ESSENCE OF

NICK A. LANSANG JR.

Faculty
Sr. Researcher and Lecturer
Marketing Management (Executive MBA) Strategic Marketing
Ateneo Graduate School of Business (AGSB) Ateneo Center for Continuing
Rockwell, Makati City Education (CCE)

INTRODUCTION

What is
Marketing and
what is its role
in Business
Management?

What most normally know.

sedatedworld.com

most marketing graduates and marketing practitioners know

Most of the time ,

they know only
about promotion
activity oriented

What most business organizations know

just one of the functions

It can actually be complex

auto-seo-system.com

quite complex

MBT Marketing
107 SE Washington St.
Suite 635 Portland, OR 97214

and tedious too

www-rohan.sdsu.edu

It can be this simple

sinergikonsultanmanajemen.wordpress.com

Some say it is now this way

bee-social.com

Others say it is still as holistic as it should be

juliaburman.com

What if Marketing has just

died?

its okay, I will just look for another racket

perhaps business modeling or strategic
planning

WHAT IS MARKETING?

15

Is Marketing Selling?
From:

Managers sometimes
think of marketing as
the art of selling
products, but many
people are surprised
when they hear that
selling is not the most
important part of
marketing! Selling is
only the tip of the
marketing iceberg.

Selling

Marketing

16

Marketing is much more than Selling

There will always, one can assume, be need
for some selling. But the aim of marketing is
to make selling superfluous (unnecessary).
The aim of marketing is to know and
understand the customer so well that the
product or service fits him and sells itself.

by: Peter Drucker

Ideally, marketing should result in a

customer who is ready to buy. All
that should be needed then is to
make the product or service
available.

So what is Marketing then?

Marketing is the process of

continuously and profitably
satisfying target customers
needs, wants and expectations
better (more superiorly) than
competition.
by Josiah Go

18

Marketing Is A System
3) Develop/Improve & Sell the Product
1) Gather information

Marketer

Market
2) Provide Information

4) Buy the Product & Provide Revenues

By: Ruby Alminar (Miriam College)

Marketing Success =
(STP) + (the base P) + (the 3 Support Ps)

The Best of Marketing Rx

Ned Roberto w/ Ardy Roberto

20

Integrating the Marketing Mix

Marketing Now: Sequence of 3 Processes
1. Process of STP (Segmenting > Targeting > Positioning)
Start marketing from where our target consumers are, that is, with their priority

values, and not from where we are as marketers

2. Process of creating the Base P (Product)

Thats the product created to embody the uncovered consumer priority values
3. Process of delivering the Product via the Support Ps

(Price, Placement and Promotion)

all in support of bringing and delivering the base P to the target consumers

Dr. Ned Roberto & Ardy Roberto

Marketing Rx, Inquirer, 06 Feb 09

Segmenti
ng
Identifying all
possible
segments

Packagi
ng

Profiling

Targeting

Determining the
most vulnerable
and profitable
segment

Choosing the
primary target
market (PTM)

Product
Development

Product

Product
Design/
Conceptualizat
ion

Pricing

Uncovering
Consumer insight

Value
Offering
Relevant &
Distinct Unique
Selling Proposition
(USP)

Placement

Branding
(Brand DNA)

Consumer
Insighting

Brand
Positioning

The Marketing Process

Promotion
Integrated Marketing
Communication (IMC)

By: NAL

There is no such thing as

loyalty to the brandbut
loyalty only to the value of
the brand

Marketing Strategy Map

By NAL

Satisfied
Target
Market

Superior
Product/
Service
Effective &
Sufficient
Promotion
Excellent
Market
Insighting

Excellent
Strategy
Formulation

Sales
& Profit

Growth &
Expansion

Reasonable/
Affordable
Price
Extensive
Availability

Excellent
Selling
Procedure

Excellent
Distribution
System

Efficient
Production
Excellent
Manufacturing
System

Trained, Motivated, Dedicated, Result Oriented, Satisfied Work Force

24

Marketing Vs. Selling

Selling
Product-centered
Pre-occupied with

converting the product

into cash
Persuading
Can only start when the
product becomes
available

Marketing
Customer-centered
Pre-occupied with

satisfying the customers

Convincing
Starts even before the
product start to exist

25

Traditional Organization Chart

CUSTOMERS

Top
Management
Middle
Management

U
S

S
T

Frontline People

Middle
Management

Top
Management

CUSTOMERS

Frontline People

R
S

E
R
S

Modern Customer-oriented Organization Chart

26

Role of Marketing

Where is Marketing in
Business Equation?

27

Profit = Sales - Expense

Where is
Marketin
g?

Hence, one has

to be sure that
a marketing
strategy will
work
otherwise,
everything
would just be a
waste
including you
and where do
we throw the
waste?

29
What is the use of
personnel if there is
nothing to do?

Accounting

HR/OD

What will Accounting

account if there are no
transactions?

Marketing

Profit

Production

What information will

IT process and
provide if there are no
business activities?

Sales

Revenues

IT
Customers

What will Finance fund

if the business does
not expand?

Finance

What will Production

produce if there are no
demand?

