Marketing Strategy: Key Concepts 5

Product scope: goods, services, experiences, events, persons, places, properties, organizations, information and ideas.

Product Levels:

  1. Core Benefits

  2. Basic Product: to satisfy core benefit sought

  3. Expected Product: meet buyers expectations for product

    Focus of competition in LDC

  4. Augmented Product: exceed expectations
    Focus of competition in developed countries

  5. Potential Product: future possibilities

Competitive pressures push competition at the augmented level, features at the augmented level become expected features, as the market adopts new features, further hightening competition. This leaves room to develop stripped down products for price conscious market.

Delight Customers by exceeding expectations.

Product Heirarchy:

  1. Need Family

  2. Product Family

  3. Product Class

  4. Product Line

  5. Product Type

  6. Brand

  7. Item

Product Classifications: Different types of goods require different marketing mixes to be successful.
  1. Durable Goods

  2. Non Durable Goods

  3. Services

Innovation of batteries?

Consumer Goods Classification:

Industrial Goods Classification: 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.

Product Line Decisions:
Cannibalization and consumer movement issues
Internal (company) versus external (market) needs/decisions

Coke Hunts for Talent ro Re-Establish Its Marketing Might

Brand

What is Branding? Why Brand?

Definition:
A name, term, design, symbol or any other feature that identifies one seller's good or service as distinct from anothers.

Provides benefits to buyers and sellers

TO BUYER:

TO SELLER:

Branding versus Tactical Promotions?

Brand Equity (Customer Equity)
Operating profits - expected profits for generic $: 10 Most Valuable


Share of Mind, Attitudes = ImagePower. Landor Associates
Brand awareness = considered set

Brand awareness:

  1. within relevant market(s)

  2. with influencers

  3. with entire market

The Best Global Brands:Handout
Interbrand: Best Global Brand

Brand Name Decisions:

Selecting a Brand Name

Criteria for choosing a name, some issues to consider: The Brand Pyramid:
  1. Features: tangible characteristics of product

  2. Finctional Benefits: benefits to consumer for brand features

  3. Emotional Rewards: psychological or emotional benefits received by using brand's product?

  4. Values: what are the values of the typical loyal customer for this brand?

  5. Personality: what words would you use to describe brand if it were a person?

NameLab
Domain Names: Highjacking issues? (Highjacked Domain and New Domain): Help! I've Lost My Domain Name!

Discussion Topic: Investigate the above issues to determine who has rights to the use of a domain name.


Online brand investment versus offline brand investment
Pampers

Discussion Topic: Discuss the challenges of branding on the web, how are Pampers developing a branding strategy?

Arthur Andersen changes name to Andersen
Accenture now a clear winner without Andersen name
Is there a window of confusion?
Andersen, Accenture

Discussion Topic: Discuss the evolution of the value of the brand: Andersen

Brand Licensing

Discussion Topic: Discuss the role the corporate logo plays in branding. Cite logos and their inherent value. Discuss logos which have changed, and why?

Packaging

Consists of a products physical container, label and/or insert.
Approximately 10% of product selling cost.
Development of a container and a graphic design for a product. Can effect purchase decisions IE pump dispenser on a tube of toothpaste.

Packaging Functions include:

Packaging decision serve the channel members and the final consumer. CD Packing Issues

AOL Packaging

Labeling

Product Positioning and Product Repositioning

Definition:
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.

Existing Products

Sun Tan Lotion Example:
                              ^
                              |
                              |
     Old Position             |         New Position
                              |
                              |
                              |
Glamour--------------------------------------------------Health
                              |
                              |
                              |
                              |
                              |
                              |
                              |
Traditional sun tan lotion positioned as aiding in getting a very glamorous deep tan etc.
Dermatologist reports...skin cancer etc.
Lifestyle needs change, move to more health conscious society
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.
How?

BMW positions on affordability

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

Why did they repositition?
Safety
Affordability
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.

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": what are the unique selling points (USPs).

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
                              |
                              |              
                              |
                              |
                              |
----------------------------------------------------------Unique
                              |
                              |
                              |
                              |
                              |
                              |
                              |                           X
                                                       Binary Data
If the feature is in the upper right hand corner then you have probably got a winning feature (USP).

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 Excel 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 Excel can't do it.

Product Life Cycle

Popularized by Theodore Levitt, 1965
PLC can be applied to: Four Stages to the Product Life Cycle:
  1. Introduction

  2. Growth

  3. Maturity

  4. Decline

The following material refers to the PLC as far as the product category is concerned unless otherwise stated.

Introduction

Failure rate for new products can range from 60%-90%, depending on the industry. A product does not have to be an entirely new product, can be a new model (car), a new product for the company, or repositioning a product to a new market.

