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2. MBA | Marketing Management | Delivering Customer Value - Coggle Diagram
2. MBA | Marketing Management | Delivering Customer Value
Product
What is Product?
Product refers to the tangible and intangible benefits that the consumer gets from the market transaction.
A product is not just a physical entity. This term encompasses all tangible and intangible aspects, such as services, personality, organisation and ideas
There are three layers of a product offering:
Core product: What is the buyer actually buying? (A beverage that helps get the day started).
Actual product: What will the customer get once they purchase the product? (A 200 g bottle of Nescafe Gold priced at $20)
Augmented product: These are the additional benefits or services that the customer will get over and above the actual product (A high-quality coffee that helps you work hard, stay motivated and come up with new ideas.)
Effective Product Mix
A product mix is a portfolio of goods and services a company offers to consumers
A product mix comprises numerous product lines that a company offers. A company might have one or more product lines in its product mix. These product lines might correspond to one another or be totally different from one another.
A product mix comprises the following dimensions:
Width: The width of the product mix refers to the total number of product lines to the targeted customers. Wider the width, the more the variety of goods and services provided by the company
Depth: The depth of the mix refers to the total number of different variants of each product offered in that particular product line. Each variant has certain distinguishing characteristics, such as size, colour, etc.
Length: The length of the product mix reflects the total number of products or services in the product mix that the company is capable of providing, at the moment, to its customers
Effective Product Strategy
Product attributes: Product attributes consist of the quality and the features of the product
Packaging: The packaging of a product should follow 4Cs, which are: Convenient; Clear; Conveys the brand’s value proposition and; Clearly stands out on the shelf.
Labelling and logos: The logo and the labelling should be significant and memorable
Product support services: The product support service, whenever required, should be reliable
Product Positioning
Positioning your product perfectly involves the following steps:
Focus on the positioning statement: As a marketer, when you are positioning your product, your starting point should be understanding the positioning statement of your company or product
Keep in mind the target segment of your product and the key value you are offering them
Divide the value proposition: Your value proposition should be divided into core, actual and augmented products
Review your existing product mix: Decide whether you need to launch a new product line or whether you can add to existing product lines
Create an effective product strategy: Ensure that you have covered all the parameters of the product strategy: Product Attributes; Packaging; Labelling and Logos; Product Support Services
What is Marketing Mix?
A marketing mix is a set of components that a company leverages to make the customers purchase its products or services. As the term suggests, it is a mix of tactical marketing tools and your job, as a marketer, is to prepare a mix that helps your product reach the targetted audience
Product
Price
Promotion
Place
People
Process
Physical evidence
Price
What is price?
The concept of price from two perspectives
Price for marketers: The amount of money charged for a product or a service
Price for consumers: The sum of all the values that customers give up in order to gain the benefits of the product or the service
The importance of pricing for marketeers
It is the only element in the marketing mix that generates revenue
It is the most flexible element of the marketing mix and can be changed quickly
It is often a very crucial part of the consumer’s purchase decision
It plays a key role in positioning the product in the consumer’s mind
Pricing Strategies
Competitor-based pricing - Competitor’s pricing strategy
Example: While selling a smartphone, competitor’s prices need to be accounted for
Customer value-based pricing
Example: Premium pricing of the Rolex watch and its value as social status and an heirloom
Cost-based pricing - Nature of market and consumer demand
Example: While selling a commodity, such as vegetables, price needs to be set based on prevalent price, which will, more often than not, depend highly on the cost of the product
Product Mix Pricing Strategies
Product line pricing: An entire product line is priced at a similar price point
Optional product pricing: It includes certain accessories as an optional part of the product. The crucial decision to be taken here is which accessories to be kept optional
Captive product pricing: It involves selling a product at a loss because it will generate revenue during use.
By-product pricing: It involves selling a by-product of the production process to subsidise the main product
Product bundle pricing: It involves combining or bundling multiple products and selling them at a price point lower than the sum of the individual prices of the products. It helps promote bulk purchases
Setting the Price
Step-3: Estimating the costs involved
Fixed costs
Variable costs
Step-4: Analysing competitor pricing
Step-2: Determining the demand
Understand the price sensitivity
Estimate the demand curves and price elasticity
Step-5: Selecting a pricing model
Cost-based, competitor-based, value-based
Step-1: Selecting the pricing objective. There are five objectives that can be fulfilled by a brand through the lever of pricing:
Survival - In this case, the objective of profit-making is kept at bay for the survival of the product
Maximising profit - In this case, the objective of this pricing strategy is maximising the profit margin
Maximising market share - In this case, the price is kept lower than the competition to penetrate deeper into the market
Maximising market skimming - Often done at the introductory stage of a product. In this case, the product is launched at the premium price and the price is reduced methodically to increase customer base
Product-quality leadership - In this case, the brands have already established their position as a leader and set their price accordingly
Step-6: Selecting the final price
Place
What is place?
