Marketing Customer Value
Marketing Customer Value
Value
MODULE – 2
It is about putting the right product or a combination thereof in place, at the right time, and at
Philip Kotler: Product is anything that can be offered to someone to satisfy a need or a want.
Goods
Services
Places
Person Experience
Events
Consumer goods Based on Nature
a) Goods: physical goods are the tangible and physical materials. It has the quality of
possession and ownership e.g. rice, clothing
b) Services: these are intangible performances where the consumption and production point
is the same. One can use the service by paying for it but cannot claim ownership e.g.
hospital, banking
c) Ideas: every market offering includes the basic idea at its core. E.g consultancy firm
d) Experience: An experience good is a product or service that is difficult to evaluate in
advance in areas such as price and quality. If you sell an experience good, reputation,
customer loyalty and word of mouth is extremely valuable as these are the primary things
that customers can use to make purchasing decisions e.g. hair cut, legal services
e) Events: marketers promote time based events such as Olympics or movie awards
Persons: celebrity marketing has become a major business. Different film stars and
sportsperson have their own publicity and endorsement agent.
Places: places can be marketed to attract tourists industries etc. kerala-God’s own country
campaign. Heart of India (MP).
Organisations: organisations actively work to build a strong favourable image in the mind of
their customers. E.g. lets make things better
a) Pleasing products
b) Deficient goods
c) Salutary products
d) Desirable Product
Based on Social Benefits
a) Pleasing products: Pleasing products. These products have short run consumer benefits but high
degree of immediate gratification. These products may hurt consumers in the long run. Junk food
is tasty which gives you immediate satisfaction but in the long run it is bad for your health.
b) Deficient goods: any good or service that has neither immediate appeal nor long-term benefits.
E.g. Pager
c) Salutary products: Salutary products are the products that have low appeal but may benefit
consumers in the long run. These products do not provide immediate satisfaction hence the
degree of overall market acceptance of these products is limited. E.g. insurance
d) Desirable Product. a term used in a classification of products by societal marketers to describe any
good or service that gives high immediate satisfaction and long-term benefits. E.g. nutritious high
fiber cereals
Product Mix
Product Mix is the set of all product lines and items that a company offers for sale.
The Product Mix also called as Product Assortment, refers to the complete range of products
that is offered for sale by the company.
The product mix has four dimensions: Breadth, Length, Depth, and Consistency.
Breadth of a product mix
Depth of a product mix
Length of a Product mix
A product mix strategy has four dimensions
These terms in a product assortment help the firm to take a decision regarding the
addition or removal of the product items in the product lines
Product Life cycle
the market.
Product Management’s Role
Product life cycle stages
Internal sources – many companies give incentives to their employees to come up with workable ideas.
SWOT analysis – Company may review its strength, weakness, opportunities and threats and come up
with a good feasible idea.
Market research – Companies constantly reviews the changing needs, wants, and trends in the market.
Customers – Sometimes reviews and feedbacks from the customers or even their ideas can help
companies generate new product ideas.
Competition – Competitors SWOT analysis can help the company generate ideas.
Idea Screening
finding those good and feasible ideas and discarding those which aren’t.
Company’s strength,
Company’s weakness,
Customer needs,
Ongoing trends,
Expected ROI,
Affordability, etc.
In screening company must avoid two types of errors:
Drop Error It means that when a company drop a good idea, if a company dismiss many drop errors it
standards are too conservative.
Go Error It occurs when company allow a poor idea to move in development and commercialization.
Concept Development & Testing
The third step of the new product development includes concept development and testing. A concept is a
detailed strategy or blueprint version of the idea. Basically, when an idea is developed in every aspect so
as to make it presentable, it is called a concept.
All the ideas that pass the screening stage are turned into concepts for testing purpose.
The concept is now brought to the target market. Some selected customers from the target group are
chosen to test the concept.
Information is provided to them to help them visualize the product. It is followed by questions from
both sides.
Business tries to know what the customer feels about the concept. Does the product fulfil customer’s
need or want? Will they buy it when it’s actually launched?
Their feedback helps the business to develop the concept further.
Business Strategy Analysis & Development
Now that the business has a finalized concept, it’s time for it to analyse and decide the marketing,
branding, and other business strategies that will be used. Estimated product profitability, marketing
mix, and other product strategies are decided for the product.
All the branding and other strategies decided previously are tested and applied in this stage.
Test Marketing
Unlike concept testing, the prototype is introduced for research and feedback in the test marketing phase.
Customers feedback are taken and further changes, if required, are made to the product. This process is of
utmost importance as it validates the whole concept and makes the company ready for the launch.