Marketing Mix(MM) considerations

Need to build channels of distribution/selective distribution
Dealers offered promotional assistance to support the product...PUSH strategy.
Develop primary demand/pioneering information, communications should stress the benefits of the product to the consumer, as opposed to the brand name of the particular product, since there will be little competition at this stage and you need to educate consumers of the product's benefits.
Price skimming...set a high price in order to recover developmental costs as soon as possible.

Price penetration...set a low price in order to avoid encouraging competitors to enter the market, also helps increase demand and therefore allows the company to take advantage of economies of scale.

Growth

Need to encourage strong brand loyalty, competitors are entering the market place. Profits begin to decline late in the growth stage.
May need to pursue further segmentation.

MM considerations

May need to perform some type of product modification to correct weak or omitted attributes in the product.

Need to build brand loyalty (selective demand), communications should stress the brand of the product, since consumers are more aware of the products benefits and there is more competition, must differentiate your offering from your competitors.

May begin to move toward intensive distribution-the product is more accepted, therefore intermediaries are more inclined to risk accepting the product.

Price dealing/cutting or meeting competition, especially if previously adopted a price skimming strategy.

Maturity

Sales curve peaks-severe competition, consumers are now experienced specialists.

MM Considerations

A product may be rejuvenated through a change in the packaging, new models or aesthetic changes.
Advertising focuses on differentiating a brand, sales promotion aimed at customer (PULL) and reseller (PUSH).
Move to more intense distribution
Price dealing/cutting or meeting competition
Provides company with a large, loyal group of stable customers. Generally cash cows that can support other products.
Strategies during maturity include: Weaker competition will have left the market place.

Decline

Sales fall off rapidly. Can be caused by new technology or a social trend.
Can justify continuing with the product as long as it contributes to profits or enhances the effectiveness of the product mix.
Need to decide to eliminate or reposition to extend its life.

MM Considerations

Some competition drop out
Need to time and execute properly the introduction, alteration and termination of a product.
Cannibalization strategies to introduce new products.

Need to manage product mix through their respective life-cycles. When to decide to introduce new (modified) products that compete with the current product offering.
With high-tech products, need to consider introducing new (and competing) products as the existing product is still in the growth stage of its life cycle.

Different types of Life Cycle Curves

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.

Timex Turns down the Swatch

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.

DID NOT KEEP UP WITH WATCHES EVOLUTION FROM A FUNCTIONAL OBJECT TO A FASHION ACCESSORY.

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.

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 above

Firms develop new products in three ways:

About 20K new products a year launched: about 75% are brand extensions.

Why New Products Fail

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 and by company culture (3M). Need a purposeful, focused effort to identify new ways to serve a market. New opportunities appear from the changes in the environment.

  2. Idea Generation
    Continuous systematic search for new product opportunities.
    • Marketing oriented sources--identify opportunities based on consumer needs, lab research is directed to satisfy that research. 1-800#s, research etc.

    • Laboratory oriented sources--identify opportunities based on pure research or applied research.

    • Intrafirm devises--brain storming, incentives and rewards for ideas. 3Ms Post it, from choir practice. Hewlett Parkards lab is open 24 hrs. day. Analyzing existing products, reading trade publications.

      Brainstorming for your group project. Ideas should not be criticized, no matter how off-beat they are.

  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 (Some companies 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.

    Conjoint Analysis to see feature tradeoffs.

    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?

  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.

  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.

  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:

    • Lessens the risk of product failure.

    • Reduces the risk of loss of credibility or undercutting a profitable product.

    • Can determine the weaknesses in the MM and make adjustments.

    • Can also vary parts of the MM during the test market.

    • Need to select the appropriate MM and check the validity.

    CONS are:
    • Test market is expensive.

    • Firm's competitors may interfere.

    • Competitors may copy the product and rush it out. IE Clorox detergent with bleach P&G. "In a live test you've tipped your hand, and believe me, the competition is going to come after you. Unless you have patented chemistry, they can rip you off and beat you to a national launch" -Director of Marketing at Gillette's Personnel division.
    Alternatively can use a simulated test market. Free samples offered in the mall, taken home and interviewed over the telephone later.
  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.

Need to consider:

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.

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.

Discussion topic: Discuss the differences in the new product development process for digital goods versus tangible goods, consider intellectual property issues, standards issues etc?

Relevant Knowledge@Wharton Articles

Corporate Sponsorships of Stadiums and Other Institutions Donít Always Pay Off
Switching names, effect of brand. Value to stadiums, value to customers?
How to Keep Others From Ripping Off Your Ideas
Poachers Are Out to Plunder Your Intellectual Property Can you Do Anything?

Intellectual Property: WIPO
Intellectual Property and the National Information Infrastructure

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