ADBMS lecture 3.ppt

7/29/2019 ADBMS lecture 3.ppt

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Marketing Mix (4p’s)Slide 5 Place

Manufacturer

Consumer

Manufacturer

Retailer

Consumer

Direct Distribution Indirect Distribution

http://www.learnmarketing.net/

http://www.learnmarketing.net/



Product anatomy



Product definition

A product is a physical good, service, idea, person or

place that is capable of offering tangible and intangibleattributes 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 in order to acquire it.



WHAT IS A PRODUCT?

• People buy want satisfaction, not objects.• Example: Consumers buy televisions because they want

entertainment, not because they want a box with a screen.

• Product Bundle of physical, service, and symbolic attributes designed to

satisfy a customer’s wants and needs.

WHAT ARE GOODS AND SERVICES?

• Services Intangible tasks that satisfy the needs of consumer and business

users.

• Goods Tangible products that customers can see, hear, smell, taste, or

touch.



The anatomy of a product

Figure 7.1



Product layers

All four layers of a product contribute to the buyer’s

satisfaction.

The outer two depend on the core product to determine

how they are realised.



Product based classifications

• Durable products - last for many uses and over a long

period before having to be replaced.

• Non-durable products - can be used once or a fewtimes before having to be replaced.

• Service products - intangible products comprising

activities, benefits or satisfactions that are not embodied

in physical products, e.g. financial services, holidays,etc.



User based classifications: consumer goods/services

• Convenience goods - relatively inexpensive, frequent

purchases which respond to routine response buying

situations.

• Shopping goods - represent more of a risk and an

adventure to consumers.

• Speciality goods - high risk, expensive and infrequently

purchased products.

• Unsought goods - e.g. sudden emergencies.



User based classifications: B2B goods/services

• Capital goods - buildings and fixed equipment that

contribute to production.

• Accessory goods - items that give peripheral support tothe production process.

• Raw materials.

• Semi-finished goods.• Components and parts.

• Supplies and services.



The product mix

The sum of all the products and variants offered by an

organisation.

The product mix can be split into the following:

• Product lines.

• Product items.

• Product line length.

• Product line depth.

• Product mix width.



DEVELOPMENT OF PRODUCT LINES

• Product line Series of related products offered by one company.

DESIRE TO GROW

• Growth potential limited if company focuses on a single product.

• Example: L. L. Bean began selling a single style of boots but has

grown by selling a variety of products.

ENHANCING COMPANY’S POSITION IN THE MARKET

• Entire lines of products make company more important to consumers and

marketing intermediaries.

OPTIMAL USE OF COMPANY RESOURCES

• Spreading operations costs over a series of product lines reduces the

average production and marketing costs of each product.

http://www.llbean.com/

http://www2.llbean.com/product/33171.htm

http://www2.llbean.com/product/33171.htm

http://www.llbean.com/



THE PRODUCT MIX

• Assortment of product lines and individual product offerings that thecompany sells.

• Product mix width— Number of product lines a firm offers.

• Product mix length— Number of different products a firm sells.

• Product mix depth— Variations in each product that the firm markets in itsmix.

PRODUCT MIX DECISIONS

• Firms evaluate the effectiveness of the width, length, and depth to make

decisions about adding or eliminating products from their offerings.

• Line extension— adding individual offerings that appeal to different market

segments while remaining closely related to the existing product line.



•

Marketing mix Blending of the four

strategy elements product, place

promotion, and price — to fit theneeds and preferences of a specific target

market. Marketers develop strategies to

sell both tangible goods and intangibleservices.



CLASSIFYING GOODS AND SERVICES FORCONSUMER AND BUSINESS MARKETS

• Consumer (B2C) products Product destined for use by ultimate

consumers.

• Business (B2B) products. Product that contributes directly or indirectly to

the out- put of other products for resale; also called industrial ororganizational product.

• Some products fall into both categories.

• Example: Prescription drugs, which are marketed to doctors and

to end users.



QUALITY AS A PRODUCT STRATEGY

• Total quality management (TQM) Continuous effort to improve productsand work processes with the goal of achieving customer satisfaction and

world-class performance.

WORLDWIDE QUALITY PROGRAMS

• Leadership of several large U.S. corporations led to quality revolution of the 1980s.

• U.S. Congress established the Malcolm BaldrigeNational Quality Award to

recognize excellence in

quality management.

• ISO 9002 standards implemented by the European Union define

international criteria for quality management and assurance.

