Chapter 13 Dimensions of Marketing Strategy: Objectives

Chapter 13 Dimensions of Marketing Strategy
OBJECTIVES
1. Describe the role of product in the marketing mix, including how products are developed, classified, and identified. 2. Define price and discuss its importance in the marketing mix, including various pricing strategies a firm might employ. 3. Identify factors affecting distribution decisions, such as marketing channels and intensity of market coverage. . !pecify the activities involved in promotion, as well as promotional strategies and promotional positioning. ". #valuate an organi$ation%s marketing strategy plans.
KEY TERMS AND DEFINITIONS

advertising advertising campaign branding business products commercialization consumer products discounts exclusive distribution generic products integrated marketing communications intensive distribution labeling & paid form of nonpersonal communication transmitted through a mass medium, such as television commercials or maga$ine advertisements. Designing a series of advertisements and placing them in various media to reach a particular target audience. 'he process of naming and identifying products. (roducts that are used directly or indirectly in the operation or manufacturing processes of businesses. 'he full introduction of a complete marketing strategy and the launch of a product for commercial success. (roducts intended for household or family use. 'emporary price reductions often employed to boost sales. 'he awarding by a manufacturer to an intermediary of the sole right to sell a product in a defined geographic territory. (roducts with no brand name that often come in plain, simple packages and carry only their generic name. 'he process of coordinating the promotion mix elements and synchroni$ing promotion as a unified effort. & form of market coverage whereby a product is made available in as many outlets as possible. 'he presentation of important information on the package.
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manufacturer brands marketing channel materials handling packaging penetration pricing personal selling physical distribution price skimming private distributor brands product line product mix promotional positioning psychological pricing publicity pull strategy )rands initiated and owned by the manufacturer to identify products from the point of production to the point of purchase. & group of organi$ations that moves products from their producer to customers* also called a channel of distribution. 'he physical handling and movement of products in warehousing and transportation. 'he external container that holds and describes the product. & low price designed to help a product enter the market and gain market share rapidly. Direct, two+way communication with buyers and potential buyers. &ll the activities necessary to move products from producers to customers, inventory control, transportation, warehousing, and materials handling. -harging the highest possible price that buyers who want the product will pay. )rands, which may cost less than manufactured brands, which are owned and controlled by a wholesaler or retailer. & group of closely related products that are treated as a unit because of similar marketing strategy, production, or end+use considerations. &ll the products offered by an organi$ation. 'he use of promotion to create and maintain an image of a product in buyers% minds. & pricing strategy that encourages purchases based on emotional rather than rational responses to the price. .onpersonal communication transmitted through the mass media but not paid for directly by the firm. 'he use of promotion to create consumer demand for a product so that consumers exert pressure on marketing channel members to make it available. &n attempt to motivate intermediaries to push a product down to their customers. 'he degree to which a good, service, or idea meets the demands and re/uirements of customers.
push strategy quality
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retailers Intermediaries that buy products from manufacturers 0or other intermediaries1 and sell them to consumers for home and household use rather than for resale or for use in producing other products. Direct inducements offering added value or some other incentive for buyers to enter into an exchange. & form of market coverage whereby only a small number of all available outlets are used to expose products. & trial minilaunch of a product in limited areas that represent the potential market. & brand that is registered with the 2.!. (atent and 'rademark 3ffice and is thus legally protected from use by any other firm. 'he shipment of products to buyers. 'he design and operation of facilities to receive, store, and ship products. Intermediaries that buy from producers or from other wholesalers and sell to retailers.
sales promotion selective distribution test marketing trademark transportation arehousing holesalers
LECTURE OUTLINE AND NOTES

