.

Consumer/Industrial Marketing Channels

Figure 17.3 (a) illustrates several consumer-goods marketing channels of different lengths. Figure 17.3 (b) shows
channels commonly used in B-to-B marketing. An industrial-goods manufacturer can use its sales force to sell
directly to industrial customers, or it can sell to industrial distributors who sell to industrial customers, or it can
sell through manufacturer’s representatives or its own sales branches directly to industrial customers or indirectly
to industrial customers through industrial distributors. Zero-, one-, and two-level marketing channels are quite
common.
Jobber - is a middleman who buys from manufacturers (or importers) and sells to retailers

Channel-Design Decisions
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). Channel segmentation exists, and marketers
must be aware that different consumers have different needs during the purchase process.

Channels produce five service outputs:

1. Desired lot size—The number of units the channel permits a typical customer to purchase on one occasion.
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.
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, though too many choices can
sometimes create a negative effect.
5. Service backup—Add-on services (credit, delivery, installation, repairs) provided by the channel. The more
service backup, the greater the benefit provided by the channel.

Managing Retailing, Wholesaling, and Logistics

Retailing – All the activities in selling goods or services directly to final consumers for personal, nonbusiness
use. Any organization selling to final consumers—whether it is a manufacturer, wholesaler, or retailer is doing
retailing.

Retailer/retail store – Any business enterprise whose sales volume comes primarily from retailing

Types of Retailers
Consumers today can shop for goods and services at store retailers, nonstore retailers, and retail organizations.
Perhaps the best-known type of store retailer is the department store.

I. Store retailers
The most important types of major store retailers
a. Specialty store: Narrow product line.
b. Department store: Several product lines.
c. Supermarket: Large, low-cost, low-margin, high-volume, self-service store designed to meet total needs
for food and household products.
d. Convenience store: Small store in residential area, often open 24/7, limited line of high-turnover
convenience products plus takeout.
e. Drug store: Prescription and pharmacies, health and beauty aids, other personal care, small durable,
miscellaneous items.
f. Discount store: Standard or specialty merchandise; low-price, low-margin, high-volume stores. (Ex: La
Suerte)
g. Extreme value or hard-discount store: A more restricted merchandise mix than discount stores but at
even lower prices.
h. Off-price retailer: Leftover goods, overruns, irregular merchandise sold at less than retail.
i. Superstore: Huge selling space routinely purchased food and household items, plus services (laundry,
shoe repair, dry cleaning, check cashing).
j. Catalog showroom: Broad selection of high-markup, fast-moving, brand-name goods sold by catalog at
a discount. Customers pick up merchandise at the store.

Levels of service for store retailers

Retailers also meet widely different consumer preferences for service levels and specific services. Specifically,
they position themselves as offering one of four levels of service:
1. Self-service—Self-service is the cornerstone of all discount operations. Many customers are willing to
carry out their own “locate-compare-select” process to save money.
2. Self-selection—Customers find their own goods, though they can ask for assistance.
3. Limited service—These retailers carry more shopping goods and services such as credit and
merchandise-return privileges. Customers need more information and assistance.
4. Full service—Salespeople are ready to assist in every phase of the “locate-compare-select” process.
Customers who like to be waited on prefer this type of store. The high staffing cost and many services,
along with the higher proportion of specialty goods and slower-moving items, result in high-cost retailing.

II. Nonstore retailing

Nonstore retailing has been growing much faster than store retailing, especially given e-commerce and m-
commerce.
1. Direct marketing - has roots in direct-mail and catalog marketing (Lands’ End, L.L.Bean); it includes
telemarketing (1-800-FLOWERS), television direct-response marketing (HSN, QVC), and online
shopping (Amazon.com, Autobytel.com).
2. Direct selling, also called multilevel selling and network marketing, is a multibillion-dollar industry, with
companies selling door to door or through at-home sales parties.
3. Automatic vending offers a variety of merchandise, including impulse goods such as soft drinks, coffee,
candy, newspapers, magazines, and other products such as hosiery, cosmetics, hot food, and
paperbacks.
 4. Buying service is a store less retailer serving a specific clientele—usually employees of large
organizations—who are entitled to buy from a list of retailers that have agreed to give discounts in return
for membership.

III. Corporate retailing and franchising

Although many retail stores are independently owned, an increasing number are part of a corporate retailing
organization. These organizations achieve economies of scale, greater purchasing power, wider brand
recognition, and better-trained employees than independent stores can usually gain alone. The major types of
corporate retailing—corporate chain stores, voluntary chains, retailer and consumer cooperatives, franchises,
and merchandising conglomerates.

Wholesaling includes all the activities in selling goods or services to those who buy for resale or business use.
It excludes manufacturers and farmers because they are engaged primarily in production, and it excludes
retailers. Wholesalers (also called distributors) differ from retailers in a number of ways.
• First, wholesalers pay less attention to promotion, atmosphere, and location because they are dealing
with business customers rather than final consumers.
• Second, wholesale transactions are usually larger than retail transactions, and wholesalers usually cover
a larger trade area than retailers. Third, wholesalers and retailers are subject to different legal regulations
and taxes.

Major Types of Wholesalers :

1) Merchant Wholesalers: These wholesale suppliers own and produce a product or service and resell
their products to resellers, retailers, distributors and other wholesalers. If you can buy the products, you
require direct from the supplier you will usually be able to obtain the best prices and profit margins.

2) General Wholesalers: Buy large quantities of products from one or more suppliers and will be intending
to add value to them by reselling in smaller quantities to distributors, retailers and resellers. This type of
wholesale supplier will often have multiple suppliers adding diversity to their product range and choice
for their customers. This type of wholesaler may resell products from a number of different industries and
in several different categories.

3) Specialty Wholesalers: This type of wholesaler will resell products in a specific industry or product
category but may have products from multiple suppliers. Because specialty wholesalers specialize in a
specific industry or product type they tend to have good product knowledge and good pricing.

4) Specific Product Wholesalers: These are wholesalers who only supply 1 type of product for example
footwear or computers. They may supply several brands but only within one product category.
Manufacturers often use this type of wholesaler to distribute one or more of their products.

5) Discount Wholesalers: This type of wholesaler will supply significantly discounted stock. Generally the
stock is discounted because the products are discontinued lines, returned goods or refurbished goods.

6) Drop Ship Wholesalers: This type of wholesaler will complete the sale of a product but will have it
dispatched from their supplier directly to their customer without actually handling the goods.

7) On-line Wholesaler: Wholesalers who sell their products on-line offer discounted prices as they can
reduce their overheads such as rent and rates of physical premises. This type of wholesaler is therefore
able to add a lower percentage to their purchase price and still make margin.

Market Logistics

Market logistics includes planning the infrastructure to meet demand, then implementing and controlling the
physical flows of materials and final goods from points of origin to points of use to meet customer requirements
at a profit.
The market logistics task calls for integrated logistics systems (ILS), which include materials management,
material flow systems, and physical distribution, aided by information technology (IT).

Market logistics encompass several activities:

Market logistics planning
1. Deciding on company’s value proposition
2. Selecting best channel design and network strategy
3. Developing operational excellence
4. Implementing solution

Market-Logistics Decisions
• Order processing: how should we handle orders?
• Warehousing: where should we locate our stock?
• Inventory: how much stock should we hold?
• Transportation: how should we ship goods?