MARK1012 LECTURE 6 AND 7 SLIDES

29
Marketing Fundamentals: Razzaque Lectures 6-7: All about products 1 ALL ABOUT PRODUCTS MARKETING MIX ELEMENTS - 1 MARKETING MIX …. Producer oriented: 4Ps Consumer oriented: 4Cs Product ї Price ї Promotion ї Place ї ї Commodity ї Cost ї Communication ї Channel RAZZAQUE:UNSW L6Ͳ 2 … refers to the marketing elements that help marketers ‘position’ their market offer.

Transcript of MARK1012 LECTURE 6 AND 7 SLIDES

Page 1: MARK1012 LECTURE 6 AND 7 SLIDES

Marketing Fundamentals: RazzaqueLectures 6-7: All about products

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ALL�ABOUT�PRODUCTS

MARKETING MIX ELEMENTS - 1

MARKETING�MIX�….

Producer�oriented:�4Ps Consumer�oriented:�4Cs

ProductїPriceї

PromotionїPlaceї

ї�Commodity

ї�Costї�Communication

ї�Channel

RAZZAQUE:UNSW L6Ͳ 2

�…�refers�to�the�marketing�elements�that�help�marketers�‘position’�their�market�offer.�

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RAZZAQUE:UNSW L6�Ͳ 3

MARKETING MIX FOR PRODUCTS [GOODS]

RAZZAQUE:UNSW L6�Ͳ 4

MARKETING MIX FOR PRODUCTS [SERVICES]

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Lecture�Objectives

RAZZAQUE:UNSW L 6 - 5

Define�the�term�‘product’�and�describe�the�nature�of�product�in�marketing�management.

Explain�product�and�service�classifications�

Outline�the�range�of�individual�product�decisions�discussing�various�product�attributes.

Discuss�branding.�

Explain�product�line�and�product�mix�decisions.

Describe�new�product�development�strategies

Explain�Product�Life�Cycle.

Products:�Bundles�of�Benefits�in�the�form�of�Goods�and�Services

RAZZAQUE:UNSW L6�Ͳ 6

• Any�tangible�object/thing�that�can�be�offered�to�a�market�for�attention,�acquisition,�use,�or�consumption�that�might�satisfy�a�want�or�need.�

Goods(Tangible�Product)

Broadly�defined�as�“products”.�Also�include�events,�persons,�places,�organisations,�

ideas,�or�mixes�of�these.�

• A�product�in�the�form�of�an�activity,�benefit�or�satisfaction�that�one�party�can�offer�to�another�that�is�essentially�intangible�and�does�not�result�in�the�ownership�of�anything.�

SERVICES(Intangible�Product)

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Products�and�Services�Continuum

RAZZAQUE:UNSW L6- 7

There is nothing called ‘pure’ product or ‘pure’ service

Three�Product�Levels

RAZZAQUE:UNSW

BrandName

Quality

Packaging

Styling

Features

Delivery& Credit

Installation

Warranty

After-Sale

Service

CoreBenefit

orService

Actual ProductCore Product

Augmented Product

L6 - 8

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Product�Levels

RAZZAQUE:UNSW L6 - 9

� Core�Product:�the�basic�useͲbenefit,�problemͲsolving�dimension�that�makes�the�purchased�product�valuable�to�consumer.

� Actual�Product:�the�tangible,�physical�product�(or�intangible�service)�that�we�buy�to�receive�the�core�product�benefits.¾ Has�5�characteristics:9 Quality�Level refers�to�product�performance.���9 Features include�combinations�of�product�attributes.���9 Styling consists�of�product’s�design�and�aesthetic�or�ergonomic�aspects.�9 Brand�Namemay�help�consumers�position�and�identify�the�product.9 Packaging serves�to�both�protect�the�product�and�to�promote�it�to�consumers.

� Augmented�Product: the�nonͲphysical�part�of�the�product�that�adds�value to�the�product�purchased.�[e.g.;�credit,�delivery,�installation,�warranties, and�after�sale�service]�¾ help�the�consumer�put�the�actual�product�to�sustained�use.

Product�Levels:�QANTAS

RAZZAQUE:UNSW L6- 10

SafetyRecord

Schedules

Seatallocation Meals

HollidayPackages

Qantas Club

Frequent Flyer Scheme

HertzCar

RentalBooking

Transportation

TimeCritical

Transportation

Actual ProductCore Product

Augmented Product

ToursFly-drivepackages

BookingSystem

Inflight Services

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Consumer�Product�Classifications

RAZZAQUE:UNSW L6- 11

Types ofConsumerProducts

Convenience

UnsoughtGoods Specialty

Shopping

Consumer�products�are�those�bought�by�final�consumers�for�personal�consumption.

