MARKETING - 4MARKETING - 4

Product level/Customer value hierarchyProduct level/Customer value hierarchy

1.1. Core benefitCore benefit

2.2. Basic productBasic product

3.3. Expected productExpected product

4.4. Augmented productAugmented product

5.5. Potential productPotential product

Product mix/Product AssortmentProduct mix/Product Assortment

4 Elements :4 Elements :

1.1.WidthWidth

2.2.LengthLength

3.3.DepthDepth

4.4.ConsistencyConsistency

Product LineProduct Line

A group of products within a product A group of products within a product class that are closely related because class that are closely related because they perform a similar function, are they perform a similar function, are sold to the same customer groups, sold to the same customer groups, are marketed through the same are marketed through the same channels, or fall within given price channels, or fall within given price rangesranges

Eg Life insuranceEg Life insurance

NEW PRODUCT DEVELOPMENTNEW PRODUCT DEVELOPMENT

A product must be entirely new or A product must be entirely new or changed in a functionally significant changed in a functionally significant or substantial respect.or substantial respect.

Need of New product developmentNeed of New product development

New product development process – 7 New product development process – 7

1.1. Idea generationIdea generation

2.2. Idea screeningIdea screening

3.3. Concept development and testing Concept development and testing

4.4. Marketing strategyMarketing strategy

5.5. Business analysisBusiness analysis

6.6. Product development and testingProduct development and testing

7.7. CommercializationCommercialization

1. Idea Generation1. Idea Generation

Interacting with othersInteracting with others- CustomersCustomers- Dist channel membersDist channel members- CompetitorsCompetitors- Sales forceSales force- MR and AD agenciesMR and AD agencies- Suppliers Suppliers - Top Mgt and Scientists and consultants.Top Mgt and Scientists and consultants.

Idea Generating techniques/Creativity techcIdea Generating techniques/Creativity techc- Brainstorming – Alex osbornBrainstorming – Alex osborn- Problem analysisProblem analysis- Synectics – Willam GordonSynectics – Willam Gordon

2.Idea screening2.Idea screening

Ideas 3 groups Ideas 3 groups - Promising ideasPromising ideas- Marginal ideasMarginal ideas- RejectsRejects

2 types of errors2 types of errors- Drop errorDrop error- Go errorGo error

3. Concept Development and testing3. Concept Development and testing

Is an elaborated version of the idea Is an elaborated version of the idea expressed in meaningful will expressed in meaningful will Consumer term.Consumer term.

Who will use the productWho will use the product What benefit should this product use What benefit should this product use

the productthe product When the consumer should use the When the consumer should use the

product.product.

Concept testingConcept testingConjoint Analysis toolsConjoint Analysis tools

4. Marketing Strategy4. Marketing Strategy

3 parts3 parts Target markets size, structure and Target markets size, structure and

behaviorbehavior Outlines the planned price, Dist and Outlines the planned price, Dist and

marketing budget for one yearmarketing budget for one year Long run sales and profit goals and Long run sales and profit goals and

marketing mix strategy marketing mix strategy

5. Business Analysis5. Business Analysis

Needs to prepare sales, cost and profit Needs to prepare sales, cost and profit projections to determine whether projections to determine whether they satisfy company objectives.they satisfy company objectives.

6. Product Design and Development6. Product Design and Development

Product idea can be translated into a Product idea can be translated into a technically and commercially feasible technically and commercially feasible productproduct

R & DR & D Prototype products – testPrototype products – test Functional test – Alpha testFunctional test – Alpha test Consumer test – Beta testConsumer test – Beta test

7. Market Testing7. Market Testing

Consumer goods market testing and Consumer goods market testing and business goods market testing.business goods market testing.

Consumer goods market testingConsumer goods market testing

- Ranking - Ranking - Monadic test 1 – 7 Monadic test 1 – 7 - Direct comparison testDirect comparison test

- Sales – Wave researchSales – Wave research- Printed shopping list/Stimulated test Printed shopping list/Stimulated test

marketing/accelerated test marketing/accelerated test marketingmarketing

- Controlled test marketing/mini Controlled test marketing/mini market testing.market testing.