Supply
Chain
What will Supply
Chain supply if there
are no production
requirements?

Role of Marketing in
Value Creation

SEGMENTING AND
SEGMENTATION

SEGMENTING:
IDENTIFYING ALL POSSIBLE
SEGMENTS TO TARGET FOR THE
PRODUCT/SERVICE

32

Segmentation: Market Focus

Definition: Dividing the total market into different groups that
have their respective homogenous character traits
Market Segment: consists of a group of customers who
share a similar set of needs and wants.

Micromarketing: segments, niches, local areas, individuals

(ethical pharmaceutical marketing)

33

Why Segmentation ?
Better serving customers needs and wants
People have different needs and/or changing needs

The computer manufacturer Dell, for instance, does not organize its

website by product groups (desktops, notebooks, servers, printers etc), but

by customer groups (privates, small businesses, large businesses,
public/state organizations).

Companies have limited resources

Opportunities for growth

34

Bases for Segmentation

Geographic Segmentation
Nation, states, regions, cities, neighborhood
Demographics
gender, age, income, occupation, education, religion,
race, social class
Psychographics/personality
Attitude, behaviors
Introvert, extrovert, pessimist, optimist
Active, adventurous, outgoing, experimental
Nave, conservative, cautious, studious

The following table shows the most important traditional variables

for segmentation.

Consumer Markets

Industrial Markets / Business Markets

Geographic:
Land or region
Rural or metropolitan area
Demographic:
Age, sex, marital status
Income, occupation, Education
Religion, nationality, ethnical
group
Psychographic:
Social status
Lifestyle-type
Personal type
Behavioral:
Intensity of product use
Brand loyalty
User behaviors

Industry
Intermediary or final consumer
Type of corporation (public or
private sector)
Size of corporation
Geographical location
Intensity of product use
Organization of purchasing
function
Centralized or decentralized
Purchasing policies, rules and
criteria

Since customer orientation of organizations is growing, segmentation as the

basis for establishing customer relationships and customer loyalty gains
importance. In this context, the elements of the loyalty ladder model could
be used as segmentation variables:

Marketers have to choose those variables that are relevant for segmenting the
market for a particular product. The basic rule is to focus on a limited number of
important variables. To segment the market into too many small, slightly distinct
segments would require splitting up the marketing budget into too many ineffective
chunks. Such varied marketing activities in the diverse segments could confuse
customers and would lead to cannibalization effects.

37

In choosing the PTM/Segment

1. The segment should be big enough to
be profitable
2. There should be a distinct segment need
for the product or service
3. The segment can identify themselves
with the product/brand segment owning
the brand
4. The segment is vulnerable to switch to
another brand/product

38

Identifying the right segment:

Combine all bases for segmentation to concretely define the
segment:
Young, active college girls
living in the city and
belonging to AB socio-economic
class who love to go out and
hang around with friends.

the more specific the better

39

What can be a good segment to target for a

toothpaste product considering the highly
competitive market situation?

40

Examples
Luxury Cars
Mercedez Benz
Senior Top Executives

BMW
Young Achievers/Businessmen
Volvo
Conservative Senior Executives/Businessmen

Axe Deocologne
Young men
Poten-Cee
Smokers

CONSUMER INSIGHTING

Once you know who you are talking to,

how do you Engage & Connect them?

Consumer Insight
is The Key

What is Customer insight ?

Knowledge about customers needs,

characteristics, preferences and behaviors
based on analysis of qualitative and
quantitative data. Specific insights can be
used to inform marketing tactics directed at
groups of customers with shared
characteristics

From Dictionary.com
1. an instance of apprehending the true
nature of a thing, esp. through intuitive
understanding
2. penetrating mental vision or
discernment; faculty of seeing into
inner character or underlying truth.

Insight is a great word. Marketing insight sounds valuable. Good to have, and
worth paying a consultant or agency if we cant find one ourselves. An insight is
going to help us succeed, to beat the competition. But what is an insight? How can
you be sure youve got one?
Next time you think youve got an insight, check it againsst this definition :

An insight is a fresh and unexpected perspective.

It gets the following reaction from those involved:
Wow, yes, youre right. Id never thought of it
like that before, but youre absolutely right. You
really understand Whats going on here.
From BuildBrands
Achieving that kind of reaction is not easy. It means you have to think of something
that no one has thought of before. Or. More accurately, that no one else in your
market has thought of before.
It requires that you look at things differently. For that reason, most of the great
sources of insight inspiration are from outside of your category, and often outside
of your (geographic) marketplace

Uncovering Consumer Insight

Understand thoroughly your target market
What is the single factor that will compel them to at least

try a new/different product?

Find the answers to the following:
What makes them happy and what will make them happier?
What are their pre-occupation? What do they miss or long for?
What do they desire?
What DIABs (Disappoints, Irritates, Annoys, Bothers) them?
What their fears or worries or apprehensions are?
What is their primary consideration in using their current product?

What will make them shift to another product or brand?

The Marketing research Process.

