1

SUMMARYMARKETING

REAL PEOPLE, REAL DECISIONS

206 CHAPTER 5 BUSINESS-TO-BUSINESS MARKETING

Sash uses three metrics that are applied to evaluate any capi-tal investment: return on capital, internal rate of return andcash payback. In addition, the company uses a set of market-ing metrics to test the success of the strategy. These include:

• Delivery to customer request: Is the delivery in full and ontime? The firm’s target is 95% delivery in full and on time.

Marketing MetricsHow Sash Measures Success

Despite these and other measures, web security for B2B marketers remains a problem.The threat to intranet and extranet usage goes beyond competitive espionage. The increas-ing sophistication of hackers and internet criminals who create viruses, worms and othermeans for disrupting individual computers as well as entire company systems means that allorganisations and consumers are vulnerable to attacks and need to remain vigilant.

• Market share of the window market.

• Market growth in the US in terms of revenue and unitssupplied.

M05_SOLO8803_01_SE_C05.QXD 3/3/09 2:41 PM Page 206

206CHAPTER 5BUSINESS-TO-BUSINESS MARKETING

Sash uses three metrics that are applied to evaluate any capi-tal investment: return on capital, internal rate of return andcash payback. In addition, the company uses a set of market-ing metrics to test the success of the strategy. These include:

•Delivery to customer request: Is the delivery in full and ontime? The firm’s target is 95% delivery in full and on time.

Marketing MetricsHow Sash Measures Success

Despite these and other measures, web security for B2B marketers remains a problem.The threat to intranet and extranet usage goes beyond competitive espionage. The increas-ing sophistication of hackers and internet criminals who create viruses, worms and othermeans for disrupting individual computers as well as entire company systems means that allorganisations and consumers are vulnerable to attacks and need to remain vigilant.

•Market share of the window market.

•Market growth in the US in terms of revenue and unitssupplied.

M05_SOLO8803_01_SE_C05.QXD 3/3/09 2:41 PM Page 206

2

The layers of the product

Classifying Products

Products are classified to clarify the differences in how consumers and business customers feel about products and how they purchase them. It helps to develop new products and a marketing mix that satisfies customers’ needs.

Products are either consumer products or business-to-business products.

Consumer products can be classified based on how long the product lasts:

• Durable goods: consumer products that provide benefits over a period of months, years or decades. They are more likely to be pur-chased under conditions of high involvement. There is a large emphasis on the importance of the product’s supporting features.

• Non-durable goods: are consumed in the short-term. They are more likely to be purcha s ed under cond i t i on s o f l ow involvement. Often decisions are based on passed experience.

Consumer products can be classified based on where & how consumers buy the product:

• Convenience product: a non-durable good/service that consumers purchase frequently with a minimum of comparison and effort. Consumers consider the product to be handy and don’t focus on the brand. They generally know all they need/want to know about the product and devote little effort to purchases. Most are purchases are the result of habitual consumer decision making. These products have to be easily obtainable.

Types of convenience products:- Staples: basic or necessary items that are available almost everywhere, there is normally no perceived difference between brands.- Impulse products: something people often buy on the spur of the moment.- Emergency products: purchased when consumers are in urgent need of it.

• Shopping products: goods or services for which consumers will spend time and effort gathering information on price, product attributes and quality. The purchase is often a limited problem-solving decision.

Chapter 7Creating the ProductBy Mieke Goeijenbier

SU

MM

AR

Y M

ARK

ETIN

G N

ove

mb

er 1

0, 2

010

Augmented product

Actual Product

Core Product

Core product: consists of all the benefits the product will provide for customers or business customers.

Actual product: the physical good or the delivered service that supplies the desired benefit.

Augmented product: the actual product plus supporting features such as warranty, delivery, instal-lation etc.

3

Types of shopping products: - Attribute based: consumers spend time and

energy to find the best possible product selection.

- Price-based shopping products: consumers try to find the best price for a product for which the choices in the market at roughly the same.

Consumers use shopbots or intelligent agents to find sites selling particular products. These programs might also include reviews and competitors’ prices.

•Speciality product: products that have unique characteristics that are important to buyers at any price. Brand loyalty plays an important role with these products. It is often an extended problem-solving purchase that requires a lot of effort to choose.

• Unsought products: goods or services for which a consumer has little awareness or interest until a need arises.

Business-to-business products are classified based on how organizational customers use them. There are 5 different types of business-business products:

1. Equipment2. Maintenance, repair and operating MRO products3. Raw materials4. Processed materials5. Component parts

New product/innovation: anything that customers perceive as new and different.

Innovations are categorized in 3 categories based on their degree of novelty. These categories should be seen as a continuum that goes from a very small change to a totally new product.

1.Continuous innovation: a modification to an existing product. There is no new learning for customers. Copycats: products that with slight modification copy the design of an original product.

2. Dynamically continuous innovation: a pronounced modification to an existing product that requires a modest amount of learning or change in behavior to use it. Convergence: the coming together of 2 or more technologies to create new systems that provide greater benefit than the original technology.

3.Discontinuous innovation: innovation that creates major changes in the way we live. Consumers must engage in a great amount of learning because no similar product has ever been on the market.

Chapter 7Creating the ProductBy Mieke Goeijenbier

SU

MM

AR

Y M

ARK

ETIN

G N

ove

mb

er 1

0, 2

010

ContinuousInnovation

DynamicallyContinuousInnovation

DiscontinuousInnovation

4

New product development generally occurs in 7 phases:

1. Idea generation: identify product ideas that will provide important customer benefits compatible with company mission.

2. Product Concept Development and Screening: expand product ideas into more complete product concepts and estimate the potential commercial success of product concepts.

