Professional Documents
Culture Documents
Part V
Part V
- 5-
• Product Includes:
– Physical Products
– Services
– Persons
– Places
– Organizations
– Ideas
– information
– Combinations of the above
five product levels
core benefit of the product
generic product
expected product
augmented product
potential product
the set of attributes or characteristics that buyers normally expect and agree to
when they purchase a product.
expected product Hotel guests minimally expect a clean bed, fresh towels, working lamps, and a
relative degree of quiet. Developing country compete at this level
inclusion of additional features, benefits, attributes or related services that
serve to differentiate the product from its competitors.
augmented product
satellite television, high-speed Internet access, and a fully equipped
fitness center. Developed country compete at this level
potential product all the augmentations and transformations a product might undergo in the future.
Each augmentation adds cost, however, and augmented benefits soon become expected
benefits and necessary points-of parity in the category
Product classifications
• Consumer products
• Industrial product
i.i. Consumer
Consumer Products
Products
Convenience Products Shopping Products
> Buy frequently & immediately > Buy less frequently
> Low priced > Gather product information
> Many purchase locations > Fewer purchase locations
> Includes: > Compare for:
• Staple goods • Suitability & Quality
• Impulse goods • Price & Style
• Emergency goods
Unsought Products:-Unsought products are consumer products that the consumer either does
not knows about or knows about but does not normally think of buying. Most major new inventions
are unsought until the consumer become aware of them through advertising.
E.g. smoke detectors, Life Insurance and blood donations to the Red Cross.
ii.
ii. Industrial
Industrial Products
Products
Materials
Materials
and
and
Parts
Parts
Capital
Capital
Items
Items
Supplies
Supplies
and
and
Business
Business Services
Services
Cont’d
Materials and parts are goods that enter the manufacturer’s product
completely. It can be: raw material & manufactured materials
Raw materials: fall into two major groups:
• farm products (wheat, cotton, livestock, fruits, and vegetables) (need little or no ad). &
• natural products (fish, lumber, crude petroleum, iron ore). Fewer and larger producers
often market them directly to industrial users. Price and delivery reliability are the major
factors influencing the selection of suppliers
Manufactured materials and parts: fall in to two major groups:
• component materials (iron, yarn, cement, wires)- are usually fabricated
further. -price and supplier reliability are key purchase factors
• component parts (small motors, tires, castings)-no further change in the form
Most manufactured materials and parts are sold directly to industrial users. Price and
service are major marketing considerations, with branding and advertising less
important
Capital items are long-lasting goods that facilitate developing or managing the
finished product. It can be installations and equipment
Cont’d
Marketing
Strategy Business
Development Analysis
Concept Product
Development Development
and Testing
Idea Market
Screening Testing
Idea
Generation Commercialization
Step
Step 1.
1. Idea
Idea Generation
Generation
Systematic Search for New Product Ideas from the
following sources:
By answering such questions, a company can often form several product concepts
Cont’d
1.
1. Develop
DevelopProduct
ProductIdeas
Ideasinto
into
Alternative
Alternative
Product
ProductConcepts
Concepts
2.
2. Concept
ConceptTesting
Testing--Test
Testthe
the
Product
ProductConcepts
Conceptswith
withGroups
Groups
of
ofTarget
TargetCustomers
Customers
3.
3. Choose
Choosethe
theBest
BestOne
One
Step
Step 4.
4. Marketing
Marketing Strategy
Strategy Development
Development
• The third part will describe the long-run sales and profit goals
and marketing-mix strategy over time.
Cont’d
Part
Part One
One -- Overall:
Overall:
Target
Target Market
Market
Planned
Planned Product
Product Positioning
Positioning
Sales
Sales &
& Profit
Profit Goals
Goals
Market
Market Share
Share
Part
Part Two
Two -- Short-Term:
Short-Term:
Product’s
Product’s Planned
Planned Price
Price
Distribution
Distribution
Marketing
Marketing Budget
Budget
Part
Part Three
Three -- Long-Term:
Long-Term:
Sales
Sales &
& Profit
Profit Goals
Goals
Marketing
Marketing Mix
Mix Strategy
Strategy
Step
Step 5.
