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Principles of Marketing

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Principles of Marketing ­ MGT301
VU
Lesson ­ 19
Lesson overview and learning objectives:
In this chapter we commence an examination of the marketing mix elements the so-called 4P's of
marketing, or if considering the extended marketing mix, the 7P's of marketing. 1st p of these 4PS
is Product is a complex concept that must be defined carefully.
A. 4PS
o Product
a. Marketing Mix
Marketing is a process that revolves around the customers and in order to meet the requirements
of the customer marketers formulate and design the marketing mix that is also known as 4Ps
Four marketing activities--product, Price, Place and Promotion--that a firm can control to meet
the needs of customers within its target market ). The marketing mix variables are: Product:
Goods, services, or ideas that satisfy customer needs, Price: Decisions and actions that establish
pricing objectives and policies
and set product prices. Place:
Marketing is the involved
The ready, convenient, and
timely availability of products
process of determining the 4
and finally the Promotion:
P's of the Marketing Mix
Promotion can be defined as
activities that are used to inform
customers
about
the
­Product
organization and its products.
These
elements
of
the
­Price
marketing mix and strategies
related to these elements or the
variables  are  designed  by
­Promotion
keeping  in  view  all  the
environmental  factors  either
macro  or  micro  that  can
­Place (Distribution)
influence the marketing in any
context.  Today is the era of
value driven marketing, Value can be defined as a customer's subjective assessment of benefits
relative to the costs in determining the worth of a product. Customer is ready to pay the cost of
given product if that product is of some value. This value can be determined as a capability of the
product to satisfy the customer's needs and wants.
When ever customer or the consumer makes the purchasing decisions they (Consumers) don't buy
products; they buy benefits that can be functional benefits( relating to the practical purpose a
product serves) or the Psychological benefits (relating to how a product makes one feel) for the
reason being products are always purchased in order to fulfill certain needs that are definitely
fulfilled through acquiring certain benefits of the product. Today, as products and services become
more and more commoditized, many companies are moving to a new level in creating value for
their customers. To differentiate their offers, they are developing and delivering total customer
experiences. Whereas products are tangible and services are intangible, experiences are memorable.
Whereas products and services are external, experiences are personal and take place in the minds
of individual consumers. Companies that market experiences realize that customers are really
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Principles of Marketing ­ MGT301
VU
buying much more than just products and services. They are buying what those offers will do for
them--the experiences they gain in purchasing and consuming these products and services.
b. WHAT IS A PRODUCT?
A product is anything that can be offered to a market for attention, acquisition, use, or
consumption and that might satisfy a want or need. It includes physical objects, services, persons,
places, organizations, and ideas.' Pure' Services are distinguished from 'physical' products on the
basis of intangibility, inseparability, variability and perish ability. Services are a form of product that
consist of activities, benefits, or satisfactions offered for sale that are essentially intangible and do
not result in the ownership of anything.
Product is a complex concept that must be carefully defined. As the first of the four marketing mix
variables, it is often where strategic planning begins. Product strategy calls for making coordinated
decisions on individual products, product lines, and the product mix.
a) Levels of Product and Services
As shown in the fig each product item offered to customers can be viewed on three levels.
Therefore product planners need to think about products and services on three levels:
1). The core product is the core, problem solving benefits that consumers are really buying
when they obtain a product or service. It answers the question what is the buyer really buying?
2). The actual product may have as many as five characteristics that combine to deliver
core product benefits. They are:
a). Quality level.
Augmentted
Augmened
Prroduct
P oduct
b). Features.
c). Design.
d). Brand name.
Installation
e). Packaging.
3).
The augmented
Packaging
product includes any additional
Brand
Features
Name
consumer services and benefits
Core
Core
After-
Delivery
Benefiit or
built around the core and actual
Benef t or
Sale
& Credit
Serviice
Service
Serv ce
products.
Quality
Design
Level
Therefore, a product is more
than a simple set of tangible
features.  Consumers tend to
Warranty
see  products  as  complex
bundles of benefits that satisfy
Acttual
Acual
Corre
Co e
Prroduct
P oduct
Prroduct
P oduct
their
needs. When
developing products, marketers
must: 1). Identify the core consumer needs that the product will satisfy. 2). Design the actual
product and finally  3). Find ways to augment the product in order to create the bundle of
benefits that will best satisfy consumer's desires for an experience. The product. For example, a
Sony camcorder is an actual product. Its name, parts, styling, features, packaging, and other
attributes have all been combined carefully to deliver the core benefit--a convenient, high-quality
way to capture important moments. Sony must offer more than just a camcorder. It must provide
consumers with a complete solution to their picture-taking problems. Thus, when consumers buy a
Sony camcorder, Sony and its dealers also might give buyers a warranty on parts and workmanship,
instructions on how to use the camcorder, quick repair services when needed, and a toll-free
telephone number to call if they have problems or questions (augmented level).