Products� (i)�purchased�frequently�with� (ii)�a�minimum�of�comparison�and�buying�effort. Examplesare�staples,�impulse,�emergency

Products are�compared�on�such�bases�as�suitability,�quality,�price,�and�style.

Products�with�(i)�unique�characteristics�or�identification�with�buyers�and� (ii)�

are�specifically�sought�by�the�consumer.

Products�unknown�to�the�buyer�or�not�normally�considered��for�purchase;��require�special�marketing�effort.

RAZZAQUE:UNSW L6�Ͳ 12

Classification of consumer goods

Carol Yuan
*
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Industrial�Products�…

RAZZAQUE:UNSW L6- 13

�…�are�goods�purchased�by�individuals�and�organisations�for��(i)�further�processing�or�for� (ii)�use�in�conducting�a�business.��¾…�differ�from�consumer�goods�in�terms�of�the�purpose�of�use.�¾…�can�be�classified�in�three�groups�according�to�how�they�enter�the�production�process�and�what�they�cost.o Materials�and�parts: Includes�raw�materials�and�manufactured�materials�and�parts�that�enter�the�manufacturer’s�product�completely.�Usually�are�bulky�and�low�priced.�

o Capital�items:�Goods�and�services�that�enter�the�finished�product�partly,�including�installations��(buildings�and�fixed�equipment�)�and�accessory�equipment�(portable�factory�equipment�and�tools,�office�equipment).�Do�not�become�part�of�the�finished�product,�but�aid�in�the�production�process.

o Supplies�and�services:�Goods�and�services�that�do�not�enter�the�finished�product�at�all�(e.g.,�maintenance�and�repair�services,�advisory�services).�

Extending�the�Goods�and�Services�Classification�in�Marketing

� Organisation�marketing: Involves�creation,�maintenance�or�changing�the�attitudes�and�behaviour�of�target�consumers�toward�an�organisation�(e.g.��NAB/UNSW).

� Place�marketing:�Relates�to�creation,�maintenance�or�change�the�attitudes�and�behaviour�toward�particular�places.��(e.g.,�tourism�destinations�or�holiday�resorts).

� Event�and�experience�marketing:�Often�linked�to�other�market�offerings�such�as�major�sporting�events�like�World�Cup,�often�include�destination�marketing,�and�marketing�communications�to�involve�the�local�community.���

� Person�marketing: Relates�to�creation,�maintainance or�change�the�attitudes�and�behaviour�toward�particular�people�(celebrities,�sports�stars,�politicians�,�and�business�leaders��e.g.,�Angelina�Jolie;�Tiger�Woods;�Kevin�Rudd;�Bill�Gates.�

� Ideas�such�as�political��policies�and����environmental�and�social�causes�can�also�be�marketed.

� Social�marketing:�Use�of�marketing�concepts�and�tools�in�programs�designed�to�bring��about�social�change.��(e.g.,�reduce��speeding,�pollution�etc.�

� NonͲprofit�marketing:�Involves�activities�by�notͲforͲprofit�organisations�such�as�Red�Cross�in�fund�raising.�

RAZZAQUE:UNSW L6 - 14

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Individual�Product��and�Service�Decisions

RAZZAQUE:UNSW L6 - 15

� Product�Quality >>�The�ability�of�a�product�to�perform�its�functions.�Includes�attributes�such�as�durability,�reliability,�precision,�ease�of�operations,�and quality�consistency. Has�lead�to�adoption�of�TQM.�

� Product�Features. Technical�characteristics�of�the�offering.�Consumers�seek�value�and�needͲsatisfaction.�Product�feature�decisions�must��reflect�consumer�needs�and�perceptions�,�affordable�value�and�company�cost.�Features�irrelevant�to�consumers��cost�money�and�are�undesirable.�

� Product�Design. Combines attention�to�style�(appearance)�with�enhanced�performance.��Style�alone�may�attract�attention�but�not�improve�performance.

Product Attributes

Branding

Packaging

Labelling

Product Support Services

Product�Features,�Advantages�and�Benefits

Marketers are expected to sell benefits, not features.

� Refer�to�the�following�extract�of�an�onͲline�advertisement�for�Miele ovens.

¾ “The�Miele fan forced cooking system,�for�example,�enables�you�to�cook�on�up�to�three�levels.�Rather�than�just�circulating�hot�air�with�a�fan�we�use�a mini-turbine together�with�a�ring heater element to�force�hot�air�evenly�throughout�the�oven�interior.�This�reduces cooking time and�thus�energy consumption – above�allproviding perfectly even cooking results.”

