View source for Principles of Marketing

Welcome to Principles of Marketing, a recommended prerequisite for many business majors.

Marketing as defined by www.dictionary.reference.com is "the total of activities involved in the transfer of goods from the producer or seller to the consumer or buyer, including advertising, shipping, storing, and selling."
:An alternate definition paraphrased from memory of an introductory business text is: <b>Marketing</b> is all activities conducted to prepare for sales.  <b>Sales</b> is all activities required to close the deal. Shipping and customer satisfaction would be included in sales to avoid the customer from reversing or unclosing the deal.

Thus Marketing can be categorized as a branch of business as well as a social science. We buy goods (thus becoming the buyer/consumer) from a vendor (or producer/seller), creating a transaction. In the past, marketing involved traveling salesmen, while in modern times, marketing is more likely to involve television, the internet, and other forms of media bombardment.

As we progress in this age of technology it is vital for us to understand marketing and its place in the world. Understanding and applying the principles will be beneficial to the businessperson and the layperson.
{{RightTOC}}
== Marketing Management Process ==
This consists of:
*analyzing market opportunities, 
*selecting target markets, 
*designing marketing strategies, 
*planning marketing programs, 
*organizing, implementing and controlling the marketing effort.


#''Analyzing marketing opportunities''
#*Defining the market
#*Consumer assessment
#*Environmental assessment
#*Company resource assessment
#*Demand analysis and sales forecast
#''Identifying Market Segments and Selecting Target Markets''
#*Marketers set priorities for business opportunities, concentrating on market segments within which they expect to achieve the best overall economic return from their product or service. Market segmentation and target marketing are the processes used to isolate these opportunities. Market segmentation is the process of grouping customers based on their similarities
#*Market segmentation allows a company to:
#**Understand the different behavioral patterns and decision-making processes of different group of consumers
#**Select the most attractive segments or customers the company should target
#**Develop a strategy to target the selected segments based on their behavior
#''Developing marketing strategies''
#*Positioning
#*Develop new product, test and launch
#*Modification in the stages of product life cycle
#*Strategy choice depends on the strategy pursued by the firm
#*Consider changing global opportunities and challenges
#''Planning marketing programs''
#*Transforming strategy into programs
#*Managing Product Lines, Brands, and Packaging
#*Managing Service Businesses and Ancillary Services
#*Designing Pricing Strategies and Programs
#*Selecting and Managing Marketing Channels
#*Managing Retailing, Wholesaling, and Physical-Distribution Systems
#*Designing Communication and Promotion Mix Strategies
#*Designing Effective Advertising Programs
#*Designing Direct-Marketing, Sales-Promotion, and Public-Relations Programs
#*Managing the Sales force
#''Managing marketing efforts''
#*Organizing resources
#*Implementation
#*Control - Annual control, Profitability control, Strategic control

== Product Management ==

Product development: means offering new or improved products for present market. By knowing what the present markets needs, a firm may see ways to add or modify product features, create several quality levels, or add more types or sizes to better satisfy customers.

== The Product Life Cycle ==

Understanding the product life cycle is key to understanding how to market a product. Many marketing campaigns are won and lost because of knowledge of the product life cycle. If understood, the product life cycle will tell you how to market a product and how much money to spend. 

The product life cycle is divided into four parts; introduction, growth, maturity, and decline. These parts of the cycle follow a the curve you would normally expect, a long slow initial acceptance, a period of rapid growth, a long length of time where the product has fully saturated the market, and its eventual decline in obsolescence. 

The introduction phase of the product life cycle is the easiest to market, but the most resource and cost intensive. The target market is the early adopter. The problem is the early adopter is the most difficult consumer to convince. The early adopter seeks status. They crave new products, not because of usefulness, but sexiness. They want to feel this product they are buying into will bring them some amount of prestige among their constituents. 

The question then is, how do you market to them? Ad and event intensive sales are probably the most useful. Ads should focus less on the feature-benefits and more on the emotional aspect a product. One company that makes this distinction very clear in their advertisements is Apple Computers. When advertising for their personal computing products, they use the PC and Mac ads. They are entertaining and grab you attention, but focus mainly on the feature-benefit aspects of a product. The iPhone ads are very low on feature-benefits and high on the coolness factor. 

Growth is the period when everyone knows your product, but they aren't sure if they want to use it or not. Here it is important to stop focusing on the coolness of a product, and start focusing on the features and benefits of a product. At this point, the early adopters have shown the world how cool the product is and how cool they are for having one. The rest of you market wants to know why it is they should get one. If they don't see a real benefit, then they will move on to the next product. 

