Dr. Stephanie J. Morgan Lecture 4: Marketing mix 1: Product Marketing Principles and Practice Download Available at BizFace

Objectives Discuss issues associated with the product life-cycle concept. Complete a new product plan. Explain factors that make a successful brand, and the difference between brand extensions and stretching. Apply the growth-share matrix and explain its use.

Discuss issues associated with the product life-cycle concept.

Complete a new product plan.

Explain factors that make a successful brand, and the difference between brand extensions and stretching.

Apply the growth-share matrix and explain its use.

14 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Marketing Mix and Customer Needs Customer needs Key customer requirements Competitive advantage Marketing mix Product Price Promotion Place Marketing mix

Product

Price

Promotion

Place

Marketing Mix and the Essay Question – some hints Define classical marketing mix of the 4P’s (product, price, promotion, place). Consider what is meant by a ‘service company’. See Jobber chapter 20 for initial discussion. Chapter 15 of Kotler also concentrates on this. Can/should the 3 additional “P’s” (People, Physical Evidence, and Processes) be included in the classical mix? What are the implications? Might there be other factors (e.g. increased internal marketing/promotions) within the classical mix that need to be considered?

Define classical marketing mix of the 4P’s (product, price, promotion, place).

Consider what is meant by a ‘service company’.

See Jobber chapter 20 for initial discussion.

Chapter 15 of Kotler also concentrates on this.

Can/should the 3 additional “P’s” (People, Physical Evidence, and Processes) be included in the classical mix? What are the implications?

Might there be other factors (e.g. increased internal marketing/promotions) within the classical mix that need to be considered?

What is a product or service? Anything which is capable of satisfying customer needs. Physical products provide a service, product offerings include services, usual to differentiate by extent of tangible goods delivered. Can classify by durability and tangibility. Consumer goods include: convenience, shopping, specialty, unsought categories. Industrial goods include: materials and parts (raw or manufactured), capital items, supplies and business services categories.

Anything which is capable of satisfying customer needs.

Physical products provide a service, product offerings include services, usual to differentiate by extent of tangible goods delivered.

Can classify by durability and tangibility.

Consumer goods include: convenience, shopping, specialty, unsought categories.

Industrial goods include: materials and parts (raw or manufactured), capital items, supplies and business services categories.

Product/Service Levels Core Benefit Basic Expected Augmented Potential

Product Assortment (Mix) Product Assortment Width Product Line Length Detergents: Dreft Tide Dash Bold Toothpaste: Gleem Crest Bar Soap: Zest Safeguard Coast Oil of Olay

3 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Creating a brand Quality and design Packaging Core product Brand potential Brand potential Brand potential Delivery Brand name and images Service Guarantees

4 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Building successful brands Quality Being first Repositioning Positioning Brand building Well-blended communications Internal marketing Long-term perspective

5 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill The anatomy of brand positioning Brand domain Brand positioning Brand values Brand reflection Brand personality Brand assets Brand heritage

8 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Global branding decisions Brand communications Name Execution Packaging Global branding Delivery Service Guarantees Brand additions Brand form Quality Formulation Design Variants

Name

Execution

Packaging

Delivery

Service

Guarantees

Quality

Formulation

Design

Variants

Brand Extension Use brand name goodwill (higher company value+brand equity) release in same market (broadly). Lower risk and lower cost than alternatives Distributors and consumers may perceive less risk. May fail if do not offer functional, psychological or price advantage. Cannibalization can also occur (new brand gains at expense of established). Danger of underfunding, overconfidence, focus on minor modifications. Bad publicity for one affects reputation of others.

Use brand name goodwill (higher company value+brand equity) release in same market (broadly).

Lower risk and lower cost than alternatives

Distributors and consumers may perceive less risk.

May fail if do not offer functional, psychological or price advantage.

Cannibalization can also occur (new brand gains at expense of established).

Danger of underfunding, overconfidence, focus on minor modifications.

Bad publicity for one affects reputation of others.