� Features:�Fan forced cooking system, mini turbine, and ring heater element.

� Advantages:�Cooking�on�up�to�three�levels,�hot�air�forced�evenly�through�the�interior.

� Benefits:�Reduced cooking time, reduced energy consumption, perfectly even cooking results.

� Summary:�Features describe the sales item in technical terms. Advantages�describe�the�sales�item�in�terms�of�what�the�feature�does.�Benefits describe the sales item in terms of the benefit to me, the customer.

RAZZAQUE:UNSWL6�Ͳ 16

Carol Yuan
(Total Quality Management)
Carol Yuan
*
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Packaging�Decisions

RAZZAQUE:UNSWL6 - 17

Includes�designing�and�producing�the�container�or�wrapper�for�a�product.

Must�support�marketing�objectives�of�the�company.�

The�package�includes�the�immediate�container�(that�holds�the�product�for�use),�a secondary�package�(discarded�prior�to�use),�and�a�shipping�package�(necessary�for�storage�and�shipping).

Labels�Identify�products:�Distinguish one�product�from�others;�and�support�brand�strategies;Describe�product:�By providing�information�about�contents,�production,�freshness,�and�instructions�on�safe�and�effective�use;�and�Promote�products: Through�the�use�of�color and�graphics�can�stimulate�and�arouse�consumer�attention�for�the�product.Must�satisfy�legal�regulation.

Labeling�Decisions

Product�Line�&�Mix�Decisions

RAZZAQUE:UNSWL6 - 18

ProductLine Decisions

Product MixDecisions

Consistency

Length

FillingStretching

Featuring

DepthLength

Width

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Product Line Decisions

RAZZAQUE:UNSWL6 - 19

Product�Line�Length:�The�number�of�products�in�the�line.�A�line�is�too�short�if�adding�items�increases�profits;�too�long�if�dropping�items�increases�profits. Company�objectives�of�fullͲline�offerings�may�decrease�strict�profit�criterion�on�length.

Product�Line�Stretching: Lengthening�a�company’s�product�lineDownward�stretch offers�items�to�lower�end�of�the�market.��Upward�stretch introduces�items�to�high�end�of�market.��TwoͲway�stretch extends�the�line�both�upward�and�downward.

Product�Line�Filling: Adding�items�within�the�existing�product�range�of�the�line.

Product�Line�Featuring: Selecting�a�few�items�to�receive�special�marketing�attention�to�either�increase�volume�of�the�featured�items�or�draw�customers�closer�to�other�products�in�the�line

Product�Mix�Decisions

RAZZAQUE:UNSW L6 - 20

Assortment�Dimensions� Width:�number�of�different�

product�lines�marketed�by�a�single�firm.

� Length:�number�of�items�sold�by�a�firm�within�each�product�line.

� Depth:�number�of�shapes�and�model�designation�of�the�product

� Consistency:�how�closely�related�the�various�product�lines�are�in�end�use,�production�requirements,�distribution�channels,�or�other�ways

Optimizing�the�product�mix

� The�optimum�product�mix�for�a�firm�varies�across�time.

¾ The�mix�is�a�function�of�engineering,�production,��and�marketing�skills�available;�the�financial�resources�and�the�objectives�of�the�organization.

� For�longͲterm�growth�expand�product�mix�continuously

Product�mix�:�The�set�of�merchandise�offered�by�a�firm�to�its�customers.

Carol Yuan
*
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Product�Mix�Strategy�of�General�Motors

RAZZAQUE:UNSW

CARS TRUCKS CHASSIS

Cadillac

Buick

Oldsmob

GMC

Chevrolet

School bus

PRODUCT WIDTH

PRODUCT

LINE

LENGTH

Pontiac

L6- 21

RAZZAQUE:UNSW L6 - 22

Product Line Stretching Decisions

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Services�Marketing�Characteristics�of�Services

RAZZAQUE:UNSW L7- 23

y Intangibility�of�services:�‘Almost�pure�services,�e.g.,�a�haircut,�has�no�physical�element�like�coffee’�

y High�involvement�and�personal�nature�of�services:�When�your�teeth�are�cleaned,�you�are�receiving�a�personalised�service.

y Perishability�of�services:�Almost�pure�services,�e.g.,�a�rock�concert,�can�not�be�stored�like�coffee.�Once�the�concert�is�over,�only�its�memory�is�left.

� Synchronous�delivery�and�consumption:����������������������Almost�pure�services,�e.g.,�learningͲtoͲdrive�session�or�aerobics�instruction�session,�require�you�to�interact�in�real�time�as�the�service�is�consumed.

