Distributing Goods & Services

Developing & Pricing Products

Business battle fiercely, making an enormous variety of products to meet different customers� needs. In many businesses, promotion is the key to a new product success. Promotion is any technique designed to sell a product to a customer. To sell a product, promotional techniques must communicate the uses, features, & benefits of the product. Here we will look at different reasons for & approaches to promotion, When & why companies use particular tools & strategies, & the special promotional problems & solutions of small business.

Promotional Objectives, Strategies, & Tolls

In developing a promotional plan, marketers must consider the company�s basic promotional objectives. They must develop promotional strategies to reach those objectives. Then, as a part of their strategies, they must choose among various promotional tools that may be used alone or in combination

You may think that the ultimate objective of any type of promotion is to increase sales. You�re right. After all, the goal of any business is to make money, & companies make money by making sales. However, marketers also use promotion to communicate information, position products, & control sales volume.

Communication of Information.

A very basic objective of promotion is to communicate information from one person or organization to another. Consumers cannot buy a product unless they have been informed about it.

Information may advise customers about the availability of a product. It may educate them on the latest technological advances. Or it may announce the candidacy of someone running for a government office.

Information may be communicated in writing (newspapers & magazines) It may be communicated verbally (in person or over the telephone) Or it may be communicated visually (television, a match book cover, or a billboard). Today, the communication of information regarding a company�s products or services is so important that markets try to place it wherever consumers may be.

Product Positioning.

Another objective of promotion, Product Positioning, is to establish an easily identifiable image of a product in the minds of consumers. For example, by selling only in department stores, Lauder products have positioned themselves as more upscale than cosmetics sold in drugstores. Given all the brands & trademarks in the marketplace, it is impossible for an individual to remember each one. Therefore, marketers seek a unique position in buyer�s minds.

Positioning a product is difficult because the company is trying to appeal to a specific segment of the market rather than to the market as a whole. First, the company must identify which segments of a market could would be likely purchasers of its product & who is competitors are. Only then can it focus its promotional strategy on differentiating its product from the competition�s, while appealing to its target audience.

Controlling Sales Volume.

Another objective of promotions is sales volume control. Many companies such as Hallmark Cards, experience seasonal sales patterns. By increasing its promotional activities in slow periods, the firm can achieve a more stable sales volume throughout the year. As a result, it can keep its production & distribution systems running evenly. Promotions can even turn slow seasons into peak sales periods. For example, greeting card companies & florists together have done much to create Grandparents� day.The result has been increased consumer desire to send cards & flowers to older relatives in the middle of what was a dry for these industries.

Once a firm�s promotional objectives are clear, it must develop a promotional strategy to achieve these objectives. Promotional strategies may be of the push or pull variety. A company with a Push strategy will aggressively push its product through wholesalers & retailers, who persuade customers to buy it. In contrast, a company with Pull strategy appeals directly to customers who demand the product from retailers, who in turn demand the product from wholesalers.

Makers from industrial products most often use a Push strategy And makers of consumer products most often use a Pull strategy. Many large firms use a combination of the two strategies. For example, General Foods uses advertising to create consumer demand(pull) for its cereals. It also pushes wholesalers & retailers to stoke these products. Once the promotional strategy has been determined, it guides the company�s choice of promotional objectives & the types of promotional communicational tools that will be used.

Based on these strategies, the firm must select the right promotional tools. There are four basis types of promotional tools: Advertising, Personal selling, Sales promotions, & Publicity & Public relations.

The best combination of these tools-the best promotional mix - depends on many factors. The company�s product, the costs of different tools versus the promotional budget, & characteristics in the target audience all play a role.

The product. The nature of the product being promoted affect the mix greatly. For example, advertising can reach a large number of widely dispersed consumers. Thus it is used by makers of products that might be purchased by anyone, like sunglasses, radios & snack foods. Companies introducing new products also favor advertising because it reaches a large number of people very quickly & can repeat a message many times. Personal selling, on the other hand, is important when the product appeals to a very specific audience, such as piping or pressure gauges for industrial accounts.

Cost of the Tolls. The cost of communication tools is also important. Because personal selling is an expensive communicational tool, it is most appropriate in marketing high-priced goods like computers for industrial customers & homes for consumers. In contrast, advertising reaches more customers per dollar spent.

