The 4P Strategy

Copyright © 2021 Pearson Education Ltd.

PRODUCT
New Product Development Strategy
Ways to Obtain New Products
Acquisition refers to the buying of a whole company, a
patent, or a license to produce someone else’s product.
New product development refers to original products,
product improvements, product modifications, and new
brands developed from the firm’s own research and
development.
Learning Objective 2
List and define the steps in the new product development
process and the major considerations in managing this
process.
What is the New Product Development (NPD)
Process? | From A Business Professor
New Product Development Process
(1 of 17)
Figure 9.1 Major Stages in New Product Development
Learning Objective 3
Describe the stages of the product life cycle and how
marketing strategies change during a product’s life cycle.
Product Life-Cycle Strategies (1 of 9)
Figure 9.2 Sales and Profits over the Product’s Life from
Inception to Decline
Product Life-Cycle Strategies (2 of 9)
Product development
• Zero sales and increasing investment costs
Introduction
• Slow sales and nonexistent profits
Growth
• Rapid market acceptance and increasing profits
Maturity
• Slow sales growth and profits level off or decline
Decline
• Sales fall off and profits drop
Product Life-Cycle Strategies (3 of 9)
Introduction Stage

• Slow sales growth

• Little or no profit
• High distribution and promotion expenses
Product Life-Cycle Strategies (4 of 9)
Growth Stage

• Sales increase
• New competitors enter the market
• Profits increase
• Economies of scale
• Consumer education
• Lowering prices to attract more buyers
Product Life-Cycle Strategies (5 of 9)
Maturity Stage

• Slowdown in sales
• Many suppliers
• Substitute products
• Overcapacity leads to competition
• Increased promotion and R&D to support sales and profits
Product Life-Cycle Strategies (6 of 9)
Maturity Stage Managing the product life cycle: The
140-year old Quaker brand is acting
Modification Strategies
anything but its age. Through what it
• Modify the market calls “oatsperiments,” the brand has
added a kitchen cabinet full of
• Modify the product contemporary new products and a full
slate of modern marketing approaches.
• Modify the marketing mix
Product Life-Cycle Strategies (7 of 9)
Decline Stage

• Maintain the product

• Harvest the product
• Drop the product
Product Life-Cycle Strategies (8 of 9)
Table 9.2 Summary of Product Life-Cycle Characteristics,
Objectives, and Strategies
Product Life-Cycle Strategies (9 of 9)
Table 9.2 Summary of Product Life-Cycle Characteristics,
Objectives, and Strategies
PRICE
What questions of pricing strategy?
• What is the perceived value of the product/service to the
customer?
• How does the pricing compare to competitors in the
market?
• What pricing strategy should we use?
Learning Objective 1
Answer the question “What is a price?” and discuss the
importance of pricing in today’s fast-changing environment.
What Is a Price?
Price is the amount of money charged for a product or
service, or the sum of all the values that customers
exchange for the benefits of having or using the product or
service.
Major Pricing Strategies
Define price, identify the three major pricing strategies, and
discuss the importance of understanding customer-value
perceptions, company costs, and competitor strategies when
setting prices.
Learning Objective 2

▪ General Pricing Approaches

 Cost vs. value vs. competition-based pricing
▪ Psychological Pricing Strategies
 Decoy effect
 Compromise effect
▪ Differential Pricing and Revenue Management
▪ Pricing and Product Life Cycle
 Premium positioning
 New product pricing
 Existing product pricing
Major Pricing Strategies (1 of 17)
Figure 10.1 Considerations in Setting Price
Major Pricing Strategies (2 of 17)
Customer Value-Based Pricing

Value-based pricing uses the buyers’ perceptions of value

rather than the seller’s cost.
• Value-based pricing is customer driven.
• Cost-based pricing is product driven.
• Price is set to match perceived value.
Major Pricing Strategies (3 of 17)
Figure 10.2 Value-Based Pricing versus Cost-Based Pricing
Major Pricing Strategies (4 of 17)
Customer Value-Based Pricing

Good-value pricing is offering just the right combination of

quality and good service at a fair price.
Major Pricing Strategies (5 of 17)
Customer Value-Based Pricing

