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Intro to Business
Table of Contents
Unit 11 Overview: Product Development and Pricing Strategies
11.1 The Marketing Concept
11.2 Creating a Marketing Strategy
11.3 Developing a Marketing Mix
11.4 Buyer Behavior
11.5 Market Segmentation
11.6 What Is a Product?
11.7 Creating Products That Deliver Value
11.8 The Product Life Cycle
11.9 Pricing Strategies and Future Trends
11.10 Trends in Developing Products and Pricing

Marketing mix strategies are essential for businesses to effectively reach and engage their target audience. These strategies encompass the 5Ps: Product, Price, Place, Promotion, and People. Each element plays a crucial role in shaping a company's approach to meeting customer needs and achieving business goals.

Understanding and implementing these strategies allows companies to create a cohesive marketing plan. By aligning product offerings, pricing strategies, distribution channels, promotional efforts, and customer interactions, businesses can maximize their market impact and build strong, lasting relationships with consumers.

Marketing Mix Strategies

Components of 5P marketing mix

  • Product
    • Core product delivers the primary benefit or service to the customer
    • Actual product encompasses the physical product or service, including its features, design, and packaging (iPhone, hotel room)
    • Augmented product offers additional benefits or services, such as warranties, customer support, and delivery options (extended warranty, 24/7 customer service)
  • Price
    • Pricing strategies
      • Cost-based pricing determines prices based on the costs of production and distribution (materials, labor, overhead)
      • Value-based pricing sets prices according to the perceived value to the customer (luxury goods, personalized services)
      • Competition-based pricing establishes prices in relation to competitors' offerings (price matching, undercutting)
    • Price elasticity measures how responsive demand is to changes in price (gasoline, generic medications)
    • Discounts and promotions provide reduced prices or incentives to attract customers (seasonal sales, buy-one-get-one offers)
  • Place (Distribution)
    • Distribution channels define the path a product takes from the manufacturer to the end consumer
      • Direct distribution involves selling directly to the consumer (e-commerce, company-owned stores)
      • Indirect distribution relies on intermediaries to sell the product (supermarkets, department stores)
    • Intensive distribution makes the product widely available through numerous outlets (soft drinks, snacks)
    • Selective distribution limits the number of outlets to maintain brand image and control (high-end fashion, specialty products)
    • Exclusive distribution grants exclusive rights to a single distributor in a specific area (luxury car dealerships, designer boutiques)
  • Promotion
    • Advertising uses paid, non-personal communication through various media channels (television commercials, billboards)
    • Public relations manages the spread of information and the company's image (press releases, sponsored events)
    • Personal selling involves direct, personal communication with potential customers (in-store demonstrations, sales calls)
    • Sales promotions offer short-term incentives to encourage product purchases (coupons, contests)
    • Direct marketing communicates directly with targeted individuals to obtain an immediate response (email campaigns, telemarketing)
  • People
    • Employees' training, motivation, and customer service skills significantly impact the customer experience (friendly staff, knowledgeable salespeople)
    • Customers' needs, preferences, and behaviors must be understood to effectively target the market (market research, customer feedback)
    • Consumer behavior analysis helps tailor marketing efforts to meet customer expectations and preferences

Market Analysis and Segmentation

  • Target market identification involves determining the specific group of consumers most likely to purchase a product or service
  • Market segmentation divides the overall market into distinct groups based on demographics, psychographics, or behavior
  • Brand positioning establishes a unique image and value proposition in the minds of consumers relative to competitors
  • Customer value proposition articulates the unique benefits and value a product or service offers to its target market

Integration of marketing strategies

  • Alignment of strategies ensures that all elements of the marketing mix are consistent and support each other (product quality matches pricing, distribution aligns with target market)
  • Product-price relationship involves setting prices that reflect the product's quality, features, and benefits (premium pricing for innovative products, competitive pricing for basic goods)
  • Product-place relationship requires selecting distribution channels that match the product's characteristics and target market (convenience stores for impulse purchases, specialty stores for niche products)
  • Product-promotion relationship develops promotional messages and tactics that highlight the product's unique selling points (emphasizing eco-friendliness for sustainable products, showcasing advanced features for tech gadgets)
  • Price-place relationship considers the costs and margins associated with different distribution channels when setting prices (higher prices for products sold in upscale retailers, lower prices for products sold in discount stores)
  • Price-promotion relationship uses promotional tactics, such as discounts or bundling, to influence perceived value and encourage purchases (limited-time offers, value meals)
  • Place-promotion relationship tailors promotional efforts to the specific distribution channels and outlets where the product is available (in-store displays, targeted online ads)
  • Marketing strategy development integrates all aspects of the marketing mix to achieve business objectives and create competitive advantage