� Variability�of�service�encounters:���������������������������Almost�pure�services,�e.g.,�a�restaurant�or�ocean�cruise�involve�interaction�between�a�patron/guest�and�customer�service�personnel.�They�are�not�necessarily�the�same�every�time.�

Marketing�Strategies�for�Service�Firms�I

RAZZAQUE:UNSW L7�Ͳ 24

� In�a�service�business,�the�customer�and�frontͲline�service�employee�interact to�create�the�service.

� The�serviceͲprofit�chain�consists�of�five�links:¾ Internal�service�quality:�superior�employee�selection�and�training,�a�quality�work�environment,�and�strong�support�for�those�dealing�with�customers,�which�in�turn�results�in...

¾ Satisfied�and�productive�service�employees:�more�satisfied,�loyal,�and�hardworking�employees,�which�results�in...

¾ Greater�service�value:�more�effective�and�efficient�customer�value�creation�and�service�delivery,�which�results�in...

¾ Satisfied�and�loyal�customers:�satisfied�customers�who�remain�loyal,�repeat�purchase,�and�refer�other�customers,�which�results�in...

¾ Healthy�service�profits�and�growth:�superior�service�firm�performance.

Carol Yuan
*
Carol Yuan
Carol Yuan
Carol Yuan
Carol Yuan
Carol Yuan
Carol Yuan
Carol Yuan
Carol Yuan
Carol Yuan
Carol Yuan
Carol Yuan
Carol Yuan
Carol Yuan
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External marketing : what this course is covering

Service�marketing�requires� (i)�internal�marketing,�(ii)�external�marketing and� (iii)�interactive�marketing

RAZZAQUE:UNSW L7�Ͳ 25

Internal marketing: Orienting and motivating firm’s customer-contact employees and supporting service people to work as a team to provide customer satisfaction.

Interactive marketing: Developing quality the buyer-seller interaction during the service encounter.

Hence,�service�companies�must�increase three�major�marketing�tasks:�(i)�their�service�differentiation,�(ii)�service�quality,�and�(iii)�service�productivity.�

Branding��I

RAZZAQUE:UNSW L7�Ͳ 26

� A�brand�is�‘a�name,�term,�sign,�symbol,�design,�or�a�combination�of�these,�that�identifies�the�goods�or�services�of�one�seller�or�group�of�sellers�and�differentiates�them�from�those�of�competitors’

� Brands�are�themajor�enduring�asset�of�a�company�as�they¾ Facilitate�easy�product�recognition�and�repeat�purchase.�

¾ Simplify the�introduction�of�new�products�and�allow�control�over�channel�of�distribution.�

¾ Develop�permanent�priceͲquality�image�of�the�product

� Powerful�brand�names�have�consumer�franchise�ͲͲ they�command�consumer�loyalty.�

Product Attributes

Branding

Packaging

Labelling

Product Support Services

Carol Yuan
Carol Yuan
if it is a good brand, the quality and image cannot be changed
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RAZZAQUE:UNSWL7�Ͳ 27

• The�added�value�that�knowledge�about�a�brand�brings�to�a�product�over�and�above�its�basic�functional�qualities.

• The�foundations�of�brand�equity:��������(i)�extensive�brand�awareness;�and���(ii)�strong,�unique�and�favorable�brand�associations�[e.g.,�VOLVO�>>�Safety]

Brand�Equity

• differentiation(what�makes�the�brand�stand�out),�

• relevance (how�consumers�feel�it�meets�their�needs),�

• knowledge (how�much�consumers�know�about�the�brand),�and�

• esteem (how�highly�consumers�regard�and�respect�the�brand).

Measures�of�Brand�Strength

• High�level�of�consumer�brand�awareness�and�loyalty.�

• More�leverage�in�bargaining�with�resellers.�

• More�easily�launch�line�and�brand�extensions.�

• Defence�against�fierce�price�competition.�

• Forms�the�basis�for�building�strong�and�profitable�customer�relationships.�

Brand�Valuation

Branding - II

RAZZAQUE:UNSW L7�Ͳ 28

2013 Rank 2012 Rank BrandBrand Name

Region/Country Sector

Brand Value ($m)

