Transcript Unit Five Managing Market Strategies What do you have to do to market this?

Unit Five
Managing Market Strategies
What do you have to do to
market this?
Unit 5 Vocabulary
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Advertising
Advertising Agency
Bait-and-Switch
Brand
Break-even Point
Bundle Pricing
Campaign
Channel of Distribution
Consumer Pretest
Cooperative Advertising
Discount Pricing
Diversification
Exclusive Distribution
Fixed Costs
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Guarantee
Image
Industry Average
Intensive Distribution
Intermediaries
Label
Markdown
Marketing Mix
Marketing Objectives
Marketing Plan
Marketing Tactics
Markup
Multiple-unit Pricing
News Release
Unit 5 Vocabulary
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Odd / Even Pricing
Package
Penetration Pricing
Premium
Preselling
Prestige Pricing
Price Fixing
Price Gouging
Price Lining
Price Skimming
Private Brand
Product Mix
Product Positioning
Promotional Mix
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Promotional Pricing
Psychological Pricing
Publicity
Public Relations
Rebate
Resale Price Maintenance
Return on Investment
Selective Distribution
Selling Price
Specialty Item
Sweepstakes
Unit Pricing
Variable Costs
Unit 5 Essential
Question
(MKT-EN-8)
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What are the concepts, systems,
and tools needed to meet the goals
and objectives of an
entrepreneurial entity?
Market Planning
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Marketing Objectives: What a business
wants to accomplish with its marketing
efforts.
• Usually relates to sales, market share, growth, and
profit.
• Short-range objectives are for one year.
• Long range objectives reflect goals of three to five
years.
Market Planning
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Marketing Plan: A plan for a business to
reach its marketing objectives.
• Marketing Mix: The combination of marketing
strategies known as the “Five P’s”
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Product
Place
Price
Promotion
People
Essential Question 1A
(MKT-EN-8A)
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What are the various product strategies?
The Product Strategy
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Product Decisions:
• What products should I manufacture or sell?
• How will my products meet the needs of my target
market?
• At what quality level should I make my goods?
• How much inventory should I maintain?
• How will my products be different from or better
than my competitors’?
• How will I position my products?
• What will my customer service policy be?
The Product Strategy
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Product Selection:
• Generate product ideas and sort the good from the
bad.
• Study products potential costs and revenues.
• Develop the product and test-market it.
• If everything looks promising, introduce it.
The Product Strategy
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Product Features and Benefits: Style, color,
quality, warranty, service contracts, delivery,
convenience, health, entertainment, etc.
Branding, Packaging, and Labeling:
• Brand: Name, symbol, or design used to identify a
product.
• Package: Physical container or holder.
• Label: Part of the package used to present information.
What are Grades and
Standards?
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Standards are
statements that
specify a product’s
size, contents, and/or
quality; used as a
basis for comparing
or judging goods or
services
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Grades are ratings
assigned to products
that tell to what
extent it meets the
standards
Interrelationship between
Grades and Standards
Standards are set. Each product is rated
against these preset standards and assigned a
grade. Products that don’t meet the lowest
standard are scrapped, reworked or sold at a
discounted price.
 Example: School grading system – standards
are set. You have to do this to earn an “A” in
this class. Your work is compared to the
standards and your grade is determined.
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Why are Standards used?
Standards are used to
establish uniform,
consistent products.
 Example: CD’s
made in the USA,
Japan, and Mexico
all have to fit into the
same disc player
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Grades and Standards can
indicate…
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How the product can
be used
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• Ex. Grades on milk
and motor oil
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Where the product
will be sold
• Ex. Gap, Inc. places
higher quality clothes
at the Gap and their
lower grade clothing
at Old Navy
How much the
product will cost its
buyer
• Ex. Buyers will pay
more for top grade
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Who the user
can/should be
• Ex. Movie ratings
indicate the audience:
G, PG, PG13, and R
Grades and Standards Aid
Buying and Selling
Their use speeds up
the process because
consumers can buy
products without
having to inspect
 Consumers rely on
grades and standards
for product
information
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Grades and Standards in
Global Trade
The ISO 9000 are international standards for
quality
 This standard guarantees that manufacturers
have meet certain requirements for producing
and shipping their products
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Who Sets Grades and
Standards?
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Government agencies
• Ex. FDA – food and
drugs, FCA –
communication,
County Health Dept. restaurants
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Trade and
professional
organizations (to
promote product
safety)
• Ex. AAA - motels
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Businesses
• Ex. McDonalds buns
have an exact size and
color, Ford requires
suppliers to meet
certain standards
when making “Q1”
parts.
What is a Warranty?
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Warranty is a defined
promise made by the
seller to the
consumer that the
seller will repair or
replace a product that
does not perform as
expected
Types of Warranties
Express Warranty
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Defined as promises
expressed in a
specific statement
concerning the
quality of the product
• Can be written or oral
Implied Warranty
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Defined as an
unwritten, unstated
warranty understood by
the consumer and the
seller that a product will
perform as expected
• The product will do what
it is designed and
recommended to do
Types of Warranties
Full Warranty
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Defined as warranties
that cover the entire
product
• If the product doesn’t work it
must be made good in a
reasonable time if not the
customer can choose a
replacement or refund
• No time limits on implied
warranties
• The customer need only notify
the warrantor in order to obtain
repairs
Limited Warranty
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Defined as
warranties that do
not contain the
provisions of full
warranties, may
cover only certain
repairs or specific
parts
What is a Guarantee?
Defined as a promise made by the seller to the
consumer that the seller will refund the
consumer’s purchase price if the product
doesn’t perform as expected.
 AKA – “Money-back guarantees”
 While warranties usually apply to goods,
guarantees are given for both goods and
services
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Characteristics of an
Effective Guarantee
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Unconditional
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• No conditions for the
customer to meet
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• Not a lot of forms,
people to see, and
different locations
Understandable
• Clear language and no
difficulty
understanding the
promises
Easy for the customer
to implement
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Easy for the customer
to collect
• When possible money
should be refunded on
the spot
Purpose of Warrantees and
Guarantees
To reassure
prospective
customers
 To protect the
producer and seller
 To gain repeat
customers
 To increase sales
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To use as a
promotional tool
 To use as a
competitive tool
 To use as a image