Maturity is the least expensive segment of a product's life cycle. When a product has generally been accepted, and the market has reached its final penetration, it has reached this point. Your marketing techniques should focus on maintaining customers and customer satisfaction. Your advertisements can focus on what you can do for them while they keep using you product.

Decline is the most difficult segment for most companies. Decline requires a lot of soul searching. If a company continues in the status quo, the product will decline and the company will continue to spend money on it. This is the recipe for disaster. A company has one of two paths it can take. Either, you can rebuild the product, or you must discontinue the product. 

If the company wishes to revitalize a product, it usually does so in one of two ways. The first is nostalgia marketing. You remind the consumer about the product and that it was always their. The second, is to refresh the product. You can create new promotional material, new packaging, new advertising or new features. 

The process of rebuilding a products market is often not feasible because of obsolescence. If this is the case, the company shouldn't just discontinue the product and leave the customer hanging. A well designed marketing plan should inform customers of the end of the products life cycle, and move them onto another of the companies replacement products.

== New Product Development ==

Every company must develop new products. New products development shapes the company’s future.  A company can add new products through acquisition or development.

The acquisition route can take three forms:-
*the company can buy other companies
*it can acquire patents from other companies
*it can buy a license or franchise from another company

The development route can take two forms:
*the company can develop new products in its own laboratories; or
*it can contract with independent researchers or new-product development firms to develop specific new products.

Competition is strong and dynamic in most markets. So it essential for a firm to keep developing new products-as well as modifying its current products-to meet changing customer needs and competitors’ actions. 

Booz, Allen and Hamilton have identified six categories of new products:-
1.	New-to-the world products
2.	New-product lines. New products that allow a company to enter an establishment market for the first time.
3.	Additional to existing product lines: New products that supplement a company’s established product lines (package sizes, flavor and so on.)
4.	Improvements and revisions of existing products: New products that provide improved performance or greater perceived value and replace existing products.
5.	Repositioning existing products that are targeted to new markets or market segmentation.
6.	  Cost reduction: new products that provide similar performance at lower cost

An Organized New-Product Development Process is Critical   
Identifying and developing new-product ideas and effective strategies to go with them is      often the key to a firm’s success and survival. New-product development demands effort, time and talent-and still the risks and costs of failure are high.

A new product may fail for many reasons. Most often, companies fail to offer a unique benefit or underestimate the competition.
Specific reasons are:
•	A high-level executive pushes a favorite idea thru’ in spite of negative market research findings.
•	The idea is good but the market size is over-estimated.
•	The product is not well designed.
•	The product is incorrectly positioned in the market, not advertised effectively or over-priced.
•	Development costs are higher than expected.
•	Competitors fight back harder than expected. 

Several other factors hinder new-product development
•	Shortage of important ideas in certain areas.
•	Fragmented markets
•	Social and governmental constraints.
•	Costliness of the development process.
•	Capital shortages
•	Faster required development time
•	Shorter product life cycle

===New Product Development Process===

1.	Idea Generation- is the idea worth considering? 
Ideas might come from Internal sources:  R & D, top mgt’ employees; External sources: Customers, competitors, distributors, suppliers, research institutes

2.	Idea Screening- Is the product idea compatible with company objectives, strategies?
Strength and weaknesses, Fit with objectives, Market trends, Rough ROI (Return on Investment) estimate
Ideas are evaluated against criteria; most are eliminated.
Errors: A GO-Error
A DROP-Error

3.	Concept development and testing-Can we find a good concept for the product that consumers say they would try?
Concept: who will use the product? What primary benefit should the product provide? When will people consume? 
Concept testing is the way of testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal. It can be presented symbolically or physically. Nowadays are designed and developed in a computer
Obtain: Reactions from customers, Rough estimates of cost, sales and profits

4.	Marketing strategy development-can we find a cost-effective, affordable marketing strategy?
Preliminary market strategy plan describe:
•	The target market, product positioning, and sales, share, and profit goals for the first few years.
•	Product price, distribution, and marketing budget for the first year.
•	Long-run sales and profit goals and the marketing mix strategy.

5.	Business Analysis 
Evaluating proposal’s business attractiveness - Will this product meet our profit goal? Management prepares sales, cost, and profit projections. As new information comes in, the analysis will undergo revision and expansion

6.	Product development
R&D or reengineering – developing physical product
Prototype development and testing

7.	Market testing
Not all companies undertake market testing. New-to the market products, high risk, high investment cost influence market testing.

