1 Instructor’s Manual – Chapter 12 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
Chapter 12: Dimensions of Marketing
Strategy
Use this Instructor’s Manual to facilitate class discussion and incorporate the unique features of the text’s
highlights. Follow-up via the Connect exercises is then encouraged to provide a holistic understanding of the
chapter.
C H A P T E R F O R E C A S T
The key to developing a marketing strategy is selecting a target market and maintaining a marketing mix that
creates long-term relationships with customers. Getting just the right mix of product, price, promotion, and
L E A R N I N G O B J E C T I V E S
LO 12-2 Define price, and discuss its importance in the marketing mix, including various pricing strategies
a firm might employ.
LO 12-4 Specify the activities involved in promotion, as well as promotional strategies and promotional
positioning.
2 Instructor’s Manual – Chapter 12 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
L E A R N T H E T E R M S
advertising 378
advertising campaign 378
discounts 371
exclusive distribution 376
generic products 366
manufacturer brands 365
marketing channel 371
physical distribution 376
price skimming 370
private distributor brands 365
publicity 380
pull strategy 381
sales promotion 381
selective distribution 376
test marketing 361
K E Y T E R M S A N D D E F I N I T I O N S
advertising
A paid form of nonpersonal communication transmitted through a mass
medium, such as television commercials or magazine advertisements.
advertising campaign
Designing a series of advertisements and placing them in various media
to reach a particular target market.
branding
The process of naming and identifying products.
business products
Products that are used directly or indirectly in the operation or
manufacturing processes of businesses.
commercialization
The full introduction of a complete marketing strategy and the launch of
a product for commercial success.
consumer products
Products intended for household or family use.
discounts
Temporary price reductions often employed to boost sales.
3 Instructor’s Manual – Chapter 12 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
exclusive distribution
The awarding by a manufacturer to an intermediary of the sole right to
sell a product in a defined geographic territory.
generic products
Products with no brand name that often come in plain, simple packages
and carry only their generic name.
integrated marketing
communications
The process of coordinating the promotion mix elements and
synchronizing promotion as a unified effort.
intensive distribution
A form of market coverage whereby a product is made available in as
many outlets as possible.
labeling
The presentation of important information on the package.
manufacturer brands
Brands initiated and owned by the manufacturer to identify products
from the point of production to the point of purchase.
marketing channel
A group of organizations that moves products from their producer to
customers; also called a channel of distribution.
materials handling
The physical handling and movement of products in warehousing and
transportation.
packaging
The external container that holds and describes the product.
penetration price
A low price designed to help a product enter the market and gain market
share rapidly.
personal selling
Direct, two-way communication with buyers and potential buyers.
physical distribution
All the activities necessary to move products from producers to
customers—inventory control, transportation, warehousing, and
materials handling.
price skimming
Charging the highest possible price that buyers who want the product
will pay.
private distributor brands
Brands, which may cost less than manufactured brands that are owned
and controlled by a wholesaler or retailer.
product line
A group of closely related products that are treated as a unit because of
similar marketing strategy, production, or end-use considerations.
product mix
All the products offered by an organization.
promotional positioning
The use of promotion to create and maintain an image of a product in
buyers’ minds.
4 Instructor’s Manual – Chapter 12 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
psychological pricing
Encouraging purchases based on emotional rather than rational
responses to the price.
publicity
Nonpersonal communication transmitted through the mass media but
not paid for directly by the firm.
pull strategy
The use of promotion to create consumer demand for a product so that
consumers exert pressure on marketing channel members to make it
available.
push strategy
An attempt to motivate intermediaries to push a product down to their
customers.
quality
The degree to which a good, service, or idea meets the demands and
requirements of customers.
reference pricing
A type of psychological pricing in which a lower-priced item is compared
to a more expensive brand in hopes that the consumer will use the
higher price as a comparison price.
retailers
Intermediaries that buy products from manufacturers (or other
intermediaries) and sell them to consumers for home and household use
rather than for resale or for use in producing other products.
sales promotion
Direct inducements offering added value or some other incentive for
buyers to enter into an exchange.
selective distribution
A form of market coverage whereby only a small number of all available
outlets are used to expose products.
test marketing
A trial minilaunch of a product in limited areas that represent the
potential market.
trademark
A brand that is registered with the U.S. Patent and Trademark Office and
is thus legally protected from use by any other firm.
transportation
The shipment of products to buyers.
warehousing
The design and operation of facilities to receive, store, and ship
products.
wholesalers
Intermediaries who buy from producers or from other wholesalers and
sell to retailers.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
C O N T E N T O U T L I N E
The following section provides the flow of information using the LEARNING OBJECTIVES as a guide, KEY TERMS
learners will need to take away from the course and a notation of when to use POWERPOINT SLIDES with
LECTURE NOTES to drive home teaching points. There is also a reminder on when CONNECT activities can be
used. This is created so that you can facilitate in–class or online discussion effectively.
