Four Elements of the Marketing Mix and Four Promotion Activities

Marketing Mix – what is the goal? The goal is to create a marketing mix that contains the right product, at the right price, at the right place and time, with the right promotional effort to create awareness and demand.

Product A product is a bundle of tangible and intangible attributes, including package, color, and brand, plus the services and even the reputation of the seller

Product – it’s more than you think.

Price - it’s important to success Price refers to the value or worth of a product that attracts the buyer to exchange money or something of value for the product Based on cost Based on market

Place - it has to be available Manufacturer > Wholesaler > Retailer > Customer

Products are Often Distributed Through Resellers. What are Resellers? Resellers, such as wholesalers or retailers, purchase products and then sell to organizations and/or individuals

Wholesaler/Distributor Primarily engaged in buying, taking title to, usually storing and physically handling goods in large quantities, and reselling the goods, usually in smaller quantities to Retailers Wholesalers Manufacturers

Promotion – you have to tell people Promotion increases sales by communicating product information to potential customers The four basic components of a firm’s promotional effort are: (PAPs) Personal selling Advertising Publicity Sales promotion

Promotion Activities Personal Selling Advertising Personal communication of information to persuade Advertising Non-personal communication of information paid for by an identified sponsor such as an individual or an organization. Methods include TV, newspapers, catalogs and the radio

Promotion Activities Publicity Sales promotion Non-personal communication of information that is not paid for by an individual organization. Information appears in media such as television, radio and newspapers Sales promotion Involves activities or materials used to create sales for goods or services

Promotion Activities Two types of sales promotion Consumer - includes free samples, coupons, contests, and demonstrations to consumers (“pull”) Trade - encourages wholesalers and retailers to purchase and to sell aggressively using devices such as sales contests, displays, special purchase prices, and free merchandise (“push”)

Example – Crest Toothpaste Prior to the 1960s tooth cleaners were in the form of powder, then paste. They contained cleaners, polishers, and eventually some mouth freshener (mint oil). By the 1960s dental care had reached a high level, and a main enemy was identified – dental caries. Salespeople were asking customers (retail drug stores) what could be done to improve the product, and cavity prevention emerged.

Example – Crest Toothpaste Procter and Gamble scientists developed a way to incorporate a known enamel hardener – fluoride – into toothpaste. Studies were done to confirm the positive effects, and the product went to market.

Example – Crest Toothpaste Product: “Crest” toothpaste with flouride. Price: Comparable with market – “penetration pricing” Promotion: Publicity – news articles about “new cavity fighter” Sales Promotions – “pull” using samples sent to households

Example – Crest Toothpaste Sales Follow Up Salespeople followed up to insure sales commitments were being met (if they weren’t = How can I help?) Salespeople trained retail sales force in stores. Salespeople continued to provide feedback. Salespeople sought new markets (grocery stores, supermarkets)

Example – Crest Toothpaste This is what is meant by “Relationship Marketing”

Relationship Marketing Relationship marketing is the creation of customer loyalty Targets a major customer that you want to sell to now and in the future Establishes a long-term collaborative relationship

Three Levels of Relationship Marketing Transaction selling: customers are sold to and not contacted again Relationship selling: the seller contacts customers after the purchase to determine if they are satisfied and have future needs Partnering: the seller works continually to improve its customers’ operations, sales, and profits

Partnering with Customers Encourages both the buyer and seller to share information Two companies work toward the same objective

Consultative Selling The process of helping the customer achieve strategic short and long-term goals through the use of the seller’s goods and/or services A highly interactive dialogue between a salesperson and a customer A balanced exchange of information

The Role of Consultative Selling The Long-Term Ally Creates a “win–win” situation. As the customer’s sales and profits grow, so do the salesperson’s The ability of a salesperson to fulfill the role of long-term ally is a pivotal factor in determining whether a sales transaction is just a transaction or the beginning of a relationship

Avoid The Customer-Seller Relationship Gap May occur when the salesperson’s interest in the customer declines Usually after the sale Yet the customer’s interest increases after the sale This is one reason why service after the sales is so important

The Key to Success Knowing target customers Informing target customers of competitively superior products Guiding target customers towards good purchase decisions Following up afterward to insure that goals of both parties were met Looking ahead and anticipating the next possible benefits to the customer

Ethical Situation #1 The Cadillac Lease A car salesman has presented a sales price and payment to a customer, who has agreed to the terms A bank salesman suggests he offer the customer a lease in order to lower the payment. The car salesman switches to a lease, but increases the profit instead. McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

Ethical Situation #2 The Home Mortgage A mortgage broker tells the customer he is getting the lowest rate available. Between the time the customer agrees to the terms and then signs papers rates go down. The mortgage salesman keeps the rate the same and is paid the difference by the bank. McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

Ethical Situation #3 Overdraft Protection The bank suggests that a customer sign up for overdraft protection. “It’s easy and convenient. It simply charges your credit card to cover overdrafts – no overdraft charges.” Each time the customer overdraws his account he is charged $5, and the interest ticker begins on the entire credit card balance. McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

Ethical Situation #3 Fees for Overdrafts A bank Marketing Manager calculates the actual costs of an overdraft at $1.50. His manager insists that the bank “fee” be increased from $12 to $20. The Marketing Manager decides to resign rather than support the increase. McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

Tomorrow: Ethics Why People Buy McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.