Transcript File

Slide 2.1
Chapter 2
The product in theory
and practice
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.2
Agenda
• Markets and demand
• Product classification
• Services
• Branding
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.3
Marketing is all about success
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.4
Marketing is selling things that
do not come back to people
who do.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.5
Marketing is about the creation and
maintenance of mutually satisfying
exchange relationships.
(Baker, 1973)
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.6
The ‘market’ is the place where Adam
Smith’s ‘invisible hand’ achieves an
equilibrium between demand and supply.
Traditionally, demand has exceeded supply so
it has determined which products are wanted
most and for which most will be offered in
exchange.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.7
Price
The traditional demand curve
Quantity
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.8
Elasticity of demand
Price
Inelastic
Elastic
Infinitely elastic
Quantity
Price elasticity
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.9
Melvin Copeland’s (1923) classification
of goods:
• Convenience
• Shopping
• Specialty
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.10
Copeland’s classification of goods
Price
Specialty
Differentiated
Convenience
Quantity
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.11
Convenience goods are those with which the
consumer is familiar and ‘as soon as he recognises
the want, the demand becomes clearly defined in
his mind. Furthermore, he usually desires the
prompt satisfaction of the want’.
Convenience goods tend to be of low unit price
and are purchased frequently. They are sometimes
referred to as ‘low involvement’. The widest possible
distribution is necessary to maximize sales
opportunities.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.12
‘Shopping goods are those for which the consumer desires
to compare prices, quality and style at the time of purchase’.
Shopping goods differ from convenience goods in several ways:
1. The exact nature of the want may not be defined clearly in
advance, i.e. you may know the product category but need to
establish what is on offer before making a decision.
2. Therefore : A special shopping trip may be organised and
several outlets visited before reaching a decision. Alternatively,
customers collect information in the course of other shopping
trips (window shopping) until they have enough
background information to make a shopping trip.
3. Except in the case of distress purchases (where an immediate
replacement is required) the decision can be delayed.
4. There is low frequency of purchase.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.13
‘Specialty goods are those which have some particular
attraction for the consumer, other than price,
which induces him to put forth special effort to visit
the store in which they are sold and to make
the purchase without shopping’.
What distinguishes specialty goods is that the
consumers have pre-determined what it is they want
to buy and will make a special effort to source the
product. Such products are sometimes called
‘high involvement’ products.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.14
Different categories of goods call for different
marketing strategies:
Convenience = Undifferentiated (Cost leadership)
Shopping = Differentiated
Specialty = Concentrated (Focus)
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.15
The Buygrid framework
Buy classes
Buy phases
1.
Anticipation or recognition of a problem
(need) and a general solution
2.
Determination of characteristics and
quantity of needed items
3.
Description of characteristics and quantity
of needed items
4.
Search for and qualification of potential
sources
5.
Acquisition and analysis of proposals
6.
Evaluation of proposals and selection
of supplier(s)
7.
Selection of an order routine
8.
Performance feedback and evaluation
New
task
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Modified
rebuy
Straight
rebuy
Slide 2.16
Products and Services
Adam Smith (1776) distinguished between the production
of tangible objects and the intangible outputs of persons
like lawyers and doctors. The latter he described as
‘unproductive of any value’.
However, Marshall (1890) recognised that while services
might be intangible they created ‘utility’ and so had value.
Today, services are regarded as essentially intangible
activities or benefits provided by one party to another
that do not result in the ownership of anything. They may
or may not be associated with a tangible product.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.17
Palmer (1994) defines services as:
‘The production of an essentially intangible benefit,
either in its own right or as a significant element of
a tangible product, which through some form of
exchange satisfies an identified consumer need’.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.18
‘Pure’ services are seen as having a number of
characteristics that distinguish them from physical
products, namely:
• Intangibility
• Inseparability
• Variability
• Perishability
• Impossibility of ownership
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.19
The paradox and challenge that marketing has to solve
is that while objective differences are easier to perceive
and evaluate it is these same characteristics that make
them easier to copy or replicate.
As a result, the USP or JND factor, is likely to be the
consequence of the customers’ perception and exists
in their minds as being associated with an image or
identity. It is for this reason that BRANDING has
assumed so much importance in modern marketing
practice.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.20
Since time immemorial people have marked
their possessions.
Marking goods for sale meant that satisfied customers
could repeat purchase, and dissatisfied customers
could seek redress.
Branding as we know it today began in the
mid-nineteenth century.
Initially it operated mainly on a local or regional basis
and was restricted to a limited category of goods
like tobacco, beer and patent medicines.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.21
The growth of branding may be attributed,
inter alia, to:
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Mass production and consumption
Improved transportation and communication
Advances in packaging
Increased literacy and growth of advertising
New retail formats
Improved standards of living
Development of trademark laws
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.22
In an increasingly competitive environment, brand
building, especially of companies, is seen as the
only sure road to survival and success. Only
through brand building is it possible to:
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Build stable, long-term demand
Add value looked for by customers
Develop a sound basis for future growth and expansion
Recruit the growing power of intermediaries
Become recognised as a company with a reputation that
is going places and that people want to work for
• Create a reputation as an organization that people will
want to develop relationships with.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.23
‘A successful brand is a name , symbol, design,
or some combination which identifies the “product”
or a particular organization as having a sustainable
differential advantage’.
[Peter Doyle]
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.24
Key points in Doyle’s definition:
• Successful brands are positive (and vice versa)
• Brands can take many forms – not just names
• The ‘product’ may just as easily be a service, an
organization, or an aspiration
• Brands are owned by organizations/people
• Successful brands confer a sustainable differential
advantage – an advantage that is not easily copied
and so represents a barrier to entry in the market
segment in which the brand competes.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.25
72% of customers will pay a 20% premium for their
preferred brand.