LO 12-1
Describe the role of product in the marketing mix, including how
products are developed, classified, and identified.
• Introduction
• The Marketing Mix
• Product Strategy
o Developing New Products
o Classifying Products
o Product Line and Product Mix
o Product Life Cycle
o Identifying Products
PowerPoint Slides
PPT 12.4
Lecture Outline and Notes:
I. The Marketing Mix
D. Successful companies offer at least one dimension of value that
surpasses all competitors in the marketplace in meeting customer
expectations.
6 Instructor’s Manual – Chapter 12 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.5
PPT 12.7
PPT 12.8
E. Successful companies must also maintain acceptable, and if possible,
distinguishable differences in the other dimensions as well.
II. Product Strategy
A. A product is a good, service, or idea containing tangible and intangible
attributes that provide satisfaction and benefits.
very few succeed.
2. A firm can take considerable time to get a product ready for the
example.
3. Sometimes a product or idea is shelved, only to be returned to later.
B. Developing New Products (Figure 12.1)
1. Before introducing new products, a business must follow a multistep
2. Idea Development
a. New ideas can come from marketing research, engineers, and
outside sources.
intra-company incentives.
1) New ideas can even create a company. While attending Yale,
Fred Smith studied a mathematical discipline called topolog.
Realizing the potential efficiencies of connecting all points
3. New Idea Screening
a. In this phase, a marketing manager should look at the
organization’s resources and objectives and assess the firm’s
the product will affect the firm’s sales, costs, and profits.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.9
PPT 12.11
5. Product Development
a. In this stage, the firm develops a prototype that should reveal
the intangible attributes as perceived by the consumer.
b. Product development is often expensive, and few product ideas
make it to this stage.
6. Test Marketing
a. Test marketing is a trial minilaunch of a product in limited areas
environment, giving the organization the opportunity to discover
weaknesses and eliminate them before the product is fully
launched.
c. Because test marketing requires significant resources and
expertise, market research companies like ACNielsen can assist
firms in test marketing their products.
b. During this stage, the firm gears up for full-scale production,
distribution, and promotion.
C. Classifying Products
a. Convenience products are bought frequently, without a lengthy
search, and often for immediate consumption. Consumers spend
little time in planning where to buy the product and usually take
any available brand.
b. Shopping products are purchased after the consumer has
compared competitive products. Price, features, quality, style,
service, and image all influence buyers’ decisions.
8 Instructor’s Manual – Chapter 12 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.12
connect
brief animated
explanation.
PPT 12.14
3. Business products are used directly or indirectly in the operation or
manufacturing processes of businesses.
a. Raw materials are natural products that usually require
additional processing for use in production.
b. Major equipment covers large, expensive items used for
production purposes.
c. Accessory equipment is used for production, office, or
management purposes and does not become part of the final
product.
g. Industrial services include financial, legal, marketing research,
janitorial, and exterminating services.
D. Product Line and Product Mix
E. Product Life Cycle (Figure 12.4)
1. Like people, products are born, grow, and eventually die.
short lived.
3. In the introductory stage, consumer awareness and acceptance are
limited; sales start at zero, and profits are negative (3D televisions).
a. Competing firms become aware that the product has achieved
some success, which may result in their entry into the market.
b. The firm tries to strengthen its position in the market.
5. In the maturity stage, industry sales continue to increase, peak, and
then decline. Severe competition and heavy marketing expenses
characterize this stage.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.15
PPT 12.16
PPT 12.17
6. During the decline stage, sales, and profits decline (landline phones,
VCRs).
a. Certain models may be eliminated, and marketing expenditures
may be cut.
b. Plans must be made to phase out the declining product and
introduce new ones to take its place.
7. It should be noted that products do not always go one way in the life
2. Branding
a. Branding is the process of naming and identifying products.
