Post on 26-Apr-2017
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
1
ALL�ABOUT�PRODUCTS
MARKETING MIX ELEMENTS - 1
MARKETING�MIX�….
Producer�oriented:�4Ps Consumer�oriented:�4Cs
ProductїPriceї
PromotionїPlaceї
ї�Commodity
ї�Costї�Communication
ї�Channel
RAZZAQUE:UNSW L6Ͳ 2
�…�refers�to�the�marketing�elements�that�help�marketers�‘position’�their�market�offer.�
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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RAZZAQUE:UNSW L6�Ͳ 3
MARKETING MIX FOR PRODUCTS [GOODS]
RAZZAQUE:UNSW L6�Ͳ 4
MARKETING MIX FOR PRODUCTS [SERVICES]
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Lecture�Objectives
RAZZAQUE:UNSW L 6 - 5
Define�the�term�‘product’�and�describe�the�nature�of�product�in�marketing�management.
Explain�product�and�service�classifications�
Outline�the�range�of�individual�product�decisions�discussing�various�product�attributes.
Discuss�branding.�
Explain�product�line�and�product�mix�decisions.
Describe�new�product�development�strategies
Explain�Product�Life�Cycle.
Products:�Bundles�of�Benefits�in�the�form�of�Goods�and�Services
RAZZAQUE:UNSW L6�Ͳ 6
• Any�tangible�object/thing�that�can�be�offered�to�a�market�for�attention,�acquisition,�use,�or�consumption�that�might�satisfy�a�want�or�need.�
Goods(Tangible�Product)
Broadly�defined�as�“products”.�Also�include�events,�persons,�places,�organisations,�
ideas,�or�mixes�of�these.�
• A�product�in�the�form�of�an�activity,�benefit�or�satisfaction�that�one�party�can�offer�to�another�that�is�essentially�intangible�and�does�not�result�in�the�ownership�of�anything.�
SERVICES(Intangible�Product)
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Products�and�Services�Continuum
RAZZAQUE:UNSW L6- 7
There is nothing called ‘pure’ product or ‘pure’ service
Three�Product�Levels
RAZZAQUE:UNSW
BrandName
Quality
Packaging
Styling
Features
Delivery& Credit
Installation
Warranty
After-Sale
Service
CoreBenefit
orService
Actual ProductCore Product
Augmented Product
L6 - 8
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Product�Levels
RAZZAQUE:UNSW L6 - 9
� Core�Product:�the�basic�useͲbenefit,�problemͲsolving�dimension�that�makes�the�purchased�product�valuable�to�consumer.
� Actual�Product:�the�tangible,�physical�product�(or�intangible�service)�that�we�buy�to�receive�the�core�product�benefits.¾ Has�5�characteristics:9 Quality�Level refers�to�product�performance.���9 Features include�combinations�of�product�attributes.���9 Styling consists�of�product’s�design�and�aesthetic�or�ergonomic�aspects.�9 Brand�Namemay�help�consumers�position�and�identify�the�product.9 Packaging serves�to�both�protect�the�product�and�to�promote�it�to�consumers.
� Augmented�Product: the�nonͲphysical�part�of�the�product�that�adds�value to�the�product�purchased.�[e.g.;�credit,�delivery,�installation,�warranties, and�after�sale�service]�¾ help�the�consumer�put�the�actual�product�to�sustained�use.
Product�Levels:�QANTAS
RAZZAQUE:UNSW L6- 10
SafetyRecord
Schedules
Seatallocation Meals
HollidayPackages
Qantas Club
Frequent Flyer Scheme
HertzCar
RentalBooking
Transportation
TimeCritical
Transportation
Actual ProductCore Product
Augmented Product
ToursFly-drivepackages
BookingSystem
Inflight Services
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
6
Consumer�Product�Classifications
RAZZAQUE:UNSW L6- 11
Types ofConsumerProducts
Convenience
UnsoughtGoods Specialty
Shopping
Consumer�products�are�those�bought�by�final�consumers�for�personal�consumption.
Products� (i)�purchased�frequently�with� (ii)�a�minimum�of�comparison�and�buying�effort. Examplesare�staples,�impulse,�emergency
Products are�compared�on�such�bases�as�suitability,�quality,�price,�and�style.
Products�with�(i)�unique�characteristics�or�identification�with�buyers�and� (ii)�
are�specifically�sought�by�the�consumer.
Products�unknown�to�the�buyer�or�not�normally�considered��for�purchase;��require�special�marketing�effort.