Everyday low pricing (EDLP) involves charging a constant

everyday low price with few or no temporary price discounts.
Major Pricing Strategies (6 of 17)
Customer Value-Based Pricing

High-low pricing involves charging higher prices on an

everyday basis but running frequent promotions to lower
prices temporarily on selected items.
Major Pricing Strategies (7 of 17)
Customer Value-Based Pricing

Value-added pricing attaches value-added features and

services to differentiate a company’s offers and thus their
higher prices.
Major Pricing Strategies (8 of 17)
Cost-Based Pricing

Cost-based pricing sets prices based on the costs for

producing, distributing, and selling the product plus a fair
rate of return for effort and risk.
Major Pricing Strategies (9 of 17)
Cost-Based Pricing

Fixed costs are the costs that do not vary with production or
sales level.
• Rent
• Heat
• Interest
• Executive salaries
Major Pricing Strategies (10 of 17)
Cost-Based Pricing

Variable costs vary directly with the level of production.

• Raw materials
• Packaging
Small Group Discussion
• Cost-based
IKEA. Which pricing • Value-based
approach? • Competition-based
Psychological Pricing:
Your Choice?

16%

0%

84%
Your Choice?

68%

32%
Total Sales per 1,000 Subscribers

$114,444 $80.120
Psychological Pricing:
Decoy Effect
Consumers tend to have a specific change in preference
between two options when presented with a third option
that is similar but inferior (a decoy).

Decoy

$114,444 $80.120
Psychological Pricing:
Decoy Effect
The Camera Store Experiment Business Application:
Scenario Good-Better-Best Strategy
Scenario 1: Two Options • Offering three tiers instead
• Camera A: $169 of two

• Camera B: $239 • Middle option typically

becomes most popular
Scenario 2: Three Options
• Psychological anchor effect
• Camera A: $169
of premium option
• Camera B: $239
• Camera C: $469
 Psychological Pricing:
Compromise Effect (Extremeness Aversion)
▪ Consumers like to avoid extremes so choose the middle brand
▪ Makes justification easier

[Link]
Psychological Pricing:
The Power of 9-Price Endings

Case Study 1: The Margarine Experiment

• Regular price: 83¢ → 2,817 unit sales
• Price reduced to 63¢ → Sales increased by 194%
• Further reduced to 59¢ → Sales increased by 400%
Key Finding: The 4¢ reduction to a '9' ending had more
impact than the previous 20¢ reduction
Psychological Pricing:
The Endowment Effect

Understanding Ownership Psychology

• Mere sense of ownership increases willingness to pay

• Actual ownership not required - perception is sufficient

Real-World Application

• Car Sales Example

• Homestay at VHOP

• Modern approach: Solo test drives

• Creates sense of ownership
• Removes salesperson presence
• Increases likelihood of purchase
Psychological Pricing:
Weber-Fechner “Law”

The Percentage vs. Absolute Change Principle

Key Concept

• Consumers react to percentage changes rather than absolute

amounts

• Not a strict law but a reliable empirical observation

• Scenario: Saving $5 by driving 5 miles

• On a $10 purchase: Consumers likely to make the trip
• On a $1,000 purchase: Consumers unlikely to make the trip

• Despite identical absolute savings ($5), consumer behavior

varies based on the percentage of savings
 Price Differentiation
Revenue Management is Demand-based Pricing
▪ “The process of allocating the right type of capacity to the right kind
of customer at the right price so as to maximize revenue or yield.”
(Kimes1989)
Example: Flight tickets

▪ Develop offers based on customer value; price elasticity

characteristics of the segments; what customers are willing to pay
(e.g., lower rates for consumerswho book early or late –cruise lines)
▪ The difference in price is NOT based on differences in cost.
▪ When there are different market segments willing to make tradeoffs to
get the rates they desire (e.g., less desirableroomsor cabins)
Differential Pricing and Fences
Example:Airlines Airlines differentiated pricing regularly, as they sell seats
simultaneously to different market segments.

