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Chapter 11

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COMM 103
Gary Bisonnette

Chapter 11: Understanding the Marketing Effort Four Pillars of the Marketing Effort 1) PRODUCT (Value Proposition Attributes) • Broadens focus to include such additional items as branding, emotional bonding, peer acceptance, and post-purchase service support • Viewing product strategies as the development of value proposition attributes shifts the marketing team’s focus from simply building a better mouse trap to creating positive performance gaps b/w the company and its competitors. • Value Proposition Strategies: o Tangible Product Attributes + Intangible Product AttributesDevelop Positive Performance Gaps over Competitors • Value Proposition Attributes: o Brand Leveraging o Cost Advantages o Behaviour Linkage o Point-of-Sale and Post-Purchase Services & Benefits o Financial Incentives & Benefits o Tangible Product Attributes o Psychological & Social Benefits • The Power of Brands: o Companies spend millions on creating brand image o Brand which carries emotional ties & strong intrinsic value into a value prop. = greater chance of success o Ability of brand to move its customer market beyond awareness of the brand itself to that of a lvl of commitment unmatched by competitors o Brand Ladder: 1. Brand Awareness – organization communicates and market accepts that the brand offers distinctive features which set it apart from its competitors’ brands 2. Brand Preference – customers use this brand and recognizing the benefits, choose to repurchase the brand & concluding that the benefits of the brand (vs. competitors) 3. Brand Loyalty – “ “ 4. Brand Commitment – active & loyal customer base which continually places the brand at the top of their pre-determined purchase list resulting in their immediate purchase decision w/o considering other competitive options (need to successfully connect w/ customers on 3 lvls: product features, product benefits, emotional ties); substitute brands not result in same lvl of satisfaction 5. Ability to transition from awareness to commitment: value proposition demonstrates distinctiveness and creates emotional & psychological ownership w/ customers as the proven solution to solving their needs 2) PRICE (Maximize ROS) • Responding to Price Pressures: o Protect our Price Point: o Communicate Product Importance o Develop Brand Distinction o Develop Quality Differentials o Develop Unique Need Solution Features o Respond to Price Reduction Requirements: o Process Innovation o Greater economies of scale o Reduce quality o Reduce marketing effort • Ability to differentiate ourselves = price minimized as major point of comparison, thereby reducing its influence on decision-making process • Managing the Pricing Process: o What price to charge = critical to execution of marketing strategy & to overall success of marketing effort o Requires knowledge of both internal & external influences o Internally: must understand cost base, ensure charged prices enough to cover operating expenses & support investment needs • Key Fundamentals to Setting Price o 1. Identify cost structure components of product/service o 2. Research and identify cost structures of major competitors o 3. Analyze price elasticity of target market (understand price range which consumers will conclude as acceptable for the product/service offered); define consumer price threshold (minimum price point customers willing to pay) o 4. Degree of value proposition positioning strength which product/service commands in marketplace • Consider required margin which must be incorporated into pricing structure in order to ensure that additional organizational-based expenditure obligations (debt repayment, equipment & capital asset replacement, inflationary cost pressure, product-line growth initiatives & allowance for unforeseen contingencies) • Successful pricing strategies seek to maximize the return on sales on the product/service which ensures competitiveness, lies within customers’ acceptable price range, results in recognized value advantage b/w our product/service and those of our competitors & contributes to long-term wealth of org. 3) PLACEDISTRIBUTION (Connecting w/ Customers) • 1. Direct, Indirect, or Mixed Systems o Amount of involvement & control which an organization desires to maintain over the final sale of its products/services o Direct Distribution a.Connect directly w/ customers & handle final sale of its products/delivery of services without the assistance of a channel intermediary b.Orgs believe they can more effectively control the transportation & distribution costs associated w/ products c.Necessary to effectively educate customers on benefits of products/services & new technologies d.Single customer contact points e.Utilize multiple purchase option arrangements o Indirect Distribution a.Use of intermediary (broker, wholesale, retailer) to sell org’s products/services to customer b.Significantly greater market reach & support can be provided by leveraging the expertise, locations, facilities & experience of channel intermediaries c.Customer familiarity with use of product is sufficient enough that a personal or company- dedicated selling approach is not essential to overall value proposition strategy, and when cost of reaching customers is significantly higher than that incurred by using intermediary o Mixed Distribution System a. Both direct & indirect distribution options b. Web-based models • Product and/or Service Delivery Options o More and more companies seeking distribution approach which maximizes options which customers can look to use when purchasing product/service o Web-based strategies becoming more fully developed, technology advances pushing costs down & customer buying trends exhibiting non-traditional behaviours, addition of variety of purchase opportunity options is necessary to maintain customer interest and loyalty o Ex. “Pop-Up” stores – temporary storefronts, stocked with selected merchandise, designed to appeal to university-age demographic o Ex. catalogues o Ex. online shopping o Multi-channel distribution strategy – number of different channel connections through which customers can purchase a product/service • Importance of Sales Support within the Channel o Key decision associated with determining type of channel system lies in determining level of sales support o Positive buying experience = what really drives value o Ensure that customers are supported in the selling process by channel intermediaries o Distribution channel’s maximum value lies in the stages of alternative selection & supporting the purchase decision o Greater the complexity of the product, the greater lack of familiarity w/ the product category by the customer,
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