MKTG 101 Week 8 by BrittanyGibbons

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									MKTG101 Marketing Fundamentals
Week 8 The Nature of Products and Services 2

MKTG101 2005 Week 8


• Consumer products are those usually purchased for personal and/or family use/consumption. • Business products are those procured (purchased) to assist business operations and/or to re-sell or convert into other products.
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• Convenience consumer goods are those that are relatively inexpensive, frequently purchased and require very little „involvement‟. Eg chewing gum • Shopping consumer goods are those in which consumers spend some effort in planning and buying the product. Eg appliances, bicycles, DVD players & sound systems.
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• Specialty consumer goods are those that have such unique characteristics that consumers spend considerable effort in researching them prior to purchase. Eg exclusive brand of watch. • Unsought consumer goods are those that were not in the „evoked set‟ (current purchase intention) of the consumer but were purchased because of some external immediate stimuli. Eg flat tyre on car; candy at the check-out counter in service station.
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Business products include:
• • • • • • • CapEx – infrastructure and installations Accessory equipment RM‟s – Raw Materials Component parts Process materials R&M materials – Repairs & Maintenance Business services – legal, financial etc..
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Branding concepts
• Unique name, term design or symbol or a „mix‟ of these – eg “oh what a feeling” and the Toyota symbol. • When the brand is vocalised it becomes a brand name – Disneyworld • Trademark is the legal designation that is owned and protected giving the Org‟n exclusive rights.
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Branding concepts
• Trade name is usually the full legal name of the organisation eg Cadbury Schweppes • When you assess the marketing and financial value of a brand to an Org we are referring to the BRAND‟S EQUITY. • Brand equity has 4 components: 1 Brand Awareness; 2 Brand Loyalty; 3 Brand Associations & 4 Perceived Brand Quality
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Branding policies
• Naming each product in the range individually => Individual Labelling eg Unilever‟s Omo Persil, Comfort etc… • Using a consistent brand/company identifier in the name => Family Branding like Kellogg‟s Frosties, Kellogg‟s Rice Bubbles, Kellogg‟s Corn Flakes
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Branding policies
• Sometimes manufacturers will improve a product line or introduce a new product into that line and so will Brand Extend. Eg oral hygiene products like Macleans toothpaste • If an Org uses two or more brands on one product it is Co-Branding eg Telstra Visa Card
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Existing product management
• When an Org develops products that are closely related to its existing product line but are designed to meet slightly different consumer needs it is LINE EXTENDING. Eg Hyundai‟s Elantra line extended to include the up-market Elantra Elite; CocaCola‟s Vanilla and Cherry Coke; Redhead‟s matches extending to BBQ firestarters.
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Existing product management
• Products may be „modified‟ for 3 main reasons: • 1 upgrade or alter Quality • 2 improve or alter Functionality • 3 alter the products Aesthetic (sensory) Appeal

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Brand growth strategies
Brand Name - registered Product Category – what group it belongs to
Existing New


Line Extension

Brand Extension New Brands



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Brand repositioning
When a brand’s current positioning is not optimal (best for company), it must be repositioned. Toothpaste may be repositioned in a 2x2 matrix whose axes may describe Expensive v’s Inexpensive and Whiteness v’s Taste Usually involves (sometimes costly) relaunching of the brand (see also New product development) eg Napisan
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Key Packaging and labelling functions
Containment: ensuring the product reaches the point of consumption in its entirety (complete) Protection: ensuring the product reaches the point of consumption in suitable condition
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Packaging and labelling cont.d
Storage: ensuring the product can be stored
and retrieved when needed Usage facilitation: minimising the difficulties associated with consuming the product eg usage instructions Promotion: packaging provides a large, long term, point of purchase and point of consumption communication vehicle.
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Product mix concepts
Product line: a group of closely related products Product range: the total width and depth of the product mix Width: the number of product lines offered by an Org’n for consumers to choose

Depth: the number of variants/variations offered to consumers within each product line MKTG101 2005 Week 8 16

Product “Width” examples
• Chocolates by say Cadbury may have a width that covers:
– – – – – Bars Boxed sets Blocks Ice cream and Beverages
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Product “Depth” examples
• Cadbury Ice cream range may include „brand names‟ like:
– – – – – Picnic Vanilla Bucket Crunchie nuggets Fingers Dream
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Increasing range
Positive reasons to increase range:
– More closely reflects the segmentation of the market – Closes gaps for competitor entry/meets competition – Increases profile with customers and consumers
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Increasing range cont.d
Negative consequences of increased range:
– Greater costs – Greater complexity – Reduced concentration

Usual corporate Objective is the optimisation of the ‘range’ being offered.