Wirtz and Lovelock, Services Marketing (8th edition)

New-Product Pricing: Skimming
Pricing
Sellat high price
before reducing to “Skim the cream” pricing
next price level
Price and repeat;Skim off involves selling at a high price
Initial to those who are willing to
small but profitable
skimming marketsegments
pay before aiming at more
price (layerby layer) price- sensitive consumers.
Second
price

Final
price Sony HDTV

Quantity 1990 1993 2001 2010

PROMOTION
What We’ve Learned &Where We’re
Heading..
Value, Mission,
Identify Objectives
Problem

Competition
Competition Analyze Environment
Analyze Environment SWOT
PESTN

UnderstandConsumer
Analyze Consumer

Segment Market,
Segment Choose
Market
Target, Position Product

Develop Strategy

Additional 3P’s Product Price Place Promo

Promo
New • Integrated
People Product/Serv Pricing Strategies • Distribution Marketing
Process ice Design Communications :
Physical evidence Process Advertising, PR, and
Branding/Brand Sales Promotion
Management

Customer satisfaction, service failure, recovery, and loyalty

Learning Objectives
• Define the five promotion mix tools for communicating
customer value
• Outline the steps in developing effective communications
• Discuss the unique characteristics of each element of
integrated marketing communications
Learning Objective 1
Define the five promotion mix tools for communicating
customer value.
The Promotional Mix (1 of 6)
The promotion mix is the specific blend of promotion tools
that the company uses to persuasively communicate
customer value and build customer relationships.
The Promotional Mix (2 of 6)
Advertising is any paid form of nonpersonal presentation
and promotion of ideas, goods, or services by an identified
sponsor.
• Broadcast
• Print
• Online
• Mobile
• Outdoor
The Promotional Mix (3 of 6)
Sales promotion is a short-term incentive to encourage the
purchase or sale of a product or service.
• Discounts
• Coupons
• Displays
• Demonstrations
The Promotional Mix (4 of 6)
Personal selling is the personal interaction by the firm’s
sales force for the purpose of engaging customers, making
sales, and building customer relationships.
The Promotional Mix (5 of 6)
Public relations involves building good relations with the
company’s various publics by obtaining favorable publicity,
building up a good corporate image, and handling or heading
off unfavorable rumors, stories, and events.
The Promotional Mix (6 of 6)
Direct and digital marketing involves engaging directly with
carefully targeted individual consumers and customer
communities to both obtain an immediate response and build
lasting customer relationships.
Learning Objective 2
Discuss the changing communications landscape and the
need for integrated marketing communications.
Integrated Marketing Communications (1 of 4)
The New Marketing Communications Model
• Consumers are changing.
• Marketing strategies are changing.
• Advances in digital technology.

The new marketing communications

model: Marketers are shifting ever-larger
portions of their marketing budgets away
from old-media mainstays to online,
social, and mobile media. Adidas now
uses only digital channels to engage its
younger consumers.
Integrated Marketing Communications (2 of 4)
The New Marketing Communications Model
Content marketing: As the lines are rapidly blurring between
traditional advertising and new digital content, many marketers
now view themselves more broadly as content marketing
managers who create, inspire, share, and curate marketing
content—both their own and that created by consumers and
others.
Integrated Marketing Communications (4 of 4)
Figure 14.1 Integrated Marketing Communications

In the consumer’s mind,

messages from different media
and promotional approaches all
become part of a single
message about the
company. Mixed
communications from multiple
sources will blur consumer’s
brand perceptions.
Push and Pull Strategies as one of
the IMC Decision Factors
 Push and Pull Strategies as one of
the IMC Decision Factors
Producer’s Promotion Blend
Personal Selling, Sales Promo, Advertising,
PR, Direct Mktg.
Promotion to Promotion to
Final Consumers Channel Wholesaler
(advertising, consumer Wholesaler Promotion
Members
promotion) Pull (personal selling, Push
trade promotion)
End
Customer Retailer
Retailer Promotion
Pull
Pull Push
In-store
promotion,
End Trained End
Customer sales force
Pull Customer