RAZZAQUE:UNSW L6�Ͳ 12
Classification of consumer goods
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Industrial�Products�…
RAZZAQUE:UNSW L6- 13
�…�are�goods�purchased�by�individuals�and�organisations�for��(i)�further�processing�or�for� (ii)�use�in�conducting�a�business.��¾…�differ�from�consumer�goods�in�terms�of�the�purpose�of�use.�¾…�can�be�classified�in�three�groups�according�to�how�they�enter�the�production�process�and�what�they�cost.o Materials�and�parts: Includes�raw�materials�and�manufactured�materials�and�parts�that�enter�the�manufacturer’s�product�completely.�Usually�are�bulky�and�low�priced.�
o Capital�items:�Goods�and�services�that�enter�the�finished�product�partly,�including�installations��(buildings�and�fixed�equipment�)�and�accessory�equipment�(portable�factory�equipment�and�tools,�office�equipment).�Do�not�become�part�of�the�finished�product,�but�aid�in�the�production�process.
o Supplies�and�services:�Goods�and�services�that�do�not�enter�the�finished�product�at�all�(e.g.,�maintenance�and�repair�services,�advisory�services).�
Extending�the�Goods�and�Services�Classification�in�Marketing
� Organisation�marketing: Involves�creation,�maintenance�or�changing�the�attitudes�and�behaviour�of�target�consumers�toward�an�organisation�(e.g.��NAB/UNSW).
� Place�marketing:�Relates�to�creation,�maintenance�or�change�the�attitudes�and�behaviour�toward�particular�places.��(e.g.,�tourism�destinations�or�holiday�resorts).
� Event�and�experience�marketing:�Often�linked�to�other�market�offerings�such�as�major�sporting�events�like�World�Cup,�often�include�destination�marketing,�and�marketing�communications�to�involve�the�local�community.���
� Person�marketing: Relates�to�creation,�maintainance or�change�the�attitudes�and�behaviour�toward�particular�people�(celebrities,�sports�stars,�politicians�,�and�business�leaders��e.g.,�Angelina�Jolie;�Tiger�Woods;�Kevin�Rudd;�Bill�Gates.�
� Ideas�such�as�political��policies�and����environmental�and�social�causes�can�also�be�marketed.
� Social�marketing:�Use�of�marketing�concepts�and�tools�in�programs�designed�to�bring��about�social�change.��(e.g.,�reduce��speeding,�pollution�etc.�
� NonͲprofit�marketing:�Involves�activities�by�notͲforͲprofit�organisations�such�as�Red�Cross�in�fund�raising.�
RAZZAQUE:UNSW L6 - 14
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Individual�Product��and�Service�Decisions
RAZZAQUE:UNSW L6 - 15
� Product�Quality >>�The�ability�of�a�product�to�perform�its�functions.�Includes�attributes�such�as�durability,�reliability,�precision,�ease�of�operations,�and quality�consistency. Has�lead�to�adoption�of�TQM.�
� Product�Features. Technical�characteristics�of�the�offering.�Consumers�seek�value�and�needͲsatisfaction.�Product�feature�decisions�must��reflect�consumer�needs�and�perceptions�,�affordable�value�and�company�cost.�Features�irrelevant�to�consumers��cost�money�and�are�undesirable.�
� Product�Design. Combines attention�to�style�(appearance)�with�enhanced�performance.��Style�alone�may�attract�attention�but�not�improve�performance.
Product Attributes
Branding
Packaging
Labelling
Product Support Services
Product�Features,�Advantages�and�Benefits
Marketers are expected to sell benefits, not features.
� Refer�to�the�following�extract�of�an�onͲline�advertisement�for�Miele ovens.
¾ “The�Miele fan forced cooking system,�for�example,�enables�you�to�cook�on�up�to�three�levels.�Rather�than�just�circulating�hot�air�with�a�fan�we�use�a mini-turbine together�with�a�ring heater element to�force�hot�air�evenly�throughout�the�oven�interior.�This�reduces cooking time and�thus�energy consumption – above�allproviding perfectly even cooking results.”
� Features:�Fan forced cooking system, mini turbine, and ring heater element.
� Advantages:�Cooking�on�up�to�three�levels,�hot�air�forced�evenly�through�the�interior.
� Benefits:�Reduced cooking time, reduced energy consumption, perfectly even cooking results.