A promotional mix that is good for one company is not really good for another. For example, Frito -Lay can afford to spend millions of dollars on advertising & consumer promotions to promote Ruffles Cajun Spice potato chips nationally. But Zapps Potato Chips of Gramercy, Louisiana, the innovator in Cajun flavor potato chips, must rely on personal selling & publicity to promote its Cajun Craw-taters locally.

Promotion & the Buyer Decision Process. Another consideration in establishing the promotional mix is the stage of the buyer decision process that customers are in. Customers must first recognize the need to make a purchase. At these stage marketers need to make sure the buyer is aware that their products exist. Thus, advertising & publicity, which can reach a large number of people very quickly, are very important.

At the next stage, customers want to learn more about possible products. Advertising & personal selling are important because they both can be used to educate the customer about the product.

During the third stage, customers will evaluate & compare competing products. Personal selling is vital at this point because sales representatives can demonstrate their product�s quality & performance in direct relation to the competition�s product.

Next, customers decide ton a specific product & purchase it. Sales promotion is effective at these stage because it can give consumers an incentive to buy. Personal selling can also help by bringing the product to convenient location for the consumer.

Finally, consumers evaluate the product after buying it. Advertising, or even personal selling, is sometimes used after the sale to remind consumers that they made wise & prudent purchases.

Advertising Promotions

Advertising strategies most often depend on which stage of the product life cycle their product is in. During the introduction stage, Informative Advertising can help develop an awareness of the company & its product among buyers & can establish a primary demand for the product. For example, when a new textbook is being published, instructors receive direct-mail advertisements notifying them of the book�s contents & availability.

As products become established, advertising stages must change. During the growth stage, Persuasive Advertising can influence customers to buy the company�s products, not those of its rivals. For example, during its growth stage, Advil used this approach to attract buyers of Tylenol & other pain relievers. Persuasive advertising is also important during the maturity stage to maintain the product�s level of sales. In addition, Comparative Advertising may help to steal sales away from the competition. After proclaiming that �most people in Ford country drive Chevy pickups�, the ad then discusses specific features of the two brands, in a classic example of the comparison approach.

Finally, during the latter part of the maturity stage and all of the decline stage, Reminder Advertising keeps the product�s name on the tip of the consumer�s lips. And so Atari continues to advertise its home video games, even though attention has shifted over to a newer competitor, Nintendo.

Whatever the product�s life cycle stage, advertising strategies must consider timing. Should the organization advertise throughout the year on a continual basis, or seasonally? Companies such as commercial banks space ads evenly throughout a year.

In developing advertising strategies, marketers must also consider the best

Advertising Medium for their message. IBM, for example, uses television ads to keep its name fresh in consumers� minds. But it uses newspaper & magazine ads to educate consumers on the product�s abilities & trade publication to introduce new software. Each advertising medium has its own advantages & disadvantages.

Newspapers. Newspapers are the most widely used advertising medium, accounting for about 27 % of all advertising expenditures. Newspapers offer excellent coverage, since each local market has at least the daily newspaper & many people read the paper ever day(Like you are).This medium offers flexible, rapid coverage, since ads can change from day to day. It also offers believable coverage, since ads are presented side-by-side with news. However, newspapers are generally thrown out after one day, often cannot print in color, & have poor reproduction quality. Moreover newspapers don�t usually allow advertisers to target their audience very well.

Television. Television accounts for about 22% of all advertising expenditures. In addition to the major networks, cable television is becoming a major advertising medium. Cable ad revenues have increased from $58million in1980 to $1.4billion in1988, & are projected to be over $2billion by1990.

Television allows advertisers to combine sight, sound, & motion, thus appealing to almost all the viewer�s senses. National advertising is done on television because it reaches more people than any other medium.

One disadvantage of television is that there are too many commercials, causing viewers to confuse products. Most people for example, can�t recall whether a tire commercial was for Firestone, or Goodrich. Viewers of VCR tapes of shows often fast-forward past the ads. Another disadvantage, is that the normal �Commercial spot� lasts only a short time(usually 30sec), & then its gone. If the viewer is not paying attention, the impact of the commercial is lost. Brevity also makes television a poor medium in which to educate viewers about complex products. Finally television is the most expensive medium. A 30sec commercial during the Super Bowl costs about $750.000!

