Transcript Product - Prof Marshal Sahni

Product
What the Customer Wants
What is a Product?
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“ … the need satisfying offering of a firm …”
Translation

what you buy, that satisfies what you want to
be able to do
What is a Product?
what you buy, that satisfies what you want to
be able to do
 it can be “good feeling” cause you bought
some cosmetics and someone said you
looked pretty
 it could be a happy stomach cause you
bought a meal that tasted great
 it could be easier homework cause you
bought new software for your computer

Customers Buy Benefits, Not Products
Need
Benefits sought
Choice criteria
Product/service features
Brand/supplier chosen
“… A product’s ability to satisfy a customer’s needs
or requirements …”
Quality is often tied in to comparison with what the
competitor does at the same price
- always important to remember the “Competitive
Environment”
Service
Any activity or benefit that one party can offer to
another that is essentially intangible and does not
result in ownership of anything.
Goods - things you can touch “tangible”
Services - things you can’t touch - but
you can see their effect “intangible”
“… services are not physical, they are
intangible…”
What is a Product?

A Product is anything that can be offered to a
market for attention, acquisition, use, or
consumption and that might satisfy a want or
need.
 Includes:
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Physical Objects
Services
Events
Persons
Places
Organizations
Ideas
Combinations of the above
Levels of Product
Products can be viewed at three satisfaction levels - formal, core and augmented product
levels:
Actual - quality, features, styling, brand and packaging
Core - utility or benefit (key to selling)
Augmented - totality of product; warranty, maintenance, focuses on buyer’s total
consumption system
Augmented Product
Installation
Packaging
Delivery
& Credit
Brand
Name
Quality
Level
Core
Benefit or
Service
Features
Design
Warranty
Actual Product
Core Product
AfterSale
Service
Product Classifications Consumer Products
Convenience Products
Shopping Products
 Buy frequently & immediately
 Buy less frequently
Specialty Products
Unsought Products
 High price
 Unique characteristics
 Brand identification
 Few purchase locations
i.e Mercedes, Rolex
 Consumers don’t want to
think about
 Require much advertising &
personal selling
i.e Life insurance, blood donation
 Low priced
 Mass advertising
 Many purchase locations
i.e Candy, newspapers
 Special purchase efforts
 Higher price
 Fewer purchase locations
 Comparison shop
i.e Clothing, cars, appliances
 New innovations
Different Classes
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Convenience goods and services
 things consumer wants to buy frequently
 minimum effort, low risk
 small amount of money, not much time
three types
1. Staples
- bought routinely
2. Impulse products
- unplanned purchases
3. Emergency products
- bought immediately
Different Classes

Shopping goods and services
“stuff” people buy after they “shop &
compare”
they have the time to compare prices
Homogenous - stuff that is the same
simply pick the lowest price
eg. Condensed milk,
Heterogeneous - stuff that is different, so
the customer will take time to compare
features and prices
- “some retailers carry competing
brands”
Different Classes
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Speciality goods and services
jewellery, special clothing
special entertainment
“Willingness to search, not extent of
searching, makes it a specialty product”
if people are willing to look and look at
different products, before they commit, it
is a specialty item
Different Classes
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Unsought
things people don’t want to buy, but
have to eg. Auto insurance, funeral plan
the only way to sell this is to convince
people of the benefit because the benefit
is not easily seen by the average
person.
Various Classes of Consumer and Industrial
Goods and Services
Goods and Services
Consumer Goods
Consumer Services
Convenience Goods
Shopping Goods
Specialty Services
Convenience Services
eg. Mac's Milk
eg. clothing
eg. banking
eg. fast foods
eg. newspaper
eg. groceries
eg. travel
raw material
grain, steel
Industrial Goods
Industrial Services
Production Goods
Support Services
component
parts
eg. circuit board
eg. wiring
harness
materials
nuts, bolts
accessory equipment
tools, computers
installations
eg. buildings
Product Line
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Terms
A series of related products
A group of products that are physically similar in
performance, use or features and intended for a
similar market
Line stretching: adding products that are higher or
lower priced than the existing line
Line filling: adding more items within the present price
range
Product line width:
number of different product lines carried by company
Product line depth:
Number of different versions of each product in the line
Terms
Product Mix

The assortment of product lines and
individual offerings available from a
company.