(PP notations !elo" re#er to the Pre$iu$ Content slides%& I. (('13.5" &. 'he key to developing a marketing strategy is maintaining the right marketing mix that satisfies the target market and creates long+term relationships with customers. ((' 3.56 ). !uccessful companies offer at least one dimension of value that surpasses all competitors in the marketplace in meeting customer expectations, aka Competitive !dvantage. -. !uccessful companies must also maintain acceptable, and if possible, distinguishable differences in the other dimensions as well. II. (roduct !trategy (('13.57 &. & product is a good, service, or idea containing tangible and intangible attributes that provide satisfaction and benefits. 'he 4arketing 4ix
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). Developing .ew (roducts,is a multi+step process (('13.58 1. Idea Development a. .ew ideas can come from marketing research, engineers, and outside sources. b. .ew ideas can also come from customers, brainstorming, and intracompany incentives. 2. .ew Idea !creening a. In this phase, a marketing manager should look at the organi$ation%s resources and ob9ectives and assess the firm%s ability to produce and market the product. b. Important considerations are consumer desires, the competition, technological changes, social trends, and political, economic and environmental considerations. 3. )usiness &nalysis a. )usiness analysis is a basic assessment of a product%s compatibility in the marketplace and its potential profitability. b. 'he most important /uestion relates to market demand,how the product will affect the firm%s sales, costs, and profits. . (roduct Development a. In the product development stage, the firm develops a prototype that should reveal the intangible attributes as perceived by the consumer. b. (roduct development is often expensive, and few product ideas make it to this stage. ((' 13.5: ". 'est 4arketing a. "est marketing is a trial minilaunch of a product in limited areas that represent the potential market. b. It allows a complete test of the marketing strategy in a natural environment. ((' 13.15 6. -ommerciali$ation a. Commercialization is the full introduction of a complete marketing strategy and the launch of a product for commercial success. b. During this stage, the firm gears up for full+scale production, distribution, and promotion. -. -lassifying (roducts 1. ;ow a product is used and why it is purchased determines how a product is classified. ((' 13.12 2. Consumer products are purchased for household or family use* they are not intended for any purpose other than daily living. a. -onvenience products are bought fre/uently, without a lengthy search, and often for immediate consumption. -onsumers spend little time in planning where to buy the product and usually take any available brand. b. !hopping products are purchased after the consumer has compared competitive products. (rice, features, /uality, style, service, and image all influence buyers% decisions.
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c. !pecialty products are products that the consumer makes a special effort to obtain. 'hey are purchased less often, have a lower turnover, and consumers are unwilling to accept a substitute. ((' 13.13 3. #usiness products are used directly or indirectly in the operation or manufacturing processes of businesses. a. <aw materials are natural products that usually re/uire additional processing for use in production. b. 4a9or e/uipment covers large, expensive items used for production purposes. c. &ccessory e/uipment is used for production, office, or management purposes and does not become part of the final product. d. -omponent parts are finished items, ready to be assembled into the final product. e. (rocessed materials are things that are used directly in production or management operations but are not readily identifiable as component parts. f. !upplies are materials that make production, management, and other operations possible. g. Industrial services include financial, legal, marketing research, 9anitorial, and exterminating services. D. (roduct =ine and (roduct 4ix (('13.1 1. & product line is a group of closely related products that are treated as a unit because of similar marketing strategies and production or end+use considerations. 2. & product mix is all the products offered by the organi$ation. #. (roduct =ife -ycle (('13.1" 1. !ome products have very long lives, and others are comparatively short lived. 2. In the introductory stage, consumer awareness and acceptance are limited* sales start at $ero, and profits are negative. 3. During the growth stage, sales increase at a rapid rate, and profits peak and start to decline. a. -ompeting firms become aware that the product has achieved some success, which may result in their entry into the market. b. 'he firm tries to strengthen its position in the market. . In the maturity stage, industry sales continue to increase, peak, and then decline. !evere competition and heavy marketing expenses characteri$e this stage. ". During the decline state, sales and profits decline. a. -ertain models may be eliminated, and marketing expenditures may be cut. b. (lans must be made to phase out the declining product and introduce new ones to take its place. >. Identifying (roducts
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1. )randing, packaging, and labeling can be used to identify or distinguish one product from other products. 2. )randing ((' 13.18 a. #randing is the process of naming and identifying products. 11 & brand is a name, term, symbol, design, or combination that identifies and distinguishes a product. 21 'he brand name is the part of the brand that can be spoken and consists of letters, words, or numbers. 31 & brand mark is the part of the brand that is a distinctive design. 1 & trademark is a brand that is registered with the 2.!. (atent and 'rademark 3ffice and is legally protected from use by any other firm. b. 'here are two main categories of brands. (('13.25 11 Manufacturer brands are brands initiated and owned by the manufacturer to identify products from the point of production to the point of purchase. 21 $rivate distributor brands are middleman or store brands owned and controlled by a wholesaler or retailer. 31 In addition, there are generic products% which have no brand name at all. c. -ompanies use two basic approaches to branding multiple products. 11 #ach product within a company%s product mix is given its own brand name. 21 In family branding, each of a firm%s products is branded with the same name or at least part of the name. ((' 13.21 3. (ackaging a. $ackaging is the external container that holds and describes the product. b. 'he packaging influences consumers% attitudes and their buying decisions. c. & package can perform several functions including protection, economy, convenience, and promotion. ((' 13.22+13.13+23 . )randing a. =abeling b. &abeling is the presentation of important information on the package. c. ?arranties, contents, nutritional information, safety precautions, and instructions are the kinds of information contained on labels.
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". (roduct @uality (('13.2 a. 'uality reflects the degree to which a good, service, or idea meets the demands and re/uirements of customers. b. @uality of service is difficult to gauge because it depends on customers% perceptions of how well the service meets or exceeds their expectations. @uality is 9udged by customers, not service providers. III. (ricing !trategy &. (rice is the value placed on the ob9ect involved in an exchange between a buyer and seller. 1. )uyers% interest in price stems from their expectations about the usefulness of a product or the satisfaction they may derive from it. 2. (rice is a key element in the marketing mix because it relates directly to the generation of revenue and profits. 3. >or most products, the /uantity demanded goes up as the price goes down, and vice versa. . (rice is probably the most flexible variable in the marketing mix. ((' 13.26 ). (ricing 3b9ectives. >our common pricing ob9ectives are maximi$ation of profits and sales, boosting market share, maintaining the status /uo, and survival. -. !pecific (ricing !trategies (('13.27 1. (ricing strategies provide guidelines for achieving the company%s pricing ob9ectives and overall marketing strategy. 2. (ricing .ew (roducts. a. !etting the correct price is criticalA the right price leads to profitability, but the wrong price may kill the product. b. 'here are two basic approaches to setting the base price for a new product. 11 $rice skimming is charging the highest possible price that buyers who want the product will pay. 21 $enetration pricing is a low price designed to let a product enter the market and gain market share rapidly. 31 (enetration pricing is less flexible* it is more difficult to raise a penetration price than to lower a skimming price. 3. (sychological (ricing a. $sychological pricing is a policy designed to encourage purchases based on emotional rather than rational responses to the price. b. #venBodd pricing 0C:.:: rather than C151 is an example of psychological pricing. c. !ymbolicBprestige pricing creates an image of high /uality to buyers.
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. (rice Discounting. a. 'emporary price reductions, or discounts% are often employed to boost sales. b. @uantity discounts reflect the economies of purchasing in large volumes. c. !easonal discounts are used to stimulate purchases of products out of season. d. (romotional discounts attempt to improve sales by advertising price reductions on selected products to increase customer interest. e. !ome organi$ations shun price discounting and focus more on building relationships with customers andBor providing Deveryday low prices.E D. & Freen 4arketing !trategy ((' 13.28 a. b. c. d. e. (('13.2: &. 4arketing -hannels 1. & marketing channel, or channel of distribution, is a group of marketing organi$ations that directs the flow of products from producers to consumers. 2. 4iddlemen, or intermediaries, are organi$ations that bridge the gap between the producer of the product and the ultimate user of the product. a. (etailers buy products to sell to consumers rather than for resale or use in producing other products. 11 <etailing usually occurs in a store, but it can also occur through the Internet, vending machines, mail+order catalogs, and entertainment. 21 )y bringing together an assortment of products from competing producers, retailers create place utility 0a convenient shopping location1, time utility 0convenient hours of operation1, and ownership utility 0the risk of ownership1. 31 -ompetition between similar retailers has become very intense. b. )holesalers generally buy from producers or other wholesalers and sell to retailers. 11 ?holesalers are extremely important because of the marketing activities they perform. 21 &lthough it is true that wholesalers can be eliminated, their functions must be passed on to some other intermediary or even the consumer. ). Intensity of 4arket -overage (('13.31 1. Intensity of market coverage relates to the number and variety of product outlets* it depends on the behavior of customers and the nature of the target 'arget consumers who want to make eco+friendly decisions Design products to reduce environmental impact Include added costs in price (romote via electronic mail to reduce use of paper Distribute through efficient transport and supply chain management
IG. Distribution !trategy
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market and competition. 2. *ntensive distribution makes a product available in as many outlets as possible. 'his type of distribution is usually used for convenience goods. 3. Selective distribution uses only a small portion of all available outlets. It is used most often for products for which consumers compare price, /uality, and style. . +xclusive distribution exists when a manufacturer gives a middleman the sole right to sell a product in a defined geographic territory. 'his method is used when products are purchased and consumed over a long period of time and re/uires service or information to develop a satisfactory sales relationship. -. (hysical Distribution (('13.32 1. $hysical distribution is all the activities needed to move products from producer to consumer. 2. 'ransportation a. "ransportation, the shipment of products to buyers, is an essential part of distribution. b. >ive ma9or modes of transportation are used to move products. 11 <ailroads offer the least expensive transportation for many products. 21 'rucks have greater flexibility than railroads, can handle freight /uickly and economically, can deliver door+to+door, and have more flexible packaging re/uirements than ships or airplanes. 31 &ir transport is expensive, but it offers a high degree of dependability and speed. 1 !hipping by waterways is the least expensive and slowest form of transportation. "1 (ipelines are important for moving heavy, bulky li/uids such as petroleum products, natural gas, semi+li/uid coal, and certain chemicals. c. >actors affecting the selection of a mode of transportation include cost, capability, reliability, and availability. 3. ?arehousing a. )arehousing involves designing and operating facilities to receive, store, and ship products. b. -ompanies can use their own private warehouses or lease space in public warehouses. c. ?arehousing is important because it makes products available for shipment to match demand at different geographic locations. . 4aterials ;andling. Materials handling is the physical handling and movement of products in warehouse operations and transportation. G. (romotion !trategy ((' 13.33 &. 'he role of promotion is to communicate with individuals, groups, and organi$ations to facilitate an exchange directly or indirectly. 1. It encourages marketing exchanges by attempting to persuade individuals, groups, and organi$ations to accept goods, services, and ideas.
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2. It is used not only to sell products but also to influence opinions and attitudes toward an organi$ation, person, or cause. ). 'he (romotion 4ix 1. &dvertising, personal selling, publicity, and sales promotion are called the promotion mix because a good promotion program results from carefully selecting and blending these elements. 2. 'he process of coordinating the promotion mix elements and synchroni$ing promotion as a unified effort is called integrated marketing communications. 3. &dvertising a. !dvertising is a paid form of nonpersonal communication transmitted through a mass medium. b. &n advertising campaign involves designing a series of advertisements and placing them in various media to reach a particular target audience. 11 & product%s features, uses, and benefits affect the content of the campaign message and individual ads. 21 -haracteristics of the people in the target audience also influence both content and form, as do an advertising campaign%s ob9ectives and platform. c. &dvertising media, both print and electronic, are the vehicles or forms of communication used to reach a desired audience. d. 'he use of online advertising is increasing. e. Infomercials,large blocks of radio or television air time featuring a celebrity or upbeat host talking about and demonstrating a product, have evolved as an advertising method. . (ersonal !elling a. $ersonal selling is direct, two+way communication with buyers and potential buyers. b. (ersonal selling is the most flexible of the promotional methods. c. 'here are three distinct categories of salespersonsA order takers, creative salespersons, and support salespersons. d. In general, personal selling is a six+step processA 11 (rospecting,identifying potential buyers. 21 &pproaching,using a referral or calling on a customer without prior notice to determine interest in a product. 31 (resenting,getting the prospect%s attention with a demonstration. 1 ;andling ob9ections. "1 -losing,asking the prospect to buy the product. 61 >ollow+up,checking customer satisfaction with the purchased product. ". (ublicity a. $ublicity is nonpersonal communication transmitted through the mass media, but the firm does not directly pay for this communication. b. (ublicity is mainly informative 0which differs from advertising, which is informative, persuasive, or both1. c. (ublicity describes what a firm is doing, what products it is launching, or other newsworthy information, but seldom calls for action.
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d. (ublicity is extremely important when communication focuses on a company%s activities and products and is directed at interest groups, current and potential investors, regulatory agencies, and society in general. e. & variation of traditional advertising is bu$$ marketing, in which marketers attempt to create a trend or acceptance of a product through publicity. 6. !ales (romotion a. Sales promotion uses such items as coupons, contests, and free samples to persuade buyers to purchase products. b. 'he ma9or tools of sales promotion are store displays, premiums, trading stamps, samples and demonstrations, coupons, contests and sweepstakes, refunds, and trade shows. c. !ales promotion stimulates customer purchasing and increases dealer effectiveness in selling products. d. It is used to enhance and supplement other forms of promotion. e. !ales promotions are generally easier to measure and less expensive than advertising. -. (romotion !trategiesA 'o (ush or (ull (('13.3" 1. In developing a promotion mix, marketers must decide whether to fashion a mix that pushes or pulls the product. 2. & push strategy is used to motivate middlemen to push the product down to their customers. 3. ?ith a pull strategy, promotion creates consumer demand for the product so that consumers will exert pressure on marketing channel members to make the product available. . #xclusive use of advertising denotes a pull strategy, while personal selling to marketing channel members indicates a push strategy.
BOXED TEXT DISCUSSION QUESTIONS