Questions: have product sales met expectations? Or should we send the idea back for product development (stage 6)? how much market testing should be done, and what kind(s)? How many test cities? Which cities?  Length of test? What information? What action to take?

8.    Commercialization-Are product sales meeting expectations?
Contracting for manufacture or build or rent a full-scale manufacturing facility.
The company launching a new product must first decide on introduction timing, geographic strategy, target market prospects and introductory market strategy.
When? (introduction timing)
–	First entry
–	Parallel entry
–	Late entry
Where? (geographic strategy)
–	single location, 
–	a region, 
–	the national market or 
–	the international market.
To Whom? (target market prospects) 
–	Determining initial distribution and promotion
–	Early adopters, heavy users and opinion leaders
How? (introductory market strategy)
–	Developing action plan for introducing the product
–	Critical path scheduling (CPS) can be used

'''MANAGING PRODUCT LIFE CYCLE'''
Stages in Product Life Cycle
•	Introduction
•	Growth
•	Maturity
•	Decline

''Introduction''	
•	Price: High
•	Quality: Low
•	Number of versions: Few
•	Number of competitors: Few
•	Intensity of Competition: Little
•	Advertising: High to introduce
•	Distribution: Little

''Growth'' 
•	Price: High and dropping
•	Quality: Low and growing
•	Number of versions: Few and increasing
•	Number of competitors: Few and growing
•	Intensity of Competition: Growing
•	Advertising: Still high to expand
•	Distribution: Growing

''Maturity''
•	Price: Dropping and stabilizing
•	Quality: High
•	Number of versions: Many
•	Number of competitors: Many/dropping
•	Intensity of Competition: High
•	Advertising: Stable
•	Distribution: Maximum

''Decline''
•	Price:  Dropping
•	Quality:  High
•	Number of versions:  Dropping
•	Number of competitors: Dropping
•	Intensity of Competition: Depends
•	Advertising:  Dropping
•	Distribution:  Losing


===Product and Product Mix===
Product Planning refers to the systematic decision making related to all aspects of the development and management of a firms products including branding and packaging.
A product is anything that can be offered to a market to satisfy a want or need. Each product includes a bundle of attributes capable of exchange and use. Products that are marketed include physical goods, services, experiences, events, persons, places, organizations, properties, information, and ideas. 
The marketing manager needs to understand how markets develop overtime, in order better to plan and manage products, their life-cycles and their marketing strategies. 

''Differences between Goods and Services''
o	Goods are tangible. You can see them, feel them, touch them etc. 
o	Services are intangible. The result of human or mechanical efforts to people or objects
o	Sales of goods and services are frequently connected, i.e. a product will usually incorporate a tangible component (good) and an intangible component.


Product Levels
A product has five levels. 
•	Core benefits- the essential service or benefit that the buyer is buying. E.g. getting clean, rest and sleep,
•	Basic (generic) products - the basic product recognized as such. E.g. soap; room components – bed, bathroom,
•	Expected products - the set of attributes and conditions that the buyer normally expects in buying the product. E.g. smell, shape; clean bed, towel, quietness, etc
•	Augmented products - additional services and benefits that the seller adds to distinguish the offer from competitors. E.g.  anti-bacterial, moisturizing; fresh flowers, rapid services, etc 
•	Potential product- the set of possible new features and service that might eventually be added to the offer. that exceeds customer expectations. E.g.  Vitamins; candy on the pillow. 

===Product Classifications===
1) Durability and Tangibility
a) Non-durable goods
b) Durable goods 
c) Services
2) Consumer goods Classification: 
Classified according to shopping habits
a) Convenience goods
b) Shopping goods
c) Specialty goods
d) Unsought goods

3               Industrial Goods Classification
1) Material and parts 
i-raw material 
ii-manufactured materials and parts 
2) Capital items a) installations and b) equipment
3) Supplies and business services
	

===Managing the Product Mix===
If an organization is marketing more than one product it has a product mix. 
o	Product item--a single product 
o	Product line--all items of the same type 
o	Product mix--total group of products that an organization markets 

In a dynamic marketing environment, the product mix is not static. The effects of changing technology, evolving competition and changes in customer needs mean that is most important for an organization to find ways of keeping its product ranges fresh and interesting. This opens up a number of management problems, requiring planned procedures and strategies in order to:
o	retain and maintain existing products so that they continue to meet their objectives
o	modify and adapt existing products to take advantage of new technology, emerging opportunities or changing market conditions.
o	delete old products that are close to the end of their working lives and no longer serve their purpose
o	introduce a flow of new products to maintain or improve sales and profit levels and to form a firm foundation for tomorrow’s market.
Too many products could put an organization at risk, as product launch is resource intensive with no guarantee of success. At the other extreme, too many declining products could threaten the future of the business as sales and profits start to fall.