Direct Mail. Direct Mail advertisements account for 17% of all advertising expenditures. As the name implies, direct mail often involves fliers mailed directly to consumers� homes or places of business. Direct Mail allows the company to select its audience & personalize the message. Consumers are also exposed to far less direct mail than to other advertising media. Moreover, although direct mail incurs the largest advance costs of any advertising technique, it also appears to have the highest cost effectiveness. These features have helped to make direct mail a fast-growing advertising medium.

Radio. About 7% of all advertising expenditures are for radio time. A tremendous number of people listen to the radio each day, and radio ads are very inexpensive. In addition, since most radio is programmed locally, this medium gives advertisers a high degree of customer selectivity. For example, radio stations are already segmented into listening categories such as rock & roll, country & western, jazz, talk shows, news & religious programming.

Like television however, radio ads are over quickly. And radio permits only an audio presentation. Also people tend to use the radio as a background while they�redoing their things, paying little attention to the advertisements.

Magazines. Magazine advertising accounts for roughly 5% of all advertising. The many different magazines on the market provide a high level on consumer selectivity. Magazine advertising also allows for excellent reproduction of photographs & artwork that not only grabs buyer�s attention, but may also convince them on the product�s value. And magazines allow advertisers plenty of space for detailed product information Another advantage of magazines is that they have a long life & tend to be passed from person to person, thus doubling & tripling the number of exposures.

The problem with magazine advertising is that ads must be submitted well in advance to be included in a certain issue. Often there is no guarantee of where within a magazine in ad will appear. Naturally, a company would prefer to have its advertisement appear near the front of the magazine or within a feature article.

Outdoor. Outdoor advertising - billboards, signs, & advertising buses, taxis, & subways - makes up a little more than 1 % of all advertising. These advertisements are relatively inexpensive, they face little competition for customers� attention, & they are subject to high repeat exposure. Unfortunately, companies have little control over who will see their advertisement.

Regardless of the media used, advertisements fall into one of several categories. Brand Advertising promotes a specific brand, such as Kodak126 film, Head & shoulders shampoo, & Nike Air Jordan basketball shoes. Advocacy Advertising promotes a particular candidate or viewpoint, as in ads for political candidates at electon time and antidrug commercials. Institutional Advertising promotes a fir�s long-term image, as when AT&T assures customers that it is ``the right choice.

Advertisements also differ in to whom they are directed. That is, advertisement depend on the company�s target market. In consumer markets, local stores usually sponsor retail advertising to encourage consumers to visit the store & buy its products & services. Larger retailers use retail advertising on both a local & national level. Often retail advertising is actually cooperative advertising, with the cost of the advertising shared by the retailer & the manufacturer.

In industrial markets, to communicate with companies that distribute its products, some firms use trade advertising publications. And to reach the professional purchasing agent & managers at firm buying raw material or components, companies use industrial advertising.

Advertising affects nearly every American. Because it can be used to deceive as well as inform buyers, advertising has increasingly come under regulation. The first regulation of advertising activities came in1914. This act created the Federal Trade Commission to protect competition from unfair trade practices.

Members of the advertising industry also regulate themselves to some degree. Advertising media, including television networks & local stations magazines, & newspapers, decline ads they believe to be false or in poor test. And the National Advertising Review Board investigates complaints against national advertisers. If it finds in favor of the advertiser, chargers are dropped. If it finds in favor of the complaining party, then the advertiser must modify or withdraw its claim.

Personal Selling Promotions

Virtually everyone has engaged in some sort of sales activity. Perhaps you had a lemonade stand or sold candy for the drama club. Or you may have gone on a job interview - selling your abilities & service as an employee to the interviewers company.

Personal selling - the oldest form of selling - is a vital cog in many companies� promotional efforts. It provides the personal link between seller & buyer. It adds to a firm�s creditability because it provides buyers with someone to interact with & to answer their questions.

Because it involves personal interaction, however, personal selling requires a level of trust between the buyer & the seller. When a buyer fells cheated by the seller, that trust has been broken & negative attitude towards salespeople in general develops. To counteract this reputation, many companies are emphasizing customer satisfaction & generally striving to improve the effectiveness of whatever personal selling they undertake.

