Product Strategy, Branding, Pricing, Distribution, and Marketing Communications

Posted on Dec 26, 2024 in Economy

CH8 Product Strategy

Developing New Products:

1.1 Firms Develop New Products

1.1.1 Changing Customer Needs: Satisfying the changing needs of current and new customers or by keeping customers from getting bored with the current product (e.g., a firm takes a well-known offering and innovates it to make it interesting, like the Dyson vacuum).

1.1.2 Market Saturation: When a market is saturated, without new products or services, the value of the firm will decline (e.g., cars adding new features every year, the emergence of gluten-free products).

1.1.3 Managing Risk Through Diversity: Diversify risk through a broader product portfolio (e.g., Kellogg’s offers cereals, cereal bars, and protein shakes).

1.1.4 Fashion Cycle: Industries with short product life cycles launch multiple selections a year.

1.1.5 Improving Business Relationships: With suppliers, data from suppliers can better their service.

1.2 Adoption of Innovation

Diffusion of Innovation = The process by which innovation spreads throughout a market group, over time and over various categories of adopters. This gives marketers a means for potential markets and sales.

Pioneers/Breakthroughs = New product introductions that are new to the world, creating new markets and adding great value to the firm (e.g., Apple iPod). They have the advantage of being first movers: recognizable by customers, often establishing a commanding/early market share lead. However, it’s hard to succeed because of high prices and complexity. Simple designs are easy for imitators to produce at a lower cost (with no marketing effort needed). The consumer adoption cycle is bell-shaped (four groups according to how soon they buy the product).

Adoption Cycle

• Innovators: Early buyers who enjoy taking risks, are highly knowledgeable, not price-sensitive, and stand in line to buy on the first day. They are crucial for success because they help the product gain market acceptance through word of mouth.
• Early Adopters: Wait and purchase the product after careful review, waiting for the first reviews before buying. They don’t stand in line to buy but are opinion leaders (crucial for bringing in the other three buyer categories).
• Early Majority: Reaching these buyers means the product can be profitable since they are a large group. They wait for the bugs to be resolved before buying (e.g., waiting for movies to launch on Netflix).
• Late Majority: The last group to enter. The product has achieved its full market potential by the time they enter, and sales tend to decline.
• Laggards: Consumers who avoid change and rely on traditional products until they are no longer available (e.g., smartphones vs. CDs).

Using the adoption cycle, firms can predict the type of consumers that will buy their product (early and late). Firms can then develop promotion, pricing, and other marketing strategies.

Disruptive Innovations = New, simpler, and possibly less expensive products that disrupt the industry (e.g., Netflix disrupting the movie rental industry).

Because different groups adopt the product at different stages, the speed matters.

Diffusion Speed (4 Factors): The speed with which products are adopted depends on several product characteristics:

1. Relative Advantage: If a product is perceived to be better than substitutes, diffusion will be relatively quick.
2. Compatibility: Diffusion may be faster or slower depending on various consumer features, including international cultural differences (e.g., vacuums in North America are big, while in Asia they are smaller and quieter).
3. Observability: Products easily observed and communicated enhance the diffusion process (e.g., YouTube videos on a product).
4. Complexity and Trialability: Less complex products that are easy to try will diffuse more quickly than hard-to-use products (e.g., allowing trials for consumers, like the Dyson vacuum).

Products pass through four stages:

1. Introduction Stage: The product enters the market as a pioneer, an innovative product from a single firm. Initial losses occur because of high start-up costs and low sales, but if successful, firms may see profit at the end of this stage.
2. Growth Stage: The product gains acceptance, demand and sales increase, and competitors enter the product category. The market becomes more segmented, and firms try to reach new consumers by segmenting the market more precisely (e.g., organics). Firms that don’t succeed experience an industry shakeout and exit the market.
3. Maturity Stage: Sales peak, and firms try to add new features or reposition. Marketing costs increase (promotion, distribution) as firms try to defend their market share against competitors by entering new markets, reproducing, and innovating.

3.1 Entry into new markets or market segments as the market becomes saturated. Expand internationally or find new segments, such as lower-income segments. For example, Apple targeted lower-income segments by selling older phones at reduced prices. New markets, such as wipes, may also emerge, leading to the development of new products.

4. Decline Stage: If efforts fail, the product leaves the market. Firms either position themselves for a niche segment of die-hard customers or those with special needs (e.g., vinyl rebound).

Four types of products:

• Specialty: Goods customers are willing to pay a premium to get.
• Shopping Products: Customers have a preference for these but are willing to substitute and are only willing to be inconvenienced a bit.
• Convenience Products: Customers won’t bear any inconvenience.
• Unsought Products: Things you don’t want to buy, like life insurance, textbooks, etc.