5. Business
Business Analysis
Analysis
Review
ReviewofofProduct
ProductSales,
Sales,Costs,
Costs,
and
andProfits
ProfitsProjections
Projectionsto
toSee
Seeifif
They
TheyMeet
MeetCompany
CompanyObjectives
Objectives
IfIfNo,
No,Eliminate
Eliminate
Product
ProductConcept
Concept
IfIfYes,
Yes,Move
Moveto
to
Product
ProductDevelopment
Development
Step
Step6.
6. Product
ProductDevelopment
Development
• Alpha testing means testing the product within the firm to see
how it performs in different applications. After refining the
prototype further, the company moves to beta testing.
Simulated
Simulated
Test Controlled
Controlled
TestMarket
Market Test
TestMarket
Market
Test
Testin inaasimulated
simulated AAfew
fewstores
storesthat
thathave
have
shopping environment agreed to
shopping environment agreed to carry new carry new
to
toaasample
sampleof of products
productsfor foraafee.
fee.
consumers.
consumers.
Sales-
Sales-
Wave
Wave Standard
Standard
Research
Research Test
TestMarket
Market
Test
Testoffering
offeringtrail
trailto
to Full
aasample of Fullmarketing
marketingcampaign
campaign
sample of in
ina asmall
small number
number of
of
consumers
consumersin in representative
successive representativecities.
cities.
successive
periods.
periods.
Cont’d
• If the company goes ahead with commercialization, it will face its
largest costs to date
Sales and
Profits ($)
Sales
Profits
Time
Product Introduction Growth Maturity Decline
Developme
nt
Losses/
Investments ($)
1. Introduction Stage of the PLC
Sales
Sales Low
Low sales
sales
Costs
Costs High
High cost
cost per
per customer
customer
Profits
Profits Negative
Negative
Create
Create product
product awareness
awareness
Marketing
Marketing Objectives
Objectives and
and trial
trial
Product
Product Offer
Offer aa basic
basic product
product
Price
Price Use
Use cost-plus
cost-plus
Distribution
Distribution Build
Build selective
selective distribution
distribution
Advertising Build
Build product
product awareness
awareness among
among early
early
Advertising adopters and dealers
adopters and dealers
Marketing Strategies: Introductory Stage
Sales
Sales Rapidly
Rapidly rising
rising sales
sales
Costs
Costs Average
Average cost
cost per
per customer
customer
Profits
Profits Rising
Rising profits
profits
Marketing
Marketing Objectives
Objectives Maximize
Maximize market
market share
share
Product
Product Offer
Offerproduct
productextensions,
extensions,service,
service,warranty
warranty
Price
Price Price
Price to
to penetrate
penetrate market
market
Distribution
Distribution Build
Build intensive
intensive distribution
distribution
Advertising Build
Build awareness
awareness and
and interest
interest in
in the
the
Advertising mass
mass market
market
Marketing Strategies: Growth Stage
• During this stage, the firm uses several strategies to sustain rapid
market growth as long as possible:
Improving product quality and adding new product features and
improved styling;
Adding new models and flanker products;
Entering new market segments;
Increasing distribution coverage and entering new distribution
channels;
Shifting from “product-awareness advertising” to “product-
preference advertising” ; and
Lowering prices to attract the next layer of price-sensitive buyers.
3.