Going Green: Levi ! B"#e Je$n! Go Green 1, )hy can companies charge a premium price for green products&bout 3" million people in the 2! regularly purchase DgreenE products. -onsumers are increasingly willing to pay more for earth+friendly products and services. 4any people are willing to pay more to support farmers committed to harvesting through organic methods. -onsumers are excited about green products and services and companies are spending big bucks to promote their stances on going green. ., )hat else might &evi/s do to increase its offering of moderately0priced green products=evi%s can increase production of partially green products, with some organic or recycled material combined with conventional materials. &s popularity of such gods grows, the company can be finding additional sources for organic and recycled materials to lower their costs and increase the content of these materials in moderately+priced products and to lower the prices on completely green
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products. 3, 1o much more ould you be illing to pay for environmentally0friendly clothing such as &evi/s ne green 2eans!tudent responses will vary. So"ve %&e Di"e''$ 1, Design a marketing strategy for the ne product line, !tudents% answers will vary but should reflect understanding of the chapter material. !pecifically, look for inclusion and correct use of key terms such as test marketing, product line, branding, packaging, labeling, marketing channels, retailing, advertising, sales promotion, push strategy, pull strategy, and so forth. 'he flow of the strategy should move from development of the new product line to full+scale introduction. ., Critique your marketing strategy in terms of its strengths and eaknesses, !tudents% answers will vary but should reflect thoughtful evaluation of their marketing strategies. 3, )hat are your suggestions for implementation of the marketing strategy&gain, students% answers will vary but should reflect comprehension of the relevant chapter material.
SU((LEMENTAL LECTURE
$rolonging the &ife Cycle of a $roduct 'his is the story of a comedian and some of the techni/ues he used to survive many years in show business. &t the end of the tale, identify what there is in his life story that illustrates a point from this chapter in your textbook. In the early years of the 25 th century, .athan )irnbaum decided that he wanted to spend the rest of his life in show business. 'he nation, in those days, did not have radio, television, or talking movies, and one of the premier forms of diversion for the overworked &merican public was vaudeville. !everal times a day in theaters of ma9or cities across the nation, vaudeville performers would come on+stage and pursue their craft in front of generally appreciative audiences. !ometimes the vaudeville acts would share time with a silent movie or two* that gave the performers a break. 'he performers included singers, dancers, stand+up comedians, 9ugglers, acrobats, magicians, animal trainers, trape$e artists, and musicians. .athan )irnbaum fancied himself a stand+up comedian, and he was able to get bookings in theaters in smaller cities like &lbany, &kron, (eoria, and ?ilkes+)arre. It wasn%t like playing the (alace 'heater in .ew Hork, but he made a living. =ooking back on those days, .athan admits that he probably was not the greatest comedian on the
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vaudeville circuit, and there were managers who would agree with that assessment. &s a conse/uence, once .athan had played a theater, the manager was often less than enthusiastic about bringing .athan back a second time. Despite this managerial reluctance, .athan had two things working in his favor. >irst, .athan would tour the nation over a period as long as two years before having to go back to a manager and ask for a spot as a comedian. 4aybe the manager would forget how bad .athan was. !econd, because most of the bookings were handled by mail 0rather than a personal audition1, .athan could use a different name when negotiating a new contract for a two+week appearance in 3shkosh, for example. 'rue, when .athan arrived in person, the manager might discover the ruse, but a contract was a contract, and .athan would have his two weeks% employment. !witching names would work for only so long, so .athan added a partner. ;e lined up an attractive young lady to feed him straight lines. 'he audience liked her straight lines so much 0and did not laugh at .athan%s 9okes1 that .athan changed the act,giving the humor to his partner and becoming the straight man himself. 'he act was off and running. 'he couple moved from vaudeville to a long career in radio. <adio was the king of entertainment for many years, but it too faded, and people stopped tuning in to radio networks to hear comedians. &t about this point, .athan and his partner, who was now his wife, performed in a situation comedy for the newest medium,television. )y the time 'G came along, .athan and his wife had a grown son who was worked into the comedy series, and it was very popular for /uite a few years. 'hen tragedy struck. .athan%s partner of so many years died. .ot only was .athan now a widower, but he was again alone as a performer. #ntertainment did not forget .athan, however. ;e did some stand+up comedy routines here and there and appeared on his share of talk shows, keeping his face in front of the news cameras. 'hen he began making movies. )y now, he was able to play 9ust what he was,an old man. 'his exposure in suitable screen vehicles led to all sorts of other bookings, as many as .athan wanted. It should come as no surprise to your class to reveal that back in the old vaudeville days when .athan used all those fake names, one of the names was DFeorge )urns.E .ow, the /uestion isA ?hat does this story have to do with -hapter 13 on the marketing mixI ?hat Feorge )urns was trying to do through all those years was prolong the life cycle of a product known as Feorge )urns, comedian. =arge firms may accomplish the same thing by declaring a product as Dnew and improved,E or make the product in D7 new and exciting exotic flavors.E Feorge )urns extended the product life cycle but altered the product as it went along. &mong his devices were 1. .ew names. 2. .ew partner. 3. !witch to radio. . !witch to television. ". !witch to movies. 6. !witch to talk shows and DageE material. =et%s use Feorge for one more illustration. &t the end of the decline stage, the company takes its product off the market. 'here were thousands of people in vaudeville who did not survive in entertainment. >inding no work in the entertainment industry, these people virtually took themselves off the market in entertainment and entered other fields. 'he same fate would have faced .athan if he had not found Fracie &llen, his partner and wife. 4ore than any other factor, Fracie &llen prevented Feorge )urns from taking his uni/ue product off the market. ?hat a lucky break for us allJ
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'uestions 1. ?as Feorge 0.athan )irnbaum1 )urns successful in stretching the product life cycleI 2. ?hat stage of the product life cycle would you say Feorge )urns is in nowI 3. If a firm is to prolong the life cycle of a product, what steps must be takenI
CONTROVERSIAL ISSUE
1o Dare "hey Stop 3ur #all 4ameIt has been done in the past, and chances are good that it is still being done,stopping professional football games for the insertion of a commercial. 2pon learning of this, people have one of at least two possible reactions,one favoring the practice and one condemning it. & first reaction might well be that no advertiser has the right to stop a sports event. 'he networks that broadcast these games are to remain uninvolved observers and must not interfere with the progress of the sporting event in any way. & time+out may be called by only three parties,each of the two teams participating in the game and the officials. 'he idea that a 'G director has the right to relay signals to the playing surface as a way to insert a commercial is a corruption of a great national pastime, professional football. 'he /uestion arises of whether, at some future time, a director could say that the game is too uneven and, as a way to increase viewer interest, the officials should tell one team to let the other score. 3r whether, if the Kansas -ity -hiefs should pass more often, a director could relay instructions to that effect to their coach. 3n the other hand, one needs to keep in mind that the television networks have paid millions of dollars for the rights to broadcast football games. 'he networks knew they could afford to pay for the rights as long as they could sell advertising time to large national sponsors, and to sell time to such sponsors re/uires plenty of slots for commercials. & part of the agreement between the .ational >ootball =eague and the networks is that there will be sufficient moments in each game for commercials. If the regular flow of the game does not provide enough such moments, then the .ational >ootball =eague has agreed that the networks may stop action. & further defense of the networks% action might well be the fact that a successful .ational >ootball =eague is considered by some to be a product of television. &sk older people how much people outside .>= cities knew of professional football before the advent of television. 'he marriage of 'G and professional football has been good for both parties. 'uestions 1. !hould the networks be able to interrupt professional football gamesI 2. ?hat are the benefits of advertising for the television viewersI >or the .ational >ootball =eagueI 3. If advertising was not permitted, what would be the alternative for football fans across the nationI
REVISIT T)E *ORLD OF BUSINESS