builder
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Benefits of Warrantees and
Guarantees
Consumer Benefits
Reduced anxiety
about purchases
 Free repairs
 Service information
 Legal recourse
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Business Benefits
A customer-oriented
focus
 Establishment of
clear standards
 Feedback from
customers
 Increased profits
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Why are Warrantees and
Guarantees Regulated and
Controlled by Law?
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They can cause problems for producers
• Consumers misuse the product
• Customers expect problems to be fixed that are not under
warranty
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There have been times when companies have
“guaranteed” their products without living up t
the terms of the warranty or guarantee and the
customer was cheated.
Product Positioning
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Product positioning: Efforts a business
makes to identify, place and sell its
products in the marketplace.
• Positioning by price and quality:
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Ex: Ford Motor Company positions its Focus as an
economical passenger car while still emphasizing quality.
Product Positioning
• Positioning by features and benefits:
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Ex: Oil of Olay was positioned as a
premium facial moisturizer and cleanser to
keep skin soft and young.
• Positioning by unique characteristics:
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Ex: Cell phones that can text message or
take pictures and send them. (Is there an
app for that?)
Product Positioning
• Positioning in relation to the
competition:
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Ex: Warner-Lambert Company introduced
Cool Mint Listerine by positioning against
the “theraputic” benefits of Original
Listerine and the “cosmetic” benefits of
Scope.
• Positioning in relation to other
products in a line:
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Ex: Binney & Smith introduced washable
crayons and positioned them as a specialty
item in the company’s Crayola crayon line.
Corporate Brand Positioning
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Corporate branding is the practice of using a
company's name as a product brand name.
• Uses corporate brand equity to create product brand
recognition.
• This strategy contrasts with individual product branding,
where each product has a unique brand name and the
corporate name is not promoted to the consumer.
• Results in significant economies of scope since one
advertising campaign can be used for several products.
• Facilitates new product acceptance because buyers are
already familiar with the name.
• May hinder the creation of distinct brand images or identities
for different products.
Corporate Brand Positioning
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Factors that go into defining a corporate brand
position:
1. Brand Attributes: What the brand delivers through
features and benefits to consumers.
2. Consumer Expectations: What consumers expect to
receive from the brand.
3. Competitor Attributes: What the other brands in the
market offer through features and benefits to consumers.
4. Price: An easily quantifiable factor – your price vs. your
competitor’s price.
5. Consumer Perceptions: Perceived quality and value
of your brand in the consumer’s mind.
The Product Strategy
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Product Mix: All the different products
that a company makes or sells.
• Product Line: A group of closely related products
manufactured or sold by a business.
• Product Item: A specific model, brand, or size of
a product within a product line.
• Product Width: The number of different product
lines a business manufactures or sells.
• Product Depth: The number of product items in a
product line.
The Product Strategy
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Procurement planning is the process used
by companies or institutions to plan
purchasing activity for a specific period
of time.
The primary concept of procurement is
that advanced planning, scheduling, and
group buying will result in cost savings,
more efficient business operation, and
therefore increased profitability.
The Product Strategy
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There are four steps that form the basis of
procurement planning:
• Group buying is the process of combining the
total resource requirements for different
departments and creating one purchase order.
• Just in time delivery is a central component of
procurement planning. Under this model, the cost
of storage is carried by the supplier. They are
responsible for ensuring the purchased quantities
of materials are ready and available for delivery at
the specified dates and times.
The Product Strategy
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There are four steps that form the basis of
procurement planning:
• Bulk pricing and negotiating requires combining
the total quantity required for a specific period of
time to get lower pricing. Negotiations are
typically completed by the procurement director or
senior buying agent.
The Product Strategy
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There are four steps that form the basis of
procurement planning:
• Administrative overhead is the cost to the
organization for the entire procurement to pay
cycle. This includes the salaries and support costs
for procurement staff, invoice processing, check
production, and resolving of vendor inquiries. An
organized, managed process eliminates a
significant amount of these costs, as they are
incurred only once for every commodity.
The Product Strategy
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Impact of Technology
• What has been the impact of technology on the
product strategy?
The Product Strategy Quiz
1. What is the difference between a
feature and a benefit? (2 pts)
2. Why do customers buy benefits and not
features? (2 pts)
3. What does the question, “How is the
product positioned?”, mean? (3 pts)
4. What has been the impact of
technology on the product strategy?
(3 pts)
Essential Question 1B
(MKT-EN-8B)
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What are the various place strategies?
What is meant by,
“Location, Location,
Location?”
The Place Strategy
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Channel Management is a process by which
a company creates formalized programs for
selling and servicing members within a
specific channel to move your product to the
end user.
The Place Strategy
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Each specific channel should have:
• Specific goals for each channel segment, the channel as a
whole, and each individual accounts.
• Well-defined polices for administering the accounts within
this channel.
• Products identified in your offering which are most suited
for each segment and create appropriate messaging for
those products.
• Sales and marketing programs designed to support your
channel that meet THEIR needs, not what your idea of their
needs are. Examples: Product training, Co-op advertising,
Seasonal promotions, Merchandising
The Place Strategy
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Defining a channel management strategy
for each segment allows you to be more
effective within each segment, while
gaining efficiency at the same time.
Maintaining brand consistency across all
channel segments is critical to your longterm success.
The Place Strategy
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Intensity of Distribution: Determines
how broadly you will distribute your
product.
• Intensive Distribution: Placement of a product in
all suitable sales outlets.
• Selective Distribution: Limits distribution to the
number of sales outlets in an area.
• Exclusive Distribution: Limits the number of
distribution outlets to one per area.
The Place Strategy
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Transportation: The physical movement
of goods by truck, train, plane, ship, or
pipeline.
Location, Layout, and Availability:
• Is my location appropriate for my target market(s)?
• Will the physical layout of my business encourage
or discourage sales?
• Do my business hours of operation match the times
my target market prefers to do business?
The Place Strategy
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Impact of Technology