Brand Stretching Established brand name used in unrelated markets. Can keep cost and effort down compared to new brand – if fits values inherent in core. New brand area can damage reputation of core brand. Too much stretching reduces credibility.

Established brand name used in unrelated markets.

Can keep cost and effort down compared to new brand – if fits values inherent in core.

New brand area can damage reputation of core brand.

Too much stretching reduces credibility.

Product Life Cycle (Whole Industry Sales) TIME SALES Introduction Growth Maturity Decline D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill 10 Low growth, losses. Objective: build sales by expanding market, create product/brand awareness Foster sales and profit. Objective: build sales and market share, penetrate by build brand preference Sales peak and stabilise. Objective: maintain share with product improvements Reduced demand, new tech or changing tastes. Objective: minimize losses, move on.

Evaluating the Life-Cycle Concept As usual, an aid to thinking, need to understand limitations to avoid being misled. Fads (e.g. cabbage patch dolls) and Classics (e.g. mars bars) defy lifecycle. Life-cycle may be driven by the marketing activity – need to check assumptions (e.g. extra advertising may reinvigorate sales at ‘end’ of life). Duration and timescales are unpredictable – limits forecasting. Can be overly prescriptive – may be situations where a different strategy is needed than recommended here (e.g. build in decline instead of withdraw, if market still viable and all competitors have already withdrawn!)

As usual, an aid to thinking, need to understand limitations to avoid being misled.

Fads (e.g. cabbage patch dolls) and Classics (e.g. mars bars) defy lifecycle.

Life-cycle may be driven by the marketing activity – need to check assumptions (e.g. extra advertising may reinvigorate sales at ‘end’ of life).

Duration and timescales are unpredictable – limits forecasting.

Can be overly prescriptive – may be situations where a different strategy is needed than recommended here (e.g. build in decline instead of withdraw, if market still viable and all competitors have already withdrawn!)

11 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill The Boston Consulting Group Growth-Share Matrix 7% 15% 0% Market Growth Rate Market Share 10 0 Stars Problem children Cash cows Dogs

12 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Strategic objectives and the Boston Box Build sales and/or market share Invest to maintain/increase leadership position Repel competitive challenges Stars Build selectively Focus on defendable niche where dominance can be achieved Harvest or divest the rest Problem children Harvest or Divest or Focus on defendable niche Dogs Hold sales and/or market share Defend position Use excess cash to support stars, selected problem children and new product development Cash cows

Build sales and/or market share

Invest to maintain/increase leadership position

Repel competitive challenges

Build selectively

Focus on defendable niche where dominance can be achieved

Harvest or divest the rest

Problem children

Harvest or

Divest or

Focus on defendable niche

Dogs

Hold sales and/or market share

Defend position

Use excess cash to support stars, selected problem children and new product development

Cash cows

13 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Strategic objectives and the Boston Box Build selectively Focus on defendable niche where dominance can be achieved Harvest or divest the rest Problem children Harvest or Divest or Focus on defendable niche Dogs Build sales and/or market share Invest to maintain/increase leadership position Repel competitive challenges Stars Hold sales and/or market share Defend position Use excess cash to support stars, selected problem children and new product development Cash cows

Build selectively

Focus on defendable niche where dominance can be achieved

Harvest or divest the rest

Harvest or

Divest or

Focus on defendable niche

Dogs

Build sales and/or market share

Invest to maintain/increase leadership position

Repel competitive challenges

Stars

Hold sales and/or market share

Defend position

Use excess cash to support stars, selected problem children and new product development

Cash cows

14 Strategic objectives and the Boston Box D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Hold sales and/or market share Defend position Use excess cash to support stars, selected problem children and new product development Cash cows Build selectively Focus on defendable niche where dominance can be achieved Harvest or divest the rest Problem children Harvest or Divest or Focus on defendable niche Dogs Build sales and/or market share Invest to maintain/increase leadership position Repel competitive challenges Stars

Hold sales and/or market share

Defend position

Use excess cash to support stars, selected problem children and new product development