Commercialization
Every minor and major decision is made before the final introduction stage of the new product development. The
company may spend in millions on advertising, sales promotion of new product in the first year.
Timing. To launch a new product market entry time is very important. If another company is near to launch the
product, company has three choices:
◦ First enter his product
Jingles: Jingles are musical messages written around the brand. Usually composed by professional songwriters and
musicians. Successful jingles are registered in the minds of the listeners. It was popular early when the primary
broadcast medium was radio. Convey brand benefits and product meaning in a fairly abstract manner. E.g. Amul-
“Utterly butterly delicious”
Packaging: Packaging is the activity of designing and producing containers or wrappers for a product. Packaging must
achieve a variety of objectives. Some of them are:
◦ Enhance aesthetic value
➢Risk reducer
➢Symbolic device
➢Signal of quality
To Manufacturers
➢Branded House
➢House of Brands
➢Endorsed Brands
➢Hybrid Brands
Branded House
Ex. Apple,
Benefits
•The master brand doesn’t have to spend time and money differentiating
each sub-brand’s strategy. Although the target markets might differ, the
overall brand identity remains consistent.
•Sub-brands fully benefit from the reputation of its master brand, and sub-
brands help build brand equity for the master brand.
•Master brands can better target their communication with consumers by
addressing specific and unique pain points through the niche sub-brands.
House of Brands
Ex: P&G,
Benefits
•Individual brands can compete under a master brand.
•Negative publicity doesn’t necessarily harm the other brands or the master
brand.
•Marketing the endorsed brands can be easier when using similar brand
identities.
Hybrid Brands
•Sub-brands acquired by master brands gain resources while potentially keeping their
brand identity and brand equity, or gaining those of the master brand.
•It gives master brands and sub brands the option to have the best of both worlds in a
merger or acquisition.
Brand positioning
Brand positioning refers to the “target consumer’s reason to buy your brand in preference to
others. It ensures that all brand activity has a common aim; it is guided, directed, and delivered by
the brand’s benefits/reasons to buy; and it focuses on all points of contact with the consumer.
Objectives:
➢Relevance
➢Differentiation
➢Credible
3C’s of Positioning
Company
2. What are the needs of the various customers? (again, this is on a segment basis)
4. How much do they buy? (ultimately, your market has to be big enough to support
your company in achieving its growth goals)
Competitors
1. What are competitors offering (and not offering) that your customers need?
2. What can competitors not easily offer that you might offer?
3. How do competitors go to market (sell, service, market) that does not connect well
with customers?
Steps To Effective Brand Positioning
Brand equity
The commercial value that derives from consumer perception of the brand name of a
particular product or service, rather than from the product or service itself.
Sources of Brand Equity
➢Market research
➢Quality
➢Marketing Mix
➢Brand extension
➢Customer opinion
Elements of Brand equity/ factors influencing brand
equity
Packaging
Packaging
Packaging refers to the various activities that are carried out for designing and developing a
suitable package for a product, which may be in the form of a container, wrapper, box, tube,
plastic bottle, tetra pack or tin etc.
Advantages of Packaging
Labeling is done on the product packaging and presents all important information about the
product and its manufacturer. It is often made part of the product package but, if necessary,
the information can also be printed on the product itself.
A label display information of the following
➢The product’s manufacturer
➢The place of manufacture of the product
➢Ingredients of the product
➢Directions to use the product
➢The precise date on which the product was made and the expiry date of the product
➢Price of the product
➢Name of the brand
➢Net quantity of contents
Types of labels
➢Brand labels: The name of the brand appears on the brand label
➢Grade labels: The quality or standard of the product is displayed on the grade label.
➢Informative labels: Information about the contents of the product, care instructions,
directions for use, price, performance, manufacture date, expiry date and any
information related to precautions that need to be taken while using the product are
displayed here.
Pricing
Price is an amount for which a product or service is exchanged regardless of its value..
Pricing is the process whereby a business sets the price at which it will sell its products and
services, and may be part of the business's marketing plan.
Objectives of Pricing
Importance of Pricing
➢Price Communicates Value
➢The price you set affects your profit margin per unit sold, with higher prices giving you a higher profit
per item if you don’t lose sales.
