Weekly Application #3

Prof. Cloudya Esther Marketing Management 6805 FIU - MSM

The Marketing Plan Part 3 - Segmentation | Mix: Product & Price

COMING UP This lecture, will cover the underlined sections of how to build a Marketing Plan:

Executive Summary Mission | Vision | Objectives | Value Proposition

Strategy Segmentation | Mix | Budget | Timeline

1

2

3

4

Market Research Buyer | Brand | SWOT | Industry

Execution Create | Test | Launch

5 Analytics Evaluation | Monitoring

WHAT IS MARKET SEGMENTATION?

The process of grouping customers within a market according to similar needs, habits or attitudes that can be addressed through marketing.

The point is to identify distinct segments of customers with similarities that respond to marketing efforts.

Within the Milk Industry you have Various Segments

WHY SEGMENTING THE MARKET?

Reason 2 Segmentation lays the foundation to for identifying your Target Market, using marketing to give the brand/product a distinctive and meaningful place (position) in the minds of targeted customers.

Reason 1 Segmentation is an important part of marketing planning because it allows marketers to focus their resources on the most promising opportunities.

UNDIFFERECIATED MARKETING

DFFERENCIATED MARKETING

Targeting all market segments with the same marketing strategy, also known as Mass Marketing.

Creating a Separate Marketing Strategy for each targeted segment.

The AIDA Model

AwarenessAwarenessAwareness

InterestInterestInterest

DesireDesireDesire

ActionActionAction

Digital Funnel Awareness Phase Collateral Telemarketing White Papers Webinars Banners Print Ads PR SEO Social Media

Transactional Phase Thank you Achnowledgment

Consideration Phase Customer Evidence Testimonials Assesment Tools, calculators Demos Case Studies References

Onboarding Welcome Kit

Awareness

Consideration

Conversion

Loyalty

Advocacy

Loyalty Programs Rewards Newsletters Events Community Customer Satisfaction Survey Net Promoter Score Survey

TACTICS

Attract potential buyers, influencers and referral sources

ATTRACT PROSPECTS

BUILD ENGAGEMENT Deepen engagement with you prospects and turn them into educated and qualified opportunities.

TURN OPPORTUNITIES INTO CLIENTS

Make the decision easy for prospects that are ready to buy.

THIS IS WHAT WE DO!

Elements of the Marketing Mix Since the 1960s, marketing mix as been associated with the four Ps:

Product

1 2 3 4

Price PlacePromotion

Identifying and arranging the elements of its marketing mix allows a business to make profitable marketing decisions at every level. These decisions help a business:

Develop its strengths and

limit its weaknesses

Become more competitive and adaptable in its

market

Improve profitable

collaboration between

departments and partners

WHAT IS A DIGITAL MARKETING MIX?

A digital marketing mix is how a business achieves its marketing goals using digital technologies. As more business is done online, digital marketing tools become important to all types of businesses, not only those in the tech industry.

A digital marketing mix follows the same principles of a traditional marketing mix. However, those elements are adapted to the way the Internet influences new technologies and consumer behavior.

The Four Cs of a Marketing Mix In the 1990s, the four Ps were adapted to the four Cs to place less

focus on the business and more on the customer.

Consumer

1 2 3 4

Cost CommunicationConvenience

Miyazaki's

DISTRIBUTION

APPROACH

TO MARKETING

EXCHANGE

Seller Transaction

Cost

INFORMATION

"BUYER" INNOVATION

COMPENSATION

Seller Transaction

Cost

Seller Transaction

Cost

Buyer Transaction

Cost

Buyer Transaction

Cost

Buyer Transaction

Cost

"SELLER"

To put the idea of the distribution approach to marketing in a real life scenario (or a sit-come scene), let’s watch this clip from a Friends episode where Ross buys a

couch, and ends up paying a very high transaction cost.

If you think about it, we make purchase decisions based on transaction cost all the time.

-      Do I get this from Amazon even if it’s a couple of bucks more expensive so they bring it to my door? (innovation - convineince)

-      Do I buy this more expensive plane ticket so I get to use their executive lounge? (innovation- loyalty)

-      Do I buy this product because it says specifically that it works with my mac model, instead of the other that only says work with Apple computers? (information)

WHAT IS A PRODUCT? A product is any good, service, or idea that can be offered to a market to satisfy a want or need.

· A good, service, experience or idea · Produced and marketed so that it justifies continuance · Serves customers · Produce satisfaction and innovation · Generates funding (profit/surplus)

Marketers must consider the life cycle of the product to address any challenges that may arise once it's in the hands of the consumer.

