Marketin y Mix j \j yy spring 2005 Product - definitions Everything, both favorable and unfavorable, that a person receives in an exchange for price paid. A bundle of physical, service, and symbolic attributes designed to enhance buyers want satisfaction. A product is a set of tangible and intangible attributes including packaging, colour, price, quality and brand, plus the services and reputation of the seller. Attributes / Benefits of a product Product quality ^^^H ^^^^^^^^^^^^i l ■ Physical characteristics of goods Seller's services 1 1 ^V^l H Colour Product warranty Price Brand Packaging Design Types of Products PRODUCTS 1 i Consumer Products Business Products hi—> ■ 1 i Convenience Products Shopping Products 1 Specialty 1 Products Unsought Products Specialty Products Luxury Cars, Designer Clothing, Health Foods Unsought Products Convenience Products Impulse Items: Magazines Staples: Gas, Bread Emergency Items: Bandages, Candles Life Insurance, Self-Improvement Courses Cemetery Plots Shopping Products Homogeneous: Washing Machine, Portable Fan Heterogeneous: Physical Fitness Training Marketing Impact of the Consumer Products Classification System ^^ y Factor Convenience Products Shopping Products Specialty Products CONSUMER FACTORS Planning time involved in purchase Very little Considerable Extensive Purchase frequency Frequent Less frequent Infrequent Importance of convenient location Critical Important Unimportant Comparison of price and quality Very little Considerable Very little Marketing Impact of the Consumer Products Classification System Factor Convenience Products Shopping Products Specialty Products MARKETING MIX FACTORS Price Low Relatively high High Promotion Advertising and promotion by producer Personal selling and advertising by both producer and retailer Personal selling and advertising by producer and retailer Distribution channel length Long Relatively short Very short Number of retail outlets Many Few Very few; often one per market area Importance of store image Unimportant Very important Important Product Items, Lines, and Mixes Product Item A specific version of a product that can be designated as a distinct offering among an organization's products. Product Line A group of closely-related product items. Product Mix All products that an organization sells. Benefits of Product Lines Standardized Components Efficient Sales and Distribution Product Mix Width • The number of product lines an organization offers. > Diversifies risk > Capitalizes on established reputations Product Line Depth • The number of product items in a product line. S Attracts buyers with different preferences S Increases sales/profits by further market segmentation S Capitalizes on economies of scale S Evens out seasonal sales patterns Example : Gillette's Product Lines and Mix Width of the product mix o o 3 O Q. O Q. O Q Blades and razors Mach 3 Sensor Trac II Atra Swivel Double-Edge Lady Gillette Super Speed Twin Injector Techmatic Toiletries Writing instruments Lighters Series Adorn Toni Right Guard Silkience Soft and Dri Foamy Dry Look Dry Idea Brush Plus Paper Mate Flair Cricket ST. Dupont Example : Procter & PRODUCT LINES P Bar soaps R O Laundry detergents D Dishwashing detergents Cleaners and cleansers Shampoos " Toothpastes ' Paper tissue products * Disposable diapers Shortening and cooking oils Gamble Product Mix BRANDS Camay, Coast, Ivory, Kirk's, Lava, Monchel, Safeguard, Zest Bold, Cheer, Dash, Dreft, E ra, Gain, Ivory Snow, Liquid Bold-3, Liquid Cheer, Liquid Tide, Oxydol, Solo, Tide Cascade, Dawn, Ivory Liquid, Joy, Liquid Cascade Comet, Comet Liquid, Mr Clean, Spic & Span, Spic & Span Pine Liquid, Top Job Head & Shoulders, Ivory, Lilt, Pert-Plus, Prell Crest, Denquel, Gleem Banner, Charmin, Puffs, White Cloud Luvs, Pampers Crisco, Crisco Oil, Crisco Corn Oil, Puritan Product Portfolio - Boston (BCG) Matrix HIGH Market Growth 10 LOW 0 Stars Cash Cows i r 10.0 HIGH Problem Child/? © © Dogs ED Relative Market Share LOW 0.01 Circle Size = proportion of total revenue business contributes to corp. Each product/Strategic Business Unit (SBU) assigned to a cell: ■ Axe Y: Annual market growth rate High = 10% + Low = <10% ■Axe X: Relative market share ratio of company's marker share to the largest competitor's share ■High = 1.0-10.0 Low = 0.01-1.0 ■ Competitor share 20%, share of own company 5% -> ratio = 0.25 (Low) ■ Competitor share 5%, share of own company 20% -> ratio = 4.0 (High) Intervals highly dependable on type of market, etc.!!! General Electrica Industry Attractiveness-Business Strength Matrix Industry Attractiveness • Market Size • Growth Rate • Profit Margin • Intensity of Competition • Seasonality • Cyclically • Resource Requirements • Social Impact • Regulation • Environment • Opportunities & Threats Business Strength Relative Market Share • Relative Costs Reputation/ Image • Profit Margins Bargaining Leverage • Fit with KSFs Ability to Match Quality/Service 