Build selectively

Focus on defendable niche where dominance can be achieved

Harvest or divest the rest

Problem children

Harvest or

Divest or

Focus on defendable niche

Dogs

Build sales and/or market share

Invest to maintain/increase leadership position

Repel competitive challenges

Stars

15 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Strategic objectives and the Boston Box Build sales and/or market share Invest to maintain/increase leadership position Repel competitive challenges Stars Build selectively Focus on defendable niche where dominance can be achieved Harvest or divest the rest Problem children Harvest or Divest or Focus on defendable niche Dogs Hold sales and/or market share Defend position Use excess cash to support stars, selected problem children and new product development Cash cows

Build sales and/or market share

Invest to maintain/increase leadership position

Repel competitive challenges

Stars

Build selectively

Focus on defendable niche where dominance can be achieved

Harvest or divest the rest

Problem children

Harvest or

Divest or

Focus on defendable niche

Hold sales and/or market share

Defend position

Use excess cash to support stars, selected problem children and new product development

Cash cows

16 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill The case of an unbalanced portfolio High Low Low High Market growth rate Market share

Disadvantages of the Boston Matrix Based on cash flow, are other criterion, including ROI that may be more useful. Depends on market share – can lead to over-focus. Ignores interdependence between products – can lead to costly mistakes, need a systems approach. You could treat market growth rate as proxy for market attractiveness (depending on other information), and market share as an indicator of competitive strength. As with all tools, depends on how you use it and your understanding of its limitations.

Based on cash flow, are other criterion, including ROI that may be more useful.

Depends on market share – can lead to over-focus.

Ignores interdependence between products – can lead to costly mistakes, need a systems approach.

You could treat market growth rate as proxy for market attractiveness (depending on other information), and market share as an indicator of competitive strength. As with all tools, depends on how you use it and your understanding of its limitations.

17 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill The General Electric Market Attractiveness – Competitive Position Model High Low Low High Competitive strength Medium Medium 1 2 5 4 3 Market attractiveness

18 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Implications of portfolio planning Different products Different roles Different reward systems Different types of managers

19 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Product growth strategies: the Ansoff Matrix Market penetration or expansion Product development Diversification Market development Existing New Existing New Products Markets

20 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Market penetration Strategic options for increasing sales volume Increase sales volume Entry into new markets Market development Product development Market expansion

21 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Increase sales volume Market penetration Buy competitors Discourage competitive entry Strategic options for increasing sales volume Entry into new markets Market development Product development Market expansion Win competitors’ customers

22 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Market expansion Market penetration Strategic options for increasing sales volume Increase sales volume Entry into new markets Market development Product development Increase usage rate Convert non-users

23 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Increase sales volume Product development Market penetration Product line extension Innovation Strategic options for increasing sales volume Entry into new markets Market development Market expansion Product replacement

24 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Increase sales volume Market development Market penetration Promote new uses Strategic options for increasing sales volume Entry into new markets Product development Market expansion Enter new segments

25 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Strategic options for increasing sales volume Increase sales volume Entry into new markets Market penetration Market development Product development Market expansion New products

2 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill What is a new product? New-to-the-world products New product lines New Products Product replacements Additions to existing lines

3 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Creating and nurturing an innovative culture Reward success heavily Back words with resources Resist automatic nay-saying Give time Off or ‘turn a blind eye’ to people working on pet projects Tolerate failure Be accessible Innovative culture Clear messages about the role and importance of innovation

Organising effectively for new product development Project teams Product and brand managers New product departments and committees Importance of teamwork Role of marketing directors Encourage teamwork Improve the provision of marketing information to R&D Take R&D people out of lab Develop informal relationships with R&D Learn about technology Formalise the product development process Role of Senior management Make organisational design changes Show a personal interest in new product development Provide strategic direction. Encourage teamwork Increase resources. Understand marketing's importance 4 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill

Role of marketing directors

Encourage teamwork

Improve the provision of marketing information to R&D

Take R&D people out of lab

Develop informal relationships with R&D

Learn about technology

Formalise the product development process

Role of Senior management

Make organisational design changes

Show a personal interest in new product development

Provide strategic direction. Encourage teamwork

Increase resources. Understand marketing's importance

5 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill The eight-stage new product development process Screening Concept testing Business analysis Product development Market testing Commercialization New product strategy Idea generation New products