3. Marketing Strategy Development: develop preliminary plan for target markets, pricing, distribution and promotion.

4. Business Analysis: estimate potential for profit. What is the potential demand, what expenditures will be required, what is the cost of marketing the product?

5. Technical development: design the product and the manufacturing-and-production process. Prototypes are developed to test the product.

6. Test Marketing: develop evidence of potential success in the real market by testing out the complete marketing plan in a small geographic area that is similar to the larger market it hopes to enter.

7. Commercialisation: implement full-scale marketing plan - launching of a new product.

Chapter 7Creating the ProductBy Mieke Goeijenbier

SU

MM

AR

Y M

ARK

ETIN

G N

ove

mb

er 1

0, 2

010

Idea Generation

Marketing Strategy Development

Product Concept Development and Screening

Business Analysis

Technical Development

Test Marketing

Commercialisation

1234567

7 PHASES OFNEW PRODUCTDEVELOPMENT

5

Product adoption: the process by which a consumer or business customer begins to buy and use a new good, service or idea.

Diffusion: describes how the use of a product spreads throughout a population.

Tipping point: when the process reaches the moment of critical mass and change happens.

After developing a new product the real challenge to the firm is getting consumers to buy and use the product and to do so quickly to recover the costs of product development and launch.

Stages in consumer adaption of a new product:

1. Awareness: creating consumer awareness of the new product. Sometimes done by a media blitz: a massive advertising campaign.

2. Interest: consumers are open & looking for information about innovation and a pros-pective adopter begins to see how a new product might satisfy an existing or newly realised need.

3. Evaluation: a prospect weighs the costs and benefits of the new products. Evaluation is more important for risky innovations. There is little evaluation for impulse purchases.

4. Trial: the stage when potential buyers will actually experience or use the product for the first time.

5. Adoption: stage where a prospect actually buys the product.

6. Confirmation: stage where a customer weighs the expected versus actual benefits and costs.

Chapter 7Creating the ProductBy Mieke Goeijenbier

SU

MM

AR

Y M

ARK

ETIN

G N

ove

mb

er 1

0, 2

010

Awareness

Interest

Evaluation

Trial

Adoption

Confirmation

STAGES INCONSUMER

ADOPTION OFNEW PRODUCT

6

The diffusion of innovations depends on the willingness of consumers and businesses to try something new. Different types of adopters:

1. Innovators: extremely adventurous and willing to take risks. They are typically younger and better off financially.

2. Early adopters: compared to innovators they have a greater concern for social acceptance.

3. Early majority: middle-class consumers and are deliberate and cautious. They have slightly above average education and income levels. When they adopt, the product is no longer new but already established.

4. Late majority: older and more conservative with typically lower than average education and income. They avoid to try new products until it is no longer risky and has become a necessity.

5. Laggards: lower social class and bounds by tradition. By the time they adopt, there might already be innovations.

There are 5 characteristics of innovations that affect the rate of adoption:

1. Relative advantage: the degree to which a consumer perceives that a new product provides superior benefits.

2. Compatibility: the extent to which a new product is consistent with existing cultural values, customs and practices.

3. Complexity: the degree to which customers find a new product or its use difficult to understand.

4. Trialability: the ease of sampling a new product and its benefits.

5. Observability: how visible a new product and its benefits are to others who might adopt it.

Chapter 7Creating the ProductBy Mieke Goeijenbier

SU

MM

AR

Y M

ARK

ETIN

G N

ove

mb

er 1

0, 2

010

EarlyAdopters

Early Adopters

Early Majority

LateMajority

Laggards

Innovators

EarlyAdopters

7

To be effective, product-related objectives must be SMART - Specific, Measurable, Achievable, Relevant and Timebound.

In larger firms, strategic decisions often affect 2 or more products simultaneously. Product planning means developing product range and product mix strategies.

A product range: a firm’s total product of offering designed to satisfy a single need or desire of a target group of target customers.

- Full line strategy: large number of variations in product range.

- Limited line strategy: limited number of variations but can develop the image of a specialist.

- Upward line stretch: if a firm’s current product line includes middle-range and cheaper items and adds higher priced items with higher quality.

- Downward line stretch: adding cheaper items to current range.

- Two-way stretch: if current target market is too small.

- Filling-out strategy: adding sizes or styles not previously available.

Extension of product line has the risk of cannibalization: occurs when the sales of an existing brand are eaten up by the new item as the firm

A product mix: an entire range of products.- width of a product mix: the number of

different product lines produced by the firm.

The quality of a product is tied to how customers think a product will perform.

Kansei engineering: a philosophy that translates customers’ feelings into design elements.

Total quality management (TQM): a philosophy that calls for company-wide dedica-tion to the development, maintenance and con-tinuous improvement of all aspects of the company’s operations.

Chapter 8Managing the productBy Mieke Goeijenbier

SU

MM

AR

Y M

ARK

ETIN

G N

ove

mb

er 1

0, 2

010

8

Product life cycle: a tool to explain how product features change of the life of a product.

Chapter 8Managing the productBy Mieke Goeijenbier

SU

MM

AR

Y M

ARK

ETIN

G N

ove

mb

er 1

0, 2

010

IntroductionStage

GrowthStage

MaturityStage

DeclineStage

1 2 3 4

The Introduction Stage

★ A single company produces the product.

★ Get first-time buyers to try the product

★Normally no profit - high R&D & advertising costs

The Growth Stage

★ Sales increase rapidly, profits increase and peak

★ Encourage brand loyalty★ Product variations to increase

market share★ Heavy advertising to reduce

competition

The Maturity Stage

★ Usually the longest stage★ Sales peak and then begin to level

off or decline★ Competition grows intense★ Price reductions & reminder

advertising★ Variations to established products

The Decline Stage

★Decrease in product category sales

★ Decision on whether to keep product

THE PRODUCT LIFE CYCLE