� Summary:�Features describe the sales item in technical terms. Advantages�describe�the�sales�item�in�terms�of�what�the�feature�does.�Benefits describe the sales item in terms of the benefit to me, the customer.
RAZZAQUE:UNSWL6�Ͳ 16
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Packaging�Decisions
RAZZAQUE:UNSWL6 - 17
Includes�designing�and�producing�the�container�or�wrapper�for�a�product.
Must�support�marketing�objectives�of�the�company.�
The�package�includes�the�immediate�container�(that�holds�the�product�for�use),�a secondary�package�(discarded�prior�to�use),�and�a�shipping�package�(necessary�for�storage�and�shipping).
Labels�Identify�products:�Distinguish one�product�from�others;�and�support�brand�strategies;Describe�product:�By providing�information�about�contents,�production,�freshness,�and�instructions�on�safe�and�effective�use;�and�Promote�products: Through�the�use�of�color and�graphics�can�stimulate�and�arouse�consumer�attention�for�the�product.Must�satisfy�legal�regulation.
Labeling�Decisions
Product�Line�&�Mix�Decisions
RAZZAQUE:UNSWL6 - 18
ProductLine Decisions
Product MixDecisions
Consistency
Length
FillingStretching
Featuring
DepthLength
Width
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Product Line Decisions
RAZZAQUE:UNSWL6 - 19
Product�Line�Length:�The�number�of�products�in�the�line.�A�line�is�too�short�if�adding�items�increases�profits;�too�long�if�dropping�items�increases�profits. Company�objectives�of�fullͲline�offerings�may�decrease�strict�profit�criterion�on�length.
Product�Line�Stretching: Lengthening�a�company’s�product�lineDownward�stretch offers�items�to�lower�end�of�the�market.��Upward�stretch introduces�items�to�high�end�of�market.��TwoͲway�stretch extends�the�line�both�upward�and�downward.
Product�Line�Filling: Adding�items�within�the�existing�product�range�of�the�line.
Product�Line�Featuring: Selecting�a�few�items�to�receive�special�marketing�attention�to�either�increase�volume�of�the�featured�items�or�draw�customers�closer�to�other�products�in�the�line
Product�Mix�Decisions
RAZZAQUE:UNSW L6 - 20
Assortment�Dimensions� Width:�number�of�different�
product�lines�marketed�by�a�single�firm.
� Length:�number�of�items�sold�by�a�firm�within�each�product�line.
� Depth:�number�of�shapes�and�model�designation�of�the�product
� Consistency:�how�closely�related�the�various�product�lines�are�in�end�use,�production�requirements,�distribution�channels,�or�other�ways
Optimizing�the�product�mix
� The�optimum�product�mix�for�a�firm�varies�across�time.
¾ The�mix�is�a�function�of�engineering,�production,��and�marketing�skills�available;�the�financial�resources�and�the�objectives�of�the�organization.
� For�longͲterm�growth�expand�product�mix�continuously
Product�mix�:�The�set�of�merchandise�offered�by�a�firm�to�its�customers.
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Product�Mix�Strategy�of�General�Motors
RAZZAQUE:UNSW
CARS TRUCKS CHASSIS
Cadillac
Buick
Oldsmob
GMC
Chevrolet
School bus
PRODUCT WIDTH
PRODUCT
LINE
LENGTH
Pontiac
L6- 21
RAZZAQUE:UNSW L6 - 22
Product Line Stretching Decisions
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Services�Marketing�Characteristics�of�Services
RAZZAQUE:UNSW L7- 23
y Intangibility�of�services:�‘Almost�pure�services,�e.g.,�a�haircut,�has�no�physical�element�like�coffee’�
y High�involvement�and�personal�nature�of�services:�When�your�teeth�are�cleaned,�you�are�receiving�a�personalised�service.
y Perishability�of�services:�Almost�pure�services,�e.g.,�a�rock�concert,�can�not�be�stored�like�coffee.�Once�the�concert�is�over,�only�its�memory�is�left.
� Synchronous�delivery�and�consumption:����������������������Almost�pure�services,�e.g.,�learningͲtoͲdrive�session�or�aerobics�instruction�session,�require�you�to�interact�in�real�time�as�the�service�is�consumed.
� Variability�of�service�encounters:���������������������������Almost�pure�services,�e.g.,�a�restaurant�or�ocean�cruise�involve�interaction�between�a�patron/guest�and�customer�service�personnel.�They�are�not�necessarily�the�same�every�time.�
Marketing�Strategies�for�Service�Firms�I
RAZZAQUE:UNSW L7�Ͳ 24
� In�a�service�business,�the�customer�and�frontͲline�service�employee�interact to�create�the�service.