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Principles of Marketing ­ MGT301
VU
Therefore, a product is more than a simple set of tangible features. Consumers tend to see
products as complex bundles of benefits that satisfy their needs. When developing products,
marketers first must identify the core consumer needs the product will satisfy. They must then
design the actual product and find ways to augment it in order to create the bundle of benefits that
will best satisfy consumers.
b) Product Classification
There are three basic types of product classifications. Durable products are used to over an
extended period of time. Nondurable products are more quickly consumed, usually in a single use
or a few usage occasions. 'Pure' Services are activities or benefits offered for sale which are
intangible, inseparable from the consumer, perishable in that they are experiential and do not result
in ownership of anything.  Either consumer or industrial customers can buy each of these
products.  Consumer products are sold to the final end-user for personal consumption.
Individuals and other organizations to use in their administrative or processing operations buy
business-to-business products. Industrial products are the most widely used of these products and
consist of consumables such as paper clips or raw materials that are converted to finished
products. Lets discuss these classifications in detail:
I. Consumer Products
Consumer products are those bought by final consumers for personal consumption. Marketers
usually classify these goods further based on how consumers go about buying them. Consumer
products include convenience products, shopping products, specialty products, and unsought products. These
products differ in the ways consumers buy them and therefore in how they are marketed
Convenience products are consumer products and services that the customer
usually buys frequently, immediately, and with a minimum of comparison and
buying effort. Examples include soap, candy, newspapers, and fast food.
Convenience products are usually low priced, and marketers place them in many
locations to make them readily available when customers need them.
Shopping products are less frequently purchased consumer products and services
that customers compare carefully on suitability, quality, price, and style. When
buying shopping products and services, consumers spend much time and effort in
gathering information and making comparisons. Examples include furniture,
clothing, used cars, major appliances, and hotel and motel services.
Shopping products marketers usually distribute their products through fewer
outlets but provide deeper sales support to help customers in their comparison
efforts.
Specialty products are consumer products and services with unique characteristics
or brand identification for which a significant group of buyers is willing to make a
special purchase effort. Examples include specific brands and types of cars, high-
priced photographic equipment, designer clothes, and the services of medical or
legal specialists. A Lamborghini automobile, for example, is a specialty product
because buyers are usually willing to travel great distances to buy one. Buyers
normally do not compare specialty products. They invest only the time needed to
reach dealers carrying the wanted products.
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Principles of Marketing ­ MGT301
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Unsought products are consumer products that the consumer either does not
know about or knows about but does not normally think of buying. Most major
new innovations are unsought until the consumer becomes aware of them through
advertising. Classic examples of known but unsought products and services are life
insurance and blood donations to the Red Cross. By their very nature, unsought
products require a lot of advertising, personal selling, and other marketing efforts.
II. Industrial Products
Industrial products are those purchased for further processing or for use in conducting a business.
Thus, the distinction between a consumer product and an industrial product is based on the
purpose for which the product is bought. If a consumer buys a lawn mower for use around home,
the lawn mower is a consumer product. If the same consumer buys the same lawn mower for use
in a landscaping business, the lawn mower is an industrial product.
The three groups of industrial products and services include materials and parts, capital items, and
supplies and services. Materials and parts include raw materials and manufactured materials and
parts. Raw materials consist of farm products (wheat, cotton, livestock, fruits, vegetables) and
natural products (fish, lumber, crude petroleum, iron ore). Manufactured materials and parts
consist of component materials (iron, yarn, cement, wires) and component parts (small motors,
tires, castings). Most manufactured materials and parts are sold directly to industrial users. Price
and service are the major marketing factors; branding and advertising tend to be less important.
The demand for industrial products is derived from the demand for consumer products. This is
known as "derived demand." Capital items are industrial products that aid in the buyer's
production or operations, including installations and accessory equipment. Installations consist of
major purchases such as buildings (factories, offices) and fixed equipment (generators, drill presses,
large computer systems, elevators). Accessory equipment includes portable factory equipment and
tools (hand tools, lift trucks) and office equipment (fax machines, desks). They have a shorter life
than installations and simply aid in the production process.
The final group of business products is supplies and services. Supplies include operating supplies
(lubricants, coal, paper, pencils) and repair and maintenance items (paint, nails, brooms). Supplies
are the convenience products of the industrial field because they are usually purchased with a
minimum of effort or comparison. Business services include maintenance and repair services
(window cleaning, computer repair) and business advisory services (legal, management consulting,
advertising). Such services are usually supplied under contract.