Marketing research is gathered using a systematic approach. An
example of one follows:
Define the problem. Never conduct research for things that you would 'like' to know.
Make sure that you really 'need' to know something. The problem then becomes
the focus of the research. For example, why shoppers are not buying in our stores?
How will you collect the data that you will analyze to solve your problem? Do we
conduct a telephone survey, or do we arrange a focus group?
Select a sampling method. Do we use a random sample, stratified sample, or
cluster sample?
How will we analyze any data collected? What software will we use? What degree
of accuracy is required?
Decide upon a budget and a timeframe.
Go back and speak to the managers or clients requesting the research. Make sure
that you agree on the problem! If you gain approval, then move on to step seven.
Go ahead and collect the data.
Conduct the analysis of the data.
Check for errors. It is not uncommon to find errors in sampling, data collection
method, or analytic mistakes.
Write your final report. This will contain charts, tables, and diagrams that will
communicate the results of the research, and hopefully lead to a solution to your
problem. Watch out for errors in interpretation.

Primary - Marketing Research

Primary marketing research is collected for the first time.

It is original and collected for a specific purpose, or to solve
a specific problem. It is expensive, and time consuming, but
is more focused than secondary research. There are many
ways to conduct primary research. We consider some of
them:
1.
2.
3.
4.
5.
6.
7.

Interviews
Mystery shopping
Focus groups
Projective techniques
Product tests
Diaries
Omnibus Studies

Secondary - Marketing Research.

Secondary marketing research, or desk research, already exist in one
form or another. It is relatively cheap, and can be conducted quite quickly
.However, it tends to have been collected for reasons other than for the
problem or objective at hand. So it may be untargeted, and difficult to use to
make comparisons (e.g. financial data gather on Australian pensions will be
different to data on Italian pensions). There are a number of such sources
available to the marketer, and the following list is by no means conclusive:

Trade associations
National and local press Industry magazines
National/international governments
Websites
Informal contacts
Trade directories
Published company accounts
Business libraries
Professional institutes and organisations
Omnibus surveys
Previously gathered marketing research
Census data
Public records

Market Research Helps You To:

Know about your market size, segmentation and industry

drivers
Determine which way the market is heading
Be aware of recent industry trends or key events
Reach the most suitable target market
Learn about your competitors and their market strategies
Increase sales by in-depth into your clients needs, values,
lifestyles, or your consumers buying behavior, or
demographics
Screen new market niches for business opportunities
Decide on diversification, expansion in other countries or new
distribution channels
Gain crucial, customized information so as to make firm
decisions

Deep Consumer Insights for a Financial Institution

By BCG

A New Positioning Strategy for a Health Care Player

Learn how customer research uncovered the best way to

educate and raise awareness about a pharmaceutical
product. BCG

VALUE PROPOSITION

Defining the Value Proposition

What unique relevant and compelling value can you

provide to your target market?

Is it really significantly valuable to the target market?
State clearly the unique or competitive benefit the you
want to provide to your target marketnormally it is a
description of what your target market would get or
realize.

Value =

Benefit/Cost

Value
Point-of-Difference Questions
1. Is the key benefit important to
our customer?
2. Can we deliver the benefit?
3. Can we own this point of
difference over time?
4. Is this point of difference
sustainable over our
competition and their directions?

Relevant
Point-of-Parity

Distinct
Point-of-Difference

Examples of Value Proposition

1. Worry-free effective first-aid wound treatment

for the kids

2. Sense of achievement at an early age by
driving a sleek, sporty luxury car
3. Carefree atmosphere while enjoying delicious,
home-cooked meal
4. Accurate and affordable diagnostic test result
at the comfort of your home

PRODUCT STRATEGY
AND BRANDING

59

Product Levels
Core Benefit: the value to the customer
Basic Product: the tangible product
Expected Product: attributes and conditions of the product
Augmented Product: exceeds customer expectation
Potential Product: future product to satisfy future demand

60

Types of Products
Consumer: used/consumed directly by the customer
Durable
Non-durable
Fast moving consumer goods
Commodities: price and availability

Can you brand commodity

Industrial: use to produce consumer goods

Product Development
What features and attributes the product should have to

deliver the value proposition?

What processes or systems should be in placed to
support value delivery?
What improvements should be done in an existing
product or service to provide the unique benefit you
want the target market to realize?

62

Product Decisions
Product type (what need to address/satisfy?)
Product line (what form or category?)
Product depth (what variances?)
Branding
Packaging
Container/Pack Design
Container/Pack Shape and Size
Container Material
Label Design/Text/Color

Benefits

Feature

physical

security

social

personal

spiritual

.A brand is essentially a promise from a

company to deliver a predictable
customer experience.

65

What is a Brandname?
Product name
Product Identity
Equity
Franchise
Company/Organization

66

Considerations in Branding
Easy to pronounce
Easy to remember
Easy to write
No bad meaning in other language
Should convey or connote the products:
Use (Mr. Clean)
Advantage (Havit All)
Benefit (Safeguard)

67

Branding Strategies
Uni-branding - One brand for several products
Company name branding
Family/Mother Branding
Brand Extension
Multi-branding
Distinct brand per product

68

Which is better?
Uni-branding
Effective if there is a strong common attribute among the products
Multi-branding
Different product line
Different attribute or benefit
Different image

69

Examples
Not Quite Effective Uni-branding
Green Cross (alcohol to bath soap)
What else?
Effective Uni-branding
Johnson & Johnson (Baby-care line)
San Miguel (beer line)
Dove (mild personal care product line)
Betadine?

