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CHAPTER 12: PRODUCT AND PROMOTION Delivering More Value PRODUCT DEFINITION: IT’S PROBABLY MORE THAN YOU THINK Car Wash ~ Cooking Lesson ~ Computer ~ Soap ~ Car Product – anything a company offers to satisfy customer needs and wants… including not only physical goods, but also services and ideas. Brand ~ Image ~ Packaging ~ Reputation ~ Guarantee GOODS V. SERVICES: A MIXED BAG Intangibility Most services embody these qualities: Inseparability Variability Perishability PRODUCT LAYERS: PEELING THE ONION Core Benefits Communications Image Entertainment Actual Product Ease of use Lightness Ring Tone Augmented Products Warranty Insurance Users Guide PRODUCT CLASSIFICATION: IT’S A BIRD, IT’S A PLANE…. Consumer Products • Convenience Products Toothpaste, milk • Shopping Products Computer, refrigerator • Specialty Products • Installations Rolex watch Production Robots • Accessory • Unsought Products Home warranty Copiers• Equipment Maintenance, Repair, and Operating Products Brooms, nails Business • Raw Materials Products Cotton, oil • Component Parts & Processed Payroll servicesMaterials Batteries • Business Services PRODUCT DIFFERENTIATION AND PLANNING A Meaningful Difference: 1. Product Quality 2. Features & Benefits 3. Product Lines & Product Mixes 4. Branding 5. Packaging PRODUCT QUALITY Quality Level – how well a product performs its core functions. Product Consistency – how reliably a product delivers its promised level of quality. Product Category Quality Indicators Internet Search Engine: Fast, relevant, far-reaching results Stylish Blue Jeans: High-profile designer, high price, celebrity customers TV Editing Equipment: Reliability, flexibility, and customer services Roller Coasters: Thrill factor, design and setting Chain Saws: Effectiveness, safety, and reliability FEATURES AND BENEFITS Product Features – specific characteristics of a product. Customer Benefit – the advantage that a customer gains from specific product features. Product Subway Sandwiches Product Feature Customer Benefit Lower Fat Looser pants Different Colors A new-looking you 46-inch screen The party’s at your house Hybrid Car Better gas mileage More cash for other needs Triple Latte Caffeine, Caffeine… More time to, uh, study Contact Lenses High-definition TV PRODUCT LINE AND PRODUCT MIX Product Line – products that are closely related, either in terms of how they work, or the customers they serve. Product Mix – the total number of product lines by a single firm. Cannibalization – a producer offers a new product that takes sales away from its existing product. BRANDING Brand - a product’s identity that sets it apart from other players in the same category. Brand Equity – the extra money that consumers will spend to buy that brand. Brand Name – a catchy, memorable name is a powerful part of strong brand. IBM, Coca Cola COBRANDING Cobranding - established brands from different companies join forces to market the same product. Examples: • Ford markets the Eddie Bauer Explorer • Frito-Lay markets KC Masterpiece BBQ chips • Betty Crocker markets brownies with Hershey’s syrup <> NATIONAL BRANDS VS. STORE BRANDS National Brands/ Manufacturer Brands – Brands owned and marketed by the producer. Store Brands/ Private Label Brands – Brands produced and marketed by the retailer. PACKAGING Protect the Product Provide Information Facilitate Storage Suggest Product Uses Promote the Brand Attract Buyer Attention PRODUCT LIABILITY AN ISSUE? Toilet brush: “Do not use for personal hygiene.” Scooter: “This product moves when used.” Bathroom Heater: “This product is not to be used in bathrooms.” Cardboard car sunshield: “Do not drive with sunshield in place.” Thermometer: “Once used rectally, the thermometer should not be used orally.” Baby stroller cautions: “Remove child before folding” Electric blender: “Never remove food or other items from the blades while the product is operating.” Hand-held massager: “Not for use while sleeping or unconscious.” NEW PRODUCT DEVELOPMENT Brand new ideas that radically change how people live Records > Tape > CD’s > Downloads Characterized by changes to existing products New operating system for your PC Slight modification of an existing product New packaging, additional sizes PRODUCT DIFFUSION RATES Observability How visible is the product to other potential consumers? Trialability How easily can potential consumers sample the new