Mark Liebeman Foundations of Business Practice 2 Marketing Module 3 Mark Liebeman Foundations of Business Practice 2

Objectives Identify challenges a company faces in developing and introducing new products. List the main stages in developing new products and describe how they can be better managed. Discuss factors that affect the rate at which consumers adopt new products. Determine what marketing strategies are appropriate at each stage of the product life cycle. Explain how a company can choose and communicate an effective market position.

Discuss Each Step of New Product Generation Marketing strategy development Business analysis Concept development and testing Product development Idea screening Market testing Idea Generation Commercialization

(both consumer goods and business goods) 1. Product development Managing New Products 2. Market testing (both consumer goods and business goods) 3. Commercialization

The Consumer Adoption Process In the past, companies used mass-marketing. Now they must identify and target early adopters by this process: Awareness Interest Evaluation Trial Adoption

Factors Influencing the Adoption Process Early majority Late majority Innovators Early adopters Laggards Time of adoption innovations

Sales & Profit Life Cycles Time Sales & profits ($) Introduction Growth Maturity Decline

Product Differentiation Form Features Performance Quality Conformance Quality Durability Reliability Repair- ability Style Design

Developing a Positioning Strategy A difference is worth establishing to the extent that it satisfies the following: Important Profitable Distinctive Preemptive Affordable Superior

Four Introductory Marketing Strategies Price Low High Promotion Rapid- skimming strategy Slow- skimming strategy Rapid- penetration strategy Slow- penetration strategy

Maturity Stage Market Modification Product Modification Marketing-Mix Modification

Decline Stage Increase investment Resolve uncertainties - stable investment Selective niches Harvesting Divesting

More Objectives Identify and describe characteristics of products. Explain how a company can build and manage its product mix and product lines. Determine how a company can make better brand decisions. Describe how packaging and labeling can be used as a marketing tool.

Five Product Levels Potential product Augmented product ```` Potential product Augmented product Expected product Basic product Core benefit

Consumer-Goods Classification Convenience Products Shopping Products Buy frequently & immediately Low priced Many purchase locations Includes: Staple goods Impulse goods Emergency goods Buy less frequently Gather product information Fewer purchase locations Compare for: Suitability & Quality Price & Style Specialty Products Unsought Products Special purchase efforts Unique characteristics Brand identification Few purchase locations New innovations Products consumers don’t want to think about. Require much advertising & personal selling

Product Mix Consistency Width: number of different product lines Length: total number of items within lines Product Mix: all product lines offered Depth: number of versions of each product

What is a Brand? User Culture Personality Attributes Benefits Values

(customer will change) Do You Have Brand Loyalty? Devoted to brand Values the brand (brand as friend) Satisfied and switching cost Satisfied customer (no reason to change) No brand loyalty (customer will change)

Good Brand Names: Distinctive Lack Poor Foreign Language Meanings Suggest Product Qualities Suggest Product Benefits Easy to: Pronounce Recognize Remember

Why Package Crucial as a Marketing Tool Self-service Consumer affluence Company & brand image Opportunity for innovation

Labels Promote Describe Identify

Even More Objectives Define services and discuss how they are classified. Describe how service firms improve their competitive differentiation, service quality, and productivity. Explain how goods-producing companies can improve their customer support services.

Categories of Service Mix Pure tangible good Tangible good w/ services Hybrid Major service w/ goods Pure service

Four Service Characteristics Intangibility Services cannot be seen, tasted, felt, heard, or smelled before purchase Inseparability Services cannot be separated from their providers Services Variability Quality of services depends on who provides them and when, where, and how Perishability Services cannot be stored for later sale or use

Overcoming Service Challenges Intangibility Use cues to make it tangible Inseparability Increase productivity of providers Services Variability Standardize service production & delivery Perishability Match supply and demand