• What has been the impact of technology on the
place strategy?
The Place Strategy Quiz
1. What is the difference between a
direct and indirect channel of
distribution? (2 pts)
2. List and describe the three different levels of
distribution intensity and provide a product
example of each? (9 pts)
3. What is meant by, “Location, location,
location?” (3 pts)
4. What has been the impact of technology on
the place strategy? (2 pts)
Essential Question 1C
(MKT-EN-8C)
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What are the various pricing strategies?
Factors Affecting Prices
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Costs and Expenses
• Businesses must make a profit therefore, prices must
be high enough to cover costs and expenses.
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Supply and Demand
• Businesses must understand the economic
relationship between supply and demand and all
variations.
• Elasticity depends on:
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Availability of substitutes.
Price relative to income.
Luxury versus necessity.
Factors Affecting Prices
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Consumer Perceptions
• Consumers tend to equate high prices with
quality, status, prestige, and exclusiveness.
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Competition
• Price Competition Competition based on price.
• Nonprice Competition - Competition based
on other marketing factors.
Factors Affecting Prices
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Government Regulations
• Price Fixing: Where competitors agree on certain price
ranges within which they set their own price.
• Price Gouging: Pricing above the market when no
alternative retailer is available.
• Resale Price Maintenance: Price fixing imposed by a
manufacturer on wholesale or retail resellers of its
products to deter price-based competition.
• Unit Pricing: Required pricing of goods on the basis of
cost per unit measure in addition to price per item.
• Bait-and-Switch: Advertising an out of stock or inferior
product to attract customers and then selling them a higher
priced product.
Factors Affecting Prices
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Technological Trends
• The major technology trend affecting business
today is the internet.
• Business that adapt to technological changes can
create a competitive edge.
• Business that do not adapt to technological change
could become obsolete.
Goals of Pricing
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Gain Market Share
• A firm’s percentage of the total sales
volume generated by all competitors in a
given market.
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Return on Investment
• Used to determine the relative
profitability of a product.
• Is calculated by profit divided by
investment.
Goals of Pricing
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Meet the Competition
• Some companies simply price their product the
same as the competition.
• The price is either same as the industry leader or
the average price of the industry.
Basic Price Strategies
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Cost-Based Pricing - Cost of product plus
the cost of doing business plus your projected
profit margin (markup).
Demand-Based Pricing - Determine what
customers are willing to pay and set the price
accordingly.
• Demand must be inelastic.
• Customers must believe the product is different or of
greater value.
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Competition-Based Pricing - You determine
whether to price above, below, or in line with
the competition.
Pricing Policies
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Flexible-Price Policy
• Allows customers to haggle over price.
• Takes into account changing market conditions
such as shifts in demand and prices of
competitors.
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One-Price Policy
• Tells customers they are treated equally.
• Strongly recommended for service businesses.
Pricing Techniques
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Psychological Pricing: Based on the belief
that customers base perceptions of a product
on price.
• Prestige Pricing: Uses higher than average prices
to suggest exclusiveness, status, and prestige.
• Odd/Even Pricing:
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Uses odd prices ($19.99) to suggest bargains.
Uses even prices ($20.00) to suggest higher quality.
• Price Lining: Prices items according to category
such as low, medium, and high quality.
Pricing Techniques
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Psychological Pricing: Based on the belief
that customers base perceptions of a product
on price.
• Promotional Pricing: Offers lower prices for a
limited period to generate sales.
• Multiple-unit Pricing: Items are priced in
multiples such as 3 for $.99. This suggests a
bargain.
• Bundle Pricing: Several complementary
products are sold at a single price. The bundled
price is lower than the individual items purchased
separately.
Pricing Techniques
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Discount Pricing: Offers reductions from
the regular price to customers.
• Cash Discounts: Normally given to customer for prompt
payment.
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2/10, n/30
• Quantity Discounts: Encourages buyers to order large
amounts.
• Trade Discounts: Given to distribution-channel members
who provide marketing services for the manufacturer.
• Promotional Discounts: Manufacturers pay wholesalers or
retailers for carrying out promotional activities for the
manufacturer.
• Seasonal Discounts: Used for products which have a heavy
seasonal demand.
Product Life Cycle
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All products move through a four stage
life cycle.
Introduction
• Price skimming: Charging a high price to
recover costs then dropping the price when the
product is no longer unique.
• Penetration Pricing: Charge a low price to
build customer base and discourage
competition.
Product Life Cycle
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Growth
• Sales increase and unit costs decrease.
• If you skimmed you will need to lower price to
expand customer base.
• If you were penetrating, little to no change is
necessary.
Product Life Cycle
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Maturity
• Need to look for new markets and possible
product improvements to hold prices.
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Decline
• Cut prices to stimulate sales and clear
inventory.
Break-even Analysis
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Break-even Point: The point at which
the money from product sales equals
the costs of making and distributing the
product.
Break-even Analysis
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Fixed Costs: Expenses that do not
change depending on the number of
units sold.
• Rent, mortgage, insurance, salaries, etc.
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Variable Costs: Expenses that change
depending on the number of units sold.
• Materials, advertising, insurance, wages, etc.
Fixed costs
_____________________
= Number of Units
Unit cost – Variable costs
Revenue
Cost
per
Unit
Break-even
Point
Variable
Expenses
Fixed Expenses
Number
of Units
Revising Prices
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Markup: Amount added to the cost of an
item to cover expenses and ensure a profit.
Markup
 Percentage
markup
Cost
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Markdown: Amount of money taken from
the original price.
Markdown
Price
 Percentage
markdown
Revising Prices
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Discount: Reduction in price to the
customer.
• Price x Discount % = Discount dollars
• Price – Discount Dollars = Discounted price
or
• Price x (100% – Discount %) = Discounted price
Adjusting Prices to
Maximize Profit
Are your products’ prices elastic or
inelastic?
What are your competitors’ prices?
How will you react to market price
changes?
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•
Must continually track market prices and react
accordingly or lose customers fast.
Special Market Circumstances: Circumstances
calling for a temporary price increase.
The Price Strategy
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Impact of Technology
• What has been the impact of technology on the
price strategy?
The Price Strategy Quiz
Essential Question 1D
(MKT-EN-8D)

