Product

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Product
What the Customer Wants
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What is a Product?

• the need satisfying offering of a firm
  Translation
• what you buy, that satisfies what you want to be
  able to do

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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

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Customers Buy Benefits, Not Products
Need
Benefits sought
Choice criteria
Product/service features
Brand/supplier chosen
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Q U A L I T Y
A products ability to satisfy a customers
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
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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 cant touch - but you can see their
effect intangible services are not physical,
they are intangible
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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
• Physical Objects
• Services
• Events
• Persons
• Places
• Organizations
• Ideas
• Combinations of the above

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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 buyers total
consumption system
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Product Classifications Consumer Products
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Different Classes

• Convenience goods and services
• things consumer wants to buy frequently
• minimum effort, low risk
• small amount of money, not much timethree
  types1. Staples - bought routinely2.
  Impulse products - unplanned purchases3.
  Emergency products - bought immediately

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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 samesimply pick
  the lowest priceeg. Condensed milk,
• Heterogeneous - stuff that is different, so the
  customer will take time to compare features and
  prices- some retailers carry competing brands

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Different Classes

• 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

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Different Classes

• Unsought
• things people dont 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.

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Various Classes of Consumer and Industrial Goods
and Services
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Terms
Product Line

• 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
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Terms
Product Mix

• The assortment of product lines and individual
  offerings available from a company.
• the combination of product lines offered by the
  manufacturer

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Product Life Cycle (PLC)
Sales and Profits Over the Products Life From
Inception to Demise
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Boston Consulting Group (BCG) Approach

Relative Market Share High
Low

• Question Marks
• High growth, low share
• Build into Stars or phase out
• Require cash to hold
• market share

• Stars
• High growth share
• Profit potential
• May need heavy
• investment to grow

?
Market Growth Rate Low High

• Dogs
• Low growth share
• Low profit potential

• Cash Cows
• Low growth, high share
• Established, successful
• SBUs
• Produce cash

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Introduction Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
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Growth Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
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Maturity Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
Sales
Peak sales
Costs
Low cost per customer
Profits
High profits, then lower profits
Maximize profits while defending market share
Marketing Objectives
Product
Diversify brand and models
Price
Price to match or best competitors
Distribution
Build more intensive distribution
Advertising
Stress brand differences and benefits
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Maturity Stage of the PLC
Modifiying the Market

Company tries to increase
consumption of the current product.
Modifying the Product
Changing characteristics such as quality,
features, or styles to attract new users.
Modifying the Marketing Mix

Company tries to improve sales by changing
one or more marketing mix elements.
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Decline Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
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Extending the Product Life Cycle
1. Increase frequency of use by present
customers 2. Add new users 3. Find new
uses 4. Change product quality or packaging
Market Modification
Product Modification
Purpose to sell more product and cover original
investment
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Major Stages in New-Product Development

• 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

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Causes of New Product Failures

• 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?
• 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

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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
• Quality
• Features
• Brand name
• Guarantees/warranties
• Services/spare parts

• Place
• Numbers and types of middlemen
• Locations/availability
• Inventory levels
• Transportation

• Style
• Options
• Packaging

The target market

• Price
• Discounts
• Allowances
• Credit terms
• Payment period
• Rental/lease
• List price

• Promotion
• 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 firms objectives in a given target
market.
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Positioning

• Positioning
• The place the product occupies in consumers
  minds relative to competing products.
• Typically defined by consumers on the basis of
  important attributes.

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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
• Extended product - firms create the necessary
  infra-structure 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 markets respect)

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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

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Positioning

• 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

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How to Add Value to Products

• Companies must constantly search for new ways to
  add value to distance themselves from their
  rivals
• 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

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Brand Decisions

• 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.

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Brand Decisions

• Brands can convey six levels of meaning
• Attributes
• Benefits
• Values
• Culture
• Personality
• User

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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

• 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.

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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

• Advantages of branding
• Facilitates order processing
• Trademark protection
• Aids in segmentation
• Enhances corporate image
• Branded goods are desired by retailers and
  distributors

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Packaging and Labeling

• Packaging includes
• The primary package
• The secondary package
• The shipping package
• Many factors have influenced the increased use of
  packaging as a marketing tool.

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Packaging and Labeling

• Developing an effective package
• Determine the packaging concept
• Determine key package elements
• Testing
• Engineering tests
• Visual tests
• Dealer tests
• Consumer tests

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Packaging and Labeling

• 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.

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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
• Research
• Promotion
• Market contact
• Assortment
• Physical distribution
• Financing risk taking
• Negotiation
• Storage

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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

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Channel Structure and Flows
Manufacturer
Structure
Flows
B2B
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).
Wholesaler
B2B
Retailer
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.
B2C
Functions of Retailers Wholesellers?
Consumer
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• 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

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• 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.

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Adoption Process (Diffusion of Innovation)
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Relationship between Advertising and the Product
Life Cycle
Not mentioned in your textbook