- Second Semester Plans > Ski Trip > Blue Man Group SMG Class of 2009 "Town Hall" Meeting Thursday, January 26 at 5:00 PM in Room 306 - Second Semester Plans > Ski Trip > Blue Man Group > Guest Speakers - Voice concerns, questions, comments - FREE SNACKS & SODA!! :0) I can’t wait to go!!!

Marketing – SM122 Product

Consumers Have Different Needs Market: Aggregate of people who, as individuals or as organizations, have needs for products in a product class and who have the ability, willingness, and authority to purchase such products Segment: Group of individuals, groups, or organizations that share one or more similar characteristics which make them have relatively similar products needs and have high probability of responding to a similar marketing mix Segmentation: Process of identifying segments or groups of people / organizations that exist within the larger market

How to Segment Consumer Markets Common Bases for Segmenting Markets Geographic Psychographic Demographic Behavioral / Product Usage

All Four P’s Contribute to the Whole This slide relates to material on p. 43. : Indicates place where slide “builds” to include the corresponding point. Position Product Price Place Promotion Selection of Target Market Summary Overview All of the four Ps--product, place, promotion and price--have an impact on satisfying the needs of consumers in the target market. No single area is more important than the others--they are all interconnected. Key Issues In developing a marketing strategy, the jobs of selecting a target market and developing the marketing mix are interrelated. The outcome of the strategy is evaluated against the objectives of the marketer. Discussion Question: Choose a product or service and discuss how the elements of the marketing mix interact with each other. For example, how do product decisions affect decisions about place, promotion, and price? Keeping in mind the marketing concept, the needs of the target market determine the nature of the marketing mix, so developing a thorough understanding of the target market leads to good strategies. : : : © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Approaches to Serving Markets Description Examples Mass Marketing A single marketing mix for the entire market Commodity products Segment marketing A single marketing mix for one segment of the market (Concentrated Marketing) Women's Workout World (exercise facilities for women); American Association for Retired Persons (lobbying and membership services for people over 50) Separate marketing mixes for two or more segments of the market (Multisegment Marketing) McDonald’s (Happy Meals for young children, Big Macs for Teens, Arch Deluxe for adults); Toshiba copiers (several sizes and features to meet different levels of business needs) Individual marketing A marketing mix customized for an individual or organization Personalized amenities for repeat guests at Ritz-Carlton hotels; management consulting services tailored to an organization’s needs

Consumers Buy Benefits Not Features Consistency, convenience McDonald’s Fun, hip, cool Reef Flip - Flops, Pacific Sunwear of CA Aspirational, escape, illusion Jimmy Buffet, Grateful Dead, Jaguar, Maxim, Cosmopolitan Cleanliness, brightness, freshness Tide Detergent Timeliness, safety SwissAir, Airport Security

Product The good or service that is offered has basic functionality and features. It may be offered in one or multiple varieties. But, not just the good or service you offer, but a much broader definition to include warranties, after-sales service, installation, image,

Products are Goods and Services Pure Service Pure Good

Actual/Expected Product Augmented Product Product Levels Installation Packaging & Labeling Brand Name Features Delivery & Credit After- Sale Service Core Benefit Or Service Quality Styling Warranty Actual/Expected Product Core/Generic Product

Classification of Consumer Goods Type of Consumer Good Basis of comparison Convenience Shopping Specialty Unsought Toothpaste, cake mix, hand soap, laundry detergent Relatively inexpensive Widespread; many outlets Price, availability, and awareness stressed Cameras, TV’s briefcases, appliances, clothing Fairly expensive Large number of selective outlets Differentiation from competitors stressed Rolls Royce cars, Rolex watches Usually very expensive Very limited Uniqueness of brand and status stressed Burial insurance, thesaurus Varies Often limited Awareness is essential Product Price Place Promotion