Change in Brand Value

1 2 Apple United States

Technology 98,316 28%

2 4 Google United States

Technology 93,291 34%

3 1 Coca-Cola United States

Beverages 79,213 2%

4 3 IBM United States

Business Services 78,808 4%

5 5 Microsoft United States

Technology 59,546 3%

6 6 GE United States

Diversified 46,947 7%

7 7McDonald

'sUnited States

Restaurants 41,992 5%

8 9 Samsung South Korea Technology 39,610 20%

9 8 Intel United States

Technology 37,257 -5%

10 10 Toyota Japan Automotive 35,346 17%

WORLD’s TOP BRANDS 2013

Carol Yuan
Brand Equity is not goodwill. It is not shown on accounting statement
Carol Yuan
Carol Yuan
Marketing is all about perception. BRANDING IS ALL ABOUT PERCEPTION
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Branding�III:�Building��Brand�Names�

RAZZAQUE:UNSW L7 - 29

�Cost�of�establishing�a�brand�name�is�very�high,�often�ranges�between�50Ͳ150�million�dollars.� Yet�chances�for�success�in�establishing�a�brand�name�are�rather�low.

�Companies�with�strong�brands�often�attempt�to�build�brand�portfolios�by�acquiring�brands�with�strong�brand�equity�from�other�companies.

RAZZAQUE:UNSW L7 - 30

Brand RepositioningBrand Repositioning

No Brand Repositioning

Brand StrategyNew Brands

Line/Brand Extensions Multibrands

Brand SponsorManufacturer’s Brand

Private Brand Licensed Brand

Brand Name SelectionSelectionProtection

To Brand or Not to Brand: Positioning: PBrand

No Brand

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Major Branding Decisions II

RAZZAQUE:UNSWL7 - 31

Brand�Decision. The�company�must�decide�whether�or�not�to�place�a�brand�name�on�its�product�or�use�generic�names�(e.g.�Paracetamol).��Brands�(e.g.�Panadol�or�Heffron)�usually�command�higher�profit�margins�than�nonͲbrands.�

Brand�Name�Selection. A�good�brand�name�should:1. suggest something about the product’s benefits [Navigator>Netscape];

2. be easy to pronounce and remember [Total, Tide];3. be distinctive [Lexus];4. Be extendable5. translate easily into foreign languages [Exxon,(formerly standard oil of

New Jersey) translated in 54 languages]; and 6. be eligible for registration and legal protection.

Major Branding Decisions III: Brand�Sponsorship.

RAZZAQUE:UNSWL7 - 32

�A�manufacturer�has�four�sponsorship�options.�¾ Launch�the�product�as�a�manufacturer’s�brand (or�national�brand)�[e.g.,IBM,�Kellogg].�Producer�owns�the�BRAND.�

¾ Sell�to�resellers�who�give�it�a�private�brand (also�called�a�store�brand�or distributor�brand).�Private�brands [Ingham’s�chicken�also�sold�by�Coles�as�‘Farmland’�and�‘Savings’].�Reseller�create�and�own�the�BRAND.�

¾Use�other�brands’�name�under�license�[e.g.,�Gucci,�Calvin�Klein].¾ Join�another�company�and�coͲbrand a�product.�[e.g.�Visa�and�Commonwealth�Bank]

�MixedͲbrand strategies�combine�both�approaches�[IBM�and�its�Secondary�brand�sold�thru’�direct�mail].

Carol Yuan
*
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Brand�Development�Strategy

RAZZAQUE:UNSW L7 - 33

LineExtension

Multibrands[Flanker]

BrandExtension

[Brand Leveraging]

NewBrandsB

rand

Nam

e

Existing New

Product Category

Existing

New

Occurs�when�a�company�extends�existing�brand�names�to�new�forms,�colours,�sizes,�ingredients,�or�flavours�of�an�existing�product�category.�Add decaf Coffee.

A company seeks to extend existing brand qualities to launch new products or modified products in a new category.Quaker oatmeal > Quaker Granola bar

Develops additional products in the same product category. P & G pioneered multibranding

A company creates a new brand name when it enters a new product category for which none of the company’s current brand names are appropriateCoca Cola > Dasani

Megabrand�Strategy Brand�Repositioning.

RAZZAQUE:UNSW L7 - 34

� Involves�dropping�weaker�brands�and�focusing�only�on�brands�that�can�achieve�the�number�one�or�number�two�market�share�positions�in�their�categories.�

� May�be�necessary�in�response�to�change�in�the�competitive�market.

� Could�be�very�expensive� Could�also�be�challenging�to�

marketers�as�the�‘repositioning’�the�image�of�the�same�product�may�not�be�easy�to�communicate�to�the�target�market.¾ Kentucky�Fried�Chicken to�KFC¾ Kraft’s�Velveeta�Brand�from�“cooking�cheese”�to�“good�tasting,�natural�and�nutritious’�snack�cheese.

� Should�be�done�carefully.