the combination of product lines offered
by the manufacturer
Product Life Cycle (PLC)
Sales and
Profits (Rs)
Sales
Profits
Time
Product
Development
Introduction
Growth
Maturity
Decline
Losses/
Investments (Rs)
Sales and Profits Over the Product’s Life From
Inception to Demise
Boston Consulting Group (BCG)
Approach
Relative Market Share
Low
Market Growth Rate
High
High
Stars
• High growth & share
• Profit potential
• May need heavy
investment to grow
Cash Cows
• Low growth, high share
• Established, successful
SBU’s
•Produce cash
Low
Question Marks
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• High growth, low share
• Build into Stars or phase out
• Require cash to hold
market share
Dogs
• Low growth & share
• Low profit potential
Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Low sales
Costs
High cost per customer
Profits
Negative or low
Marketing Objectives
Create product awareness and trial
Product
Offer a basic product
Price
Usually is high; use cost-plus formula
Distribution
High distribution expenses
Advertising
Build product awareness among early
adopters and dealers
Growth Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Rapidly rising sales
Costs
Average cost per customer
Profits
Rising profits
Marketing Objectives
Maximize market share
Product
Offer new product features,
extensions, service, and warranty
Price
Price to penetrate market
Distribution
Increase number of distribution outlets
Advertising
Build awareness and interest in the
mass market
Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategie
Sales
Peak sales
Costs
Low cost per customer
Profits
High profits, then lower profits
Product
Maximize profits while defending
market share
Diversify brand and models
Price
Price to match or best competitors
Distribution
Build more intensive distribution
Advertising
Stress brand differences and benefits
Marketing Objectives
Maturity Stage of the PLC
Company tries to increase consumption of
the current product.
Changing characteristics such as quality,
features, or styles to attract new users.
Company tries to improve sales by changing
one or more marketing mix elements.
Decline Stage of the PLC
Summary of Characteristics, Objectives, &
Strategies
Sales
Declining sales
Costs
Low cost per customer
Profits
Declining profits
Reduce expenditure and maintain,
reposition, harvest or drop the product
Phase out weak items
Marketing Objectives
Product
Price
Distribution
Advertising
Cut price
Go selective: phase out unprofitable
outlets
Reduce to level needed to retain
hard-core loyal customers
Extending the Product Life Cycle
Market
Modification
1. Increase frequency of use
by present customers
2. Add new users
3. Find new uses
Product
Modification
4. Change product quality or
packaging
Purpose: to sell more product and cover original investment
Major Stages in New-Product
Development
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Idea - 38% of new product ideas come from looking at
competitors
- one of the best ways is to listen to employee new ideas
Screening - purpose is to “screen” out the bad ideas and
focus on the good ideas that might work
and Analysis - is making the cost estimates and sales
forecasts to estimate profitability
Development - concept testing for totally new products (ie.
holographic maps)
Testing - taking the prototypes to a sample group of
consumers and watch their reactions
Commercialization - promoting the product and developing
advertising and sales campaigns
Causes of New Product Failures
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One study estimated that as many as 80% of
new consumer packaged products failed.
 Only about 40% of new consumer products are
around 5 years after introduction.
 Why?
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Overestimation of market size,
Product design problems,
Product incorrectly positioned, priced or advertised,
Product may have been pushed despite poor
marketing research findings,
Costs of product development, or
Competitive actions &
5. What is a “market?”
A market is
– individuals and organizations
– interested and willing to buy a particular product
– have the resources to engage in the transaction
 Markets are seldom homogenous
– they are fragmented, segmented, disorderly
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Market segmentation
Some markets are sufficiently homogenous that
segmentation is not necessary.
 Most markets are defined by specific characteristics
defining the consumer.
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Decisions Within the Four Elements of the Marketing Mix
Product
Place
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• Numbers and types of
middlemen
• Locations/availability
• Inventory levels
• Transportation
Quality
• Style
Features
• Options
Brand name • Packaging
Guarantees/warranties
Services/spare parts
The target market
Price
Promotion
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Discounts
Allowances
Credit terms
Payment period
Rental/lease
List price
Advertising
Personal selling
Sales promotion
Point-of-purchase
materials
• Publicity
The marketing mix is the combination of controllable marketing variables that a manager uses to carry out a marketing strategy in
pursuit of the firm’s objectives in a given target market.
Positioning
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Positioning:
– The place the product occupies in consumers’
minds relative to competing products.
– Typically defined by consumers on the basis of
important attributes.
Levels of POSITIONING
There are 3 levels of product positioning:
 Core product is short-term positioning and typically works
for a year or less - companies focus on the tangibles:
price, quality, and technical specifications
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Extended product - firms create the necessary infrastructure to develop strong relationships with channel
members, suppliers, and customers; strategy tends to
last in the intermediate term, 1 to 5 years