[Link]
instead-of-sales- to-push/#207a9e9c22e5
Pull vs. Push Strategy
Avis encourages travel agents to
recommend their rental cars to
travelers by giving them
[Link] promotion is called
"Avis Loves Travel Agents"
promotion, and give $5.00 to
travel agents for each booking.
Pull vs. Push Strategy
Criteria Push Marketing Pull Marketing
Actively promoting products
Attracting customers to
to customers by pushing
Definition seek out the product by
them through distribution
creating demand.
channels.
Quickly get products into Build long-term demand
Objective
customers' hands. and brand loyalty.
Vinamilk provides Cocoon uses influencer
Vietnam
discounts and free gifts at marketing to create demand
Examples
supermarkets. on social platforms.
Promotions, discounts, and Branding, social media, and
How It
direct selling to encourage content marketing to drive
Works
purchases. interest.
Long-term, focuses on
Effectivene Short-term, boosts
building relationships and
ss immediate sales.
loyalty.
Poll for Review: Push vs. Pull strategy
Shelf space is so scare these days that manufacturers often have to
offer price-offs, allowances, buy-back guarantees, or free goods to
retailers and wholesales to get products on the self.
Malcom Gladwell’s publishers incentivize bookstores at various
airports with a couple of thousand dollars to give his new books
favored shelf space and position.

This is part of a strategy:

A. Pull
B. Push
C. Don’t know
Push Strategy at the Airport Bookstores
Steps in Marketing Communications
Design
Identify the Target Audience

DetermineCommunication
Objectives

Design a Message

Choose a Media(Channel)

Select a Source

Collect Feedback
Steps in Developing Effective
Marketing Communication (2 of 10)
Identifying the Target Audience
• What will be said
• How it will be said
• When it will be said
• Where it will be said
• Who will say it
The Hotel Inspector | Full Series Season 8
[Link]

[Link] traveller-
[Link]
Mystery Inspector
▪ Challenges (budget, 1% audience)
▪ Brand insight? Category insight?
▪ Unique and different independent properties
▪ Commonality: Rigorous vetting process (the most
discerning and demanding customers as mystery hotel
inspectors)
▪ Recruitment campaign (advertising a job) vs. advertise hotels
▪ How to gain a high level of reach amongst the target audience?
(media
strategy)
▪ There were strong calls to action to book and sign up to the Club
eNewsletter to
ensure visitors did not simply apply for the Mystery Inspector jobs.
Step 2: Determine Communication
Objectives

AIDAmodel Purchase

Conviction
Preference
Liking
Knowledge
Awareness

Cognitive Affective Behavioral

Cf. Affective Cognitive Behavioral

Step 3: Design a Message

• Message Content: what to say (rational, moral,

emotional appeals)

• Message Structure: how to say it logically

• Message Format: how to say it symbolically
Steps in Developing Effective
Marketing Communication (3 of 10)
Designing a Message
AIDA Model
• Get Attention
• Hold Interest
• Arouse Desire
• Obtain Action
Steps in Developing Effective
Marketing Communication (4 of 10)
Message Content – “What to Say”
Rational appeal relates to the audience’s self-interest.
Emotional appeal is an attempt to stir up positive or
negative emotions to motivate a purchase.
Moral appeal is directed to an audience’s sense of what is
right and proper.
Steps in Developing Effective
Marketing Communication (5 of 10)
Designing a Message
Message content is “what to say.”
Message structure and format is “how to say it.”
Message format: To attract attention, advertisers can use novelty and
contrast, eye-catching images and headlines, and distinctive formats, as
shown in this Reese’s ad.
Message Content: Emotional Appeals
Message Format: Symbolically Convey
Message

Absolut Vodka: 25 năm chỉ đi quảng cáo ... vỏ chai

[Link]
vo-chai
Ad Message Format
Step 4: Choose a Media
Step 4: Choose a Media
Choosing Communication Channels and Media
Personal communication involves two or more people
communicating directly with each other.
• Face-to-face
• Phone
• Mail or email
• Texting or internet chat
Step 4: Choose a Media
Choosing Communication Channels and Media
Opinion leaders are people whose opinions are sought by
others.
Product PlacementExample:
• BMW cars in James Bond movies
• Indirect advertising that appears less aggressive
• Believed to be more effective than traditional ads
Step 4: Choose a Media
Choosing Communication Channels and Media
Non personal communication channels are media that
carry messages without personal contact or feedback,
including major media, atmospheres, and events.
Not Yet All Digital…Mix of Traditional
and Digital
Step 5: Select a Source