• U.S. member body of ISO is National Institute of Standards and

Technology.

http://www.quality.nist.gov/Improvement_Act.htm

http://www.iso.org/iso/en/ISOOnline.frontpage

http://www.nist.gov/




http://www.iso.org/iso/en/ISOOnline.frontpage

http://www.quality.nist.gov/Improvement_Act.htm



THE PRODUCT LIFE CYCLE

• Product life cycle Progression of a product through introduction, growth,maturity, and decline stages.



Stage 1: Market Introduction

• Sales are low as the new idea is first introduced to themarket.

• Customers may not be aware of the product’s benefitsand features and may not be aware of the product

itself.• Most companies experience losses during the market

introduction stage.

– A lot of money is spent on promotion and product

development to build product awareness. – Promotion is aimed at innovators and early adopters.

• Pricing:

– Low penetration pricing

– High skim pricing



Stage 2: Market Growth

• Rapid growth in sales and profits

– More product awareness

• Competitors see the opportunity and enter the

market.

– Some competitors will copy the product or may try

to make it better or more appealing to other target

markets.

– The new entries result in more product variety.



• Additional features and support services may

be added to: – Combat competition

– Retain customers

• Promotion is aimed at a broader audience.

• More distribution channels are established.



Stage 3: Market Maturity• Most common stage in the cycle.

• Sales begin to level off.

• The competition gets tougher as morecompetitors have entered the market.

– Increased competition creates a downwardmovement in prices.

• Industry profits are largest, but it is also when

industry profits begin to decline.• Promotion is targeted to create branddifferentiation.



Stage 4: Sales Decline

• Sales continue to decline.

– Shrinking market

• New products replace the old.

• Firms will often try to use extension strategies.

• Companies may be able to keep some sales by

appealing to their most loyal customers.



• When in the decline stage, a firm may:

– Maintain: enhance the product by finding new uses

or by adding new features.

– Harvest: reduce costs and continue to offer the

product to a targeted niche.

– Discontinue: sell the product to another firm, or

liquidate inventory.



Example: New Flavor of Pepsi

• Stage 1: Market Introduction – Pepsi bottles the new flavored product and places it

on the market for consumers.

– Pepsi also spends a lot of money advertising thenew flavor creating awareness.

• Stage 2: Market Growth

– Customers like the flavor and begin to make

routine purchases.

– Coke introduces their competing flavor.



• Stage 3: Market Maturity

– More competitors enter the market taking some of

Pepsi’s profits.

• Stage 4: Sales Decline

– Customers have moved on to the next new flavor.

– Some loyal fans stay behind.



Pros

The product life cycle is a useful model

when deciding possible stages of a product orservice.

Useful to help demonstrate how marketingstrategies can vary at different stages of a

product's life.

Promotion



Cons

Tends to be backward looking

We only know which stage we have been inafter it has been completed.

Only looks at a single product when mostfirms have many products.



EXTENDING THE PRODUCT LIFE CYCLE

• Product life cycles can be extended indefinitely as a result of marketers’decisions.

INCREASING FREQUENCY OF USE

• Convincing current customers to buy a product more frequently boosts

total sales even if no new buyers enter the market.

• Example: Custom Printed M&Ms that allow consumers to order

their own initials or sayings.

INCREASING THE NUMBER OF USERS

• Attracting new customers who have not previously used the product.

• Example: Walt Disney markets its theme parks to adults.

http://www.mymms.com/

http://www.disneyweddings.com/

http://www.disneyweddings.com/

http://www.mymms.com/



FINDING NEW USES

• New applications extend a product’s life cycle.

• WD-40 identified the top 2,000 uses for its oil.

CHANGING PACKAGE SIZES, LABELS, OR PRODUCT

QUALITY

• Example: Food marketers produce packages designed to appeal to one-person households.

• Example: Kraft’s 100-calorie Snack Packs, which package snacks in 100

calorie amounts.

http://www.wd40.com/Brands/wd40.cfm

http://www.nabiscoworld.com/100caloriepacks/100cp_varieties.aspx









PRODUCT DELETION DECISIONS

• Marketers prune product lines and eliminate marginal products to preservelimited resources.

• Firms may carry poor performing items to carry a complete product line.

• Example: Grocery stores carry bulky, low-unit value items like

salt to meet shopper demand.• Shortages or raw materials can prompt a firm to discontinue production.

• Firm may drop products that don’t fit into the direction in which it plans to

grow.

ADBMS lecture 3.ppt

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