Principles of Marketing

• Product


  First element in the marketing mix, capable of satisfying a need
• Product components


  • Packaging - contain and protect, identify and promote the product
  • Labeling - display of information on its container or product itself
• New product development


  • To defend market share
  • To position ahead of competition in a market segment
  • To establish a foothold in the future market
  • To take advantage of strengths in product distribution
• New product development steps

  1. Idea generation

  2. Idea screening

  3. Concept development and testing

  4. Business analysis

  5. Product development

  6. Market testing

  7. Product commercialization
• Price


  The amount of money charged for a product or service, produces revenue
• Unit variable cost

  Cost to manufacture one unit of the product, includes cost of direct materials, direct labor and direct overhead
• Fixed cost


  Unit share of operating and other expense
• Direct costs


  • Direct materials - materials used in manufacturing
  • Direct labor - wages of workers directly responsible for production
  • Direct overhead - amount spent in manufacturing
• Break-even point


  Lowest possible price the company can set its product
• Major pricing strategies


  • Customer value-based pricing
  • Cost-based pricing
  • Competition-based pricing
• Customer value-based pricing


  Setting price based on buyer's perception of value
• Cost-based pricing


  Price based on the cost of production, distribution and selling plus fair rate of return
• Competition-based pricing


  Prices based on competitors' strategies, prices, cost and offerings
• Other pricing strategies

  • Odd pricing
  • Loss leader pricing
  • Price lining
  • Prestige pricing
  • Marginal pricing
  • Predatory pricing
  • Going rate pricing
  • Promotional pricing
  • Price skimming
  • Penetration pricing
• Place


  Refers to the point of sales, mantra for success
• Distribution channel


  Path that a product takes before sold to the consumers
• Distribution channel types


  • Direct channel - doesn't involve an intermediary
  • Indirect channel - involves a middleman/intermediary
  • One-level channel - Manufacturer to retailer to customer
  • Two-level channel - Manufacturer to wholesaler to retailer to customer
  • Three-level channel - Manufacturer to agent to wholesaler to retailer to customer
  • Dual distribution - use a combination of direct and indirect selling
  • Reverse channels - allows the consumer to send a product to the producer
• Marketing intermediaries


  • Wholesalers - buying bulk products from manufacturers then reselling them in bulk
  • Retailers - selling goods directly to consumers
  • Distributors - selling bulk products to other businesses and vendors
  • Agents - represent a company to convince buyers to purchase their products
• Product distribution types

  • Exclusive distribution - limited to a select number of dealers
  • Intensive distribution - making a product available in as many retail outlets as possible
  • Selective distribution - more than one but not as many dealers as intensive distribution
• Supply chain management


  Organizes the parties and activities involved in the production and delivery of goods and services in an orderly and logical sequence
• Promotion


  Advertise and market your product, let potential customers know that you are selling
• Promotion methods


  • Advertising
  • Sales promotion
  • Direct marketing
  • Public relations & sponsorship
  • Personal selling
• Marketing process


  1. Analyzing marketing opportunity

  2. Selecting target markets

  3. Designing marketing strategies

  4. Planning marketing program

  5. Organizing, implementing, and controlling the marketing effort
• Market analysis


  A comprehensive study of a specific market within an industry, including an examination of its various components
• Market analysis components


  • Industry overview
  • Define target market
  • Competition
• Marketing planning


  A document that a business uses to execute a marketing strategy
• Marketing implementation


  Turning marketing plan into reality
• Marketing control types


  • Annual plan control
  • Profitability control
  • Efficiency control
  • Strategic control
• Marketing plan sections


  • Executive summary
  • Current marketing situation
  • Threats and opportunities
  • Objectives and issues
  • Marketing strategy
  • Action program
  • Budgets
  • Controls
• Fixed cost


  Do not vary with production or sales level
• Variable cost


  Vary directly with the level of production
• Total cost


  Sum of the fixed and variable costs for any given level of production
• Cost-plus pricing


  Adding a standard mark-up to the cost of the product
• Good-value pricing


  Offers the right combination of quality and good service at fair price
• Value-added pricing


  Attaching value-added features and services to differentiate a company's offer and charging higher prices
• Internal factors


  • Company's overall marketing strategy
  • Objectives
  • Marketing mix
• External factors


  • Nature of the market
  • Demand
• Break-even pricing


  Setting price to break even on the cost of making and marketing a product to make a target return
• One Level Channel


  Manufacturer to Retailers to Customers
• Two Level Channel


  Manufacturer to Wholesalers to Retailers to Customers