Business – goods market Business – goods market testing/industrial goods testing/industrial goods

Alpha testingAlpha testing Beta testingBeta testing Trade showsTrade shows Distributor and dealer display roomsDistributor and dealer display rooms

Mgt faces Several decisions :Mgt faces Several decisions : How many test cities?How many test cities? Which CitiesWhich Cities Length of testsLength of tests What informationWhat information What action to take?What action to take?

8. Commercialization8. Commercialization When ( Timing)When ( Timing)- First entryFirst entry- Parallel entryParallel entry- Late entryLate entry Where ( Geographic strategy)Where ( Geographic strategy) To Whom ( Target – Market To Whom ( Target – Market

prospects)prospects)

The consumer Adoption The consumer Adoption process/Stagesprocess/Stages

Everett . M . RogersEverett . M . Rogers

1.1. InnovatorsInnovators

2.2. Early AdoptersEarly Adopters

3.3. Early majorityEarly majority

4.4. Late majorityLate majority

5.5. LaggardsLaggards

PLCPLC

PLC curves are portrayed as bell PLC curves are portrayed as bell shaped. This curve is typically shaped. This curve is typically divided into four stages: Introduction, divided into four stages: Introduction, growth, maturity and decline.growth, maturity and decline.

S shaped sales curveS shaped sales curve

Product life Cycle /PLCProduct life Cycle /PLC

4 things : 4 things :

1.1. Limited lifeLimited life

2.2.Sales pass through distinct stagesSales pass through distinct stages

3.3.Profit rise and fall Profit rise and fall

4.4.Different strategiesDifferent strategies

PLC PLC

4 STAGES 4 STAGES

1.1. INTRODUCTIONINTRODUCTION

2.2. GROWTHGROWTH

3.3. MATURITYMATURITY

4.4. DECLINEDECLINE

INTRODUCTION STRATEGIESINTRODUCTION STRATEGIES

PRODUCT – OFFER A BASIC PRODUCTPRODUCT – OFFER A BASIC PRODUCT PRICE – CHARGE COST – PLUSPRICE – CHARGE COST – PLUS DISTRIBUTION – BUILD SELECTIVE DISTRIBUTION – BUILD SELECTIVE

DISTRIBUTIONDISTRIBUTION ADVERTISING – BUILD PRODUCT ADVERTISING – BUILD PRODUCT

AWARENESS AMONG EARLY ADOPTERS AND AWARENESS AMONG EARLY ADOPTERS AND DEALERSDEALERS

SALES PROMOTION – USE HEAVY SALES SALES PROMOTION – USE HEAVY SALES PROMOTION TO ENTICE TRIAL PROMOTION TO ENTICE TRIAL

GROWTHGROWTH STRATEGIESSTRATEGIES

PRODUCT – OFFER PRODUCT PRODUCT – OFFER PRODUCT EXTENSIONS,WARRANTY EXTENSIONS,WARRANTY

PRICE – PRICE TO PENETRATEPRICE – PRICE TO PENETRATE DISTRIBUTION – BUILD INTENSIVE DISTRIBUTION – BUILD INTENSIVE

DISTRIBUTIONDISTRIBUTION ADVERTISING – BUILD AWARENESS AND ADVERTISING – BUILD AWARENESS AND

INTEREST IN THE MASS MARKET. INTEREST IN THE MASS MARKET. SALES PROMOTION –REDUCE TO TAKE SALES PROMOTION –REDUCE TO TAKE

ADVANTAGE OF HEAVY CONSUMER ADVANTAGE OF HEAVY CONSUMER DEMAND DEMAND

MATURITY STRATEGIESMATURITY STRATEGIES

PRODUCT – DIVERSIFY BRANDS AND ITEMS PRODUCT – DIVERSIFY BRANDS AND ITEMS MODELSMODELS

PRICE – PRICE TO MATCH OR BEST PRICE – PRICE TO MATCH OR BEST COMPETITIORSCOMPETITIORS

DISTRIBUTION – BUILD MORE INTENSIVE DISTRIBUTION – BUILD MORE INTENSIVE DISTRIBUTIONDISTRIBUTION

ADVERTISING –STRESS BRAND ADVERTISING –STRESS BRAND DIFFERENCES. DIFFERENCES.

