STEN 1000 Chapter Notes - Chapter 11: Value Proposition, Marketing Mix, Sales Promotion
20 Jun 2018
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CHAPTER 11: UNDERSTANDING THE MARKETING EFFORT
Four Pillars to the Marketing Effort (fig. 11.1)
Marketing Mix – an organization’s strategic and tactical decisions relating to its product/service
offerings, pricing, distribution, and marketing communication efforts and approaches
- Also known as 4 ‘P’s of Marketing: product, price, place, promotion
- ‘place’ ! distribution; ‘promotion’ ! communication
- The effort is on developing, demonstrating, and communication to our current and potential
customers why our product is the best solution to their need ! then ensuring it is available
for customer acquisition through a convenient delivery option and at a price point that
represents the best price/quality trade-off.
- Accurate marketing research, segmentation and target market analysis + effective marketing
mix ! Achieving a definitive “fit” between our product/service offering and the needs of our
customers.
1. Product Strategy – Value Proposition Attributes
- Not only functionality, packaging, component makeup
of product (product strategy) ! but also branding,
emotional bonding, peer acceptance, post-purchase
support (value proposition)
- The overall “experience” of the customer
- How the product/service offers the best solution for the
customer, in the face of competitive alternatives
- 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 between the company and its
competitors
Value Proposition strategies (fig. 11.3):!
Tangible product attributes + intangible product attributes ! develop positive
performance gaps over competitors
Value proposition attributes (fig. 11.4): brand leveraging, cost advantages, behaviour linkage,
point-of-sale and post-purchase services and benefits, financial incentives and benefits, tangible
product attributes, psychological and social benefits
The Power of brands
- A brand that carries emotional ties and strong intrinsic value ! improves the chance for
success
- Brand name communicates: quality, reliability, product consistency, peer acceptance
- Brand ladder (fig. 11.5): brand awareness ! brand preference ! brand loyalty ! brand
commitment
- Predetermined purchase list – the ranking of products/services that purchasers develop for
all the options available when making a purchase
decision
- Brand success (fig. 11.6) – distinctive product
attributes + distinctive product benefits +
distinctive emotional or psychological
commitment
" The ability to transition a brand from awareness to commitment is all about delivery the
value proposition in a way that demonstrates distinctiveness and
creates emotional and psychological ownership with customers as
the proven solution to solving their needs.
2. Pricing Strategy – Sales Maximization
- The ability to effectively differentiate ourselves will enable us to
minimize price as a major point of comparison, thereby reducing its
influence on the decision-making process.
- Responding to price pressures (fig. 11.7)
- Protect our price point:
- communicate price importance, develop brand
distinction. Develop quality differentials, develop unique need, solution
features
- Respond to price reduction requirements
- Process innovation, develop greater economies of scale, reduce quality, reduce
marketing effort
- Economies of scale – the cost advantage achieved producing goods/services
on a greater scale, but with fewer (average) input costs
Influence of Price – Purchaser Decision Criteria (fig. 11.8)
- Price is king
- Where there are generic product attributes (little
differentiation)
- Brand indifference (weak brand positioning)
- Impact of price on the decision-making process will be
lessened
- Where there is perceived or real product
uniqueness
- Perceived or real brand differences
Managing the pricing process – 4 key fundamentals before
finalizing price (fig11.9):!
1. Analyze your critical cost structure components
2. Understand your competitors’ cost structure
- the cost structure of your major competitors, and the extent to which they intend
to focus on price as a major point of comparison.
3. Analyze the price elasticity (driven by substitutability)
- Also, understand the price range that consumers will see acceptable for the
product/service you intend to offer. Define the consumer price threshold.
- Price elasticity – the change in demand that is anticipated to occur at various
price points
- Consumer price threshold – the maximum price the consumer is willing to
pay for a product or service
4. Determine the degree of value proposition strengths
- Enables marketers and managers to identify with premiums that can be allocated to
the base pricing model given core differentiators such as brand strengths, emotional
ties, psychological uniqueness, publicity initiatives, and other positioning-based
communication message tactics
When determining price – expenditure obligations: debt repayment, equipment and capital asset
replacement, inflationary cost pressures, product line growth initiatives, allowance for
unforeseen contingencies, profit expectation (incl. acceptable returns within payback period)
- Payback period – the length of time required to recover, or earn back, the cost of an
investment
" Successful pricing strategies seek to maximize the return on sales on the product/service we
offer in a way that ensures competitiveness, lies within our customers’ acceptable price
range, results in a recognized value advantage between our product/service and those of our
competitors, and contributes to the long-term wealth of the organization.
Document Summary
Marketing mix an organization"s strategic and tactical decisions relating to its product/service offerings, pricing, distribution, and marketing communication efforts and approaches. Also known as 4 p"s of marketing: product, price, place, promotion. Accurate marketing research, segmentation and target market analysis + effective marketing mix achieving a definitive fit between our product/service offering and the needs of our customers: product strategy value proposition attributes. Not only functionality, packaging, component makeup of product (product strategy) but also branding, emotional bonding, peer acceptance, post-purchase support (value proposition) How the product/service offers the best solution for the customer, in the face of competitive alternatives. 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 between the company and its competitors. Tangible product attributes + intangible product attributes develop positive performance gaps over competitors.