Marketing for profit vs nonprofit

  • Profit-oriented companies
    • Objective aims to maximize profits and shareholder value
    • Focus centers on creating a competitive advantage and capturing market share (differentiation, cost leadership)
    • Emphasis lies on product differentiation, pricing for profit, and aggressive promotion (unique features, premium pricing, extensive advertising)
  • Not-for-profit organizations
    • Objective seeks to achieve a specific mission or social purpose (environmental conservation, poverty alleviation)
    • Focus revolves around creating value for stakeholders and beneficiaries (donors, volunteers, communities served)
    • Emphasis rests on community engagement, partnerships, and raising awareness for the cause (local events, collaborations with like-minded organizations)
  • Similarities between profit and nonprofit marketing
    1. Both use the marketing mix to achieve their objectives
    2. Both need to understand their target audience and develop strategies to reach them effectively
  • Differences between profit and nonprofit marketing
    • Pricing differs as not-for-profits may offer services for free or at a subsidized rate, while for-profits aim to maximize revenue
    • Promotion varies with not-for-profits often relying on grassroots efforts and word-of-mouth, while for-profits invest heavily in advertising
    • Performance metrics contrast with for-profits measuring success primarily through financial indicators (revenue, market share), while not-for-profits focus on mission-related outcomes (lives impacted, awareness raised)

Key Terms to Review (65)

