MGT-519 STRATEGIC MARKETING

AAMER SIDDIQI

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LECTURE 23

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RECAP

• • • • • • • Objective of distribution Channels of distribution Functions of a distributor channel Channel strategy decisions Direct and indirect channels Determining the best structure Logistics 3

PRODUCT

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The Core The Basic product The Augmented product The Perceived product 4

LEVELS OF PRODUCT

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Level 1: Core Product

What is the core benefit your product offers? – For example customers who purchase a camera are buying more than just a camera, they are purchasing memories.

Level 2: Actual Product

– All cameras capture memories, therefore aim is to persuade them to capture memories with the camera. – The strategy at this level is to add branding, features and benefits which offer a differential advantage over competitors.

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LEVELS OF PRODUCT (CONT’D)

• • • •

Level 3: Augmented Product

This level is about exploring if there are any additional non tangible benefits. Competition at this level is based around after sales service, warranties, delivery and so on. For example, a retail department store offers a free five year guarantee with television purchases. A five year guarantee offers their customers peace of mind that their television will be repaired or replaced should a fault develop.

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PRODUCT – BUNDLE OF BENEFITS

• Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying ‘Marketing is not about

providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer’ (P.Tailor 7/00)

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QUESTIONS FOR INTRODUCTION OF A PRODUCT

• When an organisation introduces a product into a market they must ask themselves a number of questions.

– – – Who is the product aimed at?

What benefit will customers expect?

How does the firm plan to position the product within the market?

– What differential advantage will the product offer over their competitors?

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FORMS OF PRODUCT

• • • • • • Products come in several forms. Consumer products can be categorized as Convenience goods, for which consumers are willing to invest very limited shopping efforts. Thus, it is essential to have these products readily available and have the brand name well known.

Shopping goods, in contrast, are goods in which the consumer is willing to invest a great deal of time and effort. For example, consumers will spend a great deal of time looking for a new car or a medical procedure.

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FORMS OF PRODUCT (CONT’D)

• • • • Specialty goods are those that are of interest only to a narrow segment of the population —e.g., drilling machines. Industrial goods can also be broken down into subgroups, depending on their uses. It should also be noted that, within the context of marketing decisions, the term product refers to more than tangible goods—a service can be a product, too.

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PRODUCT LINE

• A firm’s product line(s) refers to the assortment of similar things that the firm holds. Brother, for example, has both a line of laser printers and one of typewriters. • In contrast, the firm’s product mix describes the combination of different product lines that the firm holds.

Boeing, for example, has both a commercial aircraft and a defense line of products that each take advantage of some of the same core competencies and technologies of the firm. 11

PRODUCT LINE (CONT’D)

• Some firms have one very focused or narrow product line (e.g., KFC does only chicken right) while others maintain numerous lines that hopefully all have some common theme • This represents a wide product mix 3M, for example, makes a large assortment of goods that are thought to be related in the sense that they use the firm’s ability to bond surfaces together.

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PRODUCT DEPTH

• Depth refers to the variety that is offered within each product line. Maybelline offers a great deal of depth in lipsticks with subtle differences in shades while Morton Salt offers few varieties of its product.

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DIFFERENTIATION OF PRODUCTS

• • • • • Products may be differentiated in several ways. Some may be represented as being of superior quality (e.g., Maytag), or in terms of styles—some people like one style better than another, while there is no real consensus on which one is the superior one. Finally, products can be differentiated in terms of offering different levels of service—for example, Volvo offers a guarantee of free, reliable towing anywhere should the vehicle break down. American Express offers services not offered by many other charge cards.

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NEW PRODUCT DEVELOLOPMENT

• • • • • • New product development tends to happen in stages. Firms often go back and forth between these idealized stages, the following is a sequence of the development of a new product: New product strategy development: Different firms will have different strategies on how to approach new products. Some firms have stockholders who want to minimize risk and avoid investing in too many new innovations. Some firms can only survive if they innovate frequently and have stockholders who are willing to take this risk. For example, Hewlett-Packard has to constantly invent new products since competitors learn to work around its patents and will be able to manufacture the products at a lower cost .

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NEW PRODUCT DEVELOLOPMENT (CONT’D)

• • • • Idea generation. Firms solicit ideas as to new products it can make. Ideas might come from customers, employees, consultants, or engineers. Many firms receive a large number of ideas each year and can only invest in some of them.

Screening and evaluation: Some products that after some analysis are clearly not feasible or are not consistent with the core competencies of the firm are eliminated.

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NEW PRODUCT DEVELOLOPMENT (CONT’D)

• • • • • Business analysis. Ideas are now exposed to more rigorous analysis. Profit projections, risks, market size, and competitive response are considered. If promising, market research may be done.

Development: The product is designed and manufacturing facilities are planned.

Market testing: Frequently, firms will try to “test” a product in one region to see if it will sell in reality before it is released. 17

NEW PRODUCT DEVELOLOPMENT (CONT’D)

• • • There is a lesser risk if the firm only commits money to advertising and other marketing efforts in one region. Retailers will also be more receptive in other parts of the country and world if it has been demonstrated that the product sold well in one region. The firm may also experiment with different prices for the product.

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NEW PRODUCT DEVELOLOPMENT (CONT’D)

• • • Commercialization: Facilities to manufacture the product on a larger scale are now put into operation The firm starts a national marketing campaign and distribution effort.

When placing a product within a market many factors and decisions have to be taken into consideration. 19

PRODUCT DECISIONS

• Product design: Will the design be the selling point for the organisation as we have seen with the iPad • • Product quality: Quality has to be consistent with other elements of the marketing mix. A premium based pricing strategy has to reflect the quality a product offers 20

PRODUCT DECISIONS

• • • • • Product features: What features will you add that may increase the benefit offered to the target market? Will the organisation use a discriminatory pricing policy for offering these additional benefits Product branding; One of the most important decisions a marketing manager can make is about branding. The value of brands in today’s environment is phenomenal. Brands have the power of instant sales, they convey a message of confidence, quality and reliability to their target market.

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SUMMARY

• • • • • • • • • Product Levels of Product Introduction of a Product Product form Product line Product depth Differentiation of Product New Product development Product decision 22

THANKYOU

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