Unit2 market ing mix product

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  • 1.
    • Unit 2
    • The Marketing Mix- Product
    • Subhajit Sanyal
    11 –
  • 2. What Is a Product?
    • A Product Defined
      • A good, a service, or an idea received in an exchange
      • It can be tangible (a good) or intangible (a service or an idea) or a combination of both.
      • It can include functional, social, and psychological utilities or benefits.
    11 –
  • 3. Formal, core and augmented products 11 –
    • The formal product
    • What customers think they are buying
    • Tangible and intangible attributes that are easy to articulate
    • i.e. a meeting room with seating capacity
    • The core product
      • What the customer is actually buying
      • Defined in terms of benefits for the customer
      • Is often described through abstract, intangible terms
      • i.e. a quiet, hassle-free, successful meeting
    • The augmented product
      • The totality of all benefits received or experienced by customers
      • Includes tangible and intangible elements, attributes that are easily to articulate as well as abstract ones
      • Can comprise everything from a comfortable bed over guest amenities to the sound of the sea
  • 4. Classifying Products
    • Consumer Products
      • Products purchased to satisfy personal and family needs
    • Business Products
      • Products bought to use in an organization’s operations, to resell, or to make other products (raw materials and components)
    11 –
  • 5. Consumer Products
    • Convenience Products
      • Relatively inexpensive, frequently purchased items for which buyers exert minimal purchasing effort
      • Characteristics
        • Marketed through many retail outlets
        • Relatively low per-unit gross margins
        • Little promotional effort at the retail level
        • Packaging is important marketing mix element
    11 –
  • 6. Consumer Products (cont’d)
    • Shopping Products
      • Items for which buyers are willing to expend considerable effort in planning and making purchases
      • Characteristics
        • Expected to last a long time; less frequently purchased
        • Do not have brand loyalty appeal
        • Require fewer retail outlets
        • Inventory turnover is lower
        • Gross margins are higher
        • More amenable to personal selling
        • Supported (servicing and promoting the product) by both the producer and channel members
    11 –
  • 7. Consumer Products (cont’d)
    • Specialty Products
      • Items with unique characteristics that buyers are willing to expend considerable effort to obtain
      • Characteristics
        • Are preselected by the consumer
        • Have no close substitutes or alternatives
        • Are available in a limited number of retail outlets
        • Purchased infrequently and represent a significant and expensive investment
        • Have high gross margins and low inventory turnover
    11 –
  • 8. Consumer Products (cont’d)
    • Unsought Products
      • Products purchased to solve a sudden problem, products of which the customers are unaware, and products that people do not necessarily think about buying
      • Characteristics
        • Speed and problem resolution of the utmost importance
        • Price and other features not considered
        • No consideration of substitutes or alternatives
        • Purchased infrequently
    11 –
  • 9. Business Products
    • Installations
      • Facilities and nonportable major equipment
        • Office buildings, factories and warehouses, production lines, very large machines
    • Accessory Equipment
      • Equipment used in production or office activities
        • File cabinets, small motors, calculators, and tools
    11 –
  • 10. Business Products (cont’d)
    • Raw Materials
      • Basic natural materials that become part of a physical product such as ores, water, lumber, grains, and eggs
    • Component Parts
      • Items that become part of the physical product
        • Finished items ready for assembly
        • Items needing little processing before assembly
        • Computer chips, engine blocks, girders, and paints
    11 –
  • 11. Business Products (cont’d)
    • Process Materials
      • Materials that are not readily identifiable when used directly in the production of other products such as screws, knobs, and handles
    • MRO Supplies
      • Maintenance, repair, and operating items that facilitate production and do not become part of the finished product such as cleaners, rubber bands, and staples
    11 –
  • 12. Business Products (cont’d)
    • Business Services
      • The intangible products that many organizations use in their operations such as cleaning, legal, consulting, and repair service.
    11 –
  • 13. 11 – Seller’s services Product quality Physical characteristics of goods Price Brand Design Packaging Product warranty Seller’s reputation Color
  • 14. T HE PRODUCT LIFE CYCLE
    • A product life cycle consists of the aggregate demand for all brands comprising a generic product category over time.
    • A PLC consists of four stages:
      • Introduction—most risky and expensive.
      • Growth—both sales and profits rise, often rapidly.
      • Maturity—sales increase at a decreasing rate and profits decline.
      • Decline—demand drops, often because of another product development.
    11 –
  • 15. LENGTH OF PRODUCT LIFE CYCLE
    • Ranges from a few weeks to decades.
    • Length of individual stages varies from one product category to the next.
    • Stages of any given life cycle usually last for different periods.
    11 –
  • 16. The Four Stages of the Product Life Cycle 11 – FIGURE 10.2
  • 17. Product Life Cycles and Marketing Strategies
    • Product Life Cycle
      • The progression of a product through four stages: introduction, growth, maturity, and decline.