What are the various promotional
strategies?
The Promotion Strategy
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Pre-opening Plan
• Establish a positive image: beliefs, ideas, and
impressions that people have about your business.
• Let potential customers know that you are opening
for business.
• Bring in customers, or have them contact your
business.
• Interest customers in your product rather than your
competitors’ products.
The Promotion Strategy
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Ongoing Plan
• Preselling: Influencing potential customers to buy
from you before contact is actually made.
• Explaining major features and benefits of your
products.
• Communicating sales information.
• Answering customers’ questions and concerns.
• Introducing new goods or services.
• Promotional plans are usually seasonal or quarterly.
The Promotion Strategy
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Promotional Plan Format
• Can be an individual activity or a campaign: a
series of related activities with a similar theme.
• Each activity should contain the following
information:
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Brief description.
Specific media placement.
Submit dates.
Scheduled date of run or release.
Number of runs, copies, or items.
Costs.
Rationale and any other pertinent notes.
The Promotion Strategy
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
Must create a Promotional Mix: A
combination of advertising, sales
promotions, publicity, and personal
selling.
Must focus on:
• Target Market: Target market and promotional
option must match.
• Product Value: Match the promotional option
with the value of the product.
The Promotion Strategy

Must focus on:
• Promotional Channels: The established lines of
communication used for a product to reach its
customer.
• Time Frame:


Presale advertising is done before a new product hits
the market.
Postsale advertising focuses on customers who have
already purchased in order to confirm their decision to
buy was a good one.
• Costs: What combination of activities will give
you the best results for your money?
Types of Promotional
Activities

Advertising: Paid presentation of ideas,
goods, or services directed toward a mass
audience.
Advertising

Newspaper
TIMES
Finance News

Magazines
Advertising

Direct Mail

Outdoor
Advertising
Advertising

Directories

Transit
Advertising
Advertising

Other print media

Television
Advertising

Radio

Internet
Types of Promotional
Activities

Publicity: Placement of newsworthy
items about a company or product in the
media.
• News Releases: Brief newsworthy stories sent to
the media.
• Feature Articles: Submit articles to newspapers,
magazines, or newsletters.
• Captioned Photos: Send photos and explanations
of your company’s new products, facilities, or
employees to the media.
Types of Promotional
Activities
• Press Conference: Make major announcements
related to your company to the media.
• Seek Interviews: Discuss some newsworthy aspect
of your business with the media. Offer your expert
opinion.
Types of Promotional
Activities
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Sales Promotion: Use of incentives or
activities to stimulate traffic or sales.
•
•
•
•
•
Displays
Premiums
Rebates
Samples
Sweepstakes and Contests
Types of Promotional
Activities

