L5 product bho1171

Product

Lecture 5aChapter 7 (Sharp, 2013)

BHO1171 – Session 5 Slide 2

Products Defined

“A product is anything that can be offered to a market to satisfy a want or a need. Products that are marketed include physical goods, services, experiences, events, people, places, properties, organisations, information, and ideas.”

– Kotler and Keller (2012, p. G7)

BHO1171 – Session 5 Slide 3

What is a product?

All the satisfaction, use, benefit provided by the product

Is a car just nuts & bolts? It’s more Gestalt - the whole is

greater than the sum of the parts

BHO1171 – Session 5 Slide 4

Gestalt in products

Products are bought for more than just the bits that make them up

This Mercedes Benz commercial presents their cars as life companions, not just cars

BHO1171 – Session 5 Slide 5

What is a service

"The production of an essentially intangible benefit, either in its own right or as a significant element of a tangible product, which through some form of exchange, satisfies an identified need.”

or“Anything that can’t be dropped on

your foot” (The Economist)

BHO1171 – Session 5 Slide 6

Services

Services Any activity or benefit that one party

can offer to another that is essentially intangible and does not result in the ownership of anything.

Service organisations Offer their customers something that is

essentially intangible: the interaction does not result in the ownership of anything that endures.

BHO1171 – Session 5 Slide 7

Customer Contact - Differentiation

This ad presents different styles of customer service in banking Take particular notice of the customer service set

up shown at the end of the ad ANZ Commercial

BHO1171 – Session 5 Slide 8

Brands and products

A product is something that is made in a factory A brand is something that is bought by a customer.

A product can be copied by a competitor A brand is unique.

“Within every brand there is a product, not every product is a brand”

(Bullmore 1984).

BHO1171 – Session 5 Slide 9

Marketing mix and branding strategies

1. Brand Fit2. Features3. Product Name4. Logo5. Labels and Packaging6. Product Mix and Range

BHO1171 – Session 5 Slide 10

1. Brand fit

Relational market-based assets (rMBAs) Accumulated over time Embodied in the brand

• Reputation, goodwill Co-production of firm/product and

external environment• Distribution, selling channels, end-

customers, partnerships

BHO1171 – Session 5 Slide 11

2. Features

Customers have core needs which they want to meet Or fundamental benefits

But once those are understood… Can devise components and features of the product

http://www.rosedalenaturalhealth.com/partnering-with-rnhc/articles-2/things-every-walker-and-runner-should-know-getting-the-most-of-your-running-shoes/

http://insider.nike.com/us/shoes/nike-air-max-2012-running-shoe-2466/

BHO1171 – Session 5 Slide 12

3. Product name

Name of the product (adds to? comes from?) strong positive rMBAs

But what’s in a name?

BHO1171 – Session 5 Slide 13

3. Does the name really matter?

It is argued that the actual name really doesn’t matter Many successful brands were not well

researched but named after someone/something

BHO1171 – Session 5 Slide 14

Some ridiculous, successful brands

BHO1171 – Session 5 Slide 15

Naming Your Brand

Brand names should be Memorable (EasyJet) Able to be registered (Cadbury) Easy to pronounce (Hoechst) Easy to read and spell (Pfizer) Translatable (Coca Cola, Nova) Meaningful (Cash Converters,

ComfortBra) Culturally sensitive

BHO1171 – Session 5 Slide 16

Logos and brands Corporate brand

Maple Leaf Foods International (Toronto HQ)

Product brand “Maple Leaf Prime” is name

used for poultry products Brand mark or Logo

the element of the visual brand identity that does not consist of words but design and symbols.

BHO1171 – Session 5 Slide 17

5. Labels and packaging

Packaging not only protects the good Draws attention to it on the shelf Adds value

• Especially true if bought as a present or a personal reward

Contains information about the product• Purpose• Instructions

– Self-service

BHO1171 – Session 5 Slide 18

5. Components of a packageAppearance Protection

Cost Disposability

Function

BHO1171 – Session 5 Slide 19

6. Product mix and range

A range of products that fulfil the same basic need Example: manufacturer and range of

cars

Defined in terms of breadth (generalist) and depth (specialist)

BHO1171 – Session 5 Slide 20

Product categoriesConsumer products• For personal use or consumption

Industrial products• Products bought for further processing or for use in

conducting a business.

Consumer and industrial products• Some products are made both for consumer and

industrial use

Developing and marketing new products

BHO1171 – Session 5 Slide 22

What is a New Product?Were the Sony Walkman, stone wash jeans or the

mobile phone new products?One way to classify newness is from a customers

viewpoint e.g. a continuum based on how much behavioural

change or new learning is required by the consumer to use the product.

Another way to classify is from a firm’s point of view e.g. the amount of technological change required to

replace vs reformulate.