BRAND DNA

What is

?
Unique genetic profile made up of
specific attributes, intricately
balanced which act instantaneously
on the minds of the customers

Characteristics of Brand DNA

Brands seem like complex organisms, partly because each

one of these basic attributes can act in a different way on

each customer or group in the brand's environment (the
Brandscape.)
But, like a biological organism, Brand DNA must exhibit a
certain baseline simplicity in order to be intelligible to
customers and to evolve by rapid transmission from host to
host.
In other words, there must be a compelling story to be told
about the brand if people are gong to talk about it.
BrandSequencing makes sure not only that the story is
compelling, but that it's the right story in the first place.

5 Dimensions of Brand DNA

Brand Category: What exactly is it? What category

does it fit to?

Brand Character: Whats it look and feel like?
Brand Benefit: Whats the primary benefit to me?
Brand Difference: What makes it stand out against

competitors?
Brand Credibility: What allows me to believe the

claims made about the brand?

A Typical Brand DNA Diagram

Category
Difference

Character
BRAND

Credibility

Benefit

Example of Brand DNA Diagram

Category
Luxury Car

Difference

Character

Powerful Engine

BMW
Credibility
German
Technology

Sleek & Sporty

Benefit
Status Symbol

POSITIONING

77

Positioning
Brand Position in the mind. What step in the brand

ladder in the mind?

Top-of-mind exercise
Soft drinks
Cellphone
Search engine
Lap top computer

Brand X
Brand Y
Brand Z

Positioning
What you want your target market
to perceive about your product

Your target markets

understanding and acceptance of
your product value proposition.

79

How to Position Your Product

According to target segment
Secret (Exclusively for women)
SanMig Light
Unique product offering (USP)
Johnson Baby Shampoo (For everyday shampoo)
Versus Competition (Repositioning)
Avis rent a car (Were no.2 so we try harder)
Volkswagen (Small is beautiful)
Pepsi (The Taste of the New Generation)
7-up (The Uncola)
C2 (The healthy alternative to soft drinks)

How to Position Your Product

According to
target segment

According to
Product Benefit
(USP)
Versus Competition
(Repositioning)

Trout and Ries suggest a six-step question

framework for successful positioning:
1. What position do you currently own?
2. What position do you want to own?
3. Whom you have to defeat to own the
position you want.
4. Do you have the resources to do it?
5. Can you persist until you get there?
6. Are your tactics supporting the
positioning objective you set?

82

Positioning Line Examples

Betadine Wound Solution
Walang hapding paggaling
Betadine Feminine Wash
Your extra protection During susceptible (wet) days
Poten-Cee
Easy-to-swallow, no sour after-taste
Betadine Garle
Prophylactic treatment for every dental procedure
Glutaphos
The Brain Vitamin

The marketer would draw out the map and decide upon a label for each
axis. They could be price (variable one) and quality (variable two), or
Comfort (variable one) and price (variable two). The individual products are
then mapped out next to each other Any gaps could be regarded as
possible areas for new products.

Brand Positioning
Reference: Scott M. Davis,
Brand Asset Management : Driving Profitable Growth Through Your Brands

A well-crafted brand positioning has three

primary components:
A definition of the target market you wish to

pursue
A definition of the business your company is in
or the industry or category it competes in
A statement of your point of difference and key
benefits

85

One Sentence Positioning Statement

For___________________ who

(PTM demographic) __________________

(PTM psychographic)

_____________ is the ____________________

(brand)
(competitive category)
that provides/makes/gives/offers/brings/etc.

___________________________
(distinct benefit)

86

Example:
For upper middle-class men who
demand the most of themselves,
Boardroom is the fitness center
that provides personal trainers who
bring the most vigorous work-outs
directly to office or home

Target Segment Questions

1. Would the customers we seek recognize themselves

as part of this target market?

2. Is the target market both identifiable and reachable?

3. Is it clear why this target market would be interested

in our point of difference?

4. If we have not served this target market before, why

do we want to serve them now?

Brand Positioning Guiding Principles

A brand's positioning should be updated every

three to five years, or as often as needed to

update the company's overall growth strategy.
Positioning should drive all of an organization's
brand strategies, as well as revenue and profit
streams.
Senior management has to lead the charge in
implementing a brand's positioning.
Employees, not advertising agencies, bring a
brand positioning to life.
A strong brand positioning is customer driven
and fits with customer perceptions of the brand.

TAGLINE

 A phrase or a short statement that summarizes the

positioning statement
What you normally indicate immediately below or
beside the brand name in any communication
material
Should sell the brand right away to the target
market
Should clearly communicate the distinct
advantage of the brand

Bad Taglines
Kojie.San

Let the fantasy become reality

Accenture
High Performance. Delivered
The Suites at Mount Malarayat
An ACTIVE Group Resort Community
East West Bank Credit Card
The Credit You Deserve
Trevoca
Do More in Life

Good Taglines:
Panasonic Inverter

Save up to 60% Energy

Medic
One Step Pregnancy Test
Cherifer
The only pediatric vitamin with Chlorella Growth
Factor
Mercury Drug
Gamot ay Siguradong Bago
Olay
Healthy fairness with vitamin C

Bad or Good Tagline?