      • MP3s
      • DVDs
      • CDs
      • Cassettes
      • LP records
    11 –
  • 18. The Product Life Cycle
    • Introduction
      • The initial stage of a product’s life cycle—its first appearance in the marketplace—when sales start at zero and profits are negative
      • Why new products fail
        • Lack of resources, knowledge, and marketing skills to successfully launch the product
        • High pricing to recoup research and development costs
    11 –
  • 19. The Product Life Cycle (cont’d)
    • Growth
      • The stage of a product’s life cycle when sales rise rapidly and profits reach a peak and then start to decline
        • More competitors enter the market
        • Product pricing is aggressive
        • Brand loyalty becomes important
        • Gaps in market coverage are filled
        • Promotion expenditures moderate
        • Production efficiencies lower costs
    11 –
  • 20. The Product Life Cycle (cont’d)
    • Maturity
      • The stage of a product’s life cycle when the sales curve peaks and starts to decline and profits continue to fall
        • Intense competition
        • Emphasis on improvements and differences in competitors’ products
        • Weaker competitors lose interest and exit the market
        • Advertising and dealer-oriented promotions predominate
        • Distribution sometimes expands to the global market
      • Strategic objectives for maturity stage
        • Generate cash flow
        • Maintain market share
        • Increase share of customer
    11 –
  • 21. 11 –
  • 22. Product Life Cycle (cont’d)
    • Decline
      • The stage of a product’s life cycle when sales fall rapidly
        • Pruning items from the product line
        • Cutting promotion expenditures
        • Eliminating marginal distributors
        • Planning to phase out the product
      • Strategic choices
        • Harvesting the product’s remaining value
        • Divesting the product when losses are sustained and a return to profitability is unlikely
    11 –
  • 23.
    • 1. Cutting Edge: Technology development that is ahead of the marketplace.
    • 2. State of the Art: Adapting cutting-edge techniques to market needs.
    • 3. Advanced: Increased competition and a less sophisticated customer base.
    • 4. Mainstream: Market is fully developed with standardized products.
    • 5. Mature: Competition shifts to customer service.
    • 6. Decline: Other technologies replace the dying technology.
    L IFE CYCLES IN BUSINESS MARKETS 11 – A technological life cycle (TLC) has six phases:
  • 24. THE NEW-PRODUCT DEVELOPMENT PROCESS
    • A new product is best developed through a series of six stages:
      • The first two stages provide a focus for generating new-product ideas and a basis for evaluating them.
      • The first three stages deal with ideas and are the least expensive.
      • In their haste, some companies skip stages — the most common omission being market tests.
    11 –
  • 25. 11 – Identify the strategic role of new products, then... 1. Idea generation 2. Screening of ideas 3. Business analysis 4. Prototype development 5. Market Tests 6. Commer- cialization
  • 26. ADOPTER CATEGORIES
    • Researchers have identified five categories of individual adopters for new products:
      • Innovators — 3% of the market.
      • Early adopters — 13% of the market.
      • Early majority — 34% of the market.
      • Late majority — 34% of the market.
      • Laggards — 16% of the market.
    • In addition, some individuals — nonadopters — never accept the innovation.
    11 –
  • 27. Product Adoption Process
    • Production Adoption Process
      • The stages buyers go through in accepting a product
    11 –
  • 28. Product Adoption Process (cont’d)
    • Categories of Product Adopters
      • Innovators
        • First adopters of new products
      • Early adopters
        • Careful choosers of new products
      • Early majority
        • Those adopting new products just before the average person
      • Late majority
        • Skeptics who adopt new products when they feel it is necessary
      • Laggards
        • The last adopters, who distrust new products
    11 –
  • 29. Distribution of Product Adopter Categories 11 – FIGURE 10.3 Source: Reprinted with permission of The Free Press, a Division of Simon & Schuster, Inc., from Diffusion of Innovations, Fourth Edition by Everett M. Rogers. Copyright © 1995, by Everett M. Rogers. Copyright © 1962, 1971, 1983 by The Free Press Excerpt from Diffusion of Innovations , Fourth edition by Everett M. Rogers. Reprinted with permission of The Free Press, a division of Simon & Schuster, Inc. Copyright 2005 by Everett M. Rogers. Copyright 1962, 1971, 1983, by The Free Press.
  • 30. NEW-PRODUCT ADOPTION AND DIFFUSION
    • Adoption process: The decision-making activity of an individual through which the new product is accepted.
    • Stages in Adoption Process:
          • Awareness 
          • Interest 
          • Evaluation 
          • Trial 
          • Adoption 
          • Confirmation
    • Diffusion: The process by which an innovation is spread through a social system over time.
    11 –
  • 31. FASHION-ADOPTION PROCESS
    • Fashion: Any style that is accepted and purchased by successive groups of people over a long period of time.
    • Fashion-adoption process: Series of buying waves as a given style is popularly accepted by one group after another.
    • Three theories of fashion adoption:
      • Trickle-down—a given fashion flows down through several socioeconomic levels.
      • Trickle-across—the fashion moves horizontally and simultaneously within several socioeconomic levels.
