Getting the product and service plan right

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The product combination is a critical issues this presentation covers some of the key points to be considered and comes from the 1stoutsource business forum where more can be downloaded.

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Getting the product and service plan right

  1. 1. Slide: 1 The Marketing Mix: Product
  2. 2. Slide: 2 Dr. Stephanie J. Morgan Marketing mix 1: Product Marketing Principles and Practices
  3. 3. Slide: 3 Objectives By the end of the required reading and lecture you should be able to:  Define products, asses ways to evaluate, 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.
  4. 4. Slide: 4 14D 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
  5. 5. Slide: 5 Defining a product Product is a physical good, service, idea, person, or place that is capable of offering tangible and intangible attributes that individuals or organisations regard as so necessary, worthwhile or satisfying that they are prepared to exchange money, patronage or some other unit of value to acquire it. (Brassington & Pettit, 2006)
  6. 6. Slide: 6 So 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.
  7. 7. Slide: 7 Product/Service Levels Core Benefit Basic Expected Augmented Potential
  8. 8. Slide: 8 Understanding the Product Range  Product mix – total sum of all products and variants offered (e.g. all products sold by Cadbury-Schweppes)  Product line – group of closely related products)(e.g. the Cadbury chocolate bars.  Product item – individual products within lines (e.g. Flake)
  9. 9. Slide: 9 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
  10. 10. Slide: 10 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’ for curlers 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.
  11. 11. Slide: 11 Branding Branding seeks to create and communicate a three- dimensional character for a product that is not easily copied or damaged by competitors’ efforts. Think of some brands you know well, why are they so memorable?
  12. 12. Slide: 12 Brand Defined A brand consists of any name, design, style, words, or symbols, singly or in combination, that distinguish one product from another in the eyes of the customer.
  13. 13. Slide: 13 3D 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
  14. 14. Slide: 14 4D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Building successful brands Quality Well-blended communications Being first Internal marketing Repositioning Positioning Long-term perspective Brand building
  15. 15. Slide: 15 5D 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
  16. 16. Slide: 16 Table 7.1 Brand Preferences Which brands are most loved? Most hated? What impact does the lack of colour and logo have? GOOGLE NOKIA COCA-COLA SUNNY D MACDONALD’S MANCHESTER UNITED
  17. 17. Slide: 17 Brand positioning: A brand’s position in the market-place can be analysed using six elements:  Brand domain: the brand’s target market, i.e. where it competes in the marketplace.  Brand heritage: the background to the brand and its culture. How it has achieved success (and failure) over its life.  Brand values: the core values and characteristics of the brand.  Brand assets: what makes the brand distinctive from other competing brands such as symbols, features, images and relationships?  Brand personality: the character of the brand described in terms of other entities such as people, animals or objects.  Brand reflection: how the brand relates to self-identity; how the customer perceives him/herself as a result of buying/using the brand.
  18. 18. Slide: 18 Figure 7.5 The Brand Name Spectrum Descriptive Associative Freestanding Bitter Lemon Dairy Milk Chocolate Shredded Wheat Walkman Natrel Bold Sensodyne Kodak Esso Pantene Mars Bar
  19. 19. Slide: 19 Benefits of Branding for the Consumer  Easier product identification  Communicates features and benefits  Helps product evaluation  Establishes product’s position  Reduces risk  Creates interest
  20. 20. Slide: 20 Benefits of Branding for the Manufacturer  Helps create loyalty  Defends against competition  Creates differential advantage  Allows premium pricing  Helps targeting/ positioning  Increases power over retailer
  21. 21. Slide: 21 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.
  22. 22. Slide: 22 Mars Utilizes Brand Extension When it’s hot and you want something sweet, sticky and firm, a MARS® ice cream should hit the spot. ® MARS is a registered trademark of Masterfoods. Source: © Masterfoods 2006 http://www.mars.co.uk
  23. 23. Slide: 23 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.
  24. 24. Slide: 24 Figure 7.6 Aspects of Product Quality Performance Durability Corporate name and reputation Design and style Reliability and maintenance Quality
  25. 25. Slide: 25 Packaging Issues  Labelling – Warnings – Instructions – Regulated information – Size – Contact information  Design – Aesthetic appeal – Ergonomic properties – Functionality – Reliability – Life span
  26. 26. Slide: 26 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.
  27. 27. Slide: 27 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!)
  28. 28. Slide: 28 11D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill The Boston Consulting Group Growth-Share Matrix Stars Problem children Cash cows Dogs 7% 15% 0% Market Growth Rate Market Share10 0
  29. 29. Slide: 29 12D 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
  30. 30. Slide: 30 13D 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
  31. 31. Slide: 31 14 Strategic objectives and the Boston Box  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 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill
  32. 32. Slide: 32 15D 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
  33. 33. Slide: 33 16D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill The case of an unbalanced portfolio High Low LowHigh Marketgrowthrate Market share
  34. 34. Slide: 34 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.
  35. 35. Slide: 35 19D 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
  36. 36. Slide: 36 20D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Increase sales volume Entry into new markets Market development Product development Market expansion Market penetration Strategic options for increasing sales volume (Win from competitors, buy competitors, discourage entry) (convert non-users, increase usage) (Extension, innovation, replace) (Promote new uses, enter new segments (New products or services)
  37. 37. Slide: 37 2D 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
  38. 38. Slide: 38 3D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Creating and nurturing an innovative culture Reward success heavily Clear messages about the role and importance of innovation 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
  39. 39. Slide: 39 5D 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
  40. 40. Slide: 40 6D 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 Percentageadopting Time
  41. 41. Slide: 41 7D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Product replacement strategies Inconspicuous technological substitution Relaunch Conspicuous technological substitution No change Facelift Re-merchandising Intangible positioning Tangible positioning Neo-innovation No change Modified Technology change No change Re-mix New/market segment Marketing Product
  42. 42. Slide: 42 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, brochures or signage  Unqualified staff (esp. professional services)
  43. 43. Slide: 43 Lecture Objectives?  Define product, 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.

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