1, 1o has Concord used marketing to achieve success-oncord 4usic Froup uses innovative marketing plans to achieve its goals. 'he company supported a ()! documentary featuring its !tax record label known for showcasing 3tis <edding, Isaac ;ayes and other soul music greats. 'he popular documentary increased -oncord%s sales.
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-oncord became part of a 9oint venture with !tarbucks, the ;ear 4usic label partnership. 'his partnership offers the benefits of shared risk and low+cost marketing. 'he company also benefits by finding niche markets for most of its products. ., )hy do you think $aul McCartney released his album through Concord/s 2oint venture label 1ear Music at Starbucks'hrough -oncord, 4c-artney sold 7" percent more copies in the first week than his previous release for a ma9or record label. " percent of 4c-artney%s album sales occurred inside !tarbucks locations, reaching a wide audience. 'he rest were marketed and promoted by -oncord at various locations outside the coffee chain. 'his allowed 4c-artney greater promotion opportunities concentrated to his target markets. 3, )hy ould Concord permit free do nloads of songs-oncord allows free downloads of songs hoping to entice downloaders into purchasing the entire album. &llowing customers a free sample of music from a new artist, in particular, gives more exposure to that artist%s music and encourages people to purchase music they like that they may otherwise have ignored.
C)ECK YOUR (ROGRESS