BHO1171 – Session 5 Slide 23

Developing and marketing new products

What do we mean by ‘new’?There are three categories of new products:

Discontinuous innovations• Completely new • e.g. first mobile phone

Continuous innovations• Slight changes to product features• e.g. most new car models

Dynamic continuous innovations• Large change in technology, but product largely the same to use• e.g. Dyson’s vacuum cleaner

BHO1171 – Session 5 Slide 24

Alternatives to NPD

Acquiring new productsCopy products that have been developed elsewhere

E.g. Many successful companies have copied technology:

The Ssangyong Chairman Daewoo Le Mans Lexus

Purchase the ability to produce or supply a new product

BHO1171 – Session 5 Slide 25

The Linear NPD Process

1. Idea Generation

2. Idea Screening

3. Concept Development

4. Business Analysis

5. Product Development

6. Market Testing

7. Product Launch

As each stage is

reached, a “Go/Kill” decision needs to be taken

BHO1171 – Session 5 Slide 26

An example of NPD processes

Wow Toys

BHO1171 – Session 5 Slide 27

An example of R&D NPD

New Speaker Development at Warwick University

BHO1171 – Session 5 Slide 28

Example of concept testing

Volvo S60 Concept Development

BHO1171 – Session 5 Slide 29

New Product Testing

Testing new products for functional performance is important To make sure you got it right

An example of when Chinese carmaker Brilliance got it wrong

An example of when Mercedes Benz got it right in the 1980s

BHO1171 – Session 5 Slide 30

New Product Failure Rate

The success rate of fully developed products can be generalised at between 45% and 67% Based on Australian, US and UK studies conducted

in the last fifteen years • NOTE: it is how the firm itself perceives its product to

have performed relative to their expectations that determines success in these studies.

Sources citing the failure rate at launch to be as high as 90% tend to be unsubstantiated and are likely wildly overstated.

BHO1171 – Session 5 Slide 31

Some empirical results

27% of product line extensions failed; 31% of new brands introduced in categories where

the company already had a product failed; and 46% of the new products that were introduced to

new categories failed. • (Urban and Hauser, 1993)

While not guaranteed of success, line and brand extensions are considered less risky because they attempt to capitalise on existing market based assets

• (Aaker and Keller, 1990).

The Product Life Cycle (PLC)

BHO1171 – Session 5 Slide 33

Why develop new products?

It is claimed products have a finite life span

PLC Product Life Cycle

As a product dies, it needs to be replaced

BHO1171 – Session 5 Slide 34

The Product Life Cycle (PLC)

Profits

Sales

Development Introduction

Growth

Maturity

Decline

SalesProfit ($)

Loss ($)

BHO1171 – Session 5 Slide 35

Marketeer Beware! Individual brands may not follow PLC globally

e.g., Daewoo took 70s Opel design and sold many cars in 90s in US as Pontiac LeMans

Each market is different 86% of North American households have microwave less than 15% in Italy

Using PLC can kill product off early

BHO1171 – Session 5 Slide 36

Introduction: a stage of the PLC when sales are low as a new idea is first introduced to a market

Growth: a stage of the PLC where industry sales grow fast but profits rise and start falling as competitors enter the market

Maturity: a stage when industry sales level off and competition gets tougher

Decline: new products start to replace the old

Introduction

Growth

Maturity

Decline

Product Life Cycle

BHO1171 – Session 5 Slide 37

+

Product modePrice policy

Place

PromotionProfits

newuse skimming or

penetration strategiesrapidly building distribution

networkbuild general demand

expected losses

Introduction

Growth

Maturity

Decline

Product Life Cycle

BHO1171 – Session 5 Slide 38

+

Product modePrice policy

Place

PromotionProfits

differentiated productsmaintain stable pricing policy

solidify distribution channels and network

generate secondary demandhighest profits (peak)

Introduction

Growth

Maturity

Decline

Product Life Cycle

BHO1171 – Session 5 Slide 39

+

Product modePrice policy

PlacePromotion

Profits

modify product or product usageprice reduction; non-price

competitionincrease distribution efforts

concentrate on productpositioning

stable profits

Introduction

Growth

Maturity

Decline

Product Life Cycle

BHO1171 – Session 5 Slide 40

+

Product modePrice policy

PlacePromotion

Profits

maintain a basic productmaintain pricing or rise prices

limit distribution effortscut-back on advertising and

sales promotionsreduced profits

Introduction

Growth

Maturity

Decline

Product Life Cycle

BHO1171 – Session 5 Slide 41

Extending the PLC

Ansoff matrix There are three strategies that might be

considered to help achieve PLC extension in sales. These are also ways of implementing one of the chosen options from the Ansoff framework:• Modifying the market• Modifying the marketing mix• Modifying the product

BHO1171 – Session 5 Slide 42

Product category life cycle (PLC)

BHO1171 – Session 5 Slide 43

Limitations of the PLC

Brand sales do not necessarily follow a symmetrical curve

Length of the life cycle may vary

Relate to specific markets

Can be manipulated by management Modifying the market

• Seek new segments (example: business to consumer, international)

Modifying the marketing mix• New channels of distribution

Modifying the product