Product Mix and Product Line:

1. Product Mix: The complete set of products offered by a firm, reflecting the breadth and depth of the product lines.

1.1 Product Mix Breadth (Variety) = The number of product lines offered by the firm.

2. Product Lines: Groups of associated items, such as items customers use together or think of as part of a group of similar products.

2.2 Product Line Depth = The number of product categories (e.g., oral care) within a product line (e.g., Colgate in the oral care category offers toothpaste, toothbrush, floss). Within product categories are SKUs (stock-keeping units) = the smallest unit available for inventory control.

Increasing and Decreasing Product Breadth and Depth:

• Increase Breadth (Variety)= Add new products.
• Decrease Breadth: Remove some product lines (sell them out) to focus on the main ones.
• Increase Depth (Product Line): Add new flavors, new features.
• Decrease Depth: Delete product categories to realign resources.

Branding:

Value of Branding:

1. Brands Facilitate Purchasing: Easily recognized as they signify a certain quality level and contain familiar attributes, helping consumers make quicker decisions.

2. Brands Establish Loyalty: With continued use, consumers learn to trust the brand.

3. Brands Protect from Competition and Price Competition: Strong brands are protected because they are more established in the market (e.g., Canada Goose as the best jacket brand).

4. Brands Reduce Marketing Costs: Well-known brands spend less on marketing.

5. Brands Are Assets: Firms fight to keep their brands “pure” and ensure brand value isn’t diluted with fake products.

6. Brands Impact Market Value: When brand value loses, it threatens other assets.

Brand Equity:

Brand equity consists of:

• Brand Awareness = Measures how many customers in a market are familiar with the brand and what it stands for.
• Perceived Value = The relationship between a product or service’s benefits and its costs (a customer’s perceived value for a cheap product may be high since the quality is similar to an expensive one).
• Brand Association= The mental links consumers make between a brand and its key product attributes, such as a logo or slogan. Firms sometimes develop a brand personality = a set of human characteristics associated with the brand.
• Brand Loyalty = When a consumer buys the same brand repeatedly.

Brand Ownership Strategies:

• Manufacturer Brand = Owned and managed by the manufacturer (e.g., Nike).
• Private Label Brands (Store Brand) = Owned and managed by retailers (e.g., those sold in Costco/Walmart).
• Generic = Sold without brand names (e.g., unbranded salt, nuts).

Brand Name Strategies:

• Family Brand = All product lines are sold under one family name (e.g., Kellogg’s Corn Flakes).
• Individual Brand Names = Different names for each product (e.g., Jell-O, Philadelphia Cream Cheese).

Brand Extension:

The use of the same brand name for new products being introduced to the same or new markets. Advantages to using the same name include people already knowing about the brand, making it easier to introduce a new product than a new brand. If the brand is known for high quality, that perception will carry over.

Brand Dilution:

Occurs when the brand extension adversely affects consumer perceptions about the attributes the core brand is believed to hold (e.g., Bic wrongly thought if people want disposable razors, they’d also want disposable underwear). Firms should consider whether the brand extension will be distanced from the core brand (e.g., Marriott-mid/Ritz-high), carefully evaluate consumer perceptions (e.g., HP printer), and refrain from extending the brand name to too many products to avoid diluting it (e.g., Kate Spade Saturday/Jack Spade).

Co-branding:

The practice of marketing two or more brands together on the same package or promotion (e.g., airlines co-branding with credit cards, like Aeroplan CIBC). It can fail when customers for each brand are vastly different.

Brand Licensing:

A contractual arrangement between firms whereby one firm allows another to use its brand name, logo, symbols, and character in exchange for a negotiated fee (e.g., having an NBA team name on an A&F hoodie). The risk is if the licensor overexposes the brand, leading to dilution.

Packaging:

An important brand element with more tangible/physical benefits than other brand elements because it comes in different types and offers a variety of benefits to consumers, manufacturers, and retailers. It helps protect the product (e.g., eggs), attract attention, enable the product to stand out, offer a promotional tool (e.g.,”New and Improve”), may affect consumers’ emotions and drive impulse buying, and help suppliers save costs (e.g., Little Macs). Nowadays, there is a focus on sustainable packaging.

Labeling:

Labels on products and packages provide information that consumers need for their purchase decisions. They can be used for promotion and need various law approvals (e.g., Siggi’s yogurt highlights 18g protein).

CH10: Services (Intangible Product)

Service:

Any intangible offering that involves an act, performance, or effort that cannot be physically possessed.