Carol Yuan
*
Carol Yuan
Carol Yuan
Carol Yuan
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New�Products

RAZZAQUE:UNSW L7 - 35

� Rapid�changes�in�tastes,�technology�and�competition,�prompt�customers�to�want�new�and�improved�products.�¾ New�products:�Include�original�products,�modifications,�new�brands.�¾ “Newness"�depends�on�who�makes�the�assessmentͲͲ buyer�or�seller.¾ Success�of�a�new�product�depends�on�a�unique�superior�product�ͲͲnew�features,�higher�quality�and�value�in�use.

�A�company�can�obtain�new�products�in�two�ways.��1. Acquisition�– buying�a�whole�new�company,�patent�or�licence�to�

produce�someone�else’s�product.��2. New�product�development.

�Degree�of�newness�to�buyer/seller�impacts�the�amount�of�risk�taken�and�influences�the�new�product�development�process.

Product�Newness

RAZZAQUE:UNSWL7 - 36

A.�New�to�the�world >>products�that�create�entirely�new�markets.

B.�New�product�lines >>entries�into�existing�markets�that�are�new�to�the�firm.

C.�Line�extensions >>new�products�allowing�firms�to�extend�served�market�through�different�benefits.

D.�Improvements�to�existing�products >>replacements�for�existing�product.�

E.�Repositioning >>modest�technical�improvements�that�allow�a�product�to�offer�new�applications

F.�Cost�reductions >>versions�of�existing�products�providing�comparable�performance�at�lower�cost.

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NewͲProduct�Success�and�Failure

RAZZAQUE:UNSW L7 - 37

�A��high�rate�of�new�product�failure;�¾80%�new�consumer�goods;

¾33%�new�B2B�products;�Reasons�why�new�products�fail:¾negative�perception,�¾wrong�timing,�¾poor�market�research,�¾poor�marketing�communications�etc.

� Identify�successful�products�and�find�out�what�they�have�in�common

� Develop�a�superior�product� Have�a�well�defined�product�concept�prior�to�development

� Inadequate�promotional�budget�and�support�may�cause�failure

� Top�management�commitment�is�vital

� A�company�must�understand�its�consumers,�markets�and�competitors.<>

RAZZAQUE:UNSWL7�Ͳ 38

What it takes to launch one commercially successful new product

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New�Product�Development�Process

RAZZAQUE:UNSW L7 - 39

IdeaGeneration

IdeaScreening

ConceptDevelopmentand Testing

MarketingStrategy

BusinessAnalysis

ProductDevelopment

TestMarketing

Commercial-isation

Stages�in�New�Product�Development�I

RAZZAQUE:UNSWL7 - 40

� Idea�Generation. This�stage�is�the�systematic�search�for�new�product�ideas.��¾ Sources�for�new�product�ideas�include�internal�sources,�customers,�competitor's�products,�distributors�&�suppliers,�and�other�sources.+HT

� Screening. This�stage�focuses�on�reducing�the�number�of�ideas�by�dropping�poor�ideas�as�soon�as�possible.��¾Helps�reduce�costs�and�focus�attention�more�productively.

�Concept�Development�and�Testing. This�stage�involves�translating�ideas�into�product�concepts�or�detailed�versions�of�the�ideas�stated�in�meaningful�consumer�terms.��Concepts�are�then�tested�on�target�consumers.

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Stages�in�New�Product�Development�II

RAZZAQUE:UNSWL7- 41

Marketing�Strategy. Consists�of�three�parts�–(i)�describe�the�target�market,�(ii)�outline�the�product's�projected�price,�distribution,�and�budget�for���������������

the�first�year,�and�(iii)�describe�longͲrun�sales,�profit�goals,�and�marketing�mix�strategy.

Business�Analysis. Reviews�the�sales,�costs,�and�profit�projections�for�the�product�to�find�out�if�they�satisfy�overall�company�objectives.

Product�Development. Involves�converting�the�product�concept�into�a�physical�product�to�ensure�that�the�idea�is�a�viable�product.

Test�Marketing. Involves�implementation�of�marketing�program�in�one�or�more�realistic�market�settings.

Commercialization. Actual�introduction�of�the�new�product�into�the�marketplace.�The�company�must�make�decisions�involving�when�to�introduce,�where,�to�whom,�and�how.

Managing�newͲproduct�development

RAZZAQUE:UNSW

• Focuses�on�finding�new�ways�to�solve�customers’�problems�and�create�more�customerͲsatisfying�experiences.

CustomerͲcentred�newͲproduct�development

• Company�departments�work�together�in�crossͲfunctional�teams,�overlapping�the�steps�in�the�product�development�process�to�save�time�and�increase�effectiveness.