➢The price you set makes you more or less competitive in the marketplace, affecting your share of the
market’s volume. Some businesses lower prices temporarily to gain market share from competitors, who
can’t respond to and meet a price decrease
➢Some businesses price products or services at or below cost to get customers into their businesses,
who then spend more money elsewhere
Factors Influencing Pricing Decisions
Steps in Price Setting
Step 1: Selecting the Pricing Objective
The company first decides where it wants to position its market offering. The clearer a firm’s objectives,
the easier it is to set price. Five major objectives are:
Survival
Maximum current profit
Maximum market share
Maximum market skimming
Product-quality leadership
Step 2: Determining Demand
Each price will lead to a different level of demand and have a different impact on a company’s
marketing objectives. The normally inverse relationship between price and demand is captured in a
demand curve. The higher the price, the lower the demand.
Most companies attempt to measure their demand curves using several different methods.
Surveys
Price experiments
Statistical analysis
Step 3: Estimating Costs
For determination the price of product company should estimate the cost of product.
Variable and Fixed Cost : Price must cover variable & fixed costs and as production increases costs may decrease.
The firm gains experience, obtains raw materials at lower prices, etc., so costs should be estimated at different
production levels.
Differential Cost in Differential Market : Firms must also analyze activity-based cost accounting (ABC) instead of
standard cost accounting. ABC takes into account the costs of serving different retailers as the needs of differ from
retailer to retailer.
Target Costing : Also the firm may attempt Target Costing (TG). TG is when a firm estimates a new product’s desired
functions & determines the price that it could be sold at. From this price the desired profit margin is calculated.
Now the firm knows how much it can spend on production whether it be engineering, design, or sales but the costs
now have a target range. The goal is to get the costs into the target range.
Step 4: Analysing Competitors’ Costs, Prices, and Offers
The firm should benchmark its price against competitors, learn about the quality of competitors offering, & learn
about competitor’s costs.
Step 5: Selecting a Pricing Method
Various pricing methods are available to give various alternatives for pricing.
Cost Oriented Pricing: Full cost pricing or Direct (or marginal) Cost Pricing
Competitor Oriented Pricing: Going-Rate Pricing or Competitive Bidding
Marketing Oriented Pricing: The price of a product should be set in line with the marketing strategy.
Step 6: Selecting the Final Price
Pricing methods narrow the range from which the company must select its final price. In selecting that price, the
company must consider additional factors.
Psychological pricing,
Impact of other marketing activities
Company pricing policies
Gain-and-risk-sharing pricing
Impact of price on other parties
Other Pricing methods
Target return
pricing Premium
pricing
Other
Pricing
Methods
Going rate
Affordability
pricing
pricing
Perceived
value pricing
New product
Pricing
Product Mix
Pricing Strategies
Strategies Discriminatory
in Pricing pricing
strategies
Discount
Pricing Strategy
Psychological
pricing
A. Price skimming
New product
Pricing
B. Price penetration
A. Product Line Pricing
B. Optional Product : Audi car, you may choose to order a GPS system
C. Captive Product Pricing: Examples for captive product pricing are
razor blade cartridges and printer cartridges.
Product Mix
Pricing Strategies D. By-product Pricing: pulp . Remains of main product can be an
important raw material for cosmetic industries for their medicinal
properties.
E. Product Bundle Pricing: The best example is probably a menu at
McDonald’s: you get a bundle consisting of a burger, fries and a soft
drink at a reduced price. A
A. Quantity discounts
B. Seasonal discounts
Discount
Pricing Strategy C. Promotional discounts
D. Cash Discounts
A. Prestige pricing: pass it on as a premium product.
B. Odd pricing: In this type, the price is set up slightly lower than a
rounded number
C. Price lining: budget cloth line with all items priced less than Rs. 500.
D. Promotional pricing: In this type, a price is temporarily reduced to
Psychological
pricing grab the attention of customers.
E. Multiple pricing: In this type, items are bundled together, like two for
Rs. 500 rather than Rs. 250 per item.
F. Loss Leader Pricing: A loss leader (also leader) is a pricing strategy
where a product is sold at a price below its market cost to stimulate
other sales of more profitable goods or services.
A. Customer-segment pricing- museums often charge a lower admission fee to
students and senior citizens.
B. Product-form pricing – Different versions of the product ‘are priced
differently but not proportionately to their respective costs
C. Image pricing –A perfume manufacturer can put the perfume in one bottle,
Discriminatory at Rs. 50. It can put the same perfume in another bottle price it at Rs.200.
pricing D. Channel pricing – Coca-Cola carries a different price for fine restaurant, a
strategies
fast-food restaurant, or a vending machine.
E. Location pricing –A theatre varies its seat prices according to audience
preferences for different locations.
F. Time pricing – Prices are varied by season, day, or hour. “early bird”
customers. Hotels charge less’ on weekends. lower rates on unsold inventory
just before it expires.