Elements of a Product Mix
Depth measures the # of products that are offered within each product line. 
Width measures the # of product lines a company offers. 

Product decisions
Marketers make product decisions at three levels: 
o	individual product decisions 
o	product line decisions 
o	product mix decisions

1. Individual product decisions are focused around the development and marketing of: 
o	Product attributes
o	Branding
o	Packaging
o	Labelling
o	Product support services.
 
2. The product line is comprised of a group of products that are closely related because: 
o	they function in a similar manner 
o	are sold to the same groups 
o	are marketed through the same types of outlet
o	fall within given price ranges
The product line length involves the number of items in the product line. It is greatly influenced by the company objectives and the resources.
Product line growth needs to be planned carefully and is extended in two ways: ‘stretching’ and ‘filling’.

Product line stretching
Downward stretch: Company initially located at the top end of the market and then ‘stretches’ downwards to pre-empt a competitor or respond to an attack. Launch of C-Class by Mercedes-Benz.
Upward stretch: Companies stretching upwards to add prestige to their existing range of products. Toyota with the Lexus.
Can be risky due to customer perception and inability of sales people to trade up and negotiate to the new level.
Two-way stretch: Extending product lines upwards and downwards to address different segments of the market.

Product line filling: Increasing the product line by adding more items within the present range of the line.
Reasons for product filling:
	Extra profits
	Satisfying dealers
	Using excess capacity
	Being the leading full-line company
	Plugging holes to keep out the opposition
Care needs to be taken that the line filling does not lead to cannibalisation and customer confusion.

3. Product mix decisions
Product mix or product assortment consists of all the product lines and items that a particular seller offers for sale to buyers.
Dimensions of the product mix
Breadth or width - Wide product mix containing many different product lines. E.g Unilever producing cooking oil, toilet soap, cosmetics etc.
Length - Total  number of products in the product lines
Depth - Different versions, such as size of packaging and different formulations.
Consistency - How closely related the various product lines are in end use, production requirements, distribution channels etc

Product mix strategies
•	Company can add new product lines, thus widening the product mix.
•	Company can lengthen the existing product lines to become a more full line company.
•	It can add more product versions of each product and deepen its product mix.
•	The company can pursue more product line consistency, or less, depending upon whether it wants to have a strong reputation in a single field or in several fields.

== Branding ==
Branding is an important element of the tangible product and, particularly in consumer markets. It is a means of linking items within a product line or emphasizing the new individuality of product items. Branding can also help in the development of a new product by facilitating the extension of a product line or mix, trough building on the consumer’s perceptions of the values and character represented by the brand name.

The common definition of brand, accepted by most marketers is that it consists of any name, term, design, style, words, symbols or any other feature that identifies the goods, and services of one seller from those of other sellers or that distinguish one product from another in the eyes of the customer.

Branding involves researching, developing and implementing brand names, brand marks, trade characters and trademarks. Branding is the art and cornerstone of marketing. Branding is a task that requires a significant contribution from marketing communications and is a long term exercise.

A successful brand is one which creates and sustains a strong, positive and lasting impression in the mind of a buyer. An organization’s approach to branding depends on its overall product mix and individual line strategy.

A brand is a complex symbol that can convey up to 6 levels of meaning
*Attributes eg. Mercedes suggests expensive, well-built, well-engineered, durable, high-prestige automobiles.
*Benefits attributes must be translated into functional and emotional benefits. The attribute "durable" could translate into the functional benefit.
*Values producer’s values eg Mercedes stands for high performance, safety and prestige
*Culture certain culture e.g. Mercedes represents German culture, organized, efficient, high quality
*Personality project a certain personality
*User the brand suggests the kind of consumer who buys a uses the product

Brand name: is any word or illustration that clearly distinguishes one seller’s goods from another. It can take the form of words or initials. 
Trade name: is the legal name of an organization, which may or may not relate directly to the branding of its products e.g. Procter and Gamble-do not display the company name, although it is shown on the back or side of the pack-Persil, Surf. 
Trade mark: is a brand, name, symbol or logo, which is registered and protected for the owners role use. Trademarks are valuable properties, as organizations invest much time and money in creating them and educating consumers about what they stand for e.g. coca-cola. 
Brand mark: is specifically the element of the visual brand identity that does not consist of words, but of design and symbols eg, McDonalds symbol (M)

'''The benefits of branding'''