� The�serviceͲprofit�chain�consists�of�five�links:¾ Internal�service�quality:�superior�employee�selection�and�training,�a�quality�work�environment,�and�strong�support�for�those�dealing�with�customers,�which�in�turn�results�in...
¾ Satisfied�and�productive�service�employees:�more�satisfied,�loyal,�and�hardworking�employees,�which�results�in...
¾ Greater�service�value:�more�effective�and�efficient�customer�value�creation�and�service�delivery,�which�results�in...
¾ Satisfied�and�loyal�customers:�satisfied�customers�who�remain�loyal,�repeat�purchase,�and�refer�other�customers,�which�results�in...
¾ Healthy�service�profits�and�growth:�superior�service�firm�performance.
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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External marketing : what this course is covering
Service�marketing�requires� (i)�internal�marketing,�(ii)�external�marketing and� (iii)�interactive�marketing
RAZZAQUE:UNSW L7�Ͳ 25
Internal marketing: Orienting and motivating firm’s customer-contact employees and supporting service people to work as a team to provide customer satisfaction.
Interactive marketing: Developing quality the buyer-seller interaction during the service encounter.
Hence,�service�companies�must�increase three�major�marketing�tasks:�(i)�their�service�differentiation,�(ii)�service�quality,�and�(iii)�service�productivity.�
Branding��I
RAZZAQUE:UNSW L7�Ͳ 26
� A�brand�is�‘a�name,�term,�sign,�symbol,�design,�or�a�combination�of�these,�that�identifies�the�goods�or�services�of�one�seller�or�group�of�sellers�and�differentiates�them�from�those�of�competitors’
� Brands�are�themajor�enduring�asset�of�a�company�as�they¾ Facilitate�easy�product�recognition�and�repeat�purchase.�
¾ Simplify the�introduction�of�new�products�and�allow�control�over�channel�of�distribution.�
¾ Develop�permanent�priceͲquality�image�of�the�product
� Powerful�brand�names�have�consumer�franchise�ͲͲ they�command�consumer�loyalty.�
Product Attributes
Branding
Packaging
Labelling
Product Support Services
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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RAZZAQUE:UNSWL7�Ͳ 27
• The�added�value�that�knowledge�about�a�brand�brings�to�a�product�over�and�above�its�basic�functional�qualities.
• The�foundations�of�brand�equity:��������(i)�extensive�brand�awareness;�and���(ii)�strong,�unique�and�favorable�brand�associations�[e.g.,�VOLVO�>>�Safety]
Brand�Equity
• differentiation(what�makes�the�brand�stand�out),�
• relevance (how�consumers�feel�it�meets�their�needs),�
• knowledge (how�much�consumers�know�about�the�brand),�and�
• esteem (how�highly�consumers�regard�and�respect�the�brand).
Measures�of�Brand�Strength
• High�level�of�consumer�brand�awareness�and�loyalty.�
• More�leverage�in�bargaining�with�resellers.�
• More�easily�launch�line�and�brand�extensions.�
• Defence�against�fierce�price�competition.�
• Forms�the�basis�for�building�strong�and�profitable�customer�relationships.�
Brand�Valuation
Branding - II
RAZZAQUE:UNSW L7�Ͳ 28
2013 Rank 2012 Rank BrandBrand Name
Region/Country Sector
Brand Value ($m)
Change in Brand Value
1 2 Apple United States
Technology 98,316 28%
2 4 Google United States
Technology 93,291 34%
3 1 Coca-Cola United States
Beverages 79,213 2%
4 3 IBM United States
Business Services 78,808 4%
5 5 Microsoft United States
Technology 59,546 3%
6 6 GE United States
Diversified 46,947 7%
7 7McDonald
'sUnited States
Restaurants 41,992 5%
8 9 Samsung South Korea Technology 39,610 20%
9 8 Intel United States
Technology 37,257 -5%
10 10 Toyota Japan Automotive 35,346 17%
WORLD’s TOP BRANDS 2013
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Branding�III:�Building��Brand�Names�
RAZZAQUE:UNSW L7 - 29
�Cost�of�establishing�a�brand�name�is�very�high,�often�ranges�between�50Ͳ150�million�dollars.� Yet�chances�for�success�in�establishing�a�brand�name�are�rather�low.