50% will pay 25% more
40% will pay 30% more
25% say that price doesn’t matter
Over 70% use brands to guide a buying decision
And 50% are brand driven.
Davis 2002
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.26
Davis (2002) cites the following benefits
of a strong brand:
• Brand-based price premiums allow for higher margins
• Strong brands lend immediate credibility to new product
introductions
• Strong brands allow for greater shareholder and
stakeholder value
• Strong brands embody a clear, valued, and sustainable
point of differentiation
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.27
• Loyalty drives repeat business
• Strong brands mandate clarity in internal focus and
brand execution
• The more loyal the customer base and the stronger
the brand, the more likely customers will be forgiving
if a company makes a mistake
• Brand strength is a lever for attracting the best
employees and keeping satisfied employees
• 70 per cent of customers use a brand to guide a
purchase
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.28
Successful brands have 4 key attributes:
1. Quality
2. Superior service
3. First to market :
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–
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–
new technology
new positioning concept
new distribution channel
new market segment
exploitation of a new gap
4. Differentiation
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.29
While a brand may be represented by a logo or
icon it invariably has a name.
A name ‘symbolizes the sum of the attributes that
make up the brand and quickly becomes
synonymous with the satisfactions that the brand
delivers’.
(Blackett 1989)
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.30
A brand name is:
• A form of identification or badge of origin
• A promise of a certain level of consistency in performance
• Reassurance as to the authenticity and performance of
the product
• An indicator of the essential properties or attributes of
the product.
As a result buyers can develop attitudes towards a
brand’s performance and quality even when it is difficult
to assess this objectively.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.31
Successful names usually have five characteristics:
1.
2.
3.
4.
5.
Descriptive qualities
Distinctiveness
International applicability
Simplicity
Ready visual comprehension
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.32
Descriptive qualities:
• Phonetics
• Orthographics
• Semantics
Descriptive brand names are viewed positively whereas
unfamiliar words or objects are viewed negatively.
In low involvement decisions evaluation of an object’s
intrinsic properties is not worth the effort.
Accordingly, extrinsic properties dominate so that the
brand name has particular importance.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.33
Distinctiveness/congruence
Many brand managers regard a distinctive name
as their first priority.
A distinctive name differentiates the product from
its competitors.
But, in some product categories, similar sounding
names can help reduce perceived risk – e.g.
‘Pal’, ‘Chum’, ‘Chappie’ for dog foods.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.34
International Applicability
When competing in global markets it is important to
choose names that are universally acceptable.
The following are unlikely to succeed in the UK:
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Pschitt (France) – a soft drink
Sic (France) – a soft drink
Skum (Denmark) – confectionery
Bums (Sweden) – biscuits
Zit (Greece) – soft drink
Super Piss (Finland) – antifreeze
Arses (Turkey) – photographic film
Bimbo (Spain) - bread
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.35
Simplicity
Brand names should be simple and easy to pronounce.
Otherwise customers will not risk embarrassment
through mis-pronouncing the name.
It also helps if the name is short and easy to write.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.36
Ready visual comprehension:
• The brand name should have a distinctive design
that is easy to recognise in any language using
the roman alphabet.
• Recognition is usually enhanced by association
with a logo or other distinctive icon (the ‘golden
arches’ of McDonalds).
• It may also be reinforced with a positioning
statement.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.37
A product brand is one where an organization
gives a unique name to every product in its
portfolio. Davis (2002) cites Procter and Gamble
as the classic example with the following list:
1. Laundry and cleaning: Bounce, Cheer, Cascade,
Comet, Era, Dawn, Joy, Tide
2. Health care: Ivory, Crest
3. Beauty care: Cover Girl, Ivory, Head & Shoulders
4. Food and beverage: Pringles, Folgers
5. Paper: Pampers, Luvs, Always.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.38
The advantages of using a different name
for each product include:
• Owning a diversified portfolio with a limited connection
between the individual items.
• Less risk that a failure of one brand will hurt the reputation
of the others.
• The opportunity to offer variants of the same product at
different price points appealing to different market
segments and so enabling the firm to secure more space
in the retail outlet.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.39
The disadvantages of using a different name
for each product include:
• Loss of scale economies.
• Inability to draw on the reputation of other
established products in the portfolio.
• The need to build a new identity and reputation for
every new addition to the portfolio.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.40
A corporate brand exists where an organization
uses its name and reputation to endorse all of
the products and services that it offers for sale.
All communications, both internal and external,
seek to convey a single and unified message
designed to build confidence and trust in the
organization. Sony, Marriott and G.E. are good
examples.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.41
Company positioning statements
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Access, your flexible friend
It’s you we answer to (British Telecom)
We won’t make a drama out of a crisis (Commercial Union)
Everything we do is driven by you (Ford)
The more we progress the further you go (Michelin)
Helping you control your world (Honeywell)
A place of useful learning (Strathclyde University)
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.42
Brands help simplify customer decision-making.
The brand is a summary statement of a complex
bundle of attributes and benefits.
Once learned and preferred a brand will lead to
identification, loyalty and repeat purchase.
Such brands possess sustainable differential advantage
(SDA) and may be considered assets in the balance
sheet, just like plant and equipment.
Brands require constant investment to maintain their
differential advantage.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 2.43
Booz Allen and Hamilton (1982) identified
six kinds of new products:
1.
2.
3.
4.
5.
6.
New to the world
New product lines
Additions to existing product lines
Improvements and revisions to existing products
Repositionings
Cost reductions.
Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007