Study unit 6 The marketing instruments

Question 1

Product

Answer 1

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.

Question 2

Consumer goods

Answer 2

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.

Question 3

Product Life Cycle

Answer 3

Life cycle that goes through four phases: the introductory phase, growth phase, maturity phase and declining phase.

Question 4

Brand

Answer 4

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.

Question 5

A manufacturer’s brand

Answer 5

A manufacturer’s brand is a brand that is owned and used by the producer of the product, for example Levi jeans.

Question 6

A dealer brand

Answer 6

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.

Question 7

Generic brands

Answer 7

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.

Question 8

Family brand

Answer 8

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.

Question 9

Packaging

Answer 9

The packaging of a product generally bears a label displaying the characteristic brand and other important information.

Question 10

Product differention

Answer 10

The method used by a marketer to differentiate his or her product from those of competitors is referred to as product differentiation.

Question 11

Product obsolescence

Answer 11

Many marketers make use of product obsolescence in order to “compel” customers to make repeat purchases.

Question 12

product range extension

Answer 12

x

Question 13

product diversification

Answer 13

x

Question 14

product withdrawal

Answer 14

x

Question 15

The new product development process

Answer 15

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.

Question 16

Price

Answer 16

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.

Question 17

Businesses follow a price determination process when setting prices.

Answer 17

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.

Question 18

Price Skimming

Answer 18

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.

Question 19

Price Penetration

Answer 19

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.

Question 20

Market price level

Answer 20

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.

Question 21

Leader Prices

Answer 21

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).

Question 22

Odd prices

Answer 22

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.

Question 23

Bait prices

Answer 23

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.

Question 24

Distribution

Answer 24

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.

Question 25

Channel Captain

Answer 25

The business that controls the channel is known as the channel captain. If the manufacturer is the channel captain, it will be mainly responsible for advertising/marketing the product.

Question 26

Make sure that you understand the different types of market coverage. The easiest way to remember is as follows:

Answer 26

• Intensive market coverage.
• Exclusive market coverage.
• Selective market coverage.

Question 27

• Intensive market coverage.

Answer 27

This is a manufacturer’s strategy of making a product available to buyers in as many outlets as possible for maximum market exposure. Manufacturers of convenience products such as cigarettes, chewing gum and cold drinks want intensive distribution.

Question 28

• Exclusive market coverage.

Answer 28

This type of coverage involves a manufacturer selling prod- ucts through only one wholesaler or retailer in a particular area. Rolex watches, Ferrari cars and Steinway pianos are examples of products that are exclusively distributed.

Question 29

• Selective market coverage.

Answer 29

Here, a few specialist intermediaries are selected even though they stock competing products. Appliances and sporting goods are products that are distributed in this way.

Question 30

Marketing communication

Answer 30

Marketing communication is the process of informing, persuading and reminding consumers, and it comprises six elements: advertising, personal selling, direct marketing, sales promotion, publicity, and public relations.

Question 31

Advertising

Answer 31

Advertising has a pervasive influence in our daily lives. Typically, advertising embodies one or more of the three fundamental objectives in respect of its target market: to inform, to persuade and to remind consumers.
These companies design their advertising messages for the different media in different ways. They make use of headings, illustrations and copy in the print media, while radio advertisements make use of words and sound. Television advertisements, on the other hand, make use of spoken and written words as well as visual images.
Companies differ in the amount of the sales revenues they spend on advertising.

Question 32

Personal selling

Answer 32

Personal selling is an active effort to communicate with high-potential buyers on a direct, usually face-to-face, basis. Salespeople are a vital source of information to consumers contemplating a purchase.
As consumers, we depend on salespeople to provide key information to help us make purchase decisions.
A company’s salespeople provide the most direct link to its customers. In fact, to many customers the salesperson is the company, and the customer’s image of the company is determined by the quality of the personal selling effort. Because of their direct contact with the market, salespeople are a valuable source of feedback. They provide feedback about the company’s products, about competitors and their products, and about customers’ requirements.

Question 33

Direct Marketing

Answer 33

We now know that the Internet, radio and television are types of advertising media used to communicate information about a product or service to customers.
Information about these products is communicated directly to the customer, who is then able to respond directly by purchasing the product online via the Internet. The type of marketing communication being used here is called direct marketing. Other advertising media such as radio and television can also be used for direct marketing.
Many consumers prefer direct marketing as they can make their purchases from the comfort of their own homes. This marketing communication element allows businesses to offer their customers a pleasurable experience and greater convenience.

Question 34

The benefits of direct marketing :

Answer 34

• A long-term relationship can be developed with the customer.
• The message can be directed at a specific customer.
• A customer database can be developed.
• The results of a direct marketing campaign can be measured directly.

Question 35

Sales promotion

Answer 35

Sales promotion can be defined as those methods that cannot be classified under personal selling, advertising or publicity, but which complement them in transmitting the marketing message to potential consumers and resellers.

Question 36

• Sampling.

Answer 36

This can be defined as any method used to deliver an actual or a trial-sized product to prospective consumers. Consumers are offered an opportunity to try the product without any commitment to buy it.

Question 37

• Price incentives.

Answer 37

These are reductions in products’ regular prices.

Question 38

• Coupons.

Answer 38

Using coupons is a promotional device that provides a cash saving to consumers who redeem the coupon.

Question 39

• Premiums.

Answer 39

These are articles of merchandise provided free or at a reduced price to consumers as incentives to encourage them to buy a product. An item could be offered inside or attached to the product package.

Question 40

• Contests and competitions.

Answer 40

These offer consumers the opportunity to win cash, merchandise or travel prizes.

Question 41

• Point-of-purchase promotion.

Answer 41

One of the most important forms of sales promotion in
retail stores is a display. Displays and the variety of display materials used are designed to attract consumer attention by enhancing the prominence or attractiveness of the products. Point-of-purchase promotion material covers a wide range, such as name cards which can be affixed to shelves, placards which stand on the floor or hang from the ceiling, tubs piled high with products, stalls for demonstrations or special displays and specially designed racks for, say, sweets and razor blades.

Question 42

• Gifts.

Answer 42

The gifts used in this kind of promotion are also known as “advertising specialities” because an advertising message is usually printed on them. Examples are key holders, lighters, T-shirts and diaries.

Question 43

Publicity

Answer 43

Publicity involves supplying information about the company’s product or service to the media, and hence obtaining a favourable and free review. This can be done by means of news or press releases, sponsorships and news articles. All the media can be used to carry the marketing message – the press, radio and television. Because the message appears in the editorial part of the press, and not in advertisements, it has greater credibility. It is almost as if someone impartial is reporting on the product or the company. The same happens when the company or its product receives favourable mention in news reports on television or radio. Consumers are then more inclined to accept the message.

Question 44

Public relations (PR)

Answer 44

Public relations (PR) refers to the management of all communication between an organisation and its publics in order to create a positive image of the company. 
The organisation’s public relations department is concerned with image-building methods of communication, while its marketing department is responsible for the promotion and sale of its products and services.

Question 45

Various methods/medium of PR

Answer 45

Various media can be used to carry the messages of the public relations department in order to create a positive image of the company. Methods include print media such as newspapers, magazines and company publications, as well as sight and sound media, for example radio, televi- sion, film and video. Special events such as press conferences, visits to the company, re- ceptions and exhibitions can also be used. Crisis management is also considered to be a communication medium for public relations. Although the crisis itself is not the medium, it may be an opportunity for management to convey a positive message about the busi- ness. The Internet has also become a very important medium for public relations. Public relations tools such as the use of web sales, intranet operations and use of the Web to communicate with the public are increasing in popularity.