product? Complexity Can potential consumers easily understand what your product is and how it works? Compatibility How consistent is your product with the existing way of doing things? Relative Advantage How much better are the benefits of your new product compared to existing products? PRODUCT LIFE CYCLE AND MARKETING STRATEGIES Phase Examples Sales/Profits Marketing Strategies Low sales, low profits Build awareness, trial, and distribution Introduction 3D TV, fuel cell technology Growth Hybrid cars, video cell phones, Increasing sales and profits Reinforce brand positioning, often through heavy advertising Airlines, DVD players Flat sales and declining profits Target competitors, new product features, competitive advertising, promotion, and price cuts Pagers, videocassettes Declining sales and profits Reduce spending and consider terminating the product Maturity Decline PROMOTION IN CHAOS: DANGER OR OPPORTUNITY? • Technology has empowered consumers to choose when they interact with media • Internet users spent an average of nearly 33 hours per week surfing the web • Network television watching is declining • Consumers watching TV are zapping ads with TiVo • Rising consumer power and the breakneck pace of technology have created a growing need and stunning opportunity AN INTERNATIONAL PERSPECTIVE DeBeers tried running ads in Japan using a proven western strategy But a Japanese woman would shed tears and feign anger that her husband would spend so much money. The revised DeBeers campaign featured a man and wife in their tiny apartment Receiving a diamond, the wife chides her extravagant husband “Oh, you stupid!” Taking a big idea to a foreign market requires careful research THE PROMOTIONAL MIX: COMMUNICATING THE BIG IDEA • Advertising These tools can help communicate the Big Idea to your target market • Sales Promotion • Direct Marketing • Personal Selling • Emerging Tools EMERGING PROMOTIONAL TOOLS: THE LEADING EDGE Product Placement Advergaming Minimovies Buzz Marketing Sponsorships A MINI CAMPAIGN WITH MAXIMUM PUNCH • BMW’s promotional budget for the Mini was 10% of the typical BMW budget • The team developed a quirky campaign with the message: Let’s Motor! • Ads appeared in Playboy, Rolling Stones and on billboards • A 40-page booklet inserted in U.S. Magazines • The car played a feature role in the movie Italian Job • Brand awareness rose from 2% to 60% • Mini sales exceeded expectations by 50% • In 2009 Mini launched an official public field trial of the environmentally friendly Mini E TRADITIONAL PROMOTIONAL TOOLS: A MARKETING MAINSTAY • Advertising • Sales Promotion • Public Relations • Personal Selling TRADITIONAL PROMOTIONAL TOOLS: ADVERTISING • Television • Broadcast • Cable • Newspapers • Direct Mail • Radio Which media effectively reaches your target market? • • • • Yellow Pages Magazines Outdoor Internet TRADITIONAL PROMOTIONAL TOOLS: CONSUMER PROMOTION • Premiums • Promotional Products • Samples • Coupons • Rebates • Displays designed to stimulate immediate sales TRADITIONAL PROMOTIONAL TOOLS: TRADE PROMOTION • • • • • • Special Deals Allowances Trade Shows Contests Sweepstakes Special Events Designed to simulate wholesalers and retailers to push specific products. IF YOU’RE NOT BLOGGING, YOU’RE SLOGGING Great ideas and scandals spread quickly. Blogs offer great opportunity for savvy firms, here are some tips: Surf through the blogosphere everyday. Consider launching a company blog. Consider advertising on blogs Consider using the blogosphere to generate word-of-mouth. Draw up commensurate blogging guidelines for your employees. TRADITIONAL PROMOTIONAL TOOLS: PUBLIC RELATIONS • • • • The media looks for newsworthy stories Smart firms push potential news of their company The advantage of PR is that it is usually credible The disadvantage is that marketers don’t control media perceptions 33 TRADITIONAL PROMOTIONAL TOOLS: PERSONAL SELLING Prospect and Qualify • Today selling means building relationships • Personal selling is best for: • High-ticket items • Complex products • High volume customers Prepare Present Handle Objections Close Sale Follow-up CHAPTER 11: MARKETING Building Profitable Connections with Your Customers MARKETING IS MORE THAN ADVERTISING Marketing – the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. PRODUCTS PROVIDE UTILITY IN A NUMBER OF WAYS Think UPS or FedEx Think Smoothie King Satisfies wants by converting Form products into