CHAPTER 12: PRODUCT AND PROMOTION

Delivering More Value

PRODUCT DEFINITION: IT’S PROBABLY MORE THAN YOU THINK

Product – anything a company offers to satisfy customer needs and

wants… including not only physical goods, but also services and ideas.

Brand ~ Image ~ Packaging ~ Reputation ~ Guarantee

Car Wash ~ Cooking Lesson ~ Computer ~ Soap ~ Car

GOODS V. SERVICES: A MIXED BAG

Intangibility

Inseparability

Variability

Perishability

Most services embody

these qualities:

PRODUCT LAYERS: PEELING THE ONION

Core Benefits

Actual Product

Augmented Products

CommunicationsImageEntertainment

Ease of useLightnessRing Tone

WarrantyInsuranceUsers Guide

PRODUCT CLASSIFICATION: IT’S A BIRD, IT’S A PLANE….

• Convenience Products

• Shopping Products

• Specialty Products

• Unsought Products

Consumer Products

• Installations• Accessory Equipment• Maintenance, Repair, and

Operating Products• Raw Materials• Component Parts &

Processed Materials• Business Services

Business Products

Toothpaste, milk

Computer, refrigerator

Rolex watch

Home warranty

Production Robots

Copiers

Brooms, nails

Cotton, oil

BatteriesPayroll services

PRODUCT DIFFERENTIATION AND PLANNING

A Meaningful Difference:

1. Product Quality

2. Features & Benefits

3. Product Lines & Product Mixes

4. Branding

5. Packaging

PRODUCT QUALITY

Quality Level – how well a product performs its core functions.

Product Consistency – how reliably a product delivers its promised level of quality.

Product Category Quality IndicatorsInternet Search Engine:

Fast, relevant, far-reaching results

Stylish Blue Jeans: High-profile designer, high price, celebrity customers

TV Editing Equipment:

Reliability, flexibility, and customer services

Roller Coasters: Thrill factor, design and setting

Chain Saws: Effectiveness, safety, and reliability

Product Category Quality IndicatorsInternet Search Engine:

Stylish Blue Jeans:

TV Editing Equipment:

Roller Coasters:

Chain Saws:

FEATURES AND BENEFITS

Product Features – specific characteristics of a product. Customer Benefit – the

advantage that a customer gains from specific product features.

Product Product Feature Customer Benefit

Subway Sandwiches

Contact Lenses

High-definition TV

Hybrid Car

Triple Latte

Lower Fat

Different Colors

Caffeine, Caffeine…

46-inch screen

Better gas mileage

Looser pants

A new-looking you

The party’s at your house

More cash for other needs

More time to, uh, study

PRODUCT LINE AND PRODUCT MIX

Product Mix – the total number of product

lines by a single firm.

Product Line – products that are closely

related, either in terms of how they work, or the

customers they serve.

Cannibalization – a producer offers

a new product that takes sales away from its

existing product.

BRANDING

Brand - a product’s identity that sets it apart from other

players in the same category.

Brand Equity – the extra money that consumers

will spend to buy that brand.

Brand Name – a catchy, memorable name is

a powerful part of strong brand.

IBM, Coca Cola

COBRANDING

Cobranding - established brands from different

companies join forces to market the same product.

Examples:• Ford markets the Eddie Bauer Explorer• Frito-Lay markets KC Masterpiece BBQ chips• Betty Crocker markets brownies with Hershey’s syrup

NATIONAL BRANDS VS. STORE BRANDS

National Brands/Manufacturer Brands –

Brands owned and marketed by the producer.

Store Brands/Private Label Brands –

Brands produced and marketed by the retailer.

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PACKAGING

Protect the Product Provide Information Facilitate Storage Suggest Product Uses Promote the Brand Attract Buyer Attention

PRODUCT LIABILITY AN ISSUE?

Toilet brush: “Do not use for personal hygiene.” Scooter: “This product moves when used.” Bathroom Heater: “This product is not to be

used in bathrooms.” Cardboard car sunshield: “Do not drive with

sunshield in place.” Thermometer: “Once used rectally, the

thermometer should not be used orally.” Baby stroller cautions: “Remove child before

folding” Electric blender: “Never remove food or other

items from the blades while the product is operating.”

Hand-held massager: “Not for use while sleeping or unconscious.”

NEW PRODUCT DEVELOPMENT

Brand new ideas that radically change how people live

Characterized by changes to existing products

Slight modification of an existing product

Idea Generation

Idea Screening

Analysis

Development

Testing

Commercialization

New packaging, additional

sizes

New operating system for

your PC

Records > Tape > CD’s >

Downloads

PRODUCT DIFFUSION RATES

ObservabilityHow visible is the product

to other potential consumers?

TrialabilityHow easily can potential

consumers sample the new product?

ComplexityCan potential consumers easily understand

what your product is and how it works?

CompatibilityHow consistent is your product

with the existing way of doing things?

Relative AdvantageHow much better are the benefits of your

new product compared to existing products?

