Study unit 6 The marketing instruments Flashcards
Product
A product is a bundle of perceived tangible and intangible attributes that has the potential to satisfy present and potential customer wants and is received in exchange for money or other considerations.
Consumer goods
Consumer goods may be classified on the basis of consumer buying habits, even though a watertight classification is not always possible, since the same product may be a luxury speciality product for one customer and a shopping product for another.
Product Life Cycle
Life cycle that goes through four phases: the introductory phase, growth phase, maturity phase and declining phase.
Brand
A brand is a name, term, design, symbol, or any other feature that identifies one business’s product or service as distinct from those of other businesses.
A manufacturer’s brand
A manufacturer’s brand is a brand that is owned and used by the producer of the product, for example Levi jeans.
A dealer brand
A brand that is owned and used by a reseller (such as a retailer and wholesaler) is called a dealer brand, for example Donna Claire is used by Foschini.
Generic brands
Many stores also stock generic brands, which are products named only by their generic class. Super- market shoppers can find products ranging from paper towels to dog food to peanut butter packaged as generic products.
Family brand
The option known as a family brand is a brand that is applied to an entire product mix or to all the products in a particular line. Gillette Company uses the family brand Gillette Series for a line of men’s shaving products, deodorants and aftershaves.
Packaging
The packaging of a product generally bears a label displaying the characteristic brand and other important information.
Product differention
The method used by a marketer to differentiate his or her product from those of competitors is referred to as product differentiation.
Product obsolescence
Many marketers make use of product obsolescence in order to “compel” customers to make repeat purchases.
product range extension
x
product diversification
x
product withdrawal
x
The new product development process
The new product development process is the series of activities by which a business generates new product ideas, evaluates them and develops them into new products that enter the marketplace. There is no way to guarantee that all new products will succeed. However, being systematic about developing new products increases the chances of success.
Price
Price is the only marketing instrument that generates an income for the business. The price that is paid by the consumer represents the income generated for the business. If the price is set too low, the business will have difficulty surviving and if this situation continues for an indefinite period, the business will go bankrupt.
Businesses follow a price determination process when setting prices.
A cost price is set first of all. The price of a product must be high enough to cover the total cost of production and marketing. The market price is the price of competing products on the market, or the price that consumers are willing to pay. Businesses may set prices below, at or above those of competitors. Campbell’s Soup has for instance been the low cost leader in the canned soup market because it has set its prices lower than those of competitors. The target price is the price that will reach the target rate of return. Lastly, the final price is set, which is a reconciliation of the market and target price. This is the price which is offered to consumers.
Price Skimming
For instance, a skimming price can be set when a new, unique product is launched on the market such as Nevirapine, the pharmaceutical product that helps prevent the transmission of HIV/ Aids from mother to child. The pharmaceutical company selects a high price to recover the costs of research and development as soon as possible – skimming the cream of rich profits.
Price Penetration
The opposite of a skimming price is a penetration price. Here an introductory price is set relatively low to gain deep market penetration quickly. For example, consum- ers are more likely to buy an innovative new sugar substitute if the price is low.
Market price level
Another method used by companies is to set the price at the market price level, in other words at the price at which competitors’ products are selling.
Leader Prices
A company can also use leader prices, which involves promoting one product at a sharply reduced price in the expectation that it will attract customers who will then purchase other items. Supermar- kets, for example, often use milk as a leader because of its wide use, perishability and well-known regular prices. Clothing stores might select a jacket as a leader because it has many complements (ie trousers, ties and shirts).
Odd prices
Odd prices are prices that are set a few rands or cents below a round number. For example, the price of a packet of Flings chips may be set at R1,69 a bag and the consumers of the chips think of the bag of chips as costing R1 and 60 something cents, rather than R2.
Bait prices
Some businesses also use bait prices, which is the practice (often illegal) of advertising a product at a very low price to attract consumers, only to persuade them to buy a higher priced item when they respond.
Distribution
The distribution channel is the marketing instrument that delivers the product to the final consumer. In this process, wholesalers, retailers and other intermediaries are used to present a product, service or idea to the final consumer.