‘place’ refers to how your product or service reaches your consumer and where they pick up your product from
This involves answering the following questions:
Where do they shop from?
Where do they look for product information?
Where do they have the maximum purchase intent?
Channel Design Strategy
Channel design: Steps
Analyse customers
Establish channel objectives
Consider channel constraints
Identify channel alternatives
Evaluate channel alternatives
Select appropriate channel
Different distribution channels are
Online Distribution Channels
Website selling: Having your own website to sell your product
Sales on social media: Using social media sites like Instagram and Facebook is much cheaper and now has options of targeted reach
Selling on an e-commerce site: Products can also be sold on sites like Amazon where a large set of consumers come looking for various products
Offline Distribution Channels
Brick and Mortar stores: A lot of people still prefer going to the store and seeing the product before actually buying it. Also creates a sense of trust among the people
Distributors: Distributors often have a contract with the manufacturers and supply bulk orders to businesses and retailers. They are often region- or industry-specific
Wholesalers: Wholesalers purchase goods in large quantities and distribute them in bulk
Retailers: Retailers obtain the goods from wholesalers and supply them to customers
Stockists: Stockists stock the goods for a selective period of time and then sell them. The stockists are often product- or brand-specific
Channel Partner Strategies
Key performance indicators (KPIs) that can be used to evaluate channel performance are as follows:
Market share: It represents the percentage of the market that the product has captured over the entire market in a specific period
Numeric distribution: It represents the fraction of the total number of stores that sell or stock your product
Evaluated / Value-weighted distribution: It represents the category offtake of the outlets that carry a product to the category offtake of the outlets that sell any brand in the same category
Stock turnover ratio: It represents how long it takes for your stock to sell
Promotion
Promotional Strategies
A good promotional strategy helps distinguish your product from the competition
A sound promotional strategy comprises the following five key elements:
Advertising
Sales promotion
Direct and digital marketing
Public relations
Personal selling
The focus of the promotional strategy changes through the different stages of the product life cycle
Stage 1 - Introductory stage: This stage essentially gives information about the product
Stage 2 - Growth stage: This stage is focussed towards building brand loyalty
Stage 3 - Maturity stage: In this stage, you work towards elongating the life cycle of the product. It is often done through sales promotions and price changes
ATL, BTL and TTL Promotions
There are three ways of conducting promotional activities, which are as follows:
ATL (Above the line): ATL strategies involve direct communication with the mass market. These promotional messages are untargeted, that is, they do not focus on a specific target group. They are often implemented through television, radio and print media
BTL (Below the line): BTL strategies are highly targeted promotion. It is often done based on thorough research while taking into account the demographics and psychographic characteristics. Examples include in-store promotions and direct marketing
TTL (Through the line): TTL advertising involves an integrated approach wherein both ATL and BTL strategies are combined. The objective here is to implement holistic promotional activities
Online and Offline Channels
Advantages of online promotional channels are as follows:
Easy to measure
Long-term exposure
Easy to target specific audience
Affordable
Greater reach
Advantages of offline promotional channels are as follows:
Provides personal connection with customers
Long-lasting impression
More trusted by customers
Following methods of online marketing promotion that you need to consider
Search engine marketing - Search engine marketing (SEM, Paid Search) often means advertising on various search engines on the web. The goal of SEM is to reach the highest position of a given search result on a search engine, also called search engine results page (SERP)
Search engine optimisation (SEO) - Search engine optimisation, or simply SEO, is the process of optimising websites to obtain higher rankings in search engines with specific keywords and phrases and getting ‘free’ organic traffic.
Content marketing - Content marketing is a method of online marketing wherein content is created with a customer-first mentality on the web
Channel Constraints and Alternatives
The constraints of mass media channels and digital channels. For instance:
Mass media channels
Reaches a wide audience
Does not provide any interaction
Digital channels
Provide more rich and granular data
Do not reach mass market
It is important to evaluate the alternate channels according to the company's messaging, the message you want to deliver and your target audience
Assets and Creatives in the Marketing Mix
Leveraging Assets
A logo, tagline and other such things can be assets in marketing. These assets are leveraged or used by businesses to achieve its goal
Assets and Value Exchange
Two ways to make the assets relevant to people:
By segmentation and targeting
By providing good value exchange