�Companies�with�strong�brands�often�attempt�to�build�brand�portfolios�by�acquiring�brands�with�strong�brand�equity�from�other�companies.
RAZZAQUE:UNSW L7 - 30
Brand RepositioningBrand Repositioning
No Brand Repositioning
Brand StrategyNew Brands
Line/Brand Extensions Multibrands
Brand SponsorManufacturer’s Brand
Private Brand Licensed Brand
Brand Name SelectionSelectionProtection
To Brand or Not to Brand: Positioning: PBrand
No Brand
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Major Branding Decisions II
RAZZAQUE:UNSWL7 - 31
Brand�Decision. The�company�must�decide�whether�or�not�to�place�a�brand�name�on�its�product�or�use�generic�names�(e.g.�Paracetamol).��Brands�(e.g.�Panadol�or�Heffron)�usually�command�higher�profit�margins�than�nonͲbrands.�
Brand�Name�Selection. A�good�brand�name�should:1. suggest something about the product’s benefits [Navigator>Netscape];
2. be easy to pronounce and remember [Total, Tide];3. be distinctive [Lexus];4. Be extendable5. translate easily into foreign languages [Exxon,(formerly standard oil of
New Jersey) translated in 54 languages]; and 6. be eligible for registration and legal protection.
Major Branding Decisions III: Brand�Sponsorship.
RAZZAQUE:UNSWL7 - 32
�A�manufacturer�has�four�sponsorship�options.�¾ Launch�the�product�as�a�manufacturer’s�brand (or�national�brand)�[e.g.,IBM,�Kellogg].�Producer�owns�the�BRAND.�
¾ Sell�to�resellers�who�give�it�a�private�brand (also�called�a�store�brand�or distributor�brand).�Private�brands [Ingham’s�chicken�also�sold�by�Coles�as�‘Farmland’�and�‘Savings’].�Reseller�create�and�own�the�BRAND.�
¾Use�other�brands’�name�under�license�[e.g.,�Gucci,�Calvin�Klein].¾ Join�another�company�and�coͲbrand a�product.�[e.g.�Visa�and�Commonwealth�Bank]
�MixedͲbrand strategies�combine�both�approaches�[IBM�and�its�Secondary�brand�sold�thru’�direct�mail].
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Brand�Development�Strategy
RAZZAQUE:UNSW L7 - 33
LineExtension
Multibrands[Flanker]
BrandExtension
[Brand Leveraging]
NewBrandsB
rand
Nam
e
Existing New
Product Category
Existing
New
Occurs�when�a�company�extends�existing�brand�names�to�new�forms,�colours,�sizes,�ingredients,�or�flavours�of�an�existing�product�category.�Add decaf Coffee.
A company seeks to extend existing brand qualities to launch new products or modified products in a new category.Quaker oatmeal > Quaker Granola bar
Develops additional products in the same product category. P & G pioneered multibranding
A company creates a new brand name when it enters a new product category for which none of the company’s current brand names are appropriateCoca Cola > Dasani
Megabrand�Strategy Brand�Repositioning.
RAZZAQUE:UNSW L7 - 34
� Involves�dropping�weaker�brands�and�focusing�only�on�brands�that�can�achieve�the�number�one�or�number�two�market�share�positions�in�their�categories.�
� May�be�necessary�in�response�to�change�in�the�competitive�market.
� Could�be�very�expensive� Could�also�be�challenging�to�
marketers�as�the�‘repositioning’�the�image�of�the�same�product�may�not�be�easy�to�communicate�to�the�target�market.¾ Kentucky�Fried�Chicken to�KFC¾ Kraft’s�Velveeta�Brand�from�“cooking�cheese”�to�“good�tasting,�natural�and�nutritious’�snack�cheese.
� Should�be�done�carefully.
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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New�Products
RAZZAQUE:UNSW L7 - 35
� Rapid�changes�in�tastes,�technology�and�competition,�prompt�customers�to�want�new�and�improved�products.�¾ New�products:�Include�original�products,�modifications,�new�brands.�¾ “Newness"�depends�on�who�makes�the�assessmentͲͲ buyer�or�seller.¾ Success�of�a�new�product�depends�on�a�unique�superior�product�ͲͲnew�features,�higher�quality�and�value�in�use.
�A�company�can�obtain�new�products�in�two�ways.��1. Acquisition�– buying�a�whole�new�company,�patent�or�licence�to�
produce�someone�else’s�product.��2. New�product�development.