Personal selling is also most expensive form of promotion per contact because presentations are generally made to one or two individuals at time. Personal selling expenses include salespeople�s compensation & their overhead, usually travel, food & lodging. The average cost of sales call has been estimated an approximately $240 & has been increasing rapidly in recent years.

The high cost of personal sales have prompted many companies to set up Telemarketing departments. Telemarketing is the use of the telephone to carry out many of the activities involved in marketing a company�s products. Telemarketing can be used to handle any stage of the personal selling process or to set up appointments for outside sales people.

Managers of both telemarketing & traditional personal sales people must always consider how personal service are affected by the difference between consumer products & industrial products. Retail selling involves selling a consumer product for the buyer�s own personal or household use. Industrial selling deals with selling products to other businesses, either for manufacturing other products or for resale.

Each of this selling groups situations has its own distinct characteristics. In retail selling the buyer usually comes to the seller. The industrial salesperson almost always goes to the prospect�s place of business. The industrial decision process also may take longer than a retail decision because more money, decision makers, & weighting of alternatives are involved. And industrial buyers are professional purchasing agents who are accustomed to dealing with salespeople. Consumers in retail stores, on the other hand, may be intimidated by salespeople.

Improving sales efficiency also requires marketers to consider salespeople�s tasks. Three basic tasks are generally associated with selling: Order processing, creative selling, & missionary selling. Sales jobs usually require salespeople to perform all three tasks to some degree, depending on the product & the company. As you will see, this tasks differ in the skills required, the methods used, & the reasons for using them.

Order Processing. At the most basic level, Order Processing, a salesperson receives an order & sees to the handling & delivery of that order. Route salespeople are often order processors. They call on regular customers to check the customer�s supply of bread, milk, snack foods, or soft drinks. Then, with a customer�s consent, they determine the size of the reorder, fill the order form their trucks, & stack the customer�s shelves.

Creative Selling. When the benefits of the product are not clear, creative selling may persuade buyers. Most industrial products involves creative selling because the buyer has not used the product before or may not be familiar with the features & uses of a specific brand. Personal selling is also crucial for high priced consumer products, such as homes, where buyers comparison shop. Any new product can benefit from creative selling that differentiates it from other products. Finally, creative selling can help to create a need.

Missionary Selling. A company may also use missionary selling to promote itself & its products. The goal of missionary selling is to promote the company�s long-term image than to make a quick sale.

Although all three sales tasks are important to an organization using personal selling, perhaps the most complicated is creative selling. It is the creative salesperson who is responsible for most of the steps in the personal selling process described here.

Prospecting & Qualifying. In order to sell, a sales person must first have a potential customer, or prospect. Prospecting is the process of identifying this potential customers. Salespeople find prospects through past company records, customers , friends, relatives, company personnel, & business associates. Prospects must then be qualified to determine whether or not they have the authority to buy & the ability to pay.

Approaching. The first few minutes that a salesperson has contact with a qualified prospect are called the approach. The success of later stages depends on the prospect�s first impression of the salesperson, since this impression affects the salesperson�s creditability. Thus, salespeople need to present a neat, professional appearance & to greet prospects in a strong, confident manner.

Presenting & Demonstrating. Next, the salesperson must present the promotional message to the prospect. A presentation is the full explanation of the product, its features, & its uses. It links the product�s benefits to the prospect�s needs. A presentation may or may not include a demonstration of the product.

Handling Objections. No matter what the products, prospects will have some objections. At the very least, prospects will object to a product�s price, hoping to get a discount. Objections show the salesperson that the buyer is interested in the presentation & which parts of the presentation the buyer is insure of or has a problem with. They tell the salesperson what customers feel is important &, essentially, how to sell them.

Closing. The most critical part of the selling process is the close, in which the sales person asks the prospective customer to buy the product. Successful salespeople, recognize the signs that a customer is ready to buy. Salespeople can ask directly for the sale or they can indirectly imply a close. Questions such as � Could you take delivery Tuesday?� & � Why don�t we start you off with an initial order of ten cases?� are implied closes. Such indirect closes place the burden of rejecting the sale on the prospect, who often will find it hard to say no.

