Chapter 11, Class Notes

Contents For Chapter 11 Notes


We are now focusing on the major elements of the marketing mix, the ingredients of the marketing mix.

First element...The Product!!

Product Planning refers to the systematic decision making related to all aspects of the development and management of a firms products including branding and packaging.

Each product includes a bundle of attributes capable of exchange and use.

Product definition:
A product is a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers and is received in exchange for money or some other unit of value.

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Differences between Goods and Services

Goods are tangible. You can see them, feel them, touch them etc.

Services are intangible. The result of human or mechanical efforts to people or objects.

Major distinguishing characteristics of Services:

Sales of goods and services are frequently connected, i.e. a product will usually incorporate a tangible component (good) and an intangible component.
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Levels of Product

There are 3 levels of products EXAMPLE SONY CAMCORDER: Marketers must first identify the core consumer needs (develop core product), then design the actual product and find ways to augment it in order to create the bundle of benefits that will best satisfy the customer.
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Classifying Products

Products can be classified depending on who the final purchaser is.
Components of the marketing mix will need to be changed depending on who the final purchaser is.

The same product can be purchased by both, for example a computer, for the home or the office.

The following are classifications for consumer products:

The following are classifications for Business to Business products:

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Elements of a Product Mix

If an organization is marketing more than one product it has a product mix. Depth measures the # of products that are offered within each product line. Satisfies several consumer segments for the same product, maximizes shelf space, discourages competitors, covers a range of prices and sustains dealer support. High cost in inventory etc.

Width measures the # of product lines a company offers. Enables a firm to diversify products, appeals to different consumer needs and encourages one stop shopping.

Proctor & Gamble example in class.
Why so many different products?
Different needs of different target markets for the same product. Channels of distribution economies etc.
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Product Positioning and Product Repositioning

This refers to a place a product offering occupies in consumers' minds on important attributes, relative to competing offerings.

How new and current items in the product mix are perceived, in the minds of the consumer, therefore reemphasizing the importance of perception!!

New Product--need to communicate benefits
Established Products--need to reinforce benefits

Ideal Characteristics

Need to introduce products that possess characteristics that the target market most desires, ideal. Product positioning is crucial.

Consumers desires refer to the attributes consumers would like the products to possess--IDEAL POINTS.
Whenever a group of consumers has a distinctive "ideal" for a product category they represent a potential target market segment.
A firm does well if its attributes (of the product) are perceived by consumers as being close to their ideal. The objective is to be "more ideal" than the competitors.

Each product must provide some unique combination of new features desired by the target market.

Instead of allowing the customer to position products independently, marketers try to influence and shape consumers concepts and perceptions.

Marketers can use perception maps.
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Existing Products

Handout...Here Comes the Sun to Confound Health-Savvy Lotion Makers

     Old Position             |         New Position
Traditional sun tan lotion positioned as aiding in getting a very glamorous deep tan etc.
Dermatologist cancer etc.
Lifestyle needs change, move to more health conscious (previously discussed)
Need to reposition sun tan lotion as a healthy way to be exposed to the sun.
Target market has shifted from the left quartile to the right quartile as far as needs are concerned.
Sun tan marketers need to do same as far as changing consumers perception for the product.

Handout...BMW Banks on Affordability...

                         Very Safe
                              |         Lexus/infiniti
                              |                   Mercedes
                              |                      BMW
                         Very Unsafe
BMW, to reposition up to the left
Due to the exchange rate, Lexus moves to the right

Why did they repositition?
Competitors include Infiniti, Lexus, Mercedes Benz and Aurora

If you already have a brand in the market, must be sure to avoid cannibalization. Attributes and brand image should give a product distinct appeal.

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New Product Positioning

When developing a new product, a company should identify all the features that are offered by all its major competitors.

Second, identify important features/benefits used in making purchase decisions.

Determine the overall ranking of features by importance and relate the importance of each feature to its "uniqueness".

For example you wouldn't buy a spreadsheet program that if it didn't perform basic math, so basic math is very important.
However since every spreadsheet has that its an "important fundamental feature", instead of an "important differentiating feature".

The flip side would be a spreadsheet that displays all numbers in binary (0-1) instead of "normal" numbers (0-9). This is unique but not important.

The evaluation becomes a 2 x 2 matrix with uniqueness on the X-axis and importance on the Y-axis.

X                        Important to TM (Stockbroker)           X
Math functions                |                        Import Data
                              |                           X
                                                       Binary Data
If the feature is in the upper right hand corner then you have probably got a winning feature.

This is known as feature positioning, as opposed to product positioning. One can then see what type of customer needs the important (and perhaps unique) features.

If your spreadsheet accepts continuous data in real-time (such as stock market data) while Lotus 1-2-3 doesn't, you'd position your spreadsheet as a "real-time spreadsheet with all calculations needed by Wall Street."

Its a claim that tells something unique about your product, who it's for, and by implication, that Lotus 1-2-3 can't do it.

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Developing and Managing Products

To compete effectively and achieve goals of an organization, the organization must be able to adjust its product mix.

Need to understand competition and customer attitudes and preferences.

Handout...At Timex, They're...

