Introduction to Marketing

Supporting project ‘The Bike Factory’

Part 2
IE&M Y1Q3
Ton van Kampen
 Chapter 7

Product
 Chapter 7
What is a product?

• Material object(s) = tangible good(s)

• Service(s)
• Customer experience(s)
• … combinations

You might buy a Rolls Royce car (tangible

good) with 24/7 driver service … and you might
feel like a king
 Chapter 7
3 levels of a product

Augmented
product

Actual product
Supplementary
Installation services

Design Brand
Functions experience Example:
Core Quality
Brand Benefit level
After sales Guarantee
service Packaging

Delivery and
Payment terms Core product
What is
augmented?
 Chapter 7
Classification of products

• Consumer products
• Convenience
• Shopping There are several methods for
• Specialty classifying products in use … this is
just one of them
• Unsought
• Industrial products
• Raw materials and processed materials
• Capital goods
• Supplies (MRO) and supporting services
• Organizations, people, places, ideas
 Chapter 7
A company must look beyond its
individual products …
• Look at its individual products
• Attributes: quality, features, style, design
• Branding
• Packaging, labeling
• Support
• Also look into product lines (or: product groups)
• Line length is a very important point
• Line is too short if making it longer leads to more profit
• Line is too long if making it shorter leads to more profit
• Line stretching, line filling
• Also look into a total assortment (or: product mix)
• Width: number of product lines
• Depth: number of versions of products
• Consistency: how close are the product lines
 Chapter 7
Brand

• More than just a name or symbol

• Everything the product means for the
customer
• In the head of the customer
• Helps to create preference and loyalty of
the customer
• Has a value: brand equity
• Brand valuation
• E.g. Apple has a value of 153 billion dollar
(2015)
 Chapter 7
Building a brand:
taking a number of decisions

Positioning Name Owner Development

Product Choice Name of Extend PL
characteristics manufacturer
Protection Extend brand to
Benefits House brand of new PLs
retailer
Beliefs, values Multi branding
Licensed for same
product
Combination of
brands New brands
 Chapter 7
Services:
differ from physical products

You cannot
possess a
Services are
service Inseparable
intangible
Service and
service provider
Services
cannot be
separated
Customers are
Variable ‘prosumers’
Service quality
is variable
(depends on Perishable
provider) Services are
non durable
 Chapter 7
Products: combination of
physical products and
services
More like a
pure service
Theater

Air travel

Restaurant

Car

More like a Salt ‘Services continuum’

pure physical
product
 Chapter 7
Marketing strategies for
service companies

• Focus on customers and employees

Company

Differentiation via
Internal External extra P’s
marketing marketing People
Process

Differentiation via
Employees Customers service quality
Interactive
marketing Higher productivity
without jeopardizing
quality
 Chapter 8
New products development
process

• Possibilities
• Buying Needed
because there
• Own development
are a lot of
• Use a new product creation process failures

1. Ideas generation 5. Analyze business case

2. Ideas screening 6. Product development
3. Concept development 7. Test marketing
and testing
4. Determine marketing 8. Introduction
strategy
 Chapter 8
Product life cycle

Turnover
Profit

Launch Pruning

0 Time

Development Introduction Growth Maturity Decline

Note: similar turnover/profit figures for style, fashion and hype

 Chapter 12

Promotion
Also called: marketing communications

y o n e
o n l
Is
r t o f
pa i n g! !
a r k et
m
 Chapter 12
Marketing communications mix
Also called: promotion mix

Adds Event marketing,

trade shows,
exhibitions
Personal sales
Public relations

Direct marketing Social media

Promotion
instruments
Sales promotion Mobile marketing

Sponsoring
 Chapter 12
Marketing communications trends

• Less focus on broadcasting more focus on

narrow casting
• Two-way interaction: supplier customer
 Chapter 12
Integrated marketing
communications
Adds Event marketing,
trade shows,
exhibitions
Personal sales
Public relations

Direct marketing Social media

Sales promotion Mobile marketing Clear and

consistent
messages
Sponsoring at all
customer
Determine touch points
Determine target
group promotion mix
 Chapter 12
Push and pull promotion
strategies

Push strategy:

Product Wholesale End

supplier and retail customer

Push Push

Pull strategy:

Product Pull Wholesale Pull End

supplier and retail customer

Push
Place
 Place: how to distribute your
products to the customers

• Most companies need other companies to be able

to have a successful business
• They are part of a ‘buying’ or value chain
• E.g. Component supplier + product
manufacturer + wholesalers + retailers
• Other companies add value
• The company itself can concentrate on its core activities
• Which channel to use depends on the customer
segment and what customers want from the
channel
 Chapter 9

Price
 Chapter 9
‘Price setting’ to harvest

• Product, promotion and place are the seeds to

achieve business success
• Effective price setting leads to a good harvest
• Find the right balance between what the
customer wants to pay (value for money) and the
needs to earn back your costs and making profit
• Don’t decrease prices if customers can be
persuaded that your product has a value fitting the
demanded price
• Base your price on market value not on costs
• Be aware: prices have a multiplier effect e.g. 1
percent higher price leading to 11 percent higher
margin
 Chapter 9
Internal influences on price

• Marketing goals
• Marketing mix strategy
• Costs
• Responsibilities within the organization
 Chapter 9
External influences on price

• Type of market
• How competition works in this market
• Price and value perception by the
consumer
• Price – demand relation
• Price elasticity
• Costs, prices and supply by competitors
• DESTEP items
 Chapter 9
Price considerations

High
Low Possible price range

Production costs Competition pricing, Value perception of

other internal and the consumer
external factors

No profit Competition No demand

possible oriented
pricing

Target Perceived Added

Cost price return price value Value Value
plus pricing pricing pricing
Workshop
 Workshop: make a marketing plan
1. Segment the bicycle market in several different ways
2. Determine three segments (or combinations of segments) you would
be interested in
3. Evaluate the rough business cases for these three segments and choose
the most interesting one
4. Determine the needs of this group (explain how you did it)
5. Decide on how you want to differentiate from competition and which
values you want to offer
6. Decide on your positioning (how you want the customers to think
about your company) ur
Use the results in yo
7. Work out PRODUCT details final project report
8. Work out PLACE details … note: if you do not directly sell to the end-
user the ‘intermediaries’ are your direct customers
9. Work out PROMOTION details • Upload your plan in ProjectBox (I will provide you
10. Work out PRICE details with some feedback)
Structure:
11. Work out PROCESS details • Start with a title page
12. Work out PEOPLE details • Then work out all 12 items in the given sequence:
each item is one chapter