3. Maturity
Maturity Stage
Stage of
of the
the PLC
PLC
Sales
Sales Peak
Peak sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits High
High profits
profits
Marketing Maximize
Maximize profit
profit while
while defending
defending
Marketing Objectives
Objectives market
market share
share
Product
Product Diversify
Diversify brand
brand and
and models
models
Price
Price Price
Price to
to match
match with
with best
best competitors
competitors
Distribution
Distribution Build
Build more
more intensive
intensive distribution
distribution
Advertising
Advertising Stress
Stress brand
brand differences
differences and
and benefits
benefits
Marketing Strategies: Maturity Stage
Sales
Sales Declining
Declining sales
sales
Costs
Costs Low
Low cost
cost per
per customer
customer
Profits
Profits Declining
Declining profits
profits
Marketing
Marketing Objectives
Objectives Reduce
Reduce expenditure
expenditure and
and milk
milk the
the brand
brand
Product
Product Phase
Phase out
out weak
weak items
items
Price
Price Cut
Cut price
price
Go
Go selective:
selective: phase
phase out
out unprofitable
unprofitable
Distribution
Distribution outlets
outlets
Advertising
Advertising Reduce
Reduce to
to level
level needed
needed toto retain
retain
hard-core
hard-core loyal
loyal customers
customers
Marketing Strategies: Decline Stage
The sales of most product forms and brands eventually
decline for a number of reasons including:
• technological advances,
• shifts in consumer tastes, and
• increased domestic and foreign competition.
Product Management Strategies
A) Integration Strategies
B) Intensive Strategies
C) Diversification Strategies
1. Cooperative strategies
2. True Defensive strategies
They are those strategies where you move vertically up or down your
channel of distribution or horizontally side-to-side.
Suppliers
Focal Firm
Distributor
Retailer
Consumer
Forward Integration – You move down the channel(starting your own
distribution) – best used when you have ineffective channel members,
there are high margins, and you have capital/resources and knowledge
for success. An effective way to use this strategy is by franchising.
a) Survival
Companies pursue survival as their major objective if they are
plagued with:
• overcapacity,
• intense competition, or
• changing consumer wants.
e.g. When Sony introduced the world’s first high-definition television (HDTV)
to the Japanese market in 1990, it was priced at $43,000.
Cont’d
The unit costs of producing a small volume are high enough to cancel the
advantage of charging what the traffic will bear
The high initial price does not attract more competitors to the market;
e.g. brands such as Starbucks & BMW have positioned themselves as quality
leaders in their categories, combining quality, luxury, and premium prices
with an intensely loyal customer base.
2. Determining the Demand
• Price sensitivity
• Price elasticity of demand
Cont’d
PRICE SENSITIVITY
PRICE ELASTICITY
What is price elasticity?
• This determines the changes in demand with unit change in
price
Price= (200000+500000+300000)/1000000
Thus, Price=$1,000,000/1,000,000=$1.0
Cont’d
2. TARGET-RETURN PRICING:
In target-return pricing, the firm determines the price that yields its “target rate
of return on investment”.
Public utilities, which need to make a fair return on investment, often use this
method.
e.g. Suppose the toaster manufacturer has invested $1 million in the business and wants
to set a price to earn a 20 percent ROI, specifically $200,000.
5. GOING-RATE PRICING
• company pricing policies: the price must be consistent with company pricing policies
• gain-and-risk-sharing pricing: the seller has the option of offering to absorb part or
all the risk if it does not deliver the full promised value
Marketing communications also work for consumers when they show how
and why a product is used, by whom, where, and when.
Consumers can learn who makes the product and what the company and
brand stand for, and they can get an incentive for trial or use.
MARKETING COMMUNICATIONS MIX
The marketing communications mix consists of eight major modes of
communication:
1. Advertising:
1. It is brief: Being brief is not dropping words or chopping sentences, It is the work of
eliminating and substituting the words with out jeopardizing the meaning.
2. It is clear: A clear copy is one which is easily and quickly read and grasp by the readers.
3. It is apt: Writing an apt copy is the art of putting in the words that create strong desire to
possess the product where the product features satisfy the consumer’s desire to possess.
These three departments will have differing agendas, priorities and budgets.
How do we ensure that the potential customer receives a consistent message from
all three sources?
While this view makes intuitive sense, it can be difficult to achieve. Factors such as
internal politics, demarcation of work and budget allocation can all conspire against
this seemingly logical approach.
……………….End………………