PRODUCT LIFE CYCLE AND MARKETING STRATEGIES

Phase Examples Sales/Profits Marketing Strategies

Introduction3D TV, fuel cell

technologyLow sales, low

profitsBuild awareness, trial, and

distribution

GrowthHybrid cars, video

cell phones, Increasing sales and

profits

Reinforce brand positioning, often through heavy advertising

MaturityAirlines, DVD

playersFlat sales and

declining profits

Target competitors, new product features, competitive advertising,

promotion, and price cuts

DeclinePagers,

videocassettesDeclining sales

and profitsReduce spending and consider

terminating the product

PROMOTION IN CHAOS: DANGER OR OPPORTUNITY?

• Technology has empowered consumers to choose when they interact with media

• Internet users spent an average of nearly 33 hours per week surfing the web

• Network television watching is declining

• Consumers watching TV are zapping ads with TiVo

• Rising consumer power and the breakneck pace of technology have created a growing need and stunning opportunity

AN INTERNATIONAL PERSPECTIVE

DeBeers tried running ads in Japan using a proven western strategy But a Japanese woman would shed tears and

feign anger that her husband would spend so much money.

The revised DeBeers campaign featured a man and wife in their tiny apartment Receiving a diamond, the wife chides her

extravagant husband “Oh, you stupid!”

Taking a big idea to a foreign market requires careful research

THE PROMOTIONAL MIX: COMMUNICATING THE BIG IDEA

• Advertising

• Sales Promotion

• Direct Marketing

• Personal Selling

• Emerging Tools

These tools can help communicate

the Big Idea to your target

market

EMERGING PROMOTIONAL TOOLS: THE LEADING EDGE

Product Placement

Advergaming

Minimovies

Buzz Marketing

Sponsorships

A MINI CAMPAIGN WITH MAXIMUM PUNCH

• BMW’s promotional budget for the Mini was 10% of the typical BMW budget

• The team developed a quirky campaign with the message: Let’s Motor!

• Ads appeared in Playboy, Rolling Stones and on billboards

• A 40-page booklet inserted in U.S. Magazines

• The car played a feature role in the movie Italian Job

• Brand awareness rose from 2% to 60%

• Mini sales exceeded expectations by 50%

• In 2009 Mini launched an official public field trial of the environmentally friendly Mini E

TRADITIONAL PROMOTIONAL TOOLS: A MARKETING MAINSTAY

• Advertising

• Sales Promotion

• Public Relations

• Personal Selling

TRADITIONAL PROMOTIONAL TOOLS: ADVERTISING

• Television• Broadcast• Cable

• Newspapers• Direct Mail• Radio

• Yellow Pages• Magazines• Outdoor• Internet

Which media effectively

reaches your target

market?

TRADITIONAL PROMOTIONAL TOOLS: CONSUMER PROMOTION

• Premiums• Promotional

Products• Samples• Coupons• Rebates• Displays

designed to stimulate immediate sales

TRADITIONAL PROMOTIONAL TOOLS: TRADE PROMOTION

• Special Deals• Allowances• Trade Shows• Contests• Sweepstakes• Special Events

Designed to simulate wholesalers and retailers to push specific products.

IF YOU’RE NOT BLOGGING, YOU’RE SLOGGING

Great ideas and scandals spread quickly. Blogs offer great opportunity for savvy firms, here are some tips:

Surf through the blogosphere everyday.

Consider launching a company blog.

Consider advertising on blogs Consider using the blogosphere to

generate word-of-mouth. Draw up commensurate blogging

guidelines for your employees.

TRADITIONAL PROMOTIONAL TOOLS: PUBLIC RELATIONS

33

• The media looks for newsworthy stories• Smart firms push potential news of their

company• The advantage of PR is that it is usually

credible• The disadvantage is that marketers don’t

control media perceptions

TRADITIONAL PROMOTIONAL TOOLS: PERSONAL SELLING

• Today selling means building relationships

• Personal selling is best for:• High-ticket items• Complex products• High volume

customers

Prospect and

Qualify

Prepare

Present

Handle Objection

s

Close Sale

Follow-up

CHAPTER 11: MARKETING

Building Profitable Connections with Your Customers

MARKETING IS MORE THAN ADVERTISING

Marketing – the activity, set of institutions, and processes for creating,

communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society

at large.

PRODUCTS PROVIDE UTILITY IN A NUMBER OF WAYS

The ability of

goods and

services to

satisfy

wants.

FormUtility

TimeUtility

PlaceUtility

Ownership Utility

Satisfies wants by converting products into a finished form

Satisfies wants by providing goods and services at a convenient place

Satisfies wants by providing goods and services at a convenient time

Satisfies wants by smoothly transferring ownership of goods and services from seller to buyer

Think Smoothie King

Think UPS or FedEx

Think ATM’sThink hassle free

purchasing

THE SCOPE OF MARKETING: IT’S EVERYWHERE

People Marketing

Place Marketing

Event Marketing

Idea Marketing

THE EVOLUTION OF MARKETING: FROM THE PRODUCT TO THE CUSTOMER

What is Customer Relationship Management?

The on-going process of acquiring, maintaining, and growing profitable customer relationships by delivering unmatched value.

Requires collecting, managing, and applying the right data at the right time for the right person (and every repeat customer is the “right person”!)

THE CUSTOMER: FRONT AND CENTER

Limited Relationships

FullPartnerships

Customer Relationship Management (CRM) Value

Customer Satisfaction

Customer Loyalty

Relationship between the cost