Century

Real Estate With Passion

Philippines:
7,107 islands beyond the usual
Mang Inasal
Unlimited Rice on All Paborito Meals
Light Residences
Home is where the shops are
Motostar
Pinoy Pride (Manny Pacquiao endorser)
Audi
Vorsprung durch Technic

PRICING

Why do we price a product?

To maximize profit
Profit = Sales Expense
Sales = Units x Price

95

What is pricing?
The amount we pay for the over-all value we derived from

consuming/using the product or experiencing the service

Why is it that a glass of coke in the cafeteria is much

cheaper than the glass of coke in a 5-star hotel? Arent

they the same cola?

96

Major Pricing Methods

Cost Plus Pricing
Cost + Margin
Profit Objective Pricing
Market Demand
Competitive Advantage
Price Skimming
Distinctiveness
Demand Size and Potential

97

Basic Pricing Strategies

Higher Pricing: better quality
Premium Pricing (Signature Brands;

Mercedez)
Image Pricing, ex.?
Parity Pricing: same price
At least one added value
Lower Pricing:
At least the same quality

98

Mark-up Pricing
Unit cost = Variable Cost + (Fixed Cost/Unit

Sales)
Markup Price = Unit Cost/(1-Desired Return on
Sales)
Example:
Variable Cost Per Unit: P10.00
Fixed Costs
: P300,000.00
Expected Unit Sales :50,000
Markup Target
:20%
Unit Cost = 10 +(300,000/50,000) = P16.00
Mark-up Price = 16/(1-0.2) = P20.00
99

Target-Return Pricing

Yields target ROI

Formula: Target-return Price = Unit Cost +

(Desired Return x Invested Capital/Unit Sales)

Example
ROI Target: 20%
Total Investment: P1,000,000
Unit Cost: P16.00
Unit Sales: 50,000
Target-return Price = 16+(0.20 x
P1,000,000/50,000) = P20.00
100

Break-even Volume
Total Revenue = Total Cost
Break-even Volume Formula = Fixed Cost/(Price-

Variable Cost)
Example
FC: P300,000
Price: P20.00
Variable Cost: p10.00
Break-even Volume = 300,000/(20-10) =
300,000/10 = 30,000 units
101

Perceived Value Pricing

Customers perceived value is made up of

several elements:

Product Performance Image

Channel Deliverables
Warranty Quality
Customer Support
Softer Attributes (suppliers reputation, trustworthiness

and esteem)

Companies must deliver the value promised by

their value proposition

Marketing-mix elements, such as advertising and
sales force, are used to communicate and
enhance perceived value

102

Perceived Value Pricing

Example: Sony Television Pricing is P20,000 vs.

P15,000 price of TLC

Rationale:

15,000 is the Sony TVs price if it is only equivalent to TLC TV

3,000 is the price premium for Sonys superior durability
2,000 is the price premium for Sonys superior reliability
1,500 is the price premium for Sonys superior service
1,000 is the price premium for Sonys longer warranty on parts
22,500 is the normal price to cover Sonys superior value
- 2,500 discount
20,000 final price

The customer actually only pays 5,000 for 7,500 extra

value

103

Value Pricing
Most Ideal Pricing Strategy

Charging a fairly low price for a high-quality offering

It is not simply setting lower prices
It is a matter of reengineering the companys

operations to become a low-cost producer without

sacrificing quality
Hence, attracting a large number of value-conscious
customers
Examples: Toyota, Southwest Airlines
Types: Everyday Low Pricing (EDLP) and High-low
Pricing
104

Going Rate Pricing

Price is based largely on competitors price, charging the

same, more or less than major competitor(s)

In oligopolistic industries that sell a commodity such as
paper, fertilizer, LPG, etc., all firms normally charge the
same price.
The smaller firms follow the leaders changing their prices
when the market leaders prices change rather than when
their own demand or costs change.
Some firms might change a slight premium or discount but
they contain the amount of difference, e.g. oil dealers
The key in going rate pricing is of course managing the
cost via efficient production and/or good sourcing
105

Auction-type Pricing
Primary purpose is to dispose of excess inventories or used goods
It is growing more popular especially with the growth of internet
English Auction (ascending bids)

One seller, many buyers.