�Degree�of�newness�to�buyer/seller�impacts�the�amount�of�risk�taken�and�influences�the�new�product�development�process.
Product�Newness
RAZZAQUE:UNSWL7 - 36
A.�New�to�the�world >>products�that�create�entirely�new�markets.
B.�New�product�lines >>entries�into�existing�markets�that�are�new�to�the�firm.
C.�Line�extensions >>new�products�allowing�firms�to�extend�served�market�through�different�benefits.
D.�Improvements�to�existing�products >>replacements�for�existing�product.�
E.�Repositioning >>modest�technical�improvements�that�allow�a�product�to�offer�new�applications
F.�Cost�reductions >>versions�of�existing�products�providing�comparable�performance�at�lower�cost.
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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NewͲProduct�Success�and�Failure
RAZZAQUE:UNSW L7 - 37
�A��high�rate�of�new�product�failure;�¾80%�new�consumer�goods;
¾33%�new�B2B�products;�Reasons�why�new�products�fail:¾negative�perception,�¾wrong�timing,�¾poor�market�research,�¾poor�marketing�communications�etc.
� Identify�successful�products�and�find�out�what�they�have�in�common
� Develop�a�superior�product� Have�a�well�defined�product�concept�prior�to�development
� Inadequate�promotional�budget�and�support�may�cause�failure
� Top�management�commitment�is�vital
� A�company�must�understand�its�consumers,�markets�and�competitors.<>
RAZZAQUE:UNSWL7�Ͳ 38
What it takes to launch one commercially successful new product
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
20
New�Product�Development�Process
RAZZAQUE:UNSW L7 - 39
IdeaGeneration
IdeaScreening
ConceptDevelopmentand Testing
MarketingStrategy
BusinessAnalysis
ProductDevelopment
TestMarketing
Commercial-isation
Stages�in�New�Product�Development�I
RAZZAQUE:UNSWL7 - 40
� Idea�Generation. This�stage�is�the�systematic�search�for�new�product�ideas.��¾ Sources�for�new�product�ideas�include�internal�sources,�customers,�competitor's�products,�distributors�&�suppliers,�and�other�sources.+HT
� Screening. This�stage�focuses�on�reducing�the�number�of�ideas�by�dropping�poor�ideas�as�soon�as�possible.��¾Helps�reduce�costs�and�focus�attention�more�productively.
�Concept�Development�and�Testing. This�stage�involves�translating�ideas�into�product�concepts�or�detailed�versions�of�the�ideas�stated�in�meaningful�consumer�terms.��Concepts�are�then�tested�on�target�consumers.
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
21
Stages�in�New�Product�Development�II
RAZZAQUE:UNSWL7- 41
Marketing�Strategy. Consists�of�three�parts�–(i)�describe�the�target�market,�(ii)�outline�the�product's�projected�price,�distribution,�and�budget�for���������������
the�first�year,�and�(iii)�describe�longͲrun�sales,�profit�goals,�and�marketing�mix�strategy.
Business�Analysis. Reviews�the�sales,�costs,�and�profit�projections�for�the�product�to�find�out�if�they�satisfy�overall�company�objectives.
Product�Development. Involves�converting�the�product�concept�into�a�physical�product�to�ensure�that�the�idea�is�a�viable�product.
Test�Marketing. Involves�implementation�of�marketing�program�in�one�or�more�realistic�market�settings.
Commercialization. Actual�introduction�of�the�new�product�into�the�marketplace.�The�company�must�make�decisions�involving�when�to�introduce,�where,�to�whom,�and�how.
Managing�newͲproduct�development
RAZZAQUE:UNSW
• Focuses�on�finding�new�ways�to�solve�customers’�problems�and�create�more�customerͲsatisfying�experiences.
CustomerͲcentred�newͲproduct�development
• Company�departments�work�together�in�crossͲfunctional�teams,�overlapping�the�steps�in�the�product�development�process�to�save�time�and�increase�effectiveness.
TeamͲbased�����newͲproduct�development
• The�NPD�process�should�be�systematic�and�holistic�to�ensure�that�new�ideas�that�may�emerge�do�not�falter.�Good�management�system��system�to�manage�newͲproduct�ideas.