Personal Selling: Oral presentations to
one or more potential buyers with the
intent of making a sale.
Types of Promotional
Activities

Considerations used to evaluate participation
in trade shows.
• Strategic trade show planning is essential to achieving
your exhibiting goals and maximizing your return on
investment.
• Identify opportunistic conferences and events that reach
your target audience of potential buyers.
• Conduct research by talking with current customers,
professional organizations and colleagues.
Types of Promotional
Activities

Considerations used to evaluate participation
in trade shows.
• Use resources such as online trade show planning
directories, local chambers of commerce, and area
business associations. Request lists of past vendors and
attendees from the trade show sponsor.
• Ensure the show you select draws the type and number of
prospects you want. Other considerations include
geography, timing, cost, and sponsor reputation.
Types of Promotional
Activities

Considerations used to evaluate participation
in trade shows.
• To promote sales, consider your need for audio visual
rental equipment and sound systems, banners,
promotional items, literature, special displays, and other
related marketing tools.
The Promotional Strategy

Impact of Technology
• What has been the impact of technology on the
promotional strategy?
The Promotion Strategy Quiz
1. What are the four strategies of the
promotional mix? (4 pts)
2. What are the basic differences between
advertising and publicity? (4 pts)
3. What is a campaign? (2 pts)
4. Describe four different sales promotion
activities? (8 pts)
Essential Question 1E
(MKT-EN-8E)

What are the various selling strategies?
The Selling Strategy

Identify your Unique Selling Proposition:
• Each advertisement makes a proposition to the
consumer by presenting a specific benefit. It is not
just words, puffery, or show-window advertising.
• The proposition must be one that the competition
either cannot, or does not, offer. It must be unique;
either a uniqueness of the brand or a claim not
otherwise made in that particular field of advertising.
• The proposition must be so strong that it can move
the mass millions, i.e., pull over new customers to
your product.
The Selling Strategy
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Conduct Sales Forecasting: the process of
estimating what your business’s sales are
going to be in the future.
• An integral part of business management.
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Helps manage inventory
Helps predict cash flow
Helps to plan for growth.
Allows for intelligent business decisions.
The Selling Strategy
• Sales forecasting for an established business is easier
because it can use sales revenues from the previous
year, combined with knowledge of general economic
and industry trends, to predict business sales in the
future.
• Sales forecasting for a new business is more difficult.
The process of preparing a sales forecast for a new
business involves researching your target market,
your trading area and your competition and
analyzing your research to guesstimate your future
sales.
The Selling Strategy

Methods of Sales Forecasting
• Sales Forecasting Method #1: Determine the
average sales volume per square foot for similar
stores in similar locations and similar size.
• Sales Forecasting Method #2: For your specific
location, determine how many households needing
your goods live within, one mile, how much they
will spend on these items annually, and the
percentage of their spending you will get, compared
to competitors. Do the same for five miles (with
lower sales forecast figures). (Use distances that
make sense for your location.)
The Selling Strategy
• Sales Forecasting Method #3: Estimate gross sales
per day for each product/service lines then multiply
by 30 for the month. Scale each month taking into
consideration increase/decrease in sales due to
trends.
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Don’t Just Do One Sales Forecast
• Use one or two of the sales forecasting methods
• Generate three figures: pessimistic, optimistic, and
realistic. Look for HUGE variations that could
identify problem times, i.e. summer vs Christmas.
The Selling Strategy

Include Expenses in Your Sales Forecasting
• Identify expenses by month, including purchases of
materials or inventory.
• Calculate amount of sales will be by extending store
credit. Allow for bad debts.
• Calculate amount of sales by cash and by credit card.
Deduct 4% for credit card sales for credit card
expense
• Calculate payroll expenses – estimate payroll tax
(25% of payroll) to be paid quarterly.
The Selling Strategy
• Create a reserve cash account for your slow months,
unforeseen emergencies, or combat large competition
price reductions?
• It is acceptable (and realistic) to have a negative cash
flow projection for the early months of your cash
flow projection period. Be prepared to show how
those cash short falls will be overcome.
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Always plan for the worse case scenario.
The Selling Strategy

Impact of Technology
• What has been the impact of technology on the
selling strategy?