Starts with low price
On sites such as yahoo and ebay
Dutch Auction (descending bids)

One seller, many buyers or one buyer many sellers

Starts with high price
On sites such as FreeMarket.com
Sealed Bid Auction

Would be suppliers can submit only one bid and cannot know the other

bids.
A supplier will not bid below its cost but cannot bid too high for fear of
losing the sale.
Highly advantageous for the seller since it can choose the price for
maximum profit
Effective for contract selling

106

Analyzing Competitors Pricing

Demand
Worth to the customers
Superior or inferior value
Price cut objectives:
Steal the market
Company is doing poorly and wants to boost its sales
Reduce price to stimulate total demand

107

Pricing Strategy
Pricing Strategies for New Products
Pricing Strategies for Established Products
Price Flexibility Strategy
Price Leadership Strategy

1. Pricing For New Products

Skimming Pricing Strategy

Penetration Pricing Strategy

Skimming Pricing Strategy

Setting a relatively high price during the initial

stage of the products life

Objectives:
To serve customers who are not price
conscious while the market is at the upper end
of the demand curve and competition has not
entered yet the market
To recover a significant portion of promotional
and research & development costs through a
high margin

Skimming Pricing Strategy

Requirements:
Heavy promotional expenditures to

introduce product, educate customers, and

induce early buying
Relatively inelastic demand at the upper
end of the demand curve
Lack of direct competition and substitutes

Penetration Pricing Strategy

Setting relatively low price during the early stage

of the products life

Objectives

To discourage competition from entering the market by

quickly taking a large market share and by gaining a

cost advantage through realizing economies of scale.

Requirements
A product must appeal to a market large enough to
support the price advantage
Demand must be highly elastic in order for the firm to
guard its cost advantage

2. Pricing for Established Products

Maintaining the Price
Reducing the Price
Increasing the Price

Maintaining the Price

Objectives:
To maintain position in the market place (i.e., market
share, profitability, etc.)
To enhance public image
Requirements:
Firms served market is not significantly affected by
changes in the environment
Uncertainty exists concerning the need for or result of a
price change
Firms public image could be enhanced by responding
to government requests or public opinion to maintain
price

Reducing the Price

Objectives:
To act defensively and cut price to meet

the competition
To act offensively and attempt to beat
competition
To respond to a customer need created
by a change in the environment

Reducing the Price

Requirements:
Firms must be financially or

competitively strong to fight in a price

war if that becomes necessary
Must have a good understanding of
the demand function of its product

Increasing the Price

Objectives:
To maintain profitability during

inflationary period
To take advantage of product
differences, real or perceived
To segment the current served
market

Increasing the Price

Requirements:
Relatively low price elasticity but

relatively high elasticity with respect

to some other factor such as quality
or distribution
Reinforcement from the other
ingredients of the marketing mix

Pricing Flexibility Strategy

One Price Strategy
Flexible Pricing Strategy

One Price Strategy

Charging the same price to all

customers under similar conditions

and for the same quantities
Objectives:
To simplify pricing decisions
To maintain goodwill among
customers

One Price Strategy

Requirements:
Detailed analysis of the firms position and cost

structure as compared with the rest of the

industry
Information concerning the cost variability of
offering the same price to everyone
Knowledge of economies of scale available to
the firm
Information on competitive prices; information
on the price that customers are ready to pay

Flexible Pricing Strategy

Charging different prices to different

customers for the same product and

quantity
Objective:
To maximize short-term profits and build
traffic by allowing upward and downward
adjustments in price depending on
competitive conditions and how much the
customer is willing to pay for the product

Flexible Pricing Strategy

Requirements: Have the information

needed to implement the strategy

Usually this strategy is implemented in one
of four ways:
By market
By product
By timing
By technology

Flexible Pricing Strategy

Other Requirements include:
A customer-value analysis of the

product
An emphasis on profit margin other
than just volume, and
A record of competitive reactions to
price moves in the past

4. Price Leadership Strategy

This strategy is used by the leading firm in

an industry in making major pricing moves,

which are followed by other firms in the
industry.
Objective: To gain control of pricing
decisions within an industry in order to
support the leading firms own marketing
strategy (i.e., create barriers to entry,
increase profit margin, etc.)

4. Price Leadership Strategy

Requirements:
An oligopolistic situation
An industry in which all firms are
affected by the same price variables
(i.e., cost, competition, demand)
An industry in which all firms have
common pricing objectives

PLACEMENT/DISTRIBUTIO
N

Distribution Defined
Kotlers Definition

is a system of bringing products and

services to the trade to satisfy customers

efficiently
NALs Definition

Making your products/services available at

places where your target market would or can

have access to buy

Is Distribution the same as Selling?

Technically, no. Selling is a different

discipline. Its a form of promotion

But there is selling in distribution,
especially for consumer goods, since
you have to convince the store owner
to make your product available in
his/her outlet.