1, )hat steps do companies generally take to develop and introduce a ne productIntroducing a new product involves a six+step processA 011 idea development, 021 screening new ideas, 031 business analysis, 0 1 product development, 0"1 test marketing, and 061 commerciali$ation. ., )hat is the product life cycle- 1o strategydoes a product/s life cycle stage affect its marketing
(roduct life cycle refers to the life of a product in the marketplace. =ike people, products are born and they grow, mature, and eventually die,that is, they are pulled from the market. 'he four stages of the product life cycle are introduction, growth, maturity, and decline. & marketer must perform different tasks for each life cycle stage of a product. In the introductory stage, consumer awareness and acceptance are limited. 'hus, buyers must be made aware of the fact that the product exists and offers benefits. In the growth stage, competing firms become aware that the product has achieved some success and may make decisions to enter the market. During the growth stage, the firm tries to strengthen its position in the market by emphasi$ing benefits in identifying market segments that want these benefits. 'he maturity stage is characteri$ed by severe competition and heavy expenditures for marketing expenses. .ew competitors emphasi$e improvements and differentiation of the product. & company may have to introduce new brand extensions. 'his is done to maintain a large market share. During the decline stage, sales continue to fall rapidly. &s profits drop, firms may eliminate certain models or items. (lans must be made for phasing out the product and introducing new products to take its place. 3, )hich marketing mix variable is the most flexible- )hy(rice is the most flexible variable in the marketing mix. &lthough it may take years to develop a
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product, establish channels of distribution, and design and implement promotion, a product%s price may be set and changed in a few minutes. 5, Distinguish bet een the t o ays to set the base price for a ne product, (rice skimming is setting the highest possible price that buyers will pay. 'his method allows a company to generate revenue to offset research and development costs and guards against setting a price that does not cover expenses. It is easier to lower prices on a successful product than it is to raise them. ;owever, the high price and /uick profits may attract competitors into the market, lowering profits. )y contrast, a penetration price is a low price designed to let a product enter the market and gain market share rapidly. 'his policy is less flexible than price skimming because it is more difficult to raise a penetration price than it is to lower a skimming price. (enetration pricing is used most often when it is suspected that competitors will enter a market soon after a product has been introduced. (enetration pricing allows the marketer to gain a large market share and discourage competitors from entering the market. It is most appropriate when demand is highly elastic. 6, )hat is probably the least flexible marketing mix variable- )hyDistribution is probably the least flexible marketing mix variable. Distribution decisions are among the least flexible marketing mix decisions because they involve committing resources and establishing contractual relationships. 'hey are difficult or impossible to change. 7, Describe the typical marketing channels for consumer products, 'here are four basic marketing channels for consumer productsA a. -hannel & moves the product from the producer directly to the consumer. b. In -hannel ), the product moves from the producer, to a retailer, to the consumer. c. In -hannel -, the product goes from the producer, to a wholesaler, to a retailer, to the consumer. d. -hannel D moves the product from the producer to an agent, to a wholesaler, to a retailer, to the consumer. 8, )hat activities are involved in physical distribution- )hat functions does a performarehouse
(hysical distribution includes all the activities necessary to move products from producers to customers,inventory control, transportation, warehousing, and materials handling. ?arehousing involves the design and operation of facilities to receive, store, and ship goods. ?arehousing makes products available for shipment to match demand at different geographic locations. 9, 1o do publicity and advertising differ- 1o are they related&dvertising is paid for by an identified sponsor and is usually directed to a mass market. 'he seller has complete control over this form of promotion. (ublicity is often viewed as being part of a public relations program, a broad set of communication activities designed to maintain favorable relations between an organi$ation and the public. &dvertising messages tend to be informative, persuasive, or
5+

