Marketing Module 3

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

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.

3. Marketing strategy development Business analysis Concept development and testing Product development Market testing Idea screening Idea Generation Discuss Each Step ofNew Product Generation Commercialization

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

5. 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

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

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

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

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

10. Promotion High Low High Price Low Four IntroductoryMarketing Strategies Rapid- skimming strategy Slow- skimming strategy Rapid- penetration strategy Slow- penetration strategy

11. Maturity Stage • Market Modification • Product Modification • Marketing-Mix Modification

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

13. 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.

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

15. Convenience Products Shopping Products Unsought Products Specialty Products Consumer-Goods Classification • 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 • 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

16. Consistency Product Mix 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

17. What is a Brand? User Culture Personality Attributes Benefits Values

18. 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)

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

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

21. Labels Promote Describe Identify

22. 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.

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

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

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

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

27. Offer Delivery Image Service Differentiation

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

29. Determinants of Service Quality • Reliability • Responsiveness • Assurance • Empathy • Tangibles

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

31. 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.

32. Major Trends inCustomer 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

33. 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.

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

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

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

37. 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

38. 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

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

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

41. 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

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

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

44. CustomerSegment Product-form Location Time Discriminatory Pricing

45. Hold our price at present level; continue to watch competitor’s price No No No Yes Is the price likely to significantly hurt our sales? Is it likely to be a permanent price cut? How much has his price been cut? Yes 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 Price-Reaction Program for Meeting a Competitor’s Price Cut Has competitor cut his price?

46. 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