Fishpeople Seafood: Fishpeople Seafood is a hypothetical company that operates in the seafood industry, focusing on ethical sourcing and sustainable practices to minimize environmental impact and ensure the health of marine ecosystems. It represents businesses that prioritize corporate social responsibility (CSR) in their operations, specifically concerning stakeholders like local communities, customers, and environmental groups.
Carnival Cruise Lines: Carnival Cruise Lines is a global cruise company offering leisure travel and vacation experiences by providing a variety of onboard services, entertainment, and destinations. It plays a significant role in the tourism industry, emphasizing customer satisfaction and innovative marketing strategies to attract diverse demographics.
Ralph Lauren: Ralph Lauren is a global multi-billion-dollar enterprise known for its clothing, marketing, and distribution of products in four categories: apparel, home, accessories, and fragrances. The brand is synonymous with an upscale American lifestyle and has effectively used the marketing mix to establish its place in the luxury fashion industry.
Target market: A target market is a specific group of consumers identified as the recipients of a particular marketing message, based on shared characteristics like demographics, interests, or needs. Businesses focus their marketing efforts and resources on this group to maximize the effectiveness of their product promotions and advertising.
Promotion strategy: A promotion strategy is a plan used by businesses to communicate the benefits of their products or services to their target audience, aiming to increase sales and customer awareness. It involves selecting the most effective mix of advertising, sales promotions, personal selling, and public relations activities.
Public relations: Public relations is a strategic communication process that organizations use to build and manage relationships with the public, aiming to create and maintain a positive image. It involves various activities such as media engagements, event management, and crisis communication to influence public perception and promote goodwill.
Museum of Science and Industry: The Museum of Science and Industry is a large museum dedicated to showcasing innovations and technological advancements across various industries, including manufacturing, transportation, and digital technology. It plays a role in educating the public on the evolution and impact of science and industry on society.
Cover Girl: In the context of business, a Cover Girl is a term often used to describe a brand or product that is prominently featured in marketing materials, such as the cover of a magazine or the forefront of an advertising campaign. It signifies a strategic choice by marketers to highlight particular products to attract and engage consumers.
Market segmentation: Market segmentation is the process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers (known as segments) based on some type of shared characteristics. It aims to identify high-yield segments to target marketing efforts and resources efficiently.
Redken: Redken is a professional haircare and hair color company founded in 1960, that offers a wide range of products for various hair needs and types. It is known for its innovative approach in combining scientific advancements with salon practicality to enhance product performance and customer satisfaction.
Coty: Coty Inc. is a global beauty company that manufactures, markets, and distributes fragrances, cosmetics, skin care, and nail care products. It plays a significant role in developing product and pricing strategies to meet customer needs within the marketing mix of the beauty industry.
Pinterest: Pinterest is a visual discovery engine and social media platform where users can find, share, and save images or videos linked to projects, hobbies, and interests. It serves as both a source of inspiration for consumers and a marketing tool for businesses to showcase their products in a visually appealing way.
Advertising: Advertising is a marketing communication that employs an openly sponsored, non-personal message to promote or sell a product, service, or idea. It is an essential component of a business's promotion strategy, designed to increase brand awareness and influence consumer behavior.
American Heart Association: The American Heart Association is a nonprofit organization in the United States that focuses on heart health and reducing the effects of cardiovascular disease and stroke. It provides guidelines for heart-healthy living, supports research, and engages in public health initiatives.
Revlon: Revlon is a global cosmetic, skin care, fragrance, and personal care company that utilizes strategic marketing mix elements to meet customer needs and preferences. It exemplifies how product differentiation and pricing strategies can create a unique brand identity in the competitive beauty industry.
Estée Lauder: Estée Lauder is a multinational manufacturer and marketer of prestige skincare, makeup, fragrance, and hair care products. The company was founded in 1946 by Estée Lauder herself, who believed in the philosophy of selling her products through demonstration and personalized customer service.
Personal selling: Personal selling is a promotional method where a salesperson uses individualized communication to sell a product or service directly to a consumer. This approach allows for immediate feedback and the ability to tailor the marketing message to the specific needs and preferences of the customer.
Pricing strategy: A pricing strategy is a company's plan for setting the prices of its products or services, aiming to find the optimal balance between profits and customer satisfaction. It involves considering factors such as production costs, market conditions, competition, and perceived value by customers.
Clinique: Clinique is an American manufacturer of skincare, cosmetics, toiletries, and fragrances, typically sold in high-end department stores. It is known for its allergy-tested and 100% fragrance-free product line developed to meet a wide range of consumer needs.
Place (distribution) strategy: Place (distribution) strategy in marketing refers to the methods a business uses to make its products available to consumers. It involves selecting the most effective channels and locations for product distribution to maximize reach and customer convenience.
Wendy’s: Wendy's is an international fast-food restaurant chain known for its square hamburgers, sea salt fries, and Frostys. It employs strategic marketing mix elements to meet customer needs and deliver value through product innovation and pricing strategies.
Product strategy: A product strategy outlines the approach a company takes to develop, market, and sell its products to meet customers' needs effectively. It considers aspects such as product design, target market, and competitive advantage.
Marketing mix: The marketing mix is a set of controllable, tactical marketing tools that a company uses to produce a desired response from its target market. It consists of everything the firm can do to influence the demand for its product.