Systematic��������newͲproduct�development
L7- 42
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Common�organizational�arranagements
RAZZAQUE:UNSWL7�Ͳ 43
How�companies�organize�for�new�product�development�is�also�important�for�its�success.�
Product�Managers. He/she�is�closest�to�the�market�and�as�such�is�the�most�knowledgeable�of�all.��However�he/she�may�be�preoccupied�with�existing�products�and�lack�specific�knowledge�and�skills�related�to�new�product�development.�
NewͲProduct�Managers. A�new�manager�assigned�to�the�task�of�new�product�development; however,�he/she�might�think�in�terms�of�modifications�and�line�extensions.
NewͲProduct�Committees. Uses�specialists�from�several�functional�areas�to�evaluate�new�product�concepts�and�plans.
NewͲProduct�Departments. Sets�up�a�separate�department�with�the�line�and�staff�authority�to�develop�new�products.���The�departmental�manager�also�has�access�to�top�management.
NewͲProduct�Venture�Teams. Brings�together�specialists�from�other�operating�departments�and�reassigns�them�to�the�venture�team.��
Product�Life�Cycle
RAZZAQUE:UNSW
TimeProduct
DevelopmentStage
Introduction
Profits
Sales
Growth Maturity Decline
Losses/Investments�($)
Sales andProfits ($)
Sales�and�Profits�Overthe�Product’s�Life�FromInception�to�Demise
L7- 44
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
23
RAZZAQUE:UNSW
Product�LifeͲCycle�Stages�I1. Introduction�stage.
¾ Promote�the�product�heavily�to�inform�the�market�about�its�debut.�¾ Low/negative�profits�may�lead�to�set�high�price�to�offset�
expenses.�¾ Adopt�skimming�strategies to�generate�high�profits�now or�
penetration�strategies to�build�market�share�and�dominate�the�market�for�larger�profits�once�the�market�stabilizes.
2.���Growth�stage.¾ The�product�experiences�both�increasing�sales�and�competition.¾ Promotion�costs�are�spread�over�larger�volume�and�strategic�
decisions�focus�on�growth�strategies.�¾ Strategies�include�adding�new�features,�improving�quality,�
increasing�distribution,�and�entering�new�market�segments.
L7- 45
RAZZAQUE:UNSW
Product�LifeͲCycle�Stages�II
3. Maturity�stage.¾ Slower�growth�over�a�longer�period�of�time.�Growth�stage�
decisions�are�inappropriate.�¾ Must�modify��(i)�the�market�to�increase�consumption,�or�(ii)�
the�product�(quality,�feature,�and�style�improvements)�to�attract�new�users�,�or�(iii)�the�marketing�mix�to�improve�competitive�position
4. Decline�stage.¾ Costs�of�managing�the�product�may�exceed�profits.�¾ Management�may�keep�the�brand�as�competitors�drop�out,�
harvest the�brand�by�reducing�costs�of�support�for�short�term�profit,�or�divest (i.e.,�drop)the�product.
L7- 46
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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RAZZAQUE:UNSW L7 - 47
Video�game�console�and�software�life�cycles�by�product�
class�and�product�form
Typical�Fashion,�Style�and�Fad
Different�types�of�PLC
Com
peti
tive
turb
ulen
ce
RAZZAQUE:UNSW
The�Product�Life�Cycle
Time
Introduction Growth Maturity Decline
$ 0.00
SalesVolume
Profitability
UnitCost
UnitPrice
L7 - 48
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Product�Life�Cycle�Stage�Characteristics�I
RAZZAQUE:UNSW
LIFECYCLESTAGE INTRODUCTION GROWTH
COMPETITIVETURBULENCE MATURITY DECLINE
Sales Low Rapidly rising Slowing Peak, Cyclical Declining
Prices High Lower Low Low Falling
Unit Profits Negative High, Rising Declining Average Declining
Customers Innovators Early Adopters Early Majority Middle Majority Laggards
Competition Few Growing Shakeout Declining, Fewer More Decline
L7 - 49
RAZZAQUE:UNSW
Product Lifecycle Stage Strategies
LIFECYCLESTAGE INTRODUCTION GROWTH
COMPETITIVETURBULENCE MATURITY DECLINE
Overall Marketawareness,R&D critical
Market sharepenetration
Protect,strengthenniche
Protect share—manage earningsand costs
Reduceexpendituresand harvest
Product Basic Add serviceand features
Tighten line,up quality
Diversify brandsand models
Phase outweak items
Price Cost plus Marketbroadening
Match or beatcompetitors
Defensive Maintainprofit margin
Distribution Selective Intensivecoverage
Strong dealersupport
Intensive andextensive
Selective
Communication Createawareness
Stimulatewider trial
Maintainconsumerfranchise
Stress branddifferences andbenefits
Phase out,maintenanceonly
Manufacturing SubcontractShort runsOvercapacity
CentralizeMass prod.Undercap'ty
Long runsStableprocess
DecentralizeMany short runs
Revert tosubcontract-ing
L7 - 50
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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L7�Ͳ 51RAZZAQUE:UNSW
How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions
RAZZAQUE:UNSWL7 - 52
Emphasize Promotion�����Distribution��������Price����������Cost�reduction�Total MarketSales
TotalMarketProfit
New product featuresNew uses
New Markets
Status quo
New product featuresNew uses
New Markets
Status quoIntroduction Growth Maturity Decline<------------------------------TIME--------------------------------->
Do
lla
rs
Exploiting the Product Life Cycle
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Managing�the�PLC�during�the�decline�stage
RAZZAQUE:UNSW L7 - 53
�The�three�ways�to�manage�a�product�through�its�life�cycle�include:
¾ Product�modification strategies:�altering�a�product�characteristic,�such�as�quality,�performance,�or�appearance�to�try�to�increase�and�extend�its�sales�and�life�cycle.