Customer Service:

Refers to human or mechanical activities firms undertake to help satisfy their customers’ needs and wants (e.g., service-oriented economies like Ikea and TaskRabbit, Apple with Apple TV, Apple Pay, Apple Arcade). It emerges quickly because of outsourcing, people placing a high value on leisure and convenience, and people demanding more specialized services (e.g., gym personal trainers).

Services marketing differs from product marketing because of four differences: intangible, inseparable, inconsistent, and inventory.

1. Intangible: Highly challenging for marketers. It’s difficult to convey the benefits of the services, so marketers use images (e.g., a happy family for Disney World).

2. Inseparable: Services are produced and consumed at the same time (e.g., haircut process, where the customer has a say). After the service is performed, it can’t be returned, so firms offer satisfaction guarantees through slogans.

3. Inconsistent: The more humans needed, the more likely the service’s quality will be inconsistent.

3.1 Training and Standardization: To reduce service inconsistency (e.g., chain places always having the same greetings).

3.2 Replace People with Machines: For simple transactions (like ATMs, self-checkout), machines reduce labor costs.

3.3 Internet-Enabled Kiosks: Provide routine customer service, freeing employees to deal with more demanding customer requests and problems, and reducing service variability (e.g., Ikea kiosks).

4. Inventory: Services are perishable because they can’t be held in inventory or stored for future use. Perishability provides both challenges and opportunities to marketers in terms of the task of matching demand and supply (e.g., ski resorts have high supply on weekends but not weekdays, even if there’s snow). For service companies, excess demand means turning people away, and excess capacity leads to a less desirable expense-to-revenue ratio.

CH11: Price

The Importance of Pricing: A good pricing strategy today may not remain effective tomorrow.

Price = The overall sacrifice a consumer is willing to make to acquire a product or service.

Sacrifices usually include nonmonetary (e.g., time used to travel) and monetary (e.g., travel costs, shipping) aspects.

The key to successful pricing is matching the product with the consumer’s value perceptions.

Price as an Information Cue: Consumers use the price to judge quality.

The 5 Cs of Pricing: Company objectives, customers, costs, competition, and channel members.

1. Company Objectives (4 Types):

1.1 Profit Orientation: Firms usually implement:

1.1.1 Target Profit Pricing = A particular profit goal is their concern. Firms use price to stimulate a certain level of sales at a certain profit per unit.

1.1.2 Maximizing Profit Strategy = Relies on economic theory. If a firm can use a mathematical model to explain and predict sales and profits, the price at which profits are maximized can be identified.

1.1.3 Target Return Pricing = Firms that are less concerned, designed to produce a specific return on investment, usually as a percentage of sales.

1.2 Sales Orientation: Firms use this to set prices, believing that increasing sales will help the firm more than increasing profits (e.g., a new health club focuses more on unit sales at first, offering cheaper membership fees and accepting less profit).

1.3 Competitor Orientation: A firm’s objective is based on the premise that it should measure itself primarily against its competition. Some firms focus on competitive parity, setting prices similar to those of their major competitors.

1.4 Customer Orientation: Explicitly invokes the concept of customer value and setting prices to match consumer expectations. This can be done by using a “no-haggle” price structure to make the purchase process simpler, thereby lowering the overall price and ultimately increasing value, or by offering many payment methods or very high-priced “state-of-the-art” products or services in full anticipation of limited sales (e.g., a $320 speaker and a $19,000 speaker).

2. Customers:

To determine how firms account for consumers’ preferences when developing pricing strategies, we must first lay a foundation of traditional economic theory that helps explain how prices are related to demand.

2.1 Demand Curves and Pricing: A demand curve shows how many units of a product or service consumers will demand during a specific period at different prices. It can be straight or curved. As demand increases, price decreases, and as price increases, demand decreases. The demand curve for prestige products is different, as consumers purchase them for their status rather than functionality. As the price increases, demand increases up to a certain point (e.g., Hermes at auction). Cons: Sometimes a product is too expensive for a student as a hobby, so they announce a cheaper line.

Price Elasticity of Demand: Measures how changes in price affect the quantity of the product demanded.

• Elastic: The market for a product or service is price-sensitive (when elasticity is less than -1). Relatively small changes in price will significantly affect the quantity demanded (e.g., steak). If firms try to increase sales, they can lower the price.
• Inelastic: The market for a product is viewed as price-insensitive (elasticity more than -1). If a firm must raise prices, it’s helpful to do so here because fewer customers will stop buying (e.g., milk).

Consumers are more sensitive to price increases than price decreases. Firms can maximize profit if they charge as much as each customer is willing to pay (e.g., Caribbean cruise example – inelastic, but after they lower the price, they all go for alternatives).