TeamͲbased�����newͲproduct�development

• The�NPD�process�should�be�systematic�and�holistic�to�ensure�that�new�ideas�that�may�emerge�do�not�falter.�Good�management�system��system�to�manage�newͲproduct�ideas.

Systematic��������newͲproduct�development

L7- 42

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Common�organizational�arranagements

RAZZAQUE:UNSWL7�Ͳ 43

How�companies�organize�for�new�product�development�is�also�important�for�its�success.�

Product�Managers. He/she�is�closest�to�the�market�and�as�such�is�the�most�knowledgeable�of�all.��However�he/she�may�be�preoccupied�with�existing�products�and�lack�specific�knowledge�and�skills�related�to�new�product�development.�

NewͲProduct�Managers. A�new�manager�assigned�to�the�task�of�new�product�development; however,�he/she�might�think�in�terms�of�modifications�and�line�extensions.

NewͲProduct�Committees. Uses�specialists�from�several�functional�areas�to�evaluate�new�product�concepts�and�plans.

NewͲProduct�Departments. Sets�up�a�separate�department�with�the�line�and�staff�authority�to�develop�new�products.���The�departmental�manager�also�has�access�to�top�management.

NewͲProduct�Venture�Teams. Brings�together�specialists�from�other�operating�departments�and�reassigns�them�to�the�venture�team.��

Product�Life�Cycle

RAZZAQUE:UNSW

TimeProduct

DevelopmentStage

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments�($)

Sales andProfits ($)

Sales�and�Profits�Overthe�Product’s�Life�FromInception�to�Demise

L7- 44

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RAZZAQUE:UNSW

Product�LifeͲCycle�Stages�I1. Introduction�stage.

¾ Promote�the�product�heavily�to�inform�the�market�about�its�debut.�¾ Low/negative�profits�may�lead�to�set�high�price�to�offset�

expenses.�¾ Adopt�skimming�strategies to�generate�high�profits�now or�

penetration�strategies to�build�market�share�and�dominate�the�market�for�larger�profits�once�the�market�stabilizes.

2.���Growth�stage.¾ The�product�experiences�both�increasing�sales�and�competition.¾ Promotion�costs�are�spread�over�larger�volume�and�strategic�

decisions�focus�on�growth�strategies.�¾ Strategies�include�adding�new�features,�improving�quality,�

increasing�distribution,�and�entering�new�market�segments.

L7- 45

RAZZAQUE:UNSW

Product�LifeͲCycle�Stages�II

3. Maturity�stage.¾ Slower�growth�over�a�longer�period�of�time.�Growth�stage�

decisions�are�inappropriate.�¾ Must�modify��(i)�the�market�to�increase�consumption,�or�(ii)�

the�product�(quality,�feature,�and�style�improvements)�to�attract�new�users�,�or�(iii)�the�marketing�mix�to�improve�competitive�position

4. Decline�stage.¾ Costs�of�managing�the�product�may�exceed�profits.�¾ Management�may�keep�the�brand�as�competitors�drop�out,�

harvest the�brand�by�reducing�costs�of�support�for�short�term�profit,�or�divest (i.e.,�drop)the�product.

L7- 46

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RAZZAQUE:UNSW L7 - 47

Video�game�console�and�software�life�cycles�by�product�

class�and�product�form

Typical�Fashion,�Style�and�Fad

Different�types�of�PLC

Com

peti

tive

turb

ulen

ce

RAZZAQUE:UNSW

The�Product�Life�Cycle

Time

Introduction Growth Maturity Decline

$ 0.00

SalesVolume

Profitability

UnitCost

UnitPrice

L7 - 48

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Product�Life�Cycle�Stage�Characteristics�I