a Utility finished form Time Utility The ability of goods Satisfies wants by providing goods and services at a convenient place and services to satisfy wants. Place Utility Think ATM’s Ownership Utility Think hassle free purchasing Satisfies wants by providing goods and services at a convenient time Satisfies wants by smoothly transferring ownership of goods and services from seller to buyer THE SCOPE OF MARKETING: IT’S EVERYWHERE People Marketing Place Marketing Event Marketing Idea Marketing THE EVOLUTION OF MARKETING: FROM THE PRODUCT TO THE CUSTOMER What is Customer Relationship Management? The on-going process of acquiring, maintaining, and growing profitable customer relationships by delivering unmatched value. Requires collecting, managing, and applying the right data at the right time for the right person (and every repeat customer is the “right person”!) THE CUSTOMER: FRONT AND CENTER Customer Relationship Management (CRM) Limited Relationships Full Partnerships Perception is key Value Relationship between the cost and the benefit of your product Customer Satisfaction Delivering perceived value above and beyond customer expectations. Customer Loyalty The payoff from delivering value and generating satisfaction. They come back! Customer Relationship Management Customer acquisition/retention tool Sales and marketing support Data collected at all contact points Stored in data warehouse Data analysis and data mining Ultimate objective is lock-in Vested interest not to change Joe’s home page Customer Relationship Management Did you know ???? It cost 6x more to sell to a new customer than to an existing one… A typical dissatisfied customer will tell 8 to 10 people about his/her experience… Annual Customer Retention of 90% means that a business will lose half of their customers every 5 years… A company can boost it’s profits 85% by increasing it’s customer retention by just 5%… 70% of complaining customers will do business with a company again if it quickly takes care of the service “snafu”... THE MARKETING MIX Product Strategy Price Strategy Promotion Strategy Place Strategy Product Price Promotion Place And now – a fifth P Service MARKETING STRATEGY Marketing Mix assists in answering …. • Where are you going and how will you get there? • Who is your target audience and how will you reach them? Competitive Economic Social / Cultural Political / Legal Technological MARKET SEGMENTATION Selecting a target market begins with dividing your market into segments. Marketers may select multiple segments to target. CONSUMER MARKETS VS BUSINESS MARKETS Consumer Markets Products for personal consumption. A Well Chosen Target Market: Size Profitability Accessibility Limited Competition How will the buyer use the product? Business Markets Products used directly or indirectly to produce other products. Different approaches to select target markets. THE GLOBAL MARKETING MIX Do you need to change your marketing mix for every country? Most consumer products require a new marketing mix for each global market. MARKET SEGMENTATION CONSUMER BUSINESS Market segmentation based on Market segmentation based on the the characteristics concentration of of customers. customers. how customers use the product. For For example, example, schools the “auto or For example, sensors. corridor” hospitals Senior citizen living facilities Demographic • Geographic Pickups in southern US Geographic Porshe, Sports Illustrated Psychographic Behavioral Miller Lite • Customer-based • Product-use based CUSTOMER BEHAVIOR: DECISIONS, DECISIONS, DECISIONS CONSUMER DECISION MAKING PROCESS Need Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behavior INFLUENCE IN DECISION MAKING Cultural: • Values, attitudes, customs, social class Social: • Family, friends & reference groups Personal: • Demographics, personality attitudes, Psychological: • Motivation, perceptions, learning BUSINESS BUYER BEHAVIOR Rationale Criteria Specific Purchase Criteria Objective Standards Input from Multiple Internal Sources Formal Process Frequently Seek Customized Goods REQUEST FOR PROPOSAL (RFP) An invitation for suppliers, through a bidding process, to submit a proposal on a specific commodity or service. One of the best methods for leveraging a company's negotiating ability and purchasing power with suppliers. Brings structure to the procurement decision and allows the risks and benefits to be identified clearly upfront. Is lengthier than others, so it is used only where its many advantages outweigh any disadvantages and delays caused. Dictates the structure and format of the supplier's response. The creativity and innovation that suppliers build into their proposals are used to judge supplier proposals MARKETING RESEARCH: SO WHAT DO THEY REALLY THINK? Marketing Research – the process of gathering, Monitor and predict customer interpreting and applying information to uncover behavior opportunities and challenges for your business. Evaluate and improve marketing mix Better marketing decisions More value for consumers More profits for business CONDUCTING MARKET RESEARCH 1. 