*Credibility:
Expertise, trustworthiness,
likeability

Celebrities, employees, CEOs,

real consumers, influencers, etc.
Step 5: Select a Source
Selecting the Message Source
The message’s impact depends on how the target audience
views the communicator.
• Celebrities
– Athletes
– Entertainers
• Professionals
– Health-care providers
Step 5: Select a Source
Consumers as a (credible) Dove gave the viewer the opportunity to
source? communicate his or her values to others.
*Credibility: Dove's message about self-image.
Expertise, trustworthiness,
likeability

[Link]
Step 5: Consumers as a Source

Dove Real Beauty Sketches

[Link]
 Step 6: Collecting Feedback
Collecting feedback involves the communicator understanding
the effect on the target audience by measuring behavior resulting
from the content.
Characteristics of Each Element of
Integrated Marketing Communications
Integrated Marketing Communications
Discuss the uniquecharacteristics of eachelementof integrated
marketing communications
Public Relations
Create a positive image through a third-party endorsement

BENEFITS DRAWBACKS
▪ Inexpensive Requiresconsistent
▪ Canbe morebelievable effort No guaranteeof
▪ Mitigatesselective exposure coverage
 Advertising: Benefits vs. Drawbacks

BENEFITS DRAWBACKS
▪ Reach mass audience ▪ Impersonal
▪ Low cost per exposure ▪ Mostly one-way comm
▪ High total expense
▪ Can repeat message
▪ Clutter
▪ Perceived legitimacy
▪ Selective exposure

“Iforgetthenameoftheproduct,butthejingleonTVgoessomething
like ‘Yadee-dum-dee-rahte-dum-dee-rah-dee-dum.’” 12
Sales Promotions: Benefits vs.
Drawbacks
Personal Selling (Sales Agents): Benefits
vs. Drawbacks

Benefits Drawback
▪ Two-way flexible ▪ Requires long-term
communication commitment
▪ Personal; Relationships ▪ Expensive per exposure (e.g.,
▪ Effective in complex selling U.S. companies spending more
situations than $7 billion annually on
training salespeople)
Direct and Interactive Marketing

Interactivemedia,
consumer Directmail,
generatedmedia, telephone,
viralmarketing, catalog
socialmedia

E-mail,mobile
phonemarketing,
podcastsand
vodcast

Digital
Direct Marketing: Benefits vs. Drawbacks

Benefits Drawback
▪ Database Marketing: Reach ▪ “Junk Mail” reputation
specific target customers
▪ Privacy; Intrusiveness
▪ Can personalize
▪ Growing consumer
▪ Relationship building
resistance
▪ Competitors would not
know what you do.
PLACE
• Examples of Places:
• Burger King Whopper Detour Campaign)
[Link]

• IKEA Biến Khắp Nơi Thành Showroom Độc Lạ |

TikTok
Channel Intermediaries

• Wholesalers - normally deal with other

intermediaries, usually retailers.
Wholesalers do take legal title to the goods.

• Retailers - sell direct to the consumer and

may purchase direct from the manufacturer
or wholesaler.
Channel Intermediaries

• Franchisees hold contracts to supply and

market a product/service of the franchisor.
Franchising is an agreement between a
franchisor and a franchisee.

• Agents and brokers have legal authority to act

on behalf of the manufacturer without taking legal
title to the goods or handling the products
directly.
Channel Intermediaries
◼ Department stores: provide a wide range of options to the consumers.
E.g. JCPenney.
◼ Discount retailers: They offer a huge range of products at a
discounted rate. The quality in certain cases might be a little low. E.g.
Wal-Mart.
◼ Supermarkets/hypermarkets: Generally they supply a range of
household, food and beverage products. They have significant buying
power.
◼ Warehouse Stores: They sells limited stock in bulk at a discounted
rate.
◼ Speciality Stores: They specialize in a particular product and would not
sell anything else apart. E.g. Reebok merchandise at Reebok store
◼ E Tailers: They can place their order through internet, pay with debit or
credit cards. E.g. EBAY, Amazon.
◼ Dollar Stores: They offer selected products at extremely low rates. E.g.
99 Store would offer all its merchandise at $0.99 only.