1982, Timex turned down the opportunity to market "Swatches". Timex was resting on its laurels, simple low cost watches. Digital revolutionized industry (technological change), Timex stuck with analog.


Now consumer owns 5 watches up from 1.5 30 years ago (emphasizing fashion need). Timex has acquired Guess and Monet Jewellers (distribution outlets) in an effort respond to change.
Product mix:
Dressy watches to Walt Disney Character watches, Indigo. Now have 1,500 styles, 300 in 1970.
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Developing New Products

Need to develop new products. A new product can be:

For a new product to succeed it must have:

Developing new products is expensive and risky.
Failure not to introduce new products is also risky. IE Timex

Firms develop new products in two ways:

17,363 (8,077 food) new items hit supermarket and drug stores in 1993, according to marketing experts, a 9.3% increase over 1992.
Launching a new product name along with new product is very risky and expensive therefore 75% of new products were brand-extension brands in 1993, up from 68% in 1992 (continuous innovations)
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Why New Products Fail

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Seven phases to new product development:

  1. New Product Strategy Development

    Only a few ideas are good enough to reach commercialization. Ideas can be generated by chance, or by systematic approach. Need a purposeful, focused effort to identify new ways to serve a market. New opportunities appear from the changes in the environment.
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  2. Idea Generation

    Continuous systematic search for new product opportunities. Return to Contents
  3. Product Screening and Evaluation

    New product check list; list new product attributes considered most important and compare each with these attributes. Check list is standardized and allows ideas to be compared.
    --General characteristics, Marketing Characteristics and Production Characteristics.

    Ideas with the greatest potential are selected for further research.

    Do they match the organizations goals (DuPont and ICI have many patents that they have not exploited for this very reason.)

    Look at companies ability to produce and market the product.

    Need to look at the nature and wants of the buyers and possible environmental changes.

    Concept Testing
    Sample of potential buyers is presented with the product idea through a written or oral description to determine the attitudes and initial buying intentions.

    This is done before investing considerable sums of money and resources in Research and Development.

    Can better understand product attributes and the benefits customers feel are most important.

    Would you buy the product?
    Would you replace your current brand with the new product?
    Would this product meet real needs?
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  4. Business Analysis

    Analyze potential contribution to sales, costs and profits.

    Does the product fit into the current product mix?
    What kind of environmental and competitive changes can be anticipated?
    How will these changes effect sales etc.?
    Are the internal resources adequate?
    Cost and time line of new facilities etc.?
    Is financing available?
    Synergies with distribution channel etc.
    MIS to determine the market potential sales etc.
    Patentability should be determined, last 17 years, 14 years for a pharmaceutical product.
    Find out if it is technically feasible to produce the new product.
    If you can produce the new product at a low enough cost so as to be able to make a profit.
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  5. Product Development

    Develop a prototype, working model, lab test etc.

    Attributes that consumers have identified that they want must be communicated through the design of the product.

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  6. Test Marketing

    Can observe actual consumer behavior.
    Limited introduction in geographical areas chosen to represent intended market.
    Aim is to determine the reaction of probable buyers.
    It is the sample launch of the Marketing Mix.
    Determine to go ahead, modify product, modify marketing plan or drop the product.

    PROS are:

    CONS are:
    Alternatively can use a simulated test market. Free samples offered in the mall, taken home and interviewed over the telephone later.

    Handout...Miller's Momemtum....

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  7. Commercialization

    Corresponds to introduction stage of the Product Life Cycle.
    Plans for full-scale marketing and manufacturing must be refined and settled.
    Need to analyze the results of the test market to determine any changes in the marketing mix.
    Need to make decisions regarding warranties etc (reduces consumers risk). Warranties can offer a competitive advantage.

    Spend alot of $s on advertising, personnel etc. Combined with capital expenditure makes commercialization very expensive.

    Handout...American Express To Try a Credit Card...

    All stages above are identified in this article except market testing.
Need to consider: Return to Contents

Buyers' Product Adoption Process

  1. Awareness
    Buyers become aware of the product
  2. Interest
    Buyers seek information and is receptive to learning about product
  3. Evaluation
    Buyers consider product benefits and determines whether to try it
  4. Trial
    Buyers examine, test or try the product to determine usefulness relative to needs
  5. Adoption
    Buyers purchase the product and can be expected to use it when the need for the general type of product arises.
Rate of adoption depends on consumer traits as well as the product and the firm's marketing efforts.
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Diffusion Process

The manner in which different members of the target market often accept and purchase a product (go through the adoption process)
  1. Innovators
    Techno-savvies first customers to buy a product, 2.5 % of consumers
  2. Early Adopters
    Tend to be opinion leaders. Adopt new products but use discretion, 13.5%
  3. Early Majority
    34% of consumers, first part of the mass market to buy the product
  4. Late Majority
    Less cosmopolitan and responsive to change, 34%
  5. Laggards
    Price conscious, suspicious of change, 16%, do not adopt until the product has reached maturity.
Implications to marketers, company must promote product to create widespread awareness of existence and benefits.
Product and physical distribution must be linked to patterns of adoption and repeat purchase.
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