Download Product Strategy

Part 5
Marketing:
Developing
Relationships
McGraw-Hill/Irwin
Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
The Marketing Mix
The marketing mix is the part of the marketing strategy
that involves decisions regarding controllable variables
 After selecting a target market, marketers develop
and manage the dimensions of the marketing mix
to give their firm an advantage over competitors
 Successful companies offer at least one dimension
of the marketing mix that surpasses all competitors
 These companies must also maintain acceptable,
and if possible distinguishable, differences in the
other dimensions as well
12-2
Product Strategy
Product
Development
Process
 Thousands of new
products are
introduced annually,
few succeed
 It takes time to get a
new product to market
 Sometimes a product
or idea is shelved,
only to be returned to
later
12-3
Product Strategy
Idea Development
New ideas come internally from marketing research or employees and from
external sources such as ad agencies, consultants and customers
New Idea Screening
Screening involves management looking at the company’s resources and its ability
to produce and market the product; most ideas are rejected in this phase
Business Analysis
Analyze the product’s affects on sales, costs and profits
12-4
Product Strategy

FedEx founder Fred Smith
studied a mathematical
discipline called topology, which
inspired his vision for creating
the company

Realizing the potential
efficiencies of connecting all
points on a network through a
central hub, Smith used what he
learned to get FedEx off the
ground
12-5
12-6
Idea Development
 Nike has a separate division (Nike Sport Research
Lab)

Scientists, athletes, engineers, and designers work
together to develop technology of the future

Teams research ideas in biomechanics, perception,
athletic performance, and physiology to create unique
relevant and innovative products

Final products are tested in environmental chambers
with real athletes to ensure functionality and quality
before being introduced in the market
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Product Strategy
Product Development
The few products to reach this stage get prototypes and the development of a
marketing strategy
Test Marketing
A trial mini-launch of a product in limited areas that represent the potential
market
Commercialization
The full introduction of a complete marketing strategy and the launch of the
product for commercial success
12-7
Product Strategy
Products are classified as consumer or business products

Consumer products are products intended for
household or family use
Convenience Products – items bought frequently
with no planning, such as eggs, milk, bread and
newspapers
Shopping Products – purchased after consumer
has “shopped around”
Specialty Products – require greater research and
shopping effort; consumers unwilling to accept a
substitute
12-8
Product Strategy
Business Products
• Used directly or indirectly in the operation or manufacturing
processes of businesses
 Raw materials – natural products from the earth
 Major equipment – large, expensive items used in production
 Accessory equipment – items not part of final product
 Component parts – finished items included in final product
 Processed materials – used in production, not a component
 Supplies – materials that make operations possible
 Industrial services – financial, legal, security and janitorial
12-9
Product Strategy
Product relationships are of key importance
Product Line
• A group of closely related products that are treated as a
unit because of similar marketing strategy, production or
end-use considerations
Product Mix
• All the products offered by an organization
12-10
Product Strategy
ColgatePalmolive’s
Product Mix and
Product Lines
Source: “Colgate World of Care,” Colgate-Palmolive Company,
www.colgate.com/app/Colgate/US/HomePage.cvsp (accessed April 11, 2012).
12-11
12-12
Product Life Cycle
The Life Cycle of a Product
 Like people,
products are
born, grow,
mature and
eventually die
 With redesign or
new uses,
products can be
reborn
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Product Strategy
As products pass through the four life cycle stages, they get new
advertising and pricing strategies for each stage
Introductory
Stage
Growth
Stage
Maturity
Stage
Marketers focus on The firm tries to
Severe
making consumers
strengthen its competition
aware of the product market position and heavy
and its benefits
by emphasizing
costs
benefits
Decline
Stage
Firms may eliminate
models, cut costs
and finally phase out
products
12-13
Product Strategy
Branding
• The process of naming and identifying products
 A brand is a name, term, symbol, design or
combination that identifies a product
 A brand name is the part that can be spoken and
consists of letters, words and numbers
 A brand mark is the part of the brand that is a
distinctive design, such as McDonald’s arches
12-14
Product Strategy
Trademark
• A brand registered with the U.S. Patent and Trademark
Office and is thus legally protected from use by any other
firm
 Protecting a brand name is
important in maintaining a brand
identity
 Xerox has become synonymous
with photocopying and Kleenex
with tissues
12-15
Product Strategy
12-16
Product Strategy
Manufacturer
Brands
Private Distributor
Brands
• Initiated and
owned by the
manufacturer to
identify products
from the point of
production to the
point of
purchase
• May cost less
than
manufacturer
brands, they are
owned and
controlled by a
wholesaler or
retailer
Generic Products
• Products with no
brand name that
often come in
simple packages
and carry only
their generic
name
12-17
Product Strategy
Two basic approaches to
branding multiple products
Each product in the
product mix has its
own brand name
Warner-Lambert sells
Dentyne, Chiclets, Listerine,
Halls, Rolaids and Trident –
each individually branded
Develop a family of
brands with each
carrying the same
name or a portion of
the name
Gillette, Sara Lee
and IBM use this
approach
12-18
Product Strategy
Packaging
• The external container that holds and
describes the product; influences consumers’
attitudes
• Performs several functions: protection,
economy, convenience and promotion
Labeling
• The presentation of important information on a
package; closely associated with packaging
• Contains information required by law such as
ingredients, nutrition facts, warnings,
instructions and manufacturer’s address
12-19
12-20
Packaging
Design thinking produces products that creatively
solve problems that touch several people
 For example, medication bottles have been problematic for a long
time…