RAZZAQUE:UNSW

LIFECYCLESTAGE INTRODUCTION GROWTH

COMPETITIVETURBULENCE MATURITY DECLINE

Sales Low Rapidly rising Slowing Peak, Cyclical Declining

Prices High Lower Low Low Falling

Unit Profits Negative High, Rising Declining Average Declining

Customers Innovators Early Adopters Early Majority Middle Majority Laggards

Competition Few Growing Shakeout Declining, Fewer More Decline

L7 - 49

RAZZAQUE:UNSW

Product Lifecycle Stage Strategies

LIFECYCLESTAGE INTRODUCTION GROWTH

COMPETITIVETURBULENCE MATURITY DECLINE

Overall Marketawareness,R&D critical

Market sharepenetration

Protect,strengthenniche

Protect share—manage earningsand costs

Reduceexpendituresand harvest

Product Basic Add serviceand features

Tighten line,up quality

Diversify brandsand models

Phase outweak items

Price Cost plus Marketbroadening

Match or beatcompetitors

Defensive Maintainprofit margin

Distribution Selective Intensivecoverage

Strong dealersupport

Intensive andextensive

Selective

Communication Createawareness

Stimulatewider trial

Maintainconsumerfranchise

Stress branddifferences andbenefits

Phase out,maintenanceonly

Manufacturing SubcontractShort runsOvercapacity

CentralizeMass prod.Undercap'ty

Long runsStableprocess

DecentralizeMany short runs

Revert tosubcontract-ing

L7 - 50

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L7�Ͳ 51RAZZAQUE:UNSW

How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions

RAZZAQUE:UNSWL7 - 52

Emphasize Promotion�����Distribution��������Price����������Cost�reduction�Total MarketSales

TotalMarketProfit

New product featuresNew uses

New Markets

Status quo

New product featuresNew uses

New Markets

Status quoIntroduction Growth Maturity Decline<------------------------------TIME--------------------------------->

Do

lla

rs

Exploiting the Product Life Cycle

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Managing�the�PLC�during�the�decline�stage

RAZZAQUE:UNSW L7 - 53

�The�three�ways�to�manage�a�product�through�its�life�cycle�include:

¾ Product�modification strategies:�altering�a�product�characteristic,�such�as�quality,�performance,�or�appearance�to�try�to�increase�and�extend�its�sales�and�life�cycle.

¾Market�modification strategies:�increasing�a�product's�use�among�existing�customers,�to�create�new�use�situations,�or�to�find�new�customers.��

¾ Product�repositioning�strategies:�changing�the�place�a�product�occupies�in�a�consumer's�mind�relative�to�competitive�products.��¾ A�firm�can�reposition�a�product�by�changing�one�or�more�of�the�four�4Ps

Length�of�product�life�cycle

RAZZAQUE:UNSWL7 - 54

�How�long�is�a�product�life�cycle?���What�determines�its�length?¾There�is�no�exact�time�that�a�product�takes�to�move�through�its�life�cycle.��9As�a�rule,�consumer�products�have�shorter�life�cycles�than�business�products.��The�availability�of�mass�communication�vehicles�informs�consumers�faster�and�shortens�life�cycles.��

9Also,�technological�change�tends�to�shorten�product�life�cycles�as�new�product�innovation�replaces�existing�products

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� Consumers�pass�through�five�stages�in�the�process�of�adopting�a�new�product:

1. Awareness:�The�consumer�becomes�aware�of�the�new���product,�but�lacks�information�about�it.

2. Interest:�The�consumer�seeks�information�about�the�new�product.

3. Evaluation:�The�consumer�considers�whether�trying�the�new�product�makes�sense.

4. Trial:�The�consumer�tries�the�new�product�on�a�small�scale�to�improve�their�estimate�of�its�value.

5. Adoption:�The�consumer�decides�to�make�full�and�regular�use�of�the�new�product.

RAZZAQUE:UNSWL7 – 55

New�Product�Adoption�Process

People�differ�greatly�in�their�readiness�to�try�new�products.�There�are�five�different�categories�of�adopters

RAZZAQUE:UNSW L7�Ͳ 56

Perc

enta

ge o

f Ado

pter

s

Time of AdoptionEarly Late

Inno

vato

rs

Early Adopters

Early Majority

2.5%13.5%

34% 34%

16%

Laggards

Late Majority

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Individual�differences�in�the�adoption�of�innovations[From�Ch.5]

1. Innovators.Innovators�help�get�the�product�exposure:�but�are�not�typical�consumers.

2. Early�Adopters.Serves�as�opinion�leaders�to�the�rest�of�the�market.

3. Early�Majority.

The"typical�consumer”;�adopt�innovations�early.

4. Late�Majority.

The�scepticals;�adopts�after�most�in�the�market.���

5. Laggards.

The�suspicious;�adopts�last�when�the�product�is�no�longer�an�innovation.

RAZZAQUE:UNSW L7�Ͳ 57

RAZZAQUE:UNSW L7 - 58

Influence�of�Product�Characteristics�on�Rate�of�Adoption

• Relative�Advantage:�the�degree�to�which�an�innovation�appears�superior�to�existing�products.

• Compatibility:�the�degree�to�which�the�innovation�fits�the�values�and�experiences�of�potential�consumers.

• Complexity:�the�degree�to�which�the�innovation�is�difficult�to�understand�or�use.

• Divisibility:�the�degree�to�which�the�innovation�may�be�tried�on�a�limited�basis.

• Communicability:�the�degree�to�which�the�results�of�using�the�innovation�can�be�observed�or�described�to�others.