Dynamic Pricing: The process of charging different prices for goods and services based on the type of customer, time of day, week, or even season, and level of demand (e.g., tickets for a sports game).

Factors Influencing Price Elasticity of Demand:

1. Income Effect: Refers to the change in the quantity of a product demanded by consumers because of a change in income. As income increases, people spend more (e.g., steak instead of ground beef).

2. Substitution Effect: Refers to consumers’ ability to substitute other products for the focal brand. The greater the availability of substitutes, the higher the price elasticity of demand. Marketing plays a critical role: if a brand is believed to be unique or extraordinary, it makes other brands less substitutable (e.g., Ralph Lauren).

3. Cross-Price Elasticity: The percentage change in the quantity of Product A demanded compared with the percentage change in price in Product B (e.g., when coffee pod prices drop, coffee machine demand rises). They are complementary goods: prices rise and drop together.

3. Cost:

Prices shouldn’t be based on cost because consumers care little about that; perceived value matters more.

• Variable Costs: Costs, primarily labor and materials, that vary with production volume.
• Fixed Costs: Costs that remain at the same level regardless of any changes in the volume of production, like rent and insurance.
• Total Cost= Variable Costs + Fixed Costs

Break-Even Analysis: Profit here is zero.

4. Competition:

Four levels: monopoly, oligopoly, monopolistic competition, and pure competition.

• Monopoly: Only one firm provides the product or service in a particular industry (less price competition) (e.g., utility industry).
• Oligopoly: Only a few firms dominate (e.g., banking industry). Reactions to prices in an oligopoly can result in a price war, where two or more firms compete primarily by lowering their prices. This often happens in the airline industry when low-cost providers enter a market where carriers already exist. However, a firm doesn’t need to lower its price to fight back; consumers also look at quality, brand loyalty, and better service.
• Monopolistic Competition: Many firms are competing for customers in a given market, but their products are differentiated (e.g., sunglasses market with Ray-Ban, Oakley, Gucci).
• Pure Competition: Consumers perceive a large number of sellers of standardized products or commodities as substitutable, such as grains, spices, gold, and minerals. In such markets, prices are usually set according to the laws of supply and demand. However, some firms start to work with suppliers to distinguish themselves from standardized products (e.g., 100% Colombian coffee beans).

5. Channel Members:

Manufacturers, wholesalers, and retailers can have different perspectives when it comes to pricing strategies. Conflict usually arises since they want different things. Channels can be difficult to manage, and distribution outside normal channels does occur.

Grey Market: Employs irregular but not necessarily illegal methods; it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer (e.g., luxury goods market with 30% off). To discourage grey markets, manufacturers have resorted to large disclaimers on websites, packaging, and other communication systems to warn customers that the manufacturer’s product warranty is only valid if purchased from an authorized dealer.

Pricing Strategies (Three)

Pricing Strategy = A long-term approach to setting prices broadly in an integrative effort based on the five Cs.

1. EDLP (Everyday Low Pricing): Companies stress the continuity of their retail prices at a level somewhere between the regular (non-sale price) and the deep discount sale prices their competitors may offer. Example: Walmart prices mostly at EDLP (not all, but known to be cheaper most of the time). Some consumers perceive EDLP goods to be of low quality.

2. High/Low Pricing: Relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases.

3. New Product Pricing: When products are new to the world, it’s difficult to set prices. Thus, two pricing strategies for pioneers are:

3.1 Price Skimming: Appeals to segments of consumers who are willing to pay the premium price to have the innovation first. After the high-price market slows down, the company then begins to “skim” down the price to capture the next most price-sensitive market segment. Profit is generated through the margin (doesn’t work with luxury items). For price skimming to be successful, competitors cannot easily enter the market. Cons: It can cause discontent for consumers who buy first.

3.2 Market Penetration Pricing: Set the initial price low for the introduction of the new product/service. The objective is to build sales, market share, and profits quickly. Profits flow through volume.

Experience Curve Effect: The drop in unit cost as the accumulated volume sold increases; as sales continue to grow, costs continue to drop, allowing even further reductions in the price.

Drawbacks: The firm must have the capacity to satisfy a rapid rise in demand, and low prices don’t signal high quality. Of course, a price below their expectations decreases the risk for consumers to purchase the product and test its quality for themselves. Firms should avoid this strategy if some segments are willing to pay more for the product (otherwise, the firm is just leaving money on the table).

Emerging Strategies and Payment Options:

• Shrinkflation: Companies reduce the amount of food in packages while leaving the prices unchanged.
• Payment Options: Contactless, Buy Now Pay Later (BNPL) is a recent payment trend.

Pricing Tactics: Short-term methods to focus on select components of the five Cs.