10.0 High 6.7 Medium 3.3 Low 1.0 Strong 6.7 Average 3.3 Weak © e CD 1.0 Rating Scale: 1 = Weak ; 10 = Strong Product Life Cycle Introduction Growth Maturity Post Decline Mortem Sales Profit Time Loss/profit CO C/) Introduction Growth Maturity Decline Product A ^Product B + Time Life cycle extensions • Fashions and fads • Technological life cycles • International product life cycle Product LIFE CYCLE STAGE SALES Introduction Low sales Growth Rapidly rising sales Maturity Peak sales Dedí me Falling sales ^ife Cycle PROFITS COMPETITORS Losses may occur Declining profits Profits may fall to become losses Few Growing number Stable number, then declining Declining number Life Cycle and the Marketing Mix MARKETING MIX ELEMENTS LIFE CYCLE STAGE PRODUCT PRICE PLACE PROMOTION Introduction Growth Maturity Decline Offer market-tested product; keep mix small Improve product; keep product mix limited Differentiate your product to satisfy different market segments Cut product mix; develop new-product ideas Go after innovators with high introductory price [slamming strategy) or use penetration pricing Adjust price to meet competition Further reduce price Use wholesalers, selective distribution Increase distribution Take over wholesaling function and intensify distribution Consider price increase Consolidate distribution; drop some outlets Dealer promotion and heavy investment in primary demand advertising and sales promotion to get stores to carry the product and consumers to try it Heavy competitive advertising Emphasize brand name as well as product benefits and differences Reduce advertising to only loyal customers ervice Marketing versus Goods Marketing Characteristics Tangibility Production/ Consumption Standardization Perishability Pure Services Marketing Intangible goods Occur at the same time Less standardization Greater perishability Pure Goods Marketing Hybrid Services/ Goods Marketing Tangible goods Occur at different times More standardization Less perishability Management Perspectives on "New" Products 1) New-to-the-world 2) Product category extensions 3) Product line extensions 4) Product modifications vs Discontinuous Innovation Consumers' Perspectives on "New" Products Dynamically Continuous Innovation Continuous Innovation 5 Characteristics of New Product Success 1. Relative advantage 3. Trial-ability - Lower costs - Easily tested - Faster - Low risk - Easier - Inexpensive - Additional services - No special equipment - More fun, etc. - Free samples or coupons 2. Compatibility with 4. Observability existing habits and visible cues behaviors ~ Communicate hidden qualities 5. Simplicity - User friendly, Understandable, Easy to grasp/use, etc. Brands BRAND = A name, term, symbol, design, or combination thereof that identifies a seller's products and differentiates them from competitors' products. Brand Name That part of a brand that can be spoken, including letters, words, and numbers. Brand Mark The elements of a brand that cannot be spoken. Brand Equity The value of company and brand names. Master Brand A brand so dominant that it comes to mind immediately when a product category, use, attribute, or benefit is mentioned. An Effective Brand Name ♦ Is easy to pronounce ♦ Is easy to recognize and remember ♦ Is short, distinctive, and unique ♦ Describes the product, use, and benefits ♦ Has a positive connotation ♦ Reinforces the product image ♦ Is legally protectable Manufacturers' Brands Versus Private Brands Manufacturers' Brand The brand name of a manufacturer. Private Brand A brand name owned by a wholesaler or a retailer. Generic Brand A no-frills, no-brand-name, low-cost product that is simply identified by its product category. Advantages of Manufacturers' Brands Develop customer loyalty Attract new customers Enhance prestige Offer rapid delivery, can carry less inventory Ensure dealer loyalty Advantages of Private Brands Earn higher profits Less pressure to mark down prices Manufacturer may drop a brand or become a direct competitor tc dealers Ties to wholesaler or retailer No control over distribution of manufacturers' brands Global Brand Scorecard RANK 2 0D3 200 2 PERCENT COUNTRY BR AM D VALUE BRAND VALUE CHANCE OF ^BILLIONS ÍBILUOMS OWNERSHIP 1 COCA-COLA 70.4b 65.54 + 1^G U.S. 2 MICROSOFT 65.17 64.09 +2 U.S. 3 IBM 3-1 77 51.19 -i-l U.S. 4 GE 4-2 3 s 41 .3 1 -1-2 U.S. S INTEL 31 .1 1 3Ci.BG -i-l U.S. 6 NOKIA 29.44 2^.^y -2 Fi n 1 and 7 DISNEY 2S.04 2l^.ZG -4 U.S. 8 MCDONALD'S 24.7 0 25.3 8 -G U.S. 9 MARLBORO ZZ .IS Z4.15 —S U.S. lO MERCEDES 21.37 £1 Ol -1-2 Germany Source: Interbrand Group, August 2003 Packaging Contain and Protect Promote Facilitate Storage, Use, and Convenience Facilitate Recycling Persuasive ♦ Focuses on promotional theme ♦ Information is secondary beling Informational ♦ Helps make proper selections ♦ Lowers cognitive dissonance ♦ Includes use/care Product Warranties 1 Express Warranty —*- Written Guarantee Implied Warranty * Unwritten Guarantee 1 e