Considered tangible products that are interactive

with in some manner

·        Apparel ·        Equipment ·        Supplements

Non-tangible products generally, provided by a person with training or

expertise in an area

·        Personal Trainer ·        CPA – Accountant ·        Freight Forwarding

Entertainment base event

·        Event (ultra) ·        Destination (wine tour) ·        Membership (time share)

TYPES OF PRODUCTS GOODS

SERVICES EXPERIENCES

Promoting an idea or a lifestyle

· Advocacy Groups ·       Research ·      Organizations

IDEAS

COMPLEXITY OF PRODUCTS To better meet customer- specific and market-specific demands, companies are increasing the number of products and product variants they manufacture.

CORE CUSTOMER

VALUE

ACTUAL PRODUCT

ASOCIATED SERVICES

Brand Name Packaging Features/Design Quality Level.

Financing Product Warranty Product Support

EXAMPLE: ONLINE SUPPLEMENTS COMPANY

PRODUCT DECISIONS

Breadth refers to the number of product lines that you have such as in this Adidas examples, Footwear, Apparel and Accessories.

Depth in this case refers to the number of categories within each of those product lines.

Packaging Sometimes it becomes part of the brand identity

What is the Real Exchange? The answers to this questions are opinion base.

What is the general product?

What is really exchanged?

What product is needed?

What product can be sold?

Determining Product Development - The market will determine what can and cannot. - This answer can be determined by doing quality market research

Ask the right questions using Market Research

What benefits do they offer?

What needs/desires do they fulfilled?

What basic needs are fulfilled?

What satisfaction/value/utilities the consumer receive?

Types of Pricing Strategies

Competition-Based Pricing1

2

3

4

5

6

7

8

Cost-Plus Pricing

Dynamic Pricing

Freemium Pricing

High-Low Pricing

Hourly Pricing

Skimming Pricing

Premium Pricing Strategy

9 Project Based

10

11

12

Value Based

Bundle Pricing

Psychological Pricing

13 Geographic Pricing

COMPETITION-BASED PRICING STRATEGY

This pricing strategy focuses on the existing market rate (or going rate) for a company’s product or service; it doesn’t take into account the cost of their product or consumer demand.

Instead, a competition-based pricing strategy uses the competitors’ prices as a benchmark.

Businesses who compete in a highly saturated space may choose this strategy since a slight price difference may be the deciding factor for customers.

Whichever price you choose, competitive pricing is one way to stay on top of the competition and keep your pricing dynamic.

AKA competitive pricing or competitor-based pricing.

1

COST-PLUS PRICING STRATEGY

A cost-plus pricing strategy focuses solely on the cost of producing your product or service, or your COGS.

It’s also known as markup pricing since businesses who use this strategy “mark up” their products based on how much they’d like to profit.

To apply the cost-plus method, add a fixed percentage to your product production cost.

Cost-plus pricing is typically used by retailers who sell physical products. This strategy isn’t the best fit for service-based or SaaS companies as their products typically offer far greater value than the cost to create them.

AKA Mark-Up Pricing

2

DYNAMIC PRICING STRATEGY

It’s a flexible pricing strategy where prices fluctuate based on market and customer demand.

Hotels, airlines, event venues, and utility companies use dynamic pricing by applying algorithms that consider competitor pricing, demand, and other factors. Even Amazon has been openly using it.

These algorithms allow companies to shift prices to match when and what the customer is willing to pay at the exact moment they’re ready to make a purchase.

AKA Surge Pricing, Demand Pricing, or Time-Based Pricing

3

FREEMIUM PRICING STRATEGY

A combination of the words “free” and premium  freemium pricing is when companies offer a basic version of their product hoping that users will eventually pay to upgrade or access more features.

Unlike cost-plus, freemium s a pricing strategy commonly used by SaaS and other software companies.

They choose this strategy because free trials and limited memberships offer a “peek” into a software’s full functionality — and also build trust with a potential customer before purchase.

With freemium, a company’s prices must be a function of the perceived value of their products.

Prices must present a low barrier to entry and grow incrementally as customers are offered more features and benefits

4

HIGH-LOW PRICING STRATEGY

A high-low pricing strategy is when a company initially sells a product at a high price but lowers that price when the product drops in novelty or relevance. Discounts, clearance sections, and year-end sales are examples of high-low pricing in action — hence the reason why this strategy may also be called a discount pricing strategy.

High-low pricing is commonly used by retail firms who sell seasonal or constantly-changing items, such as clothing, decor, and furniture. What makes a high/low pricing strategy appealing to sellers?