1. Consumer Pricing Tactics: When firms sell their products and services directly to customers, rather than to other businesses, the tactics they use naturally differ.

1.1 Price Lining: When marketers establish a price floor and price ceiling for an entire line of similar products and then set price points in between to represent distinct differences in quality (e.g., sports jackets at different prices).

1.2 Price Bundling: Pricing of more than one product for a single, lower price (e.g., buying a bundle of internet with cable TV and telephone). This encourages customers not to buy from competitors and to try their products.

1.3 Leader Pricing: Building store traffic by aggressively pricing and advertising a regularly purchased item, often priced at or just above the store’s cost (e.g., milk on sale, but likely to purchase other items too, which covers the lower markup on milk).

2. Consumer Price Reductions

2.1 Markdowns: Reductions retailers take on the initial selling price; an integral component of the high/low pricing. It allows retailers to get rid of slow-moving items and not tie up money in inventory. It can increase traffic in the store when used with promotions.

2.2 Quantity Discounts for Consumers: Size discount: the most common implementation of a quantity discount at the consumer level; the larger the quantity bought, the less the cost per unit (e.g., Makro).

2.3 Coupons and Rebates: Provide discounts to consumers on the final selling price. For coupons, the retailer handles the discount. For rebates, the manufacturer issues the refund (a portion of the purchase price returned to the buyer in the form of cash). Rebates offer greater control than coupons and provide valuable customer information. Both are also sales promotion tools.

Legal and Ethical Aspects of Pricing:

• Deceptive or Illegal Price Advertising: Price advertisements causing customer harm. Example: “best deals, guaranteed” can be deceptive marketing if not true. Posting fake reviews and charging hidden fees are also examples.
• Deceptive Reference Prices: If the reference prices are made up, it’s deceptive (e.g., Winners tag example).
• Loss Leader Pricing: Takes the tactic of leader pricing one step further by lowering the price below the store’s cost (e.g., BOGO – it’s priced for the price of two at a lower price).
• Bait and Switch: A deceptive practice of luring customers into the store with a low advertised price on an item (the bait), only to pressure them to buy a higher-priced item (the switch).
• Predatory Pricing: A firm’s practice of setting a very low price for one or more of its products with the intent of driving its competition out of business; illegal under the Competition Act. It’s hard to prove (e.g., Flair Airlines).
• Price Discrimination: Selling the same product to different resellers (wholesalers, distributors, or retailers) or to the ultimate consumer at different prices; some, but not all, forms of price discrimination are illegal.
• Price Fixing: The practice of colluding (cooperating in secret) with other firms to control prices.
• Horizontal Price Fixing: When competitors that produce and sell competing products collude to control prices, effectively taking price out of the decision process for consumers. It reduces competition and is illegal.
• Vertical Price Fixing: When parties at different levels of the same marketing channels (e.g., manufacturers and retailers) collude to control the prices passed on to consumers. Manufacturers often encourage retailers to sell their products at the Manufacturer’s Suggested Retail Price (MSRP) to reduce retail price competition among other retailers. They enforce MSRPs by withholding benefits or even refusing to deliver merchandise.

Marketers must always balance their goal of inducing customers through price to find value and their need to deal honestly and fairly with those same customers.

CH12: Distribution Channel: Place

The Importance of Distribution: To convince retailers to carry their products.

Distribution Channels, Supply Chain, Logistics:

• Distribution Channel: Transfers the ownership of goods and moves them from the point of production to the point of consumption, most often retailers. It’s part of the overall supply chain, making products available for consumers, whether they are individuals or businesses. It can be used directly or through intermediaries.
• Supply Chain Management: A set of approaches and techniques firms employ to efficiently and effectively integrate their suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless value chain in which merchandise is produced and distributed in the right quantities, to the right locations, at the right time, and to minimize system-wide costs while satisfying customers. (Wholesalers buy products from manufacturers and resell them to retailers, who sell directly to consumers. E.g., Costco acts as both).
• Logistic Management: Describes the integration of two or more activities to plan, implement, and control the efficient flow of raw materials, in-process inventory, and finished goods from the point of origin to the point of consumption (e.g., customer service, demand forecasting, distribution communications, inventory controls, etc.).

Designing Distribution Channels

1. Channel Structure: Direct, indirect, multi-channel, or a mix.

• Direct Distribution: Straight to the consumer (e.g., Etsy, or small stores).
• Indirect Distribution: One or more intermediaries (e.g., cars sold in malls).
• Multi-channel Distribution: In one area, it can be direct, and in another city, it can be through intermediaries.

Push vs. Pull Distribution Strategies

To answer whether it is a push or pull marketing strategy, ask who is watching the ads (the consumers or intermediaries).