Price Elasticity: Price elasticity is a measure of how sensitive the demand for a product or service is to changes in its price. It quantifies the relationship between the percentage change in quantity demanded and the percentage change in price, allowing businesses to understand the impact of pricing decisions on consumer behavior.
Differentiation: Differentiation is the process of distinguishing a product or service from others in the market by highlighting unique features, qualities, or benefits that make it stand out and appeal to a specific target audience. This strategic approach aims to create a perceived value proposition that sets a company's offerings apart from the competition, allowing it to command a premium price or gain a competitive advantage.
Market Segmentation: Market segmentation is the process of dividing a diverse market into distinct groups of consumers with similar needs, characteristics, or behaviors. It allows businesses to better understand and target specific customer segments with tailored products, services, and marketing strategies.
Cost Leadership: Cost leadership is a business strategy where a company aims to be the lowest-cost producer in its industry. By maintaining the lowest costs, the company can offer its products or services at the lowest prices, making it the most attractive option for price-sensitive customers. This strategy allows the company to gain a competitive advantage and potentially achieve higher profit margins or market share.
Target Market: The target market is the specific group of consumers or businesses that a company has identified as the primary focus for its products or services. It is the segment of the population that a business aims to reach and serve with its marketing efforts.
Brand Positioning: Brand positioning is the process of establishing a unique and desirable place for a brand in the minds of consumers, relative to competing brands. It involves strategically aligning a brand's identity, attributes, and benefits to create a distinct and compelling perception in the market.
People: People, in the context of marketing, refers to the individuals or target audience that a business aims to reach and engage with through its marketing strategies and tactics. They are the focal point of all marketing efforts, as understanding and catering to the needs, preferences, and behaviors of the target market is crucial for the success of a marketing plan.
Customer Value Proposition: The customer value proposition is the promise of value to be delivered and the belief from the customer that the value will be experienced. It is the primary reason a customer should buy from a particular company or use a particular product or service.
Marketing Mix: The marketing mix is the set of tactical marketing tools that a business uses to promote its offering in the market. It consists of the 4Ps: product, price, place, and promotion, which work together to satisfy customer needs and achieve the organization's marketing objectives.
Place: Place refers to the physical location, environment, and distribution channels where a product or service is made available to consumers. It is a critical element of the marketing mix that determines how a company's offerings reach and are accessed by the target market.
Promotion: Promotion is a key component of the marketing mix, focused on communicating the value of a product or service to potential customers and persuading them to make a purchase. It encompasses various marketing activities and strategies designed to raise awareness, generate interest, and influence consumer behavior.
Value-based Pricing: Value-based pricing is a pricing strategy where the price of a product or service is determined by the perceived value to the customer rather than solely based on the cost of production. The focus is on maximizing the value delivered to the customer rather than minimizing the cost to the seller.
Selective Distribution: Selective distribution is a marketing strategy where a manufacturer or producer limits the number of authorized retailers or wholesalers who are allowed to carry and sell their products. This approach aims to maintain control over the distribution and positioning of products in the market.
Place-Promotion Relationship: The place-promotion relationship refers to the interconnected nature of the place (distribution) and promotion elements within the marketing mix. It emphasizes how the choice of distribution channels and the way products are made available to consumers can impact the effectiveness of promotional strategies and vice versa.
Indirect Distribution: Indirect distribution refers to the marketing strategy where a company utilizes intermediaries, such as wholesalers, retailers, or other third-party channels, to get its products or services to the end consumer. This approach contrasts with direct distribution, where the company sells directly to the customer without any intermediaries.
Intensive Distribution: Intensive distribution is a marketing strategy that involves making a product available in as many retail outlets as possible to maximize its visibility and accessibility to consumers. This approach aims to ensure the product is readily available at the point of purchase, increasing the likelihood of impulse purchases and repeat sales.
Actual Product: The actual product refers to the physical, tangible good or service that a company offers to consumers. It is the core of the marketing mix and represents the fundamental value proposition that a business provides to meet customer needs and desires.
Discounts: Discounts refer to the reductions in the standard price of a product or service, offered to customers as an incentive or to promote sales. They are a common marketing strategy used to make products more affordable and attractive to potential buyers.
Exclusive Distribution: Exclusive distribution is a marketing strategy where a manufacturer grants the right to sell its products to a limited number of authorized distributors or retailers within a specific geographic area. This approach aims to maintain control over the distribution and sales of products while ensuring consistent brand representation and customer experience.
Augmented Product: The augmented product refers to the additional features, services, and benefits that are offered alongside the core product to enhance the customer's overall experience and perceived value. It goes beyond the basic or expected product to include supplementary elements that differentiate the offering and provide added utility or satisfaction to the consumer.
Price-Promotion Relationship: The price-promotion relationship refers to the dynamic interplay between the price of a product or service and the promotional strategies employed to market it. This relationship is a crucial consideration in the development of an effective marketing mix, as it can significantly impact consumer perceptions, purchasing decisions, and overall profitability.