      • Trickle-up—a style first becomes popular at lower levels and then flows upward.
    11 –
  • 32. 11 – TRICKLE- UP Product adopted first by lower socio- economic group TRICKLE- DOWN Product offered first to upper socio- economic group Product introduced at same time in all three types of stores: TRICKLE-ACROSS Exclusive high-priced specialty stores (boutiques) TRICKLE-ACROSS Medium-priced department stores and specialty stores TRICKLE-ACROSS Discount stores
  • 33. Marketing Mix - Definition
    • “ A framework for the tactical management of the customer relationship” (Jobber, 2000)
    • “ A blend of marketing tactics tailored to an organisation’s chosen competitive role and its strategic issues, which is aimed at increased customer satisfaction, repeat business, positive brand awareness, increased market share and sustainable competitive advantage and thus ultimately at continued business growth and enhanced profitability.”
    11 –
  • 34. Some Key Features
    • Successful marketing mix strategies
    • Are integrated
    • Are strategically timetabled
      • Examples of key strategic marketing mix decisions are thus
        • When to launch a new product or open a new property
        • When to refurbish
        • When and in which frequency to advertise
        • When to run special promotions and events
        • When to train staff and revise operational procedures
    • Need to be continuously monitored and, if required, adapted to changes in the environment
    11 –
  • 35.
    • For marketers it is not enough to focus only on the sales of formal and core product
    • The marketing mix must be laid out to embrace the augmented product
    • The hallmarks of an effective marketing mix are a good blend, a match with customer needs and company resources and the achievement of competitive advantage
    11 –
  • 36. Product Line and Product Mix
    • Product Item
      • A specific version of a product
    • Product Line
      • A group of closely related product items viewed as a unit because of marketing, technical, or end-use considerations
    11 – Whole Milk Whole Milk Skim Milk 2% Milk
  • 37. Product Line and Product Mix (cont’d)
    • Product Mix
      • The total group of products that an organization makes available to customers
      • Width of product mix
        • The number of product lines a company offers
      • Depth of product mix
        • The average number of different products in each product line
    11 –
  • 38. PRODUCT MIX AND PRODUCT LINE
    • The product mix is the set of all products offered for sale by a company.
    • A product mix has two dimensions:
      • Breadth - the number of product lines carried.
      • Depth - the variety of sizes, colors, and models offered within each product line.
    • A product line is a broad group of products, intended for similar uses and having similar characteristics.
    11 –
  • 39. The Concepts of Product Mix Width and Depth Applied to Selected U.S. Proctor & Gamble Products 11 –
  • 40.
    • 1. Market fragmentation: Smaller and smaller market segments.
    • 2. Consumer desires: Trying “something different.”
    • 3. Pricing breadth: A broader range of price points to capture a wider audience.
    • 4. Excess capacity: When faster production lines were added, many older lines were not scrapped.
    • 5. Short-term gain: Way to boost sales quickly and inexpensively.
    • 6. Competitive intensity: Build a brand’s market share and retail shelf space.
    • 7. Trade pressure: To satisfy new retail channels for consumer products.
    HAS PRODUCT PROLIFERATION GONE TOO FAR? 11 – Seven factors help explain the lure of line extensions:
  • 41.
    • 1. Overextended line: No elimination of existing items.
    • 2. Lower brand loyalty: Line extensions encourage brand switching.
    • 3. Underexploited ideas: Line extensions typically are “little” ideas rather than big ideas with more risk and greater profit potential.
    • 4. Stagnant category demand: More products alone rarely expand total demand.
    • 5. Poorer trade relations: Retailers don’t have enough shelf space for the flood of new products.
    • 6. More competitor opportunities: Competitors may concentrate on the most popular line extensions.
    • 7. Increased costs: Line-extension costs often remain hidden.
    H AS PRODUCT PROLIFERATION GONE TOO FAR? 11 – Seven pitfalls to proliferation:
  • 42. Why Some Products Fail and Others Succeed
    • Reasons for Product Failure
      • Product’s value or features did not match customer needs
      • Ineffective or inconsistent branding that failed to convey the right message or image to customers
      • Technical or design problems
      • Poor market timing
      • Overestimation of market size
      • Ineffective promotion
      • Insufficient distribution
    11 –
  • 43. 11 –
  • 44.
    • 1. Ford’s Edsel automobile.
    • 2. Dupont’s Corfam synthetic leather.
    • 3. Polaroid’s Polavision.
    • 4. United Artist’s Heaven’s Gate western movie.
    • 5. RCA’s Videodisc.
    • 6. Time’s TV-Cable Week magazine
    • 7. IBM’s PCjr.
    • 8. New Coke.
    • 9. R.J. Reynolds’ Premier cigarette.
    • 10. Nutrasweet’s Simplesse fat substitute.
    TEN “WORLD-CLASS” PRODUCT FAILURES 11 –
  • 45. Transparency Figure 10F Changing Market for Luxury Automobile Name Plates 11 –