both* publicity is mainly informative. &dvertising is often designed to have an immediate impact or to give specific information to persuade a person to act. (ublicity usually describes what a firm is doing and the type of products that are being launched, or it offers others newsworthy information that is not a call for action. ?hen using advertising, the organi$ation must pay for media time. & company may spend money to release information to the press or to call a news conference, but this is not paying for media time. 'herefore, people outside the organi$ation shape the message,either positively or negatively. &dvertising can be directed and repeated a number of times* most publicity appears in the mass media once and is not repeated. :, )hat does the personal selling process involve- #riefly discuss the process, (ersonal selling is a process of informing potential buyers and persuading them to purchase a product. >or most salespeople, personal selling is a six+step processA prospecting, approaching, presenting, answering ob9ections, closing, and following up. 'he following is a brief description of each step in personal selling process. 1. (rospecting is identifying potential buyers. 2. &pproaching involves referrals or cold canvassing to call on potential customers. 3. (resenting is making a presentation to get the prospect%s attention and to persuade the prospect to buy. . ;andling ob9ections, or reasons for not buying the product, may be done before or as soon as problems arise. ". -losing is asking the prospect to buy the product. 6. & good salesperson will follow up on a successful sale to make sure the customer is satisfied with the product. 1;, &ist the circumstances in hich the push and pull promotional strategies are used, In developing a promotion mix, marketers must decide whether to fashion a mix that pushes or pulls the product. ?hen using the push strategy, the marketer attempts to motivate these middlemen to push the product down to their customers. In contrast, a pull strategy uses promotion to create consumer demand for a product so that the consumers exert pressure on marketing channel members to make the product available. -onsumers create a pull for the product by re/uesting it from their retail outlet. & company can use either strategy, or it can use a variation or combination of the two. 'he allocation of promotional resources to various marketing mix elements probably determines which strategy will be used.
GET INVOLVED
1. (ick three products you use every day 0either in school, at work, or for pleasure,perhaps one of each1. Determine what phase of the product life cycle each is in. #valuate the marketerLs strategy 0product, price, promotion, and distribution1 for the product and whether it is appropriate for the life cycle stage. 2. Design a distribution channel for a manufacturer of stuffed toys. 3. (ick a nearby store and briefly describe the kinds of sales promotion used and their effectiveness.
5,