1) A brand is a name, term, symbol, design, or combination
that identifies and distinguishes a product.
and consists of letters, words, or numbers.
3) A brand mark is the part of the brand that is a distinctive
design.
4) A trademark is a brand that is registered with the U.S.
Patent and Trademark Office and is legally protected from
in maintaining a brand identity. (Xerox and Kleenex are now
synonymous with the product.)
b. There are two main categories of brands.
1) Manufacturer brands are brands initiated and owned by the
manufacturer to identify products from the point of
owned and controlled by a wholesaler or retailer.
3) In addition, there are generic products, which have no brand
name at all.
products.
1) Each product within a company’s product mix is given its
own brand name (Warner-Lambert).
2) In family branding, each of a firm’s products is branded with
the same name or at least part of the name (Gillette, Sara
Lee).
d. Companies may react differently to domestic vs. foreign brands.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.18
3. Packaging
a. Packaging is the external container that holds and describes the
economy, convenience, and promotion.
4. Labeling
a. Labeling is the presentation of important information on the
package.
1) For instance, as concern for the environment grows, many
companies are developing products with more eco-friendly
ingredients, from recycled paper to biodegradable
chemicals. Labels transfer that information to the consumer.
5. Product Quality
a. Quality reflects the degree to which a good, service, or idea
meets the demands and requirements of customers.
including various pricing strategies a firm might employ.
o Specific Pricing Strategies
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.21
PPT 12.22
PPT 12.24
III. Pricing Strategy
A. Price is the value placed on the object involved in an exchange between
a buyer and seller. (Figure 12.5)
1. Buyers’ interest in price stems from their expectations about the
usefulness of a product or the satisfaction they may derive from it.
2. Price is a key element in the marketing mix because it relates directly
to the generation of revenue and profits.
3. For most products, the quantity demanded goes up as the price goes
down, and vice versa.
4. Consumers vary in their response to price: some focus solely on the
lowest price, while others consider quality or the prestige associated
5. The product’s perceived value in the marketplace added to the
production costs help determine price.
6. Price is probably the most flexible variable in the marketing mix.
B. Pricing Objectives.
b. boosting market share
c. maintaining the status quo
d. survival
C. Specific Pricing Strategies
1. Pricing strategies provide guidelines for achieving the company’s
profitability, but the wrong price may kill the product.
b. There are two basic approaches to setting the base price for a
new product.
1) Price skimming is charging the highest possible price that
buyers who want the product will pay.
2) Penetration pricing is a low price designed to let a product
a penetration price than to lower a skimming price.
4) Comcast uses a penetration pricing strategy of $29.99 per
month for 12 months.
based on emotional rather than rational responses to the price.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.25
a. Even/odd pricing ($9.99 rather than $10) is an example of
psychological pricing.
buyers.
4. Reference pricing is a type of psychological pricing in which a lower–
priced item is compared to a more expensive brand in hopes that
the consumer will use the higher price as a comparison price
5. Temporary price reductions, or price discounts, are often employed
to boost sales.
a. Quantity discounts reflect the economies of purchasing in large
volumes.
interest.
LO 12-3
Identify factors affecting distribution decisions, such as
marketing channels and intensity of market coverage.
• Distribution Strategy
o Marketing Channels
o Intensity of Marketing Coverage
o Physical Distribution
o Importance of Distribution in a Marketing Strategy
PPT 12.26
IV. Distribution Strategy
marketing organizations that directs the flow of products from
producers to consumers.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.29
a. By bringing together an assortment of products from
competing producers, retailers create place utility (a
convenient shopping location), time utility (convenient
hours of operation), and ownership utility (the risk of
ownership).
b. Retailing usually occurs in a store, but it can also occur
through the Internet, vending machines, mail-order catalogs,
general merchandise in the United States.
b. Wholesalers generally buy from producers or other wholesalers
1) Wholesalers are extremely important because of the
marketing activities they perform. (Table 12.6)
2) Although it is true that wholesalers can be eliminated, their
functions must be passed on to some other intermediary or
even the consumer.