Consumers enjoy anticipating sales and discounts, hence why Black Friday and other universal discount days are so popular.

AKA Discount Pricing Strategy

5

HOURLY PRICING STRATEGY

Hourly pricing, also known as rate-based pricing, is commonly used by consultants, freelancers, contractors, and other individuals or laborers who provide business services.

Hourly pricing is essentially trading time for money.

Some clients are hesitant to honor this pricing strategy as it can reward labor instead of efficiency.

6

SKIMMING PRICING STRATEGY

A skimming pricing strategy is when companies charge the highest possible price for a new product and then lower the price over time as the product becomes less and less popular.

Skimming is different than high-low pricing in that prices are lowered gradually over time. Technology products, such as DVD players, video game consoles, and smartphones, are typically priced using this strategy as they become less relevant over time.

A skimming pricing strategy helps recover sunk costs and sell products well beyond their novelty, but the strategy can also annoy consumers who bought at full price and attract competitors who recognize the “fake” pricing margin as prices are lowered.

7

PREMIUM PRICING STRATEGY

Also known as premium pricing and luxury pricing, a prestige pricing strategy is when companies price their products high to present the image that their products are high-value, luxury, or premium.

Prestige pricing focuses on the perceived value of a product rather than the actual value or production cost.Prestige pricing is a direct function of brand awareness and brand perception.

Brands who apply this pricing method are known for providing value and status through their products — which is why they’re priced higher than other competitors. Fashion and technology are often priced using this strategy because they can be marketed as luxurious, exclusive, and rare.

8

PROJECT-BASED PRICING STRATEGY

A project-based pricing strategy is the opposite of hourly pricing — this approach charges a flat fee per project instead of a direct exchange of money for time.

It is also used by consultants, freelancers, contractors, and other individuals or laborers who provide business services.

Project-based pricing may be estimated based on the value of the project deliverables.

Those who choose this pricing strategy may also create a flat fee from the estimated time of the project.9

VALUE-BASED PRICING STRATEGY

A value-based pricing strategy is when companies price their products or services based on what the customer is willing to pay. Even if they can charge more for a product, they decide to set their prices based on customer interest and data.

If used accurately, value-based pricing can boost your customer sentiment and loyalty. It can also help you prioritize your customers in other facets of your business, like marketing and service.

On the flip side, value-based pricing requires you to constantly be in tune with your various customer profiles and buyer personas and possibly vary your prices where your customers vary.10

BUNDLE PRICING STRATEGY

A bundle pricing strategy is when you offer (or "bundle") two or more complementary products or services together and sell them for a single price.

You may choose to sell your bundled products or services only as part of a bundle, or sell them as both components of bundles and individual products.

This is a great way to add value through your offerings to customers who are willing to pay extra upfront for more than one product. It can also help you get your customers hooked on more than one of your products faster.11

PSYCHOLOGICAL PRICING STRATEGY

Psychological pricing is what it sounds like — it targets human psychology to boost your sales.   For example, according to the "9-digit effect", even though a product that costs $99.99 is essentially $100, customers may see this as a good deal simply because of the "9" in the price. 

Another way to use psychological pricing would be to place a more expensive item directly next to (either, in-store or online) the one you're most focused on selling. Or offer a "buy one, get one 50% off (or free)" deal that makes customers feel as though the circumstances are too good to pass up on. 

And lastly, changing the font, size, and color of your pricing information on and around your products has also been proven, in various instances, to boost sales.

12

GEOGRAPHIC PRICING STRATEGY

Geographic pricing is when products or services are priced differently depending on geographical location or market.

This strategy may be used if a customer from another country is making a purchase or if there are disparities in factors like the economy or wages (from the location in which you're selling a good to the location of the person it is being sold to).

13

It’s essential to know your products and understand how to price for value.  Part of that is being clear on the goals of both your product and your profits. 

Are you designing/selling products that are for convenience, profit, solutions, service, etc? Understanding why you’re selling your product then helps you determine more about the pricing. 

It’s not just the manufacturing costs, it also requires knowing the market rate, competitor’s prices, the unique benefits and features, and what end of the branding scale you desire to be on (exclusive vs. convenient).

PRICING CONCLUSION

Recap After today's lesson you should understand and be familiar with the following concepts:

Executive Summary Mission | Vision | Objectives | Value Proposition

Strategy Segmentation | Mix | Budget | Timeline

1

2

3

4

Market Research Buyer | Brand | SWOT | Industry

Execution Create | Test | Launch

5 Analytics Evaluation | Monitoring