BUILD YOUR SKILLS
!ns er <ey 1. b. 0pleasure travelers on a budget* business travelers looking to get the most for their dollar1 2. ;ere are some possible answersA Marketing Mix =ariable a. (roduct Current Strategy -lean, comfortable rooms. 60>ear Strategy In appealing to business travelers, 4otel 6 should provide rooms that keep pace with the increased dependence of business travelers on communication technology. 'his strategy should continue to work well for them for the next five years. It makes sense to continue constructing new sites at placed where people need overnight lodging. 4otel 6 should look for opportunities to provide low+cost lodging in high+traffic recreational and entertainment areas 0theme parks, casinos, ski resorts, etc.1 where lodging might normally be higher. #xplore other avenues for advertising,the Internet and other forms of electronic communication.
b.
(rice
'he lowest price of any national motel chain. 4otel 6 location sites are selected based on whether they provide convenient access to the highway system and whether they are close to areas such as shopping centers, tourist attractions, or business districts.
c.
Distribution
d.
(romotion
'he company%s national spokesperson, 'om )odett, is featured in radio and television commercials that use humorous stories to show why it makes sense to stay at 4otel 6 rather than a pricey hotel.
SO YOU *ANT TO BE A MARKETING MANAGER

)hat factors have made the 2ob of marketing manager more challenging in recent years?hile a career in marketing can be very rewarding, marketers today agree that the 9ob is getting tougher. 4any advertising and marketing executives say the 9ob has gotten much more demanding in the past 15 years, viewing their number one challenge as balancing work and personal obligations. 3ther challenges include staying current on industry trends or technologies, keeping motivatedBinspired on the 9ob, and measuring success.
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BUILD YOUR BUSINESS (LAN
#ncourage students to consider developing a short survey instrument to ascertain demand for their business, especially if the business will primarily serve the needs of college students. 'he /uestionnaire could help them determine how much college students are willing to spend on a particular product category and how far they are willing to travel to obtain or experience the productBservice. &s far as setting the final price, have students identify a local business they perceive is too high priced. ?hat you want to do is uncover the real reason students have this perception. 'his will help the students reali$e how important perception and the image of the establishment is to the customer. 2sing the example suggested in the Instructor%s manual for -hapter 12, have the students suggest ideas for special opening events for your new 'hai <estaurant that will not drain them financially. ;ow will they spread the Dword of mouthE for this new establishmentI
SEE FOR YOURSELF VIDEOCASE: *$"+M$r% Revi!e! i%! M$r,e%ing S%r$%egCase 3vervie &fter years of stellar growth, ?al+4art finally began to falter in 2556. 'arget proved to be its closest competitor, which had been able to nearly close the price gap through restructuring. 'arget has especially become known for its cheap chic,low+priced and fashionable clothes for middle+income consumers. ?al+4art tried to compete with 'arget by offering its own high+fashion, low+price clothing line,but neglected to acknowledge that its average female consumer wears a si$e fourteen. 'his is not exactly the demographic that buys skinny 9eans and other trendy items. &dvisors have suggested that ?al+4art should slow its rate of growth and focus on improving existing stores, but so far the company has not heeded this advice. ?al+4art has not identified a reason for its declining performance. 3ne thing is clear, however, ?al+4art must remain focused on its target demographic, which is not the same as 'arget%s. )ecause it caters to lower income consumers, ?al+4art has benefited from the recent economic downturn. 'uestions for Discussion 1, )hat role does marketing play in )al0Mart/s decisions to try to lure "arget/s middle0 income customers'hrough marketing research, ?al+4art discovered that its primary source of competition seemed to be 'arget, who figured out how to draw middle+income consumers in droves by creating a flourishing fashionable reputation. & BusinessWee. price comparison between ?al+4art and 'arget concluded that over all differences in price came down to mere pennies. ?al+4art%s marketing team was now forced to compete against stores with better aesthetics and savvier marketing favored by affluent and middle+income consumers while, at the same time, retaining its loyal, low price dedicated customers. ., 1o could better marketing have prevented such snafus as )al0Mart selling skinny 2eans and consistently running out of popular sizes of its ne clothing line?al+4art underestimated demand for its new line of clothing. )etter marketing would have been able to more closely predict the popularity of the new line. )etter marketing would also keep a better handle on
Ferrell/Hirt/Ferrell, Business: A Changing World, Seventh Edition 53

the demographics and habits of ?al+4art customers to avoid ordering things like skinny 9eans. 3, )hy is it said that )al0Mart and "arget have different target markets?al+4art and 'arget cater to different demographics. 'arget excels at household goods, fashionable clothing, and electronics, while ?al+4art excels at low+cost groceries, pharmacy, and entertainment. Frocery items make up 5 percent of ?al+4art%s business, an area in which most 'arget stores do not compete.
TERM (A(ER OR (ROJECT TO(ICS

1. 2. 3. . 'he Importance of Feneric (roducts in the 4arketplace 'he !uccess or >ailure of .ew (roducts & -omparison of <esearch and Development for Mapan and the 2nited !tates & -omparison of 4a9or 4odes of 'ransportation in your city or geographical area.
GUEST S(EAKER SUGGESTIONS

1. & representative from a local firm to speak on any of the following topicsA a. <esearch and Development b. (roduct =ine and (roduct 4ix c. )randing, (ackaging, and =abeling d. 'est 4arketing 2. & representative of a distribution center to speak about the distribution process. 3. & representative of a wholesaler or other marketing intermediary to talk about the way his or her organi$ation performs marketing functions.
TEAC)ING SUGGESTIONS
1. -over the chapter content by using D=ecture 3utline and .otesE and slides or transparency masters indicated in the left margins. 2. D-heck Hour (rogressE is especially helpful for understanding the concepts of this chapter. 'o save time, these /uestions could be assigned as an outside assignment in which students will write answers or be prepared to answer in class. D&dditional Discussion @uestions and #xercisesE are provided in this /nstru0tor1s 2anual% 3. &s time permits, use the discussion of boxed material. . -heck off each of the ob9ectives given at the beginning of the textbook. ". ;ave students view the video case.
DESTINATION CEO VIDEO NOTES