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Product Life Cycle
Sales and Profits ($)
Must act here to arrest future decline


Profits Time Decline

Product Development Stage




Losses/ Investments ($)
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Sales and Profits Over the Product’s Life From Inception to Demise

Development phase
Sales: none (limited test market sales) Customers: none Costs: very high Profit: accumulating loss Competitors: none that are obvious Strategic objective: develop marketing mix for successful product launch
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Introduction phase
Sales: slow growth from zero base Customers: innovators Costs: unit costs very high, promotion costs high, competitive costs low Profit: reducing loss Competitors: none that are obvious Strategic objective: market awareness, trial purchase by ‘innovators’
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Growth phase
Sales: rapid acceleration Customers: increasingly mass market Costs: unit costs drop rapidly, promotion costs high, competitive costs increasing Profit: reducing loss/breakeven Competitors: begin entering the market Strategic objective: increased market penetration
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Maturity phase
Sales: sales growth peaks Customers: no new customers enter the market. Penetration peaks Costs: unit costs reach minimum, promotion costs high, competitive costs peak Profit: likely to peak Competitors: reach maximum Strategic objective: protect market share and volume from competitors
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Decline stage
Sales: declining Customers: customers leave the market. Loyal customers lag Costs: unit costs increase but can be managed, promotion costs low, competitive costs continue to diminish Profit: declines in absolute terms Competitors: reducing Strategic objective: controlled exit
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MKTG101 2005 Week 8


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What is a New Product
• New to the world
– Inventions


Product Improvements
– Existing products that have been made better

• New Category Entries
– Take the firm into a category which is new to it

• Repositioning
– Products that are retargeted for new use, application or to a new user.

• Additions to Product Lines
– Line extensions in the firm’s current markets

• Variations of the above
– Not usually accepted as new products

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New Product Development process
Marketing Strategy Concept Development and Testing Business Analysis Product Development

Idea Screening

Test Marketing

Idea generation
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Idea generation
Objective: the generation of as many ideas as possible
– Brainstorming – Competitor monitoring – Patent monitoring – Forecasting techniques (Delphi)
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Idea screening
Objective: remove any ideas that are not consistent with the organization’s mission or contrary to social policy
– Tools considered in screening include:
• Potential Customer base • Org’ns Competitive competency

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Concept development and testing
Objective: to identify the ideas with the greatest potential customer acceptance
– ‘Concept’ testing – see if it is feasible – Focus groups give leads on ‘concepts’ – Projective techniques used to evaluate potential
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Marketing strategy
Objective: Develop draft marketing mixes for each of the remaining new product ideas
Develop strategies for:
– – – – Product Price Place Promotion
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Business analysis
Objectives: financial forecasts for each of the proposed marketing mixes
– Demand forecasts – Cost forecasts – Decision criteria
• • • • Payback Breakeven ROI NPV and IRR
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Product development
Objective: draft product formulation, packaging design, and complete marketing mix
– pilot plant – sample raw materials – mock-up pack and test – mock-up communication mix and test – research price – research distribution
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Test market
Objective: to develop a forecast of the likely outcome of launching the product into the market
1. real or simulated 2. identify the test market
• • • isolated measurable generalisable

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Test market cont.d
3. Produce product
4. Produce communications tools and book media 5. Negotiate distribution 6. Launch into test market
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Objective: a successful new product
1. Install full scale plant 2. Negotiate raw materials 3. Negotiate full scale distribution and promotion 4. Launch
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