III. Organizations, Persons, Places, and Ideas
In addition to tangible products and services, in recent years marketers have broadened the
concept of a product to include other "marketable entities" namely, organizations, persons, places,
and ideas. Organizations often carry out activities to "sell" the organization itself. Organization
marketing consists of activities undertaken to create, maintain, or change the attitudes and
behavior of target consumers towards an organization. Both profit and nonprofit organizations
practice organizational marketing. People can also be thought of as products. Person marketing
consists of activities undertaken to create, maintain, or change attitudes or behavior toward
particular people. All kinds of people and organizations practice person marketing. Ideas can also
be marketed. In one sense, all marketing is the marketing of an idea, whether it is the general idea
of brushing your teeth or the specific idea that Crest provides the most effective decay prevention
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Table of Contents:
  1. PRINCIPLES OF MARKETING:Introduction of Marketing, How is Marketing Done?
  2. ROAD MAP:UNDERSTANDING MARKETING AND MARKETING PROCESS
  3. MARKETING FUNCTIONS:CUSTOMER RELATIONSHIP MANAGEMENT
  4. MARKETING IN HISTORICAL PERSPECTIVE AND EVOLUTION OF MARKETING:End of the Mass Market
  5. MARKETING CHALLENGES IN THE 21st CENTURY:Connections with Customers
  6. STRATEGIC PLANNING AND MARKETING PROCESS:Setting Company Objectives and Goals
  7. PORTFOLIO ANALYSIS:MARKETING PROCESS,Marketing Strategy Planning Process
  8. MARKETING PROCESS:Analyzing marketing opportunities, Contents of Marketing Plan
  9. MARKETING ENVIRONMENT:The Companyís Microenvironment, Customers
  10. MARKETING MACRO ENVIRONMENT:Demographic Environment, Cultural Environment
  11. ANALYZING MARKETING OPPORTUNITIES AND DEVELOPING STRATEGIES:MIS, Marketing Research
  12. THE MARKETING RESEARCH PROCESS:Developing the Research Plan, Research Approaches
  13. THE MARKETING RESEARCH PROCESS (Continued):CONSUMER MARKET
  14. CONSUMER BUYING BEHAVIOR:Model of consumer behavior, Cultural Factors
  15. CONSUMER BUYING BEHAVIOR (CONTINUED):Personal Factors, Psychological Factors
  16. BUSINESS MARKETS AND BUYING BEHAVIOR:Market structure and demand
  17. MARKET SEGMENTATION:Steps in Target Marketing, Mass Marketing
  18. MARKET SEGMENTATION (CONTINUED):Market Targeting, How Many Differences to Promote
  19. Product:Marketing Mix, Levels of Product and Services, Consumer Products
  20. PRODUCT:Individual product decisions, Product Attributes, Branding
  21. PRODUCT:NEW PRODUCT DEVELOPMENT PROCESS, Idea generation, Test Marketing
  22. NEW PRODUCT DEVELOPMENT:PRODUCT LIFE- CYCLE STAGES AND STRATEGIES
  23. KEY TERMS:New-product development, Idea generation, Product development
  24. Price the 2nd P of Marketing Mix:Marketing Objectives, Costs, The Market and Demand
  25. PRICE THE 2ND P OF MARKETING MIX:General Pricing Approaches, Fixed Cost
  26. PRICE THE 2ND P OF MARKETING MIX:Discount and Allowance Pricing, Segmented Pricing
  27. PRICE THE 2ND P OF MARKETING MIX:Price Changes, Initiating Price Increases
  28. PLACE- THE 3RD P OF MARKETING MIX:Marketing Channel, Channel Behavior
  29. LOGISTIC MANAGEMENT:Push Versus Pull Strategy, Goals of the Logistics System
  30. RETAILING AND WHOLESALING:Customer Service, Product Line, Discount Stores
  31. KEY TERMS:Distribution channel, Franchise organization, Distribution center
  32. PROMOTION THE 4TH P OF MARKETING MIX:Integrated Marketing Communications
  33. ADVERTISING:The Five Mís of Advertising, Advertising decisions
  34. ADVERTISING:SALES PROMOTION, Evaluating Advertising, Sales Promotion
  35. PERSONAL SELLING:The Role of the Sales Force, Builds Relationships
  36. SALES FORCE MANAGEMENT:Managing the Sales Force, Compensating Salespeople
  37. SALES FORCE MANAGEMENT:DIRECT MARKETING, Forms of Direct Marketing
  38. DIRECT MARKETING:PUBLIC RELATIONS, Major Public Relations Decisions
  39. KEY TERMS:Public relations, Advertising, Catalog Marketing
  40. CREATING COMPETITIVE ADVANTAGE:Competitor Analysis, Competitive Strategies
  41. GLOBAL MARKETING:International Trade System, Economic Environment
  42. E-MARKETING:Internet Marketing, Electronic Commerce, Basic-Forms
  43. MARKETING AND SOCIETY:Social Criticisms of Marketing, Marketing Ethics
  44. MARKETING:BCG MATRIX, CONSUMER BEHAVIOR, PRODUCT AND SERVICES
  45. A NEW PRODUCT DEVELOPMENT:PRICING STRATEGIES, GLOBAL MARKET PLACE