Topic Seven: creating marketing offers(1) Product Strategy

Objectives Product Characteristics Building & Managing the Product Mix & Product Lines Brand Decisions Packaging & Labeling Product life cycle Developing new product Service

Components of the Market Offering Value-based prices Services mix and quality Product features Attractiveness of the market offering

Five Product Levels 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 Width - number of different product lines Consistency Length - total number of items within the lines Product Mix - all the product lines offered Depth - number of versions of each product

Product-Line Length Line Stretching Downmarket Upmarket Two-way Line Filling Line Modernization Line Featuring & Line Pruning

Two-Way Product-Line Stretch: Marriott Hotels Quality Economy Standard Good Superior Marriott Marquis (Top executives) High Marriott (Middle managers) Above average Price Average Courtyard (Salespeople) Fairfield Inn (Vacationers) Low

What is a Brand? Attributes Benefits Values Culture User Personality

Satisfied & Switching Cost (customer will change) Brand Equity Devoted to Brand Values the Brand (brand as friend) Satisfied & Switching Cost Satisfied Customer (no reason to change) No Brand Loyalty (customer will change)

An Overview of Branding Decisions Repositioning Decision Brand- Sponsor Decision Brand- Name Decision Brand- Strategy Decision Branding Decision Brand No brand Manu- facturer brand Distribu- tor (private) Licensed Individual brand names Blanket family name Separate Company- individual Line extension Brand Multi- brands New Cobrands Reposi- tioning No reposi-

Brand Strategies Brand Extension New Brand Name Product Category Line Existing Multibrands Brands

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

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

Labels Identify Describe Promote

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

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 Decrease investment Resolve uncertainties - stable investment Selective niches Harvesting Divesting

Market Evolution Emergence Growth Maturity Decline

Why New Products Fail “Over Championing” Overestimated Demand Poor Design Poor Marketing Execution High Development Costs Strong Competitive Reaction

Challenges in NPD Idea Shortage Fragmented Markets Social & Governmental Constraints Cost Capital Shortage Need for Speed Shorter Product Life Cycles

New Product Development Process Marketing Strategy Development Business Analysis Product Development Concept Development and Testing Market Testing Idea Screening Commercialization Idea Generation

Probability of Success commercialization given technical completion X Probability of economic success given commercialization X Overall probability of success = Probability of technical completion

Concept Development & Testing 1. Develop Product Ideas into Alternative Product Concepts Concept Development & Testing 2. Concept Testing - Test the Product Concepts with Groups of Target Customers 3. Choose the Best One

Product & Brand Positioning (a) Product-positioning map (breakfast market) b) Brand-positioning map (instant breakfast market) Expensive Slow Inexpensive Quick High price/oz. Low in calories Low price/oz. High in calories Brand C Brand B Brand A Bacon and eggs Pancakes Instant breakfast Cold cereal Hot

Consumer-Goods Market Testing Sales- Wave Research Test offering trail to a sample of consumers in successive periods. Simulated Test Market Test in a simulated shopping environment to a sample of consumers. Standard Full marketing campaign in a small number of representative cities. Controlled A few stores that have agreed to carry new products for a fee.

Commercialization Whom Product Price Place Promotion When Where

Time of adoption innovations Adopter Categorization of the Basis of Relative Time of Adoption of Innovations 2 1/2% Innovators 13 1/2% Early adopters 34% Early majority 34% Late majority 16% Laggards Time of adoption innovations

Characteristics of the Innovation Rate of Adoption Relative advantage Compatibility Complexity Divisibility Communicability

Categories of Service Mix Pure Service Tangible Good w/ Services Major w/ Goods Hybrid

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 Cleaning/ maintenance services Financial/ banking services Restaurant industry Employees Interactive marketing

Service Differentiation Offer Delivery Image

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

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

Importance-Performance Analysis A. Concentrate here B. Keep up the good work D. Possible overkill C. Low priority Extremely important Slightly important Excellent performance Fair performance 1 2 9 11 13 12 14 3 4 5 6 7 8 10 # = Attributes

Service marketing mix 4P’s People Process Physical evidence