Incidents of children taking medication because the bottle was easy
for them to open led to the child-proof feature of the cap design
 The elderly are also affected by insufficient designs in packaging

Generally they have multiple medications in their cabinets, and all
the bottles look the same and the dosage directions are difficult to
read

ClearRx was designed specifically for this problem:
♦
It has a larger flat front surface where the label can be easily
read and comes with colored bands so the patient can
differentiate between medications based on color
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Product Strategy
Quality
• The degree to which a good, service or idea meets the
demands and requirements of customers
 Level of quality is the amount of quality a product
possesses
 Consistency of quality depends on the product
maintaining the same level of quality over time
 Service quality is judged by consumers
 Quality is also associated with where the product is made
12-21
12-22
General Motors Recall
♦
Service quality is judged by consumers, not the service
providers
♦
It is quite common for perceptions of quality to fluctuate from
year to year
♦
General Motors recalled millions of vehicles due to quality
control issues

Problems included faulty ignition switches that prompted
GM to issue recall on Chevy Cobalt

These recalls are having a negative impact on
consumers’ perceptions of GM’s brand
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Product Strategy
 Google is one of the most
valuable brands worldwide
 Google also owns YouTube, the
most popular video sharing site
on the Web
 YouTube transformed an old
phone booth into a YouTube
Upload Booth at the Macworld
Expo
12-23
Pricing Strategy
o Almost anything of value can be assessed by a price
o Consumers vary in their response to price
o The product’s perceived value in the marketplace
added to the production costs help determine price
Calculating the Value of a Product
Source: Rafi Mohammed, “Use Price to Profit and Grow,” Forbes.com, March 25, 2010, www.forbes.com/ 2010/03/25/profit-gainvalue-mckinsey-sears-whirlpoolcmo-network-rafi-mohammed.html (accessed April 15, 2012).
12-24
Pricing Strategy
Price is a key element
in the marketing mix as
it related directly to
revenue and profits
Price is probably the
most flexible variable;
can be set or changed
in a few minutes
Pricing objectives
specify the role of price
in an organization’s
marketing mix and
strategy
Four common pricing
objectives: maximizing
profits, boosting market
share, maintaining the
status quo, and survival
12-25
Pricing Strategy
Pricing strategies provide guidelines for achieving the
pricing objectives
Pricing New Products
Price Skimming is charging
the highest possible price
buyers who want the
product will pay
Penetration price is a low
price designed to help a
product enter the market
and gain market share
rapidly
12-26
Pricing Strategy
Psychological Pricing encourages purchasing based
on emotional rather than rational responses to price
Even/Odd Pricing assumes people
will buy more of a product for
$9.99 than $10 because it seems
to be a bargain at the odd price
Symbolic/Prestige Pricing
assumes that high prices connote
high quality
Perfume and cosmetics prices are
set artificially high to give the
impression of superior quality
12-27
12-28
Reference Pricing and Price Discounting
Reference Pricing
• A Type of psychological pricing in which a lower-priced item
is compared to a more expensive brand in hopes that the
consumer will use the higher price as a comparison price
Discounts
• Temporary price reductions often employed to boost sales
o
o
o
Quantity discounts are given for purchasing in large
volumes
Seasonal discounts are those given for purchasing goods or
services out of season
Promotional discounts attempt to improve sales by
advertising price reductions on selected products;
increasing customer interest and profits
Distribution Strategy
Marketing Channel
A group of organizations that
moves products from their
producer to customers; also
called a channel of distribution
Makes products available to
customers when and where
they desire to purchase them
Middlemen, or intermediaries, are
organizations that bridge the gap
between a product’s manufacturer
and the ultimate consumer
Middlemen create time, place and
ownership utility
12-29
12-30
Retailers and Wholesalers
• Intermediaries who buy products from manufacturers
(or other intermediaries) and sell them to consumers
Retailers
for home and household use rather than for resale or
for use in producing other products

Move products from producers to a convenient
retail establishment (place utility)

Maintain hours of operation (time utility)