2. 3. 4. 5. 6. 7. 8. Define the problem Access available information Gather additional information Review internal records; interview employees Collect outside data Organize and interpret data Make a decision and take action Assess the results of the action DEFINE THE PROBLEM List the possible causes Eliminate any that can not be measured Beware of symptoms Your company has missed its revenue targets Symptom – sales declined Possible causes: Have your customers changed? Have their tastes changed? Have their buying habits changed? Have you changed your product? Are there new competitors? GATHERING INFORMATION Assess what you already have available If you need more… Stay as close to home as possible Sales records Complaints Receipts Credit records Ask your employees MARKETING RESEARCH DATA Secondary Data: Existing Primary Data: New Data • Lower Cost • More Expensive • May not be Specific • Customized • • Frequently Outdated • Fresh, New • Available to Competitors • Proprietary Already published material Trade associations Google???? Direct mail Questionnaires Telephone or street surveys Focus Groups Test marketing ORGANIZING AND INTERPRETING DATA Prioritize the data with the most important on top What strategies are suggested? How can they be accomplished? How are they different from what I’m doing? What current activities should be increased? What current activities should be decreased or dropped? MAKING DECISIONS AND TAKING ACTION Prioritize each possible strategy from the standpoint of: Immediate goal to be achieved Cost to implement Time to accomplish Measurements Select those with the greatest impact Develop tactics to implement ASSESS THE RESULTS Analyze your progress measures Adjust if necessary At the conclusion.. Did you achieve your goal ? Should the decision be renewed or expanded ? A MAJOR MARKETING SHIFT: SOCIAL RESPONSIBILITY Marketers have responded to social demands: Setting higher standards for environmentalism Abolishment of sweatshops Involvement in the community Many companies have begun to employ green marketing GO GREEN Target consumers who buy based on their convictions A MAJOR MARKETING SHIFT: TECHNOLOGY Technology has revolutionized marketing Power has shifted from producers to consumers Customers have 24/7 access to information Marketers have an abundance of promotional opportunities Data can be used to develop one-to-one relationships with customers Companies can mass customize products for customers Marketing To Your Foundation Simulation Customers Product Questions: What do the customers want? What are the characteristics of the product that are important to customers? What is the most important product characteristic • In the low tech segment? • In the high tech segment? What is “perceived age” of a product? How is reliability measured? Pricing Questions: What do the customers want? What is the price range for low / high tech products? How price sensitive are the customers? What are the competitors charging? Can I lower my price and still earn a ‘fair return’ on my investment? Promotional mix You will invest money in a “promotion” budget and create “awareness”. It relates to your advertising efforts. The awareness you create is specific to a single product. You will invest money in a “sales” budget and create “access” to your products. Accessibility applies to the segment, not the product Sales Budget is spent on distribution, order entry, customer service, etc. Sales Forecast Assess how the total market will perform Assess your performance and market share What is the overall economic climate ? Will customers make decisions on the same basis they have in the past ? How will your competitors perform Will there be new competitors ? Will they introduce new products ? Will some competitors leave the market ?