Three Types of Marketing in Service Industries Company Customers External marketing Internal marketing Restaurant industry Cleaning/ maintenance services Financial/ banking Employees Interactive marketing

Service Differentiation Offer Delivery Image

Service-Quality Model Personal needs Past experience Word-of-mouth communications Marketer Consumer Expected service Management perceptions of consumer expectations Gap 5 Perceived service External communi- cations to consumers Gap 4 Gap 1 Service delivery (including pre- and post-contacts) Gap 3 Translation of perceptions to service-quality specifications Gap 2

Determinants of Service Quality Reliability Responsiveness Assurance Empathy Tangibles

Service Excellence Strategic Concept Top-Management Commitment High Standards Monitoring Systems Satisfying Customer Complaints Satisfying Both Employees & Customers Managing Productivity

Managing Product Support Services Customers worry about three things: Reliability and failure frequency Downtime duration Out-of-pocket repair costs Buyers try to estimate life-cycle costs. Marketers must design service offers that will attract customers. Marketers must follow through with post-sale services.

Major Trends in Customer Service Equipment is more reliable and easily fixed Customers are sophisticated and press for services unbundling Customers dislike multiple service providers Service contracts may diminish in importance Customer service choices are rapidly increasing

Pricing Discuss how a company should price a new good or service. Determine how a price should be adapted to meet varying circumstances and opportunities. Decide when a company should initiate a price change and determine how it should respond to competitive price changes.

Price - Quality Strategies High Medium Low High Low Product Quality Med Premium Value Medium Economy High Value Super Good-Value Overcharging Rip-Off False Economy

Setting Pricing Policy 1. Selecting the pricing objective 2. Determining demand 3. Estimating costs 4. Analyzing competitors’ costs, prices, and offers 5. Selecting a pricing method 6. Selecting final price

Selecting the Price Objective Survival Maximum current profit Maximum market share Maximum market skimming Product-quality leadership

Determining Demand Demand curve - illustrates relation between alternate prices and current demand Price sensitivity Estimating demand curves Analyzing past prices Conduct price experiments Ask buyers to state how many units they would buy at different prices Price elasticity of demand

Sum of the Fixed and Variable Costs for a Given Types of Costs Fixed Costs (Overhead) Costs that don’t vary with sales or production levels. Executive Salaries Rent Variable Costs Costs that do vary directly with the level of production. Raw materials Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production

The Three C’s Model for Price Setting Low Price No possible profit at this price High Price No possible demand at this price Costs Competitors’ prices and prices of substitutes Customers’ assessment of unique product features

Pricing Methods Markup Pricing Target Return Pricing Perceived Value Pricing Value Pricing Going-Rate Pricing Sealed-Bid Pricing

Selecting the Final Price Psychological pricing Sometimes price is equated to quality Influencing of other marketing-mix elements The brand’s quality and advertising relative to competition must be considered Company pricing policies Must be consistent with company goals Impact of price on other parties such as dealers and distributors

Psychological Pricing 32 oz. $2.19 Most Attractive? Better Value? Psychological reason to price this way? B 26 oz. $1.99 Assume Equal Quality

Promotional Pricing Loss-leader pricing Special-event pricing Cash rebates Low-interest financing Longer payment terms Warranties & service contracts Psychological discounting

Discriminatory Pricing Customer Segment Product-form Location Time

Price-Reaction Program for Meeting a Competitor’s Price Cut No Hold our price at present level; continue to watch competitor’s price Has competitor cut his price? No No Is the price likely to significantly hurt our sales? Yes Is it likely to be a permanent price cut? Yes How much has his price been cut? Yes By less than 2% Include a cents-off coupon for the next purchase By 2-4% Drop price by half of the competitor’s price cut By more than 4% Drop price to competitor’s price

Flowery oratory he despised Flowery oratory he despised. He ascribed to the interested views of themselves or their relatives the declarations of pretended patriots, of whom he said, “All those men have their price.” Sir Robert Walpole