3) Wholesalers help consumers and retailers by buying in large
stocking an assortment of goods, wholesalers match
products to demand.
a. Creates alliances between channel members to improve
distribution channel relationships among manufacturers and
b. Includes all organizations involved in moving products from the
producer to the ultimate consumer.
c. Goes beyond traditional members to include all organizations
involved in moving products
consumer product channels
b. Channels can vary from being very simple (straight from the
producer to consumer) to highly complex (producer, agents,
wholesalers, retailers, then consumers)
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.33
c. Services are usually distributed through the most direct
marketing channel because they are produced and consumed
simultaneously.
5. Channels for Business Products
a. Most businesses purchase products, not services.
b. Most business products (especially expensive or complex ones)
are sold through direct marketing channels because of the higher
level of assistance and communication with the producer.
c. Business products may be distributed through channels
employing wholesaling intermediaries such as industrial
distributors and / or manufacturer’s agents.
2. Intensive distribution makes a product available in as many outlets
as possible. This type of distribution is usually used for convenience
goods.
3. Selective distribution uses only a small portion of all available
outlets. It is used most often for products for which consumers
compare price, quality, and style.
4. Exclusive distribution exists when a manufacturer gives a middleman
method is used when products are purchased and consumed over a
long period of time and requires service or information to develop a
C. Physical Distribution
1. Physical distribution is all the activities needed to move products
from producer to consumer.
part of distribution.
a. Five major modes of transportation are used to move products.
products.
2) Trucks have greater flexibility than railroads, can handle
freight quickly and economically, can deliver door–to-door,
and have more flexible packaging requirements than ships
or airplanes.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.35
3) Air transport is expensive, but it offers a high degree of
dependability and speed.
form of transportation.
5) Pipelines are important for moving heavy, bulky liquids such
as petroleum products, natural gas, semi-liquid coal, and
certain chemicals.
b. Factors affecting the selection of a mode of transportation
include cost, capability, reliability, and availability.
3. Warehousing involves designing and operating facilities to receive,
store, and ship products.
a. Companies can use their own private warehouses or lease space
for shipment to match demand at different geographic locations.
4. Materials handling is the physical handling and movement of
products in warehouse operations and transportation.
D. Importance of Distribution in a Marketing Strategy
1. Distribution is the least flexible element of the marketing mix
2. Resource commitments and contractual obligations are difficult to
3. Expanding into new markets could mean a complete change in
LO 12-4
Specify the activities involved in promotion, as well as
promotional strategies and promotional positioning.
o Objectives of Promotion
o Importance of Marketing Strategy
16 Instructor’s Manual – Chapter 12 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.37
connect
Need help
Marketers Segment
Target Market? Visit
your Connect ebook
video tab for a brief
animated
explanation.
PPT 12.39
V. Promotion Strategy
A. The role of promotion is to communicate with individuals, groups, and
organizations to facilitate an exchange directly or indirectly.
1. It encourages marketing exchanges by attempting to persuade
individuals, groups, and organizations to accept goods, services, and
ideas.
2. It is used not only to sell products but also to influence opinions and
attitudes toward an organization, person, or cause.
B. The Promotion Mix
called the promotion mix because a good promotion program results
from carefully selecting and blending these elements.
2. The process of coordinating the promotion mix elements and
synchronizing promotion as a unified effort is called integrated
marketing communications.
3. Advertising is a paid form of nonpersonal communication
transmitted through a mass medium.
1) A product’s features, uses, and benefits affect the content of
the campaign message and individual ads.
2) Characteristics of the people in the target audience also
influence both content and form, as do an advertising
campaign’s objectives and platform.
creative salespersons, and support salespersons.
17 Instructor’s Manual – Chapter 12 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 12
PPT 12.41
PPT 12.42
c. In general, personal selling is a six-step process:
1) Prospecting—identifying potential buyers.
2) Approaching—using a referral or calling on a customer without
prior notice to determine interest in a product.
3) Presenting—getting the prospect’s attention with a
demonstration.
4) Handling objections.
6) Follow-up—checking customer satisfaction with the purchased
product.
5. Publicity is nonpersonal communication transmitted through the mass
media, but the firm does not directly pay for this communication.
a. Publicity is mainly informative (which differs from advertising, which
b. Most companies have a public relations department trying to gain
favorable publicity and minimize negative publicity.
d. The mass media willingly carry publicity because they believe it has a
general public interest, but most publicity appears once in the mass
media and is not repeated (unlike advertising).
e. While advertising costs the firm money, publicity is free.
paid communication.
h. A related concept is viral marketing, which describes the concept of
getting Internet users to pass on ads and promotions to others.