Assume the risk of inventories (ownership
utility)
Wholesaler
• Intermediaries who buy from producers or
from other wholesalers and sell to retailers
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
12-31
Major Wholesaling Functions
Distribution Strategy
12-32
Distribution Strategy
Marketing
Channels
for
Consumer
Products
12-33
Distribution Strategy
Distribution decisions are among the least flexible
marketing mix decisions
Commit resources and establish contractual
relationships that are difficult or impossible to change
Expanding into new markets could mean a complete
change in distribution
If a company does not manage its channel efficiently, a
competitor may evolve to create a more effective
distribution system
12-34
Distribution Strategy
In contrast to consumer goods, more than half of all
business products are sold through direct marketing
Business Products
Business customers like to
communicate directly with
producers to gain the
technical assistance and
assurances only the
producer can offer
Business products may be
distributed through channels
employing wholesaling
intermediaries such as
industrial distributors and /
or manufacturer’s agents
12-35
Distribution Strategy
A major distribution decision is how widely to distribute a
product – how many and what type of outlets
Intensive Distribution
• A product is made
available in as many
outlets as possible
• Used for frequently
purchased items
Selective Distribution
• Only a small number of
all available outlets are
used to expose products
• Used most often when
consumers buy only after
shopping and comparing
price, quality and style
12-36
Distribution Strategy
Exclusive Distribution
• The awarding by a
manufacturer to an
intermediary of the sole
right to sell a product in
a defined geographic
territory
• Includes high-quality
merchandise
Physical Distribution
• All the activities
necessary to move
products from producers
to customers – inventory
control, transportation,
warehousing and
materials handling
• Both goods and services
require physical
distribution
12-37
Distribution Strategy
Warehousing
• The design and operation of facilities to receive, store
and ship products
 Companies can own their own warehouse, lease a
private warehouse or rent space in a public warehouse
Materials Handling
• The physical handling and movement of products in
warehousing and transportation
 Handling processes vary significantly due to
product characteristics
12-38
Promotion Strategy
Promotion encourages consumers to accept products and
influences opinions and attitudes
Advertising, personal selling, publicity and sales
promotion are collectively known as the promotion mix
Integrated Marketing Communications
• Coordinating the promotion mix elements and
synchronizing promotion as a unified effort
 This approach results in delivery of the
desired message to consumers
12-39
Promotion Strategy
Advertising
• A paid form of non-personal communication transmitted
through a mass medium, such as television commercials
or magazine advertisements
Advertising Campaign
• Designing a series of advertisements and placing them
in various media to reach a particular target market
Several factors affect the campaign, including: product features, target
audience, marketing objectives and the choice of media used
12-40
Promotion Strategy
Your Ad
Here
12-41
Promotion Strategy
Personal Selling
• Direct, two-way communication with buyers and
potential buyers
o Most flexible promotional method but expensive
o Three categories of salesperson:
 Order takers – retail sales clerks
 Creative salespersons – automobiles sales
 Support salespersons – customer educators
12-42
Promotion Strategy
Personal selling is a six-step process
Prospecting:
identifying potential
buyers
Approaching:
referral or cold call
Presenting:
demonstrating the
product
Handling
Objections:
countering reasons
for purchase
Closing: asking for
a purchase
Following Up:
checking back after
purchase
12-43
Promotion Strategy
Publicity
Most companies
Message is
have a public
Non-personal
presented as a
relations
communication
news story and the
transmitted through
department trying to
company is not
gain favorable
mass media but not
seen as the
publicity and
paid for directly by
originator of the
the firm
minimize negative
message
publicity
12-44
Promotion Strategy
Advertising and publicity are both carried by mass media
but they differ is several ways
Purpose
Impact
• Advertising in
informative,
persuasive, or
both; publicity
is informative
• Advertising
calls for
action;
publicity rarely
does
Cost
• Companies
pay for
advertising;
publicity is
free
Duration
• Advertising is
repeated
often; publicity
appears once
12-45
Promotion Strategy
Buzz marketing is a variation of traditional advertising
where marketers attempt to create a trend
Companies seek out
trend setters in a
community and get
them to “talk up”
their product
The idea is that
accepted members
of a group have
more credibility than
any form of paid
communication
Works best as part
of an integrated
marketing plan
A related concept is viral marketing, which gets Internet
users to pass on ads and promotions to others
12-46
Promotion Strategy
Sales Promotion
• Direct inducements offering added value or some other
incentive for buyers to enter into an exchange
 Easier to measure and less expensive than advertising
 Includes: store displays, premiums, samples and
demonstrations, coupons, contests and sweepstakes,
refunds, and trade shows
 Used to enhance and supplement other forms of
promotion
12-47
Promotion Strategy
When developing a promotion mix, companies must
decide whether to push or pull the product
Push
Strategy
Pull
Strategy
An attempt to motivate
intermediaries to push the product
down to their customers
Uses promotion to create consumer
demand so consumers exert
pressure on marketing channel
members to make it available
A company can use either strategy or a combination
12-48
Promotion Strategy
Personal selling indicates a push strategy
The exclusive use of advertising is a pull strategy
12-49
Promotion Strategy
Typical objectives of promotion
Stimulate Demand
Stabilize Sales
• Often through ads
• Decreasing sales
and sales promotion,
call for sales
particularly important
promotions and ads
when using a pull
strategy
Inform, remind
and reinforce
customers
Promotional positioning uses promotion to create and
maintain an image of a product in buyers’ minds
12-50
Importance of Marketing Strategy
 Marketing creates value through the marketing mix
 The marketing mix must be carefully integrated into an
effective marketing strategy
 Companies with an effective marketing mix gain
competitive advantage
 Advantages often come when a company excels at
one or more elements of the marketing mix
 Companies must monitor demand and adapt the
marketing mix when needed
12-51