6 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Diffusion of an innovation 34% 34% 16% 13.5% 2.5% Innovators Early adopters Early majority Late majority Laggards Percentage adopting Time

7 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Product replacement strategies No change Modified Technology change No change Re-mix Marketing Product Inconspicuous technological substitution Relaunch Conspicuous technological substitution No change Facelift Re-merchandising Intangible positioning Tangible positioning Neo-innovation New/market segment

Ethical Issues Concerning Products Safety: products and services need to undergo extensive safety testing before launch. Planned obsolescence, particularly if extreme, is unethical. Deceptive packaging: oversized, slack, Misleading labelling

Safety: products and services need to undergo extensive safety testing before launch.

Planned obsolescence, particularly if extreme, is unethical.

Deceptive packaging: oversized, slack,

Misleading labelling

Objectives? Discuss issues associated with the product life-cycle concept. Complete a new product plan. Explain factors that make a successful brand, and the difference between brand extensions and stretching. Apply the growth-share matrix and explain its use.

Discuss issues associated with the product life-cycle concept.

Complete a new product plan.

Explain factors that make a successful brand, and the difference between brand extensions and stretching.

Apply the growth-share matrix and explain its use.

Case Study Philips Aqua Wave – proposal for launch, Jobber p.322-316. Discuss team assignment p.325, concentrate on commercialisation and marketing communications aspects. Note your ideas. What is your opinion of the benefits claimed by Philips, can they be improved? What are the key factors for success of a new product such as this?

Philips Aqua Wave – proposal for launch, Jobber p.322-316.

Discuss team assignment p.325, concentrate on commercialisation and marketing communications aspects. Note your ideas.

What is your opinion of the benefits claimed by Philips, can they be improved?

What are the key factors for success of a new product such as this?

Philips Case Study Points to be considered when planning a new product: Launch timing, and how fits with other organizational activities. Segmentation, targeting and positioning. Competitor analysis including future moves. Pricing and promotion issues and need to balance. Distribution – best method and how to entice. Allocating launch budget and best use of funds.

Points to be considered when planning a new product:

Launch timing, and how fits with other organizational activities.

Segmentation, targeting and positioning.

Competitor analysis including future moves.

Pricing and promotion issues and need to balance.

Distribution – best method and how to entice.

Allocating launch budget and best use of funds.

Differences between Features and Benefits Use the ‘so what’ question to develop benefits. Benefits should be aimed at the target market(s). E.g. ‘heat up quick’ as ‘high speed when you are in a hurry’ for busy working wives. Consider also how these features compare to competition, ‘easy to use’ may seem an obvious benefit (although may need to explain this saves time and hassle) but is it really easier to use than the alternatives? If it is, can make more of the benefits of this – that can set a ‘frame’ in the buyers mind that they need such simplicity, and the competition will then lose out.

Use the ‘so what’ question to develop benefits.

Benefits should be aimed at the target market(s).

E.g. ‘heat up quick’ as ‘high speed when you are in a hurry’ for busy working wives.

Consider also how these features compare to competition, ‘easy to use’ may seem an obvious benefit (although may need to explain this saves time and hassle) but is it really easier to use than the alternatives? If it is, can make more of the benefits of this – that can set a ‘frame’ in the buyers mind that they need such simplicity, and the competition will then lose out.

Potential Issues Product delays, distribution problems, advertising not coordinated or too early. Linking all activities together. Competitive moves not always clear. Multiple launches or new product damaging existing products etc., can create problems. Everything related to the launch discussed earlier (points to be considered) can become an issue if not managed clearly.

Product delays, distribution problems, advertising not coordinated or too early.

Linking all activities together.

Competitive moves not always clear.

Multiple launches or new product damaging existing products etc., can create problems.

Everything related to the launch discussed earlier (points to be considered) can become an issue if not managed clearly.