SALES PROMOTION –INCREASE TO SALES PROMOTION –INCREASE TO ENCOURAGE BRAND SWITCHING ENCOURAGE BRAND SWITCHING

DECLINE STRATEGIESDECLINE STRATEGIES

PRODUCT – PHASE OUT WEAKPRODUCT – PHASE OUT WEAK PRICE – CUT PRICE PRICE – CUT PRICE DISTRIBUTION – GO SELECTIVE : DISTRIBUTION – GO SELECTIVE :

PHASE OUT UNPROFITABLE OUTLETS PHASE OUT UNPROFITABLE OUTLETS ADVERTISING –REDUCE TO LEVEL ADVERTISING –REDUCE TO LEVEL

NEEDED TO RETAIN HARD – CORE NEEDED TO RETAIN HARD – CORE LOYALSLOYALS

SALES PROMOTION –REDUCE TO SALES PROMOTION –REDUCE TO MINIMAL LEVEL MINIMAL LEVEL

PRICING PRICING

22ndnd P of marketing is Pricing P of marketing is Pricing A price is an expression of value. A price is an expression of value. Price = ValuePrice = Value Price = SomethingPrice = Something The firm must decide where to The firm must decide where to

position its product on quality and position its product on quality and price.price.

SIX STEP PROCEDURE/Pricing policies SIX STEP PROCEDURE/Pricing policies

1.1. SELECTING THE PRICING OBJECTIVE SELECTING THE PRICING OBJECTIVE

2.2. DETERMING DEMAND DETERMING DEMAND

3.3. ESTIMATING COSTS ESTIMATING COSTS

4.4. ANALYZING COMPETITORS COSTS, ANALYZING COMPETITORS COSTS, PRICE AND OFFERSPRICE AND OFFERS

5.5. SELECTING A PRICING METHODSELECTING A PRICING METHOD

6.6. SELECTING THE FINAL PRICESELECTING THE FINAL PRICE

1. Selecting the pricing objectives1. Selecting the pricing objectives

J.W. Kelvini J.W. Kelvini - Short term pricing objectivesShort term pricing objectives- Long term pricing objectivesLong term pricing objectives

2. Determining demand2. Determining demand

Price Elasticity of DemandPrice Elasticity of Demand Income Elasticity of DemandIncome Elasticity of Demand Price sensitivePrice sensitive

3. Estimating Costs3. Estimating Costs

Fixed costFixed costVariable CostVariable Cost

4. Analyzing Competitors – costs , 4. Analyzing Competitors – costs , prices and offers.prices and offers.

5. Selecting the Pricing 5. Selecting the Pricing Methods/Approaches/StrategiesMethods/Approaches/Strategies

Cost OrientedCost Oriented Demand – Oriented /Perceived value Demand – Oriented /Perceived value

pricingpricing Competition oriented/Going Rate Competition oriented/Going Rate

pricingpricing Value pricingValue pricing

Auction type pricingAuction type pricing- English Auctions (Ascending bids)English Auctions (Ascending bids)- Dutch Auctions ( Descending bids)Dutch Auctions ( Descending bids)- Sealed bid actionsSealed bid actions Group pricingGroup pricing Skimming pricingSkimming pricing Penetration pricingPenetration pricing

Premium pricingPremium pricing Psychological PricingPsychological Pricing Discount pricing – 4Discount pricing – 4- Cash discountCash discount- Quantity discountQuantity discount- Seasonal discountsSeasonal discounts- Allowance Allowance

Geographical pricingGeographical pricing Discriminatory pricing –Discriminatory pricing –- Customer segment pricingCustomer segment pricing- Product form pricingProduct form pricing- Place /location pricingPlace /location pricing- Time pricingTime pricing- Image pricingImage pricing Product Bundling pricing/ Mixed bundling Product Bundling pricing/ Mixed bundling

6. Selecting the Final Price6. Selecting the Final Price

Psychological pricingPsychological pricing The influence of other marketing mix The influence of other marketing mix

elements – AD , Brand .elements – AD , Brand . Company pricing policiesCompany pricing policies Impact of price on other parties. Impact of price on other parties.