Classification of Consumer Goods Type of Consumer Good Basis of comparison Convenience Shopping Specialty Unsought Aware of brand, but will accept substitutes Frequent purchases; little time and effort spent shopping; routine decision Prefer specific brands, but will accept substitutes Infrequent purchases; comparison shopping; uses decision time Very brand loyal; will not accept substitutes Infrequent purchases; extensive time spent to decide and get the item Will accept substitutes Very infrequent purchases; some comparison shopping Brand loyalty of consumers Purchase behavior of consumers

Diffusion or Why does everyone have (will have) an MP3 player. 1.0 Cumulative Probability of Adoption up to Time t What happens when everybody that is going to acquire a product has it? F(t) Introduction of product Time (t) From a presentation given by Professor David Berkowitz

Consumer Life Cycle Innovators (2.5%) Early Adopters (13.5%) Slide 9-5 Consumer Life Cycle Figure 9.2 F(t) 1.0 Innovators (2.5%) Early Adopters (13.5%) Early Majority (34%) Late Majority (34%) Laggards (16%) Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 6 6 6

Bass Model of Product Diffusion St = p * Remaining + q * Adopters Potential Innovation Imitation Effect Effect where: St = sales at time t p = “coefficient of innovation” q = “coefficient of imitation” # Adopters = S0 + S1 + • • • + St–1 Remaining = Total Potential – # Adopters Potential From a presentation given by Professor David Berkowitz

Examples of Innovation and Imitation Parameters Innovation Imitation Product/ parameter parameter Technology (p) (q) B&W TV 0.028 0.25 Color TV 0.005 0.84 Air conditioners 0.010 0.42 Clothes dryers 0.017 0.36 Water softeners 0.018 0.30 Record players 0.025 0.65 Cellular telephones 0.004 1.76 Steam irons 0.029 0.33 Motels 0.007 0.36 McDonalds fast food 0.018 0.54 Hybrid corn 0.039 1.01 Electric blankets 0.006 0.24 A study by Sultan, Farley, and Lehmann in 1990 suggests an average value of 0.03 for p and an average value of 0.38 for q. From a presentation given by Professor David Berkowitz

The Product Life Cycle Dollars Total Market Sales Total Market Profits Slide The Product Life Cycle 9.1 Dollars Total Market Sales Total Market Profits Introduction Growth Maturity Decline Time Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 5 5 5

Factors affecting the rate of diffusion Product-related – diffusion will be faster if… High relative advantage over existing products High degree of compatibility with existing approaches Low complexity Can be tried on a limited basis Benefits are observable Market-related – diffusion is influenced by … Type of innovation adoption decision (eg, does it involve switching from familiar way of doing things?) Communication channels used Nature of “links” among market participants Nature and effect of promotional efforts From a presentation given by Professor David Berkowitz

Product Life Cycle for Wine Coolers $1500 $1000 $500 Millions of dollars 1990 1991 1992 1993 1994 1995 1989 1984 1985 1986 1987 1988 1983 1982 Source: Figure drawn from Wine and Liquor Handbook statistics

Recording Industry Product Form Life Cycles 650 600 550 500 450 400 350 300 250 200 150 100 50 Vinyl Millions of units sold Compact disks Cassettes 1989 1991 1993 1995 1987 1977 1979 1981 1983 1985 1975 1973 Source: Figure drawn from Recording Industry Association of America statistics.

How stages of the product life cycle relate to marketing mix decisions Stage of the product life cycle Sales revenue or profit Introduction Growth Maturity Decline + – Total industry sales revenue Total industry profit Marketing objective Gain Awareness Stress differentiation Maintain brand loyalty Harvesting, deletion Competition None Growing Many Reduced Product One More versions Full product line Best sellers Price Skimming or penetration Gain share, deal Defend share, profit Stay profitable Promotion Inform, educate Stress competitive differences Reminder oriented Minimal promotion Place (distribution) Limited More outlets Maximum outlets Fewer outlets