• Push Marketing: The manufacturer focuses on promotional efforts (personal selling or sales promotion) on channel members to convince them to carry its product so customers can buy it. (Push the product out to customers).
• Pull Marketing: Promotional efforts are directed at consumers to build demand for products that, in turn, may convince retailers to carry them (e.g., flyers/coupons for them to go ask stores).

Distribution Intensity:

• Intensive = Designed to get products into as many outlets as possible.
• Selective = Lies between; uses a few selected customers in a territory.
• Exclusive = Exclusive geographic territories to one or very few retail customers so no other retailers in the territory can sell the brand.

The supply chain adds value; more components = more value.

Distribution Centre: A facility for the receipt, storage, and redistribution of goods to company stores or customers—may be operated by retailers, manufacturers, or distribution specialists (e.g., Amazon).

Managing Distribution Channels:

• Vertical Channel Conflict: A type of conflict between members at different levels within the same marketing channel. To solve: honest communication → common goal. Both firms then have the incentive to cooperate because they know it will boost both their sales.
• Horizontal Channel Conflict: Happens when two competing retailers/manufacturers disagree (e.g., the Prime effect example). To solve: set clear pricing rules.

CH13 Retailing

The set of business activities that add value to products/services sold to consumers for their personal or family use (includes in-store, through catalogs, online purchases, services on airplanes, hotels, fast food). Big retailers are in the driver’s seat.

Factors Manufacturers Consider When Developing Relationships with Retailers:

Choosing Retail Partners:

• How likely is it for some retailers to carry their products?
• Where do their target customers expect to find the product?

Identify Types of Retailers: That would suit the products (e.g., supermarkets for fresh produce).

Develop a Retail Mix Strategy: Implementing the six Ps: product, price, place, promotion, presentation, and personnel.

Multichannel Strategy: They sell in more than one channel (in-store, online, catalogs).

Choosing Retail Partners:

• Channel Structure: Vertical marketing system or unknown brand, or well-known but can’t just place a new line.
• Customer Expectation: Think about where customers would buy their products (Amazon has an advantage; it already tracks data).
• Channel Member Characteristics: The larger and more sophisticated the channel member, the less likely it is to use supply chain intermediaries.

Developing Retail Mix Strategy:

the 6p’s to develop a strategy (4p’s+ store design and display) 1.Product (Merchandise assortment) retailers should provide right mix of merchandise, offer assortments, helps attract new and existing customersexample: loblaws real canadian superstore – big selection, more services vs. loblaw no-frills – less selection, less services hard for retailers to fight competitors when they can also have same brand merchandise on the shelf; thus, they product their own store brands example: if you want house and home bedding, need to go hudson’s bay 2.Price helps define the value of both the merchandise and the service, and the general price range of a particular tore helps define its image. example: banana republic and old navy are both under Gap price must align with other element of the retail mix example: $20 bar chocolate in grocery vs. at holt Renfrew 3.Promotion :cooperative (co-op) advertising: an agreement between a manufacturer and retailer in which the manufacturer agrees to defray some advertising costs by paying all or a portion of the media costs. store credit cards/ gift cards: more subtle forms of promotion that facilitates shopping. important role in driving traffic into stores4. Presentation (Store design and display)important form of promotion to promote and showcase what they offer example: brandname shopping through WeChat, interactive showroom of Tesla/kitkat factory to create your own kitkat bar planogram: diagram that reflects how all brand products are organized on shelves. Generally retailers enter with low price, low margins, low status. Then, they add more services and able to raise prices, higher margins, achieve higher status with consumers. (Mcdonald before vs. Mcdonald today)5. Personnel: personal selling and customer services are part of promotional package, manufacturer could conduct seminar to prep sellers, apple trains woker with five point selling technique: apple, share of wallet = the percentage of the customer’s purchases made from that particular retailer/store to increase their share: they promo these customers.6. Place: convenience is key;Ikea in city areas (emsphere). The internet and omnichannel retailing: livestreaming: new shopping option (taobao), omnichannel: a strategy that creates a consistent experience for consumers across all distribution channels. example: ordering online and returning in-store.Deeper and broader selection — can shop online from across the world, More information to evaluate merchandise–internet channel allows firm to provide as much information as each customer wants, info also available 24/7 365. Personalization: personalized customer service;FAQs page that get answer right away unlike emails and calls personalized offering:using cookies that provide identifying information, online retailers are able to offer complementary merchandise, consumer worry abt data. Expanded market presence: smaller niche sources for hard to find products, collectibles. and hobbies can expand Effective Omnichannel Retailing:cons: some product has a touch and feel attributes (clothes, icecream) –so retailers strive for look-and-see attributes (color styles, and carb grams) 1.Integrated CRM: effective omnichannel needs integrated customer relationship management system with a centralized customer data warehouse that houses a complete history of each customer’s interaction with retailer regardless of where the sale occured 2.brand image; retailers need to provide consistent brand image3.pricing: customer expect pricing consistency for the same sku across channells 4.Supply chain:unique skills and resources are needed to manage each channel. CH14 IMC: Integrated marketing communications (IMC): represents the promotion dimension of the four Ps, encompasses a variety of communication disciplines— advertsing, personal selling, sales promotion, public relation, direct marketing, and digital, social, and mobile media— in combination to provide clarity, consistency and maximun communicative impact. (as part of a whole, each of which offers a diff means to connect with the target audience. Three components in any IMC strategy: the consumer or target market (communication process with consumers), the channels or vehicles through which the message is communicated (the steps involved in planning successful campaigns), the evaluation of the results of the communication (examines the six tools of IMC listed above) Steps in planning an IMC campaign (7 steps tt) 1.Identify Target Audience: firms conduct research to identify target audience, using info they gain to set the tone of ads. Firms keep n ,mind their target audience may or may not be the same as current users of the product. (Selena for Puma) 2.Set objectives: derived from overall objectives of the marketing program and clarify the specific goals that the ads are designed to accomplish. can be both short (awareness) or long term (customer loyalty). (Ovarian cancer campaigns: long term is raise donations, awareness of disease (short)) — define whether push or pull will be used. 3.Determine Budget: 4 methods 3.1Objective and Task: determines the budget required to undertake specific tasks to accomplish communication objectives. Set objectives, choose media, determine costs— must be repeated for each brand.Competitive Parity, Percentage of Sales, Affordable Budgeting:on chart. IMC toolsAdvertising: paid communication via third party, designed to persuade the receiver to take some action, now or in the future. Free standing inserts (FSI) were passive but are moving toward being more interactive with the addition of QR codes. Personal Selling: two-way flow of communication between a buyer and a seller that is designed to influence the buyer’s purchase decision. Can be inperson or online, higher cost but best/most efficient way to sell some products. Sales Promotion: special incentives or excitement-building programs that encourage the purchase of the product/service, such as coupons, rebates, contests, free samples, and point-of-purchase displays.Direct Marketing: marketing that communicates directly with target customers to generate a response or transaction. brand marketing helps customer choose, direct marketing helps them buy. Direct marketing allows for personalization of the message, a key advantage. Four defining characteristics: it is targeted, motivates an action, is measurable, and provide info for the development of a marketing database. Lower costs, broader target audience. Key characteristic = measurability (campaign can be monitored to track results, marketers know who responds to their campaign, allowing them to build rich database) Forms of direct m: Direct Mail/ Email: targetes forms of communication to consumer’s mailbox or inbox. Only work if good contact list orelse junk. Catalogues: a medium, now online Direct Response TV: (DRTV): tv commercials with a strong call to action,Kiosks: digital kiosks like airport, free manicure, dell representative Public Relation:PR = the organizational function that manages the firm’s communications to achieve a variety of objectives, including building and maintaining a positive image, handling or heading off unfavourable stories or events, and maintaining positive relationships with the media. Span both online and offline media, it supports the other promotional efforts by the firm by generating “free” media attention and general goodwill.cause-related marketing: commercial activity in which businesses and