#	'''The consumer'''
##	Easier product identification
##	Communicates features and benefits
##	Helps products evaluation
##	Establishes product’s position in the market
##	Reduces risk in purchasing

#	'''The manufacturer'''
##	Helps creates loyalty
##	Defends against competition
##	Creates differential advantage
##	Allows premium pricing
##	Helps targeting/positioning
##	Increases power over retailer

#	'''The retailer'''
##	Benefits from brand marketing support
##	Attracts customer
##	Helps differentiate the product from competitors

''Types of brands: -''

There are many forms of branding but primarily there are manufacturer, distributor, price and generic brands

Brand Equity: -
a) is an asset b) a degree of brand-name recognition perceived brand quality, strong mental and emotional associations, and other assets such as patents, trademarks and channel relationship. c) is a measure of a number of different components, including the beliefs, images and core associations consumer have about particular brand.Brand equity is the positive differential effect that knowing the brand by the buyer has on the seller.

== Packaging and Labeling ==

===Packaging===
Packaging includes the activities of designing and producing the container for a product. The package may include up to three levels of materials. E.g. Old spice aftershave 
# ''Bottle'' - primary package
# ''Cardboard box'' - secondary package
# ''Corrugated box'' - shipping package
Packaging is any container or wrapping in which the product is offered for sale and can consist of a variety of materials such as glass, paper, metal or plastic depending on what is to be contained.
Packaging is an important part of the product that not only serves a functional purpose, but also acts as a means of communicating product information and brand character. The packaging is often the consumer’s first point of contact with the actual product and so it is essential to make it attractive and appropriate for both the products and the customers need.
	
Due to the growth of mass merchants and self-service, manufacturers have come to realize the value of packaging as a marketing tool. Today it is a vital part of a firm’s product-development strategy; a package may even be an integral part of the product itself.
Packaging has become a potent marketing tool. Well-designed packages can create convenience and promotional value. 

Developing an effective package for a new product requires several decisions. The first task is to establish the packaging concept: defining what the package should basically be or do for the particular product. Decisions must include the following elements: size, shape, materials, color, text and brand mix. 

The packaging elements must also be harmonized with decisions on pricing and other marketing elements. Once the packaging is designed, it must be tested.

Factors that have contributed to packaging growing use as a marketing tool:-
•	Self service: An increasing number of products are sold on a self-service basis. The package attract attention, describe the products features, create consumer confidence and make a favorable overall impression
•	Consumer affluence: Rising consumer affluence means consumers are willing to pay a little more for the convenience, appearance dependability and prestige of better packages.
•	Company and brand image: packages contribute to instant recognition of the company or brand. It differentiates a product from competitors by its design, color, shapes and methods.
•	 Innovation opportunity: Innovative packaging can bring large benefits to consumers and profits to producers. Packaging can be a major element of new-product planning. 
•	Promotional tool: It serves as a promotional tool and is the final form of promotion the consumer sees prior to making purchase decision. 
•	Reminder: A package also serves as a reminder after a purchase is made.
 
Although packaging is expensive, developing effective packaging may cost several hundred thousand dollars and take several months to compete. Companies must pay attention to growing environmental and safety concerns about packaging. Shortages of paper, aluminum, and other materials suggest that marketers should try to reduce packaging. 

===Labeling===
Labeling is a particular area within the packing field that represents the outermost layer of the product.
Labels have a strong functional dimension, in that they include warnings and instructions, as well as information required by law on best industry practice. Labels state, at the very least, the weight or volume of the product. A bar code and the name and contact address of the producer. Consumer demand has also led to the inclusion of far more product information, such as ingredients, nutritional information and the environment friendliness of the product. Information about the extent to which the packing is made of recycled is also much more common now.    
Sellers must label products. The label may be a simple tag attached to the product or an elaborately designed graphic that is part of the package.
The label might carry only the brand name or a great deal of information. Even if the seller prefers a simple label, the law may require additional information.

== Free Audio Learning Resources ==

*[http://www.b2bmarketingpodcast.com/ Chief Marketing Officers from many of the world's largest brands explain the latest changes in their approaches to marketing], Series began March 2007

==Resources==


==See also==
* [[Lesson:Marketing to distributors]]
* [[Topic:Marketing Ph.D]]
* [[Topic:Marketing]]
* [[Marketing Strategy]]
* [[School:Entrepreneurship]]
* [[Tourism industry]]

[[Category:Business]]
[[Category:Principles]]
[[Category:Management]]
[[Category:Marketing]]
[http://www.wdalaw.com/trademark-registration.html trademarks]