Is Selling a Promotion
Yes,
And there is promotion (trade

marketing) in distribution since the

ultimate aim is to sell to
consumers

Distribution is part of the supply chain

Going to Market: Channels of Distribution

SUPPLIER

AGENT

DISTRIBUTOR

WHOLESALER
RETAILER
CONSUMER

Distribution =
(Availability)

Promotion =

Sell-in

Sell-out (Off-take)

Distribution Strategy is based on market conditions and

the companys goal
Market Coverage
Channel Control
Cost
Other qualifying factors
Intensity of distribution

Intensive
Selective

Product type and marketing approach help

determine your choice of channel
Pull
Supplier advertise
Retailers stock up / Consumers look for it
Push
Suppliers sell to dealers
Dealers select which suppliers product to carry and to push

Push and Pull are both used: Balance is key

B2B
PUSH

Philamlife
Viagra
Serendra
Car paints
CADP Sugar

PULL
Nike
San Mig Lite
Happy Meal
Gran Matador
Mercedes Benz

FMCG

Other important considerations

COST
Listing fees and In-store participation requirements
Advertising
Market Research
Salespersons
CAPABILITIES
Order Processing
Physical capability
Warehouses
Vehicles
Salespersons

138

PROMOTION --- IMC

139

Objectives of Promotion
To inform the market about the brand
To convince the market to prefer the

brand
To create recall about the product
To influence the market to make on
the spot buying decision
To establish good company/brand
goodwill or image

INTEGRATED MARKETING COMMUNICATION

The Integrated Marketing Communication enables our customers to achieve oneface communication, a cross-media effect that combines both real and net media,
improvement of brand value and more efficient media penetration etc.

Chugai Company, LTD. (Japan)

Promotional Elements

DEVELOPING THE PROMOTION PROGRAMS

Developing the Promotional Program

Specifying Promotion Objectives

Qualities of Good Objectives:

Designed for a well-defined target audience

Measurable
Cover a specified time period.

Hierarchy of effects:

Sequence of stages a prospective buyer

goes through
Use as a tool to develop objectives

Awareness.

Ability to recognize and remember the

product or brand.

Interest.

Increase in desire to learn about the product

features

Evaluation.

Consumers appraisal of the product on

important attributes.

Trial.

Consumers actual first purchase and use.

Adoption

Repeated purchase and use of the product

or brand

SELLING

146

Integrating Marketing to Selling

Start with selecting the right prospects

(Segmentation/Targeting)
Gather as many information as possible about your chosen
prospects (Consumer Insighting)
Identify the need that can be particularly addressed by your
product or service (Value Proposition)
Communicate clearly your products attribute that can
particularly satisfy their need or identify what service
should be added/done to totally satisfy the customer
(Promotion)
Do or offer other services that would satisfy other needs
related to the basic need (Full-line Selling)
Conduct post-sales services/activities to sustain a good
relation with the client (Building Customer Loyalty)

The following questions are significant

to any marketing and sales planning
process:
Where are we now?
How did we get there?
What is the competition?
What do our customers want?
Where are we heading?
Where do we want to be?
How must we get there?
Are we on track?
What must we do to stay there?

Analyzing your Present Sales Situation

A.External Issues and Challenges

1.Effects of the Present Business Climate
2.Changes in your Customers' Buying Behavior
3.Changes in your Competitors

B.Internal Issues and Challenges

1.Company Situation and Objectives
2.Analysis of your Products and Offerings' Alignment to the Market
3.Analysis of your Sales Organization
4.Analysis of your Support Groups

C. Scenario Sales Planning based on your Challenges

1.Specifying the Driving Forces or Threats that would affect your Sales
2.Specifying the Weaknesses in your Sales Organization and Company
3.Creating your Scenarios and Contingency Plans

Adaptive Sales Management Strategies

The Equation for Sales Optimization (Source: CSO Insights)

1.Having the "Right" Sales Team
2.Doing the "Right Things"
3.Armed with the "Right Tools"
4.Given the "Right Support"
5.To persuade Clients to make the "Right
Decision"
6."Right NOW"

ADVERTISING

151

6 Ms in Advertising
1. Message
2. Market
3. Material
4. Media
5. Money
6. Measure

152

Message (What to say?)

The most important element in the advertising
campaign
It is what the audience should comprehend and believe
after getting exposed to the ad
Product Positioning:

What you want your target market to perceive

about your product
The most significant consideration in preferring
your brand or product over competitor(s)

153

Market (To whom?)

The target audience for the ad who should

comprehend and believe your message and

influence the decision to buy
The target can be any or combination of the
following:
Product user
Decision maker
Decision influencer
Buyer

154

Material (How to say?)

How the advertisement should be executed
Story line
Copy/Text
Design/Lay-out
Over-all aesthetics
Should creatively convey the message to achieve

AIDA
Should be appealing to target audience
Should consider celebrity endorser only if
necessarystress a message

155

AIDA
Attention : depends on how creatively executed

the ad is (material)
Interest : depends on the value proposition of the
product (message)
Decision: depends on how significant the product
offer to the audience (positioning)
Action: depends on the level of need of the target
market and competitiveness of the product

156

Media (Where to say?)

Traditional Media = Tri-media (TV, radio, print)

New Media: (web space, cellphone, outdoor space)
Considerations in Media Selection:
Placement cost
Reach
Optimal number of target audience exposed to the medium

Frequency
Number of exposure needed to achieve AIDA

Impact
Level of awareness/recall that an ad material would create due to its impact

creative execution)

The right media for the target audience

Maximize exposure only to primary target audience

157

Exerxcise:
Choosing the media mix efficiently & Appropriating Media Budget

Assume the following:

You will advertise your cologne for middle-age female
Target sales is 50 million pesos in one year
1 million PTM population
Price per bottle is 100 pesos
Average purchase is twice a year
Exposure in print only for three months
What should be the right print media mix and how much should you
budget?
What should be the conversion rate or how many should you convince
to buy?