¾Market�modification strategies:�increasing�a�product's�use�among�existing�customers,�to�create�new�use�situations,�or�to�find�new�customers.��
¾ Product�repositioning�strategies:�changing�the�place�a�product�occupies�in�a�consumer's�mind�relative�to�competitive�products.��¾ A�firm�can�reposition�a�product�by�changing�one�or�more�of�the�four�4Ps
Length�of�product�life�cycle
RAZZAQUE:UNSWL7 - 54
�How�long�is�a�product�life�cycle?���What�determines�its�length?¾There�is�no�exact�time�that�a�product�takes�to�move�through�its�life�cycle.��9As�a�rule,�consumer�products�have�shorter�life�cycles�than�business�products.��The�availability�of�mass�communication�vehicles�informs�consumers�faster�and�shortens�life�cycles.��
9Also,�technological�change�tends�to�shorten�product�life�cycles�as�new�product�innovation�replaces�existing�products
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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� Consumers�pass�through�five�stages�in�the�process�of�adopting�a�new�product:
1. Awareness:�The�consumer�becomes�aware�of�the�new���product,�but�lacks�information�about�it.
2. Interest:�The�consumer�seeks�information�about�the�new�product.
3. Evaluation:�The�consumer�considers�whether�trying�the�new�product�makes�sense.
4. Trial:�The�consumer�tries�the�new�product�on�a�small�scale�to�improve�their�estimate�of�its�value.
5. Adoption:�The�consumer�decides�to�make�full�and�regular�use�of�the�new�product.
RAZZAQUE:UNSWL7 – 55
New�Product�Adoption�Process
People�differ�greatly�in�their�readiness�to�try�new�products.�There�are�five�different�categories�of�adopters
RAZZAQUE:UNSW L7�Ͳ 56
Perc
enta
ge o
f Ado
pter
s
Time of AdoptionEarly Late
Inno
vato
rs
Early Adopters
Early Majority
2.5%13.5%
34% 34%
16%
Laggards
Late Majority
Marketing Fundamentals: RazzaqueLectures 6-7: All about products
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Individual�differences�in�the�adoption�of�innovations[From�Ch.5]
1. Innovators.Innovators�help�get�the�product�exposure:�but�are�not�typical�consumers.
2. Early�Adopters.Serves�as�opinion�leaders�to�the�rest�of�the�market.
3. Early�Majority.
The"typical�consumer”;�adopt�innovations�early.
4. Late�Majority.
The�scepticals;�adopts�after�most�in�the�market.���
5. Laggards.
The�suspicious;�adopts�last�when�the�product�is�no�longer�an�innovation.
RAZZAQUE:UNSW L7�Ͳ 57
RAZZAQUE:UNSW L7 - 58
Influence�of�Product�Characteristics�on�Rate�of�Adoption
• Relative�Advantage:�the�degree�to�which�an�innovation�appears�superior�to�existing�products.
• Compatibility:�the�degree�to�which�the�innovation�fits�the�values�and�experiences�of�potential�consumers.
• Complexity:�the�degree�to�which�the�innovation�is�difficult�to�understand�or�use.
• Divisibility:�the�degree�to�which�the�innovation�may�be�tried�on�a�limited�basis.
• Communicability:�the�degree�to�which�the�results�of�using�the�innovation�can�be�observed�or�described�to�others.