Total Product - companies have clearly identified who the
company is and what they stand for. Firms have garnered
a long term position - lasts more than 5 years (they have
won the market’s respect)
Positioning
Choosing
a Positioning Strategy:
–Identifying possible competitive advantages
Products, services, channels, people or
image can be sources of differentiation.
–Choosing the right competitive advantage
How many differences to promote?
– Unique selling proposition
– Positioning errors to avoid
Which differences to promote?
Criteria for Meaningful Differences
Important
Superior
Preemptive
Distinctive
Communicable
Affordable
Profitable
Positioning
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Choosing a Positioning Strategy:
– Selecting an overall positioning strategy
 More for More Value Proposition
 More for the Same Value Proposition
 The Same for Less Value Proposition
 Less for Much Less Value Proposition
 More for Less Value Proposition
– Developing a positioning statement
 Positioning statements summarize the company or
brand positioning
 EXAMPLE: To (target segment and need) our (brand)
is (concept) that (point-of-difference).
– Communicating the chosen position
How to Add Value to Products
Companies must constantly search for new ways to add value to
distance themselves from their rivals
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Additional features/benefits
Affordability
Branding
Customer involvement
Customization and choice
Enhanced quality
Exceptional service
Frequency marketing incentives
Internet as a value adder
Simplify or bundle the offering
Solve customer problems
Technological leadership
Warranties
Brand Decisions
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The AMA definition of a brand:
“A name, term, sign, symbol, or design, or a
combination of these, intended to identify the goods
or services of one seller or group of sellers and to
differentiate them from the competition.”
Brand Decisions
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Brands can convey six levels of meaning:
– Attributes
– Benefits
– Values
– Culture
– Personality
– User
Brand Decisions
Brand identity decisions include:
– Name
– Logo
– Colors
– Tagline
– Symbol
 Consumer experiences create brand bonding,
brand advertising does not.
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Brand Decisions
Marketers should attempt to create or facilitate
awareness, acceptability, preference, and
loyalty among consumers.
 Valuable and powerful brands enjoy high levels
of brand loyalty.
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Brand Decisions
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Aaker identified five levels of customer
attitudes toward brands:
– Will change brands, especially for price. No
brand loyalty.
– Satisfied -- has no reason to change.
– Satisfied -- switching would incur costs.
– Values brand, sees it as a friend.
– Devoted to the brand.
Brand Decisions
Brand equity refers to the positive differential
effect that a brand name has on customers.
 Brand equity:
– is related to many factors.
– allows for reduced marketing costs.
– is a major contributor to customer equity.
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Brand Decisions
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Advantages of branding:
– Facilitates order processing
– Trademark protection
– Aids in segmentation
– Enhances corporate image
– Branded goods are desired by retailers
and distributors
Packaging and Labeling
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Packaging includes:
– The primary package
– The secondary package
– The shipping package
Many factors have influenced the increased use of
packaging as a marketing tool.
Packaging and Labeling
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Developing an effective package:
– Determine the packaging concept
– Determine key package elements
– Testing:
 Engineering tests
 Visual tests
 Dealer tests
 Consumer tests
Packaging and Labeling
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Labeling functions:
– Identifies the product or brand
– May identify product grade
– May describe the product
– May promote the product
Legal restrictions impact packaging for many products.
Distribution
Distribution System – the series of institutions and functions
linking manufacturers to markets
 Transaction Channel
 Physical Distribution (logistics) Channel
Channel Structure
 Number of channels
 Number of channel levels
 Number of middlemen per channel level
Channel Functions:
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Research
Promotion
Market contact
Assortment
Physical distribution
Financing & risk taking
Negotiation
Storage
Distribution
Performance of functions determines compensation
 Margins
 Commissions
 Price Reductions
Issues
 All flows can be shifted up or down the channel.
 All are subject to economy of scale efficiencies.
 All must be performed.
 If one flow fails, the entire channel can fail.
 Performance of flows determines compensation
Distribution Intensity
 Intensive (convenience goods): Mass distribution and
promotion
 Selective (shopping goods): Reduced distribution, assortment
breadth, channel cooperation
 Exclusive (specialty goods): Sacrifice market coverage for
channel control and prestige
Channel Structure and Flows
Manufacturer
Structure
Flows
B2B
Wholesaler
The manufacturer and wholesaler sellers normally go
to the buyers so B2B is a natural for eCommerce.
The buyers are already trained to deal with distant sellers,
and do not care where where the seller is located as long
as they can perform the required functions (flows).
B2B
Retailer
B2C
The retail level of the channel is the only channel level where the buyer goes
to the seller. Retailers can use location dominance to achieve sustainable
competitive advantage. B2C retailing does not have a dominant competitive
advantage over traditional stores.
Functions of Retailers & Wholesellers?
Consumer
Promotion (Marketing Communications)
The specific mix of advertising, personal selling, sales
promotion, and public relations a company uses to pursue
its advertising and marketing objectives.
•Personal Selling – Direct Marketing
•Mass SellingAdvertising
Publicity
Sales Promotion•Point-of-purchase advertising
•specialty advertising
•samples
•coupons
•premiums
•loyalty points / air miles
•rebates
•contests
3 promotional objectives
4 Promotional Activities
•Attention
•Interest
•Desire
•Action
AIDA
Push or Pull
Push strategy: trade promotions and personal selling
efforts push the product through the distribution channels.
Pull strategy: producers use advertising and consumer
sales promotions to generate strong consumer demand for products.
Adoption Process (Diffusion of Innovation)
Relationship between Advertising and the Product Life Cycle
Not mentioned in your textbook