charities form a partnership to market an image, product, or service for their mutual benefit; a type of promotional campaign (celebrities wear their brand at event like Oscar) event-sponsorship: popular PR tool: occurs when corporations support various activities (financially or otherwise), usually in the cultural or sports and entertainment sector (example: lululemon for team Canada) CH15 advertising, sales promotions, and personal selling dvertising: not free, must be carried by some medium, source of the message must be known or knowable, persuasive form of communication The AIDA model (think,feel,do model): suggests that Attention leads to Interest to Desire to Action. sometimes customer follow order, sometimes not like impulse buying is feel and do before they think.Attention: crucial to capture consumer attention awareness metrics: aided recall: occurs when consumer recognize the brand when its name is presented to them top-of-mind awareness: the highest level of awareness, occurs when a brand has a prominent place in people’s memories that trigger a response without them having to put any though into it. (Harley has top of mind awareness if consumer answer harley when asked about motorcycles) manufacturers and retailers build top of mind by having memroable names, repeating it through ads, location, sponsorshipInterest: communication then must work to increase their interest level BK imposible whoppersDesire:after acquring interests, goal is to move customer from “I like it” to “I want it” Action: if achieved all the aboves, its likely consumer will buy. The lagged effect: a delayed response to a marketing communiation campaign, generally takes multiple exposures to an ad before a consumerfully process its message. jelwerly ads: they kept it in mind and when the occasion arises they go buy Advertising Objectives informative advertising: often use for upcoming event/ sales, in early stage of product life cyclepersuasive advertising: to motivate consumers to take action, used when competitive, in growth and early maturity stage reminder advertising: to remind of a prodcut or to prompt repurchase, esp for product in maturity stage. Regulatory and ethical issues in advertising: Deceptive advertising: a representation, omission, act, or pratice in an advertisement that is likely to mislead consumers acting reasonably under the circumstances. (example: Keurig’s coffee pods can only be recycled in BC and Quebec so deceptive ads) Puffery: legal exaggeration of praise, stopping just for short deception, lavished on a product. Sales Promotion: can be focused to channel members (push) or end user (pull) Consumer Sale promotions: Coupons: contains data of user, online and offline Deals: short term price reductionPremiums: offers item for free or at a bargain price to reward some type of behaviour. Contests: brand-sponsored compeition that requires skills and effort. Sweepstakes: offer prizes based on a chance of lucky drawSamples: offers the opportunity to try. Loyalty progrmas: to retain customers by offering premiums or other incentives point of purchase displays: merchandiise display located at the POP such as checkout (sephora)rebates: type of price reduction in which a portion is returned by a seller to a buyer. trade channel sales promotions: helps convicne to stock new brands, give it good shelf, promote it. discount and allowances: use to maintain or increase inventory levels in the distribution channel cooperative advertising: helps compensate trade channel members for money they spend promoting products and encourages them to feature products more often. sales force training: manufacturer may offer tot rain retailers sales staff Using sales prmotion tools: pop up stores, cross promoting: when two or more firms join together to reach a specific target market – works best Personal selling process Step 1: Generate and Qualify Leads-– leads = potential customer–discovered by talking to customers, research online, networking events. options can = trade shows: major events attended by buyers who choose to be exposed to products and services offered by potential suppliers in an industry. (Guangzhou fair) cold calls: method of prospecting in which salespeople telephone or go to see potential customers without appointment telemarketing: always over the phone, qualify = assess their potential–for sales who haven’t established relationship with a customer–determining whether it is worthwhile to pursue them and attempt to turn the leads into customers. Step 2: Preapproach and the Use of CRM systems: preapproach: occurs prior to meeting the customer for the first time and extends the qualification of leads procedure described in Step 1.–they conduct additional research and p;an meetings with customer, access info on CRM customer relationship management – database Step 3: Sales presentationa nd overcoming objections–the presentation:entire selling process first,ask questions but listen too. handling objection:effective sales people can anticipate and handle some — to relax and listenStep 4: Closing the sale:means obtaining a commitment from the customer to make a purchase. Step 5:Follow Up: reliability: sales must deliver the right product/serv. on time|responsiveness: sales must be ready to deal quckly with any issue/probs.|assurance: custoemrs must be assured through guarantees that their purcahse will perform as expected|empathy: sales must have good understanding of probs|tangibles:offer a signal that products are high quality (wrapping)CH16Ethics and Sustainability:The three pillars of sustainability—environmental, social, and economic—are interconnected. Environmental sustainability protects natural resources, social sustainability ensures well-being and equity, and economic sustainability seeks long-term growth that benefits both society and the environment. 1.Identify Clear Values and Follow them:ensure organization value and brand promise are same, action rather than words, adds a “values check” in decision making process. (ex. promise workers benefit and they acc get it) 2.Understand your value proposition to society and fulfill it: competitive sense= business succeeds when they out-value others = VPTS, make sure they understand their VPTS: add a value check. (one value) (ex: what are you here for, what’s the unique things you do that adds value to society not just extract)3.Identify vulnerable people and determine your obigation to protect them: not weakness but have little power, example: kids and patients not old people (just age don’t count) (ex: frootloops to trick fruit, and pharma selling meds to make symptom worse) –organizations have to determine if there are any, seek industry to guide treatment, obey consumer&competition protection law 4.Respect Others interests and Don’t take advantage of ppl:win should not come at the expense of others right (ex: leave money for next guy; no need to negotiate so hard)–organizations should compete fairly, seek industry/obey law, use info to inform rather than mislead 5.Strive for sustainability(social,econ performance,environment)— aim for continuous improvement in environment&economic performance throughout entire value chain. (ex: buy indigenous ppl product) Balance costs and benefits, design sustainable products, minimize waste, reduce consumption, factor in environmental/social costs in pricing, choose responsible distribution, incentive customer sustainability (e.g., recycling, sharing).