Marketing and Distribution Chapter 11

Development of Marketing All activities needed to generate consumer demand and to move goods and services from the producer to the consumer History of Marketing by what the focus has been on Production Sales Advertising Consumer Sovereignty Consumer making choices for market production Today – How will product add to UTILITY

4 Types of Utility Form Utility Conversion of raw materials into finished products Place Utility Having a good or service available where a consumer wants to buy it Time Utility Having a good or service available when a consumer wants to buy it Ownership Utility Satisfaction a person receives from simply owning the good or service

Market Research Process using research methods to find out what consumer WANTS Research used to determine how to promote product What is target Audience? What is most effective way to reach audience? When is Market Research done? Beginning of Product Development What do consumers want in a product After development Taste testing or product sampling Purpose Is there a market for the good or service Who is our intended audience? Do we need to change product before we offer for sale? Immediately After release Is advertising attracting intended buyers? Is product working for consumers as expected? What can we do to increase or maintain current sales?

Steps in Market Research Conduct a survey Who are users of product Age, gender, income, education, location (urban, rural, suburban) Questionnaire, Individual interviews, focus group discussions, online Step 2 Test Market the product Select small area to release the product Track sales at various prices If doing poorly Alter (very costly) or Abandon the product If doing well Offer nationally Very few make it to this level Why do producers continue to make new??? Opportunity of high profit product

“Four Ps” of Marketing Companies will develop a marketing strategy Details how to successfully sell product Includes 4 Ps of Marketing Product Price Place Promotion

Product Market research determines What to sell Marketing Department also determines Services to offer with product Warranties How to Package product Size, design, color, coupons (repeat buyers), rebate offers EX. New and Improved, Economy Size What identification to use Attract consumers to look at, buy, and remember a product Uses a logo, colors, a song, etc

Price Ultimately decided by Supply and Demand BUT, Producer must consider costs of Production Advertising Selling Distributing How much profit desired When first introduced Penetration Pricing often used Low introduction price to lure consumers away from similar product Another tactic is to offer coupons If consumer satisfied, will buy again without coupon Prices also determined by Price Leadership One firm lowers, all others lower One firm raises, all other raise

Place Where should product be sold Other considerations??? Mail, telephone, department stores, specialty shops, supermarkets, discount stores, door-to-door, or on Internet Could be combination of many Other considerations??? Location within a store Cereal/Candy at children’s eye level More expensive items at Adult eye level/Nearest door Mail Order Catalogs/Specialty Shops Geographic Location Rural vs. Urban

Promotion Use of advertising to inform consumers new or improved product is available Seeks to convince to purchase new item Type of Promotion depends on 3 factors Product Type of consumer company wants to attract Amount company plans to spend Teen Product – teen magazine or Social Media site Credit Card Company – Usually Direct mail advertising

Product Life Cycle Introduction Growth Maturity Decline Important to understand because marketing different at each stage Introduction – product must be explained more thoroughly – Prices lower to entice buyers Growth – Prices much higher to maximize profits Maturity – Slightly lower prices - Redesign Packaging Find new uses for product Refocus advertising

Distribution Movement of goods from producer to consumer Routes are called Channels of Distribution Very few products go from producer to consumer Wholesalers Purchase large quantities from producers and resell to retailers Retailers Businesses that sell consumer goods to the public Popular use of E-commerce lately

Storage and Transportation Also part of distribution process Must store goods for future sales Most retailers keep 2 or 3 month supply on hand Transportation involves physical movement of good from producer to buyer Must Consider: Type of good (perishable food) Size and weight Speed of delivery needed (fresh food)

Other Distribution Channels Club Warehouse Store Buy limited brand and model in large quantities Get discounted price from Manufacturer Direct Marketing Done through catalogs and Internet No sales tax if catalog/internet company located in another state