0'he Destination -#3 Gideos can be found on the 3=- at www.mhhe.comBferrell7e.1
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?ordstrom Summary@ >rom humble beginnings in the 1855%s, Mohn .ordstrom founded what is today the gold standard for legendary customer service. .ordstrom%s started modestly as a shoe store, but expanded rapidly to what is today, the well+known department store giant. >or generations, with one exception in the 1::5%s, the -#3%s office has been occupied by a member of the .ordstrom family. 'oday, )lake .ordstrom, the great grandson of the founder, leads the company as its -#3. )lake .ordstrom began his career with the company in the shoe department when his father was president and -#3 of the firm. .ordstrom%s has remained true to the founder%s values with the exception of a near disastrous change in strategy. 'he failed marketing approach was designed to appeal to a younger market segment but in the process, lost its way. 'he company apparently forgot about its core customer base. ?ith the replacement of the -#3, again with a family member, the company was able to get back on track. .ordstrom is well known for its corporate culture that is based on the philosophy of the inverted pyramid. 2nlike other traditional corporations, .ordstrom%s stands the traditional corporate pyramid on its head. -ustomers occupy the broadest and most important element in the pyramid followed by employees, and shareholders last. 'he philosophy suggests that if customers are satisfied and employees are empowered to do whatever it takes to delight customers, shareholders will benefit significantly. 'his approach has served .ordstrom%s well through several generations. 'oday, under the leadership of )lake, the company has regained its footing, has computeri$ed inventory control systems, and has the ability to track customer preferences, colors, si$es, and so on, so that customers are continuously satisfied. Instructors may want to emphasi$e the role of branding and personal selling which appear to be key competitive advantages for .ordstroms. Discussion 'uestions@ 1. ;ow does the failed .ordstrom marketing strategy in the 1::5%s demonstrate the importance of brandingI !ns er@ .ordstrom%s abandoned its core marketing strategy and values. 'he .ordstrom brand was, for all intent and purposes, abandoned in an attempt to attract a new, more youthful market segment. .ordstrom moved away from its core brand, and, as a result, alienated its core customer base.. 2. ;ow does technology help .ordstrom to achieve success in its distribution systemsI !ns er@ .ordstrom%s has introduced computer+based inventory control systems. 'his technology tracks sales, si$es, colors, and customer preferences. 'he inventory control system ensures that each .ordstrom store has an appropriate mix of si$es and colors that meets the needs of its customers. 3. ?hat differentiates .ordstrom%s from its competitorsI !ns er@ =egendary, world+class customer service. .ordstrom%s used the inverted pyramid for its organi$ational structure. -ustomers are at the top of the organi$ation followed by employees. #mployees are empowered to make decisions to satisfy customer needs. !hareholders are at the bottom of the pyramid, but their return on investment is DassuredE through putting customers first and providing employees with the appropriate tools to satisfy and delight customers. !dditional Discussion 'uestions@ 1, *n your opinion% ho does ?ordstrom/s use promotion effectively!ns er@ (romotion encourages sales. .ordstrom%s uses employees to establish strong relationships
55

with their customers on a personal basis. 'his is the strongest form of promotion in that it creates a bond between customers and the company, and its employees. ?hile the company certainly uses advertising, the personal selling aspect of promotion is clearly the most pervasive part of the company%s promotion strategy. 2. ?hat should have .ordstrom%s done differently in the 1::5%s if it desired to introduce a new product line and attract a new market segmentI !ns erA 'hey should have used a combination of market research and, perhaps most important, test marketing of its new approach. It appears that .ordstrom%s simply introduced the new line and approach without having test marketed the new concept. &s we now know, this approach proved nearly fatal for the company. Multiple Choice 'uestions for Students on the 3&C@ 1. ?hich of the following elements of the promotion mix is most important to .ordstrom%sI a. &dvertising b. &dvertising campaign c. (ersonal selling d. (ublicity e. !ales promotion &nswerA c. (ersonal selling 2. ?hich of the following would not be considered a function of marketingI a. !elling b. )uying c. 'ransporting d. >inancing e. #mployee 'raining and development &nswerA e. #mployee 'raining and development 3. ?hich of the following promotion strategies occurs when the company attempts to motivate wholesalers and retailers to make the product available to their customersI a. (ull strategy b. !ales promotion strategy c. (ush strategy d. (romotion mix strategy e. .one of the above &nswerA c. (ush strategy . .ordstrom, as a large retailer, is concerned about shoplifting. ?hich of the following is most accurate relating to shoplifting among retailers in the 2nited !tatesI a. 'here are "5 million shoplifters annually in the 2.!. b. <etailers lose approximately C7" million each year. c. <etailers lose more than C15 billion annually. d. 3nly 2"N of shoplifters are adults. e. :5N of shoplifters are under the age of 21. &nswerA c. <etailers lose more than C15 billion annually. ". 2nlike .ordstrom, !am%s -lub and -ostco would be considered as which of the following type of retailerI a. Department store b. !uperstore
56

c. ?arehouse club d. -atalog showroom e. ;ypermarket &nswerA c. ?arehouse club
5'

Chapter 13 Dimensions of Marketing Strategy: Objectives

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Ferrell/Hirt/Ferrell, Business: A Changing World, Seventh Edition