Following Up. The sales process doesn�t end with the close of the sale. Most companies wants customers to come back again. Sales follow-up activities include fast processing of the customer�s orders & on-time delivery. Training in the proper care & usage of the product & speedy service if repairs are needed may also be part of the fallow-up.

Sales Promotions

Sales promotions ( motivators) are a very important factor in the promotional mix because they increase the chances that consumers will try a product. They also enhance recognition for the products. And they can increase the purchase size & amount.

Did you ever here a promotional slogan � buy three & get one free.�

To succeed, however, sales promotions must be convenient & accessible when the decision to purchase occurs.

Sales promotions can take a variety of forms. The best known are coupons, point of purchase displays, free samples, trading stamps, premiums, trade shows, trade promotions, & contests & sweepstakes.

Coupons. Any certificate that entitles the bearer to a stated savings off a product�s regular price is a coupon. Coupons may be used to encourage customers to try new products, to attract customers away from competitors or to include current customers to buy more of a product. They appear in newspapers & magazines & are often sent through direct mail.

Point-of-Purchase Displays. To grab customer�s attention as they walk through the store, some companies use Point of Purchase Displays. Displays located at the end of the aisles or near the checkout in supermarkets are POP displays. POP displays are always coincide with a sale or the item being displayed. They also make it easier for customers to find a product & easier for manufacturers to eliminate competitors from consideration. The cost of shelf & display space, however, is becoming more & more expensive.

Free Samples, Trading Stamps, & Premiums. Purchasing incentives such as free samples, trading stamps, & Premiums are used by many manufacturers & retailers. Premiums are gifts, such as pens, pencils, calendars, & coffee mugs, that are given away to consumers in return for buying a specified product. Retailers & wholesalers also receive premiums for carrying some products.

Trade Shows. Periodically, industries sponsor Trade Shows for their members & customers. Trade shows allow companies to rent booths to display & demonstrate their products to customers who have a special interest in the products or who are ready to buy. Trade shows are relatively inexpensive & are very effective, since the buyer comes to the seller already interested in a given type of product.

Contests & Sweepstakes. Customers, distributors, & sales representatives may all be persuaded to increase sales of a product through the use of contest. For example, distributors & sales agents may win a trip to Hawaii for selling the most pillows in the month of March. Although sweepstakes can�t require consumers to buy a product to enter, they may increase sales by stimulating buyers� interest in a product.

Publicity & Public Relations Promotions

Much to the delight of marketing managers with tight budgets, Publicity Is FREE. Moreover, consumers see publicity as objective & highly believable. Thus, it is a very important part of the promotional mix. However marketers often have a little control over publicity.

Public relations is company-influenced publicity. It attempts to establish a sense of goodwill between the company & its customers through public service announcements that enhance the company�s image. From this topic, so far, you may think that only large companies can afford to seriously promote their goods & services. Although small businesses have fewer resources, cost-effective promotions can improve sales & enable small firms to complete with a much larger firms.

The type of advertising chosen by a small business depends on the market the firm is trying to reach: Local, National, International.

Local Markets. Advertising is non prime-time slots on local television offers great impact at a cost many small firms can afford. More commonly though, small businesses with a local market use newspaper & radio advertising &, increasingly, direct mail.

National Markets. Many businesses have grown from small to large operations by using direct mail & particularly catalogues. By purchasing mailing lists of other companies� customers, a small firm can target its mailing, reducing costs. The ability to target an audience also makes specialized magazines attractive to small businesses.

International Markets. Television, radio, & newspapers are seldom viable promotional options in reaching international markets because of both their costs and their limited availability. Most small firms find direct mail & magazine advertising the most effective promotional tools.

Like advertising, personal selling strategies used by small businesses depend on their intended market.

Local Markets. Some small firms maintain a sales force to promote & sell their products locally. Other contract with a sales agency - a company that handles the products of several companies - to act on their behalf. Insurance agents who sell insurance for several different companies are sales agencies.

National Markets. Because of a high costs of operating a national sales force, many companies have established telemarketing staffs. By combining telemarketing with a catalog or other educational product literature, small companies can sell their products nationally & compete against much larger companies.