158

Money (How much to be able to say?)

Budget Decision:
As percentage of sale

Established brand
5%; 10%
Share-of-voice

Head-on competition
Example?
Advertising Objective

New product; re-launch product

Pre-emptive marketing assault

159

Measure (How do you know if what you are saying is

understood, believed and accepted?
Awareness level
Brandname survey
Message survey

Recall level
Brandname survey
Message survey
Attitude level
Survey, FGD, observation
Sales and Profit
Internal figures
Shelf off-take
Industry Sales Audit (Vs. competition)

160

Assessment of TV ads
Winner corned beef
Family Sardines
Bench (Richard Gomez)
Solmux
Fibisco

161

Sales Promotions
Consumer promotion
Benefits the consumers

On-pack promo; dry sampling; discount

coupons; raffle promo, etc.

Trade promotion
Benefits the trade channels
Volume discount; Off-take contest; etc.

162

When to do Sales Promotions?

Product Launch (part of integrated marketing

communication)
When there is strong challenger
To pre-empt any strong competitive move
To capture in-store buying decision

163

Trade Marketing
Availability
Stock inventory monitoring
Visibility
Merchandising

Facing; display; collaterals

Movement
In-store promo
Push program (push girls; promodizers)

164

Publicity
To create company/brand goodwill with the

customers
To establish favorable company/brand image
To develop customer emotional attachment with the
company/brand
To sustain company/brand patronage
To indirectly solicit government/public support
What to publicize:
CSR activities
Sports sponsorships
Company advocacies (R&D, Clean Environment,
Green Marketing)

165

Integrated Marketing Communication

(IMC)
Promo Mix done under one theme
Advertising message :
Publicity :
Special Events :
Sales Promo :
Personal Selling :
Employee Communication and Attitude :

Example : Clear Shampoo

NAL

Integrated marketing communication (IMC)

Product
Users
Promotion Mix

Message

Theme

Promotion Mix

Decision
Influencers

Promotion Mix
Decision
Makers
166

PRODUCT LIFE CYLE AND PROMOTION STRATEGY

Product Life Cycle

168

PRODUCT LIFE CYCLE

AND THE
4 PS

169

Sales

Profit

INTRODUCTION
S
T
R
A
T
E
G
I
E
S

Target Market
Product
Price
Placement
Promotion

GROWTH

MATURITY

DECLINE

170

Strategies in the Different Stages of the Product Life Cycle

Introduction

Growth

Maturity
Stretch market

Focus on the
primary

Target
Market

target segment

convert non-users

enter new segments

attract competitors'
customers

Improve quality,
styling

Start to develop new product

for

Obsolete the product with

Differentiate

Introduce new
variants

Objective pricing

Lower price to reach

Stay competitive in quality

and

a new promising one

Sell the product if there are

attributes

interested to acquire it
Optimize to maximize profit

Increase to maximize profit

Offer trade discounts

Saturate distribution channels

Limit to outlets where there

is

Strengthen partnership with

out to more segments

Placement

Primary outlets

Expand channel
coverage

Product awareness

any emerging market

Lower to be more competitive

Price Skimming
Competitive
pricing

Maintain loyal users

Enter new segments

Product

Price

Decline

Product Preference

the channels
Reinvest if new market or
new

movement

No investment

171

New Marketing Realities

Network information technology (e-marketing)
Globalization (international marketing)
Deregulation
Privatization
Multilevel Marketing (MLM)
Heightened competition (national vs. multinational brands;
brands vs. generics; concessionaire brand vs. house
brands)
Industry convergence (communication and entertainment)
Consumer resistance (negative opinion about advertising
and marketing)
Retail Transformation (mega retailers, specialty retailers,
direct-mail firms, home shopping TV, e-commerce on the
Internet)

172

New Consumer Capabilities

A substantial increase in buying power

A greater variety of goods and services
A great amount of information about practically

anything
Greater ease in interacting and placing receiving
orders
An ability to compare note on products and
services
An amplified voice to influence peer and public
opinion

173

New Company Capabilities

- Can use the internet as powerful information and

sales channel
- Researchers can collect fuller and richer information
about markets, customers, prospects and
competitors
- Managers can facilitate quick communication with
internal and external customers (internet connection)
- Target marketing and two-way communication are
easier (internet connection)
- Companies can establish customer network without
physically organizing them (internet connection)
- Companies can reach customers on the move with
mobile marketing (GPS technology)

174

Internet and Mobile Phones

Selling media
Advertising media
Sales promo media
Market research media
Network marketing media
Marketing strategy feedback media

Marketing Process Summary

1

Discovering/
Identifying the
Value
Segmenting
Profiling
Targeting
Consumer Insighting
Value Offering

Creating the
Value

Product Concept
Product Development
Branding
Positioning
Pricing

Distribution
Placement
Channel Marketing
Making the
Value Accessible

IMC
EMC
Communicating
the Value

Wow,

Indeed!

"The way to get started is to quit

talking and begin doing."
- Walt Disney