Advertising: Advertising is the process of promoting a product, service, or idea to potential customers or audiences through various media channels. It is a critical component of a company's marketing strategy, aimed at influencing consumer behavior and driving sales.
Profit-Oriented Companies: Profit-oriented companies are businesses that prioritize generating profits as their primary objective. These organizations focus on maximizing revenue, minimizing costs, and increasing the bottom line to provide financial returns to their owners or shareholders.
Marketing Strategy: Marketing strategy refers to the comprehensive plan an organization develops to achieve its marketing objectives. It involves the selection of target markets, the creation of a unique value proposition, and the coordination of various marketing elements to effectively reach and engage customers.
Product-Place Relationship: The product-place relationship refers to the connection between a product and the physical location or distribution channel through which it is made available to consumers. This relationship is a critical component of the marketing mix, as it determines how a product reaches and is accessed by the target market.
Price-Place Relationship: The price-place relationship refers to the connection between the price of a product or service and its availability or distribution across different locations or channels. It is a crucial aspect of the marketing mix, as it determines how the product is priced and made accessible to consumers.
Not-for-profit organizations: Not-for-profit organizations are entities that are focused on providing a public service or benefit rather than generating profits for owners or shareholders. These organizations operate with the primary goal of fulfilling a specific mission or purpose, rather than maximizing financial returns.
Sales Promotions: Sales promotions are marketing strategies that provide short-term incentives to encourage the purchase or sale of a product or service. They are designed to stimulate immediate consumer action and boost sales in the near-term, often complementing other marketing efforts.
Direct Distribution: Direct distribution refers to the practice of a manufacturer or producer selling products directly to consumers, bypassing intermediaries such as wholesalers and retailers. This approach allows the company to have more control over the sales process and maintain a closer relationship with the end-user.
Integration of Marketing Strategies: Integration of marketing strategies refers to the coordinated and cohesive implementation of various marketing elements to achieve a unified and effective marketing approach. It involves aligning and synergizing different marketing tactics and channels to create a consistent and impactful brand presence, enhance customer experience, and drive desired business outcomes.
Direct Marketing: Direct marketing is a promotional strategy that involves communicating directly with consumers to promote products or services and elicit a measurable response. It focuses on engaging customers through personalized, targeted messages and interactions, often bypassing traditional media channels.
Personal Selling: Personal selling is a form of direct marketing where a sales representative interacts directly with a potential customer to promote a product or service. It involves face-to-face communication, relationship building, and tailored presentations to address the customer's specific needs and concerns.
Product-Price Relationship: The product-price relationship refers to the interdependence between a product's characteristics and its pricing. It explores how the features, quality, and perceived value of a product influence the optimal price point that a business can charge to maximize profitability and meet customer demand.
Product-Promotion Relationship: The product-promotion relationship refers to the interdependent connection between a product and the promotional strategies used to market and communicate information about that product to potential customers. This relationship is a critical component of the marketing mix, as it helps businesses effectively reach and engage their target audience.
Core Product: The core product is the fundamental product or service that a business offers to meet the basic needs of its customers. It represents the core value proposition that the customer is seeking to fulfill when making a purchase.
Cost-based Pricing: Cost-based pricing is a pricing strategy where a business sets the price of a product or service based on the total cost of producing, distributing, and marketing that item. The goal is to cover all costs and achieve a desired profit margin.
Competition-based Pricing: Competition-based pricing is a pricing strategy where a company sets its product or service prices based on the prices charged by its competitors in the market. The goal is to match or undercut the prices of rival offerings to remain competitive and attract customers.
Public Relations: Public relations is the strategic management of relationships and communication between an organization and its various stakeholders, including the public, media, investors, and the government. It aims to build and maintain a positive image and reputation for the organization through effective communication and engagement.
Distribution channels: Distribution channels are the pathways through which products or services flow from producers to consumers. They play a critical role in connecting businesses with their target markets, ensuring that goods reach customers efficiently and effectively. Distribution channels can vary in complexity and may include direct sales, intermediaries, wholesalers, and retailers, all of which impact pricing, delivery speed, and customer satisfaction.
Consumer behavior: Consumer behavior refers to the study of how individuals or groups make decisions to purchase, use, and dispose of products, services, ideas, or experiences. This understanding is essential for companies as it helps them to tailor their marketing strategies effectively, aligning with consumer needs and preferences. By analyzing consumer behavior, businesses can implement the marketing concept, develop a marketing mix that resonates with their audience, understand the nuances of buyer behavior, and leverage advertising to influence consumer choices.
Price: Price is the amount of money that customers are willing to pay for a product or service. It is a crucial element in influencing consumer behavior, impacting demand, and determining a company's revenue. Pricing strategies can vary significantly based on factors such as market conditions, competition, and the perceived value of the product or service offered.
Product: A product is any item or service offered to the market to satisfy customer needs and wants. It encompasses not only physical goods but also services, ideas, or experiences that can be marketed to consumers. Understanding the concept of a product is essential for crafting effective marketing strategies, developing a balanced marketing mix, and ensuring that offerings meet the demands of target customers.