International Markets. Small companies can�t afford to establish international offices in order to conduct businesses. Even sending sales representatives overseas is expensive. Thus, many small companies have combined telemarketing with direct mail in order to expand internationally. Small businesses often depend on an interesting or unusual sign to attract new customers.

Small companies use the same sales promotion incentives that larger companies use. The difference is that larger firms tend to use more coupons, POP displays, & sales contests. Smaller firms rely on premiums & special sales, since coupons & sales contests are more expensive & difficult to manage.

Publicity is very important to small businesses with local markets. Small firms often have an easier time getting local publicity than do national firms. Readers of local papers like to read about local companies, so local papers like to write about such businesses. But fierce competition for coverage in national & international publications limits the access small businesses have to those markets.

Distributing Goods & Services

In selecting a distribution mix for getting its products to customers, a firm may use any or all of six distribution channels. The first four are aimed at consumers & the last two at industrial customers. Channel 1 involves a direct sale to the consumer. Channel 2 includes a retailer. Channel 3 also includes one wholesaler, while Channel 4 includes an agent or broker before the wholesaler. Distribution strategies include intensive, exclusive, & selective distribution.

Wholesalers act as distribution intermediaries, extending credit & storing, repackaging, & delivering the product to other members of the distribution channel. Full-service, & limited-service, merchant wholesalers differ in the number of distribution functions they offer. Agents & brokers never take legal possession of the product.

Retailing involves direct interaction with the final consumer. The major types of retail stores are department, specialty, bargain, convenience, supermarkets, & hypermarkets. (Like in Moscow.) They differ in terms of size, services, & product type they offer, & product pricing. Some retailing also takes place without stores, through the use of catalogs, vending machines, & video marketing. According to the wheel of retailing, conventional retailers are periodically Displaced by low-priced innovative retailers, who then become more conventional & subject to displacement.

Distribution ultimately depends on physically getting the product to the buyer. Physical distribution includes customer-service operations such as order processing. It also includes warehousing & transportation of products. Warehouses may be public or private & may be used for long-term storage or serve as distribution centers. Costs of warehousing include inventory control & materials handling.

Truck, plane, railroad, water, & pipeline transportation differ in cost, availability, reliability of delivery, & speed. Air is the fastest but most expensive. Water carriers are the slowest, but least expensive. Most products are moved by truck at some point. Transportation in any form may be supplied by common carriers, freight forwarders, contract carriers, or private carriers.

Products are a firm�s reason for being, their features offer benefits to buyers, whose purchases are the source of business profits. In developing products, marketers must take into account whether their market is individual consumers or other firms. Marketers must also recognize that buyers will pay less for & worry less about the exact nature of convenience goods than about shopping & specialty goods. In industrial markets, expensive items are generally less expensive & more rapidly consumed than are capital items.

The seven stages of product development are development the ideas, screening, concept testing, business analysis, prototype development, test marketing, & commercialization. Very few ideas for new products survive to the commercialization stage.

When new products are launched, they have a life cycle that begins with their introduction & progresses through stages of growth, maturity, & decline Revenues rise through the early growth period; sales rise through the late maturity period. In terms of the growth -share matrix, this progression appears as a product moves from questions mark to star to cash cow to dog.

Each product is given a visible identity by its brand & the way it is packaged & labeled. National, licensed & private brands are developed to create brand loyalty. Packaging provides an attractive container & advertises the product. The label informs the consumer of the package contents. The pricing of the product will determine its business success, depending on the business objectives that are being sought. Profit maximization, market share, & other business objectives may be relevant to the pricing decision. Economic theory, cost-oriented pricing, & break-even analysis are tan used as tools in determine prices.

Pricing also involves choices of a basic pricing strategy can be used for new products. Existing products may be priced at, above, or below prevailing prices for similar products, depending on the other elements in the marketing mix. Within a firm�s pricing strategies, managers set prices using tactics such as price lining, psychological pricing, & discounting.

1. Principles of Marketing Philip Kotler

2. The practice of Marketing Kenneth E. Runyon

3. Business Ricky W. Griffin

4. Marketing Patrick E. Murphy

5. Ben M. Enis Marketing Management ( A Strategic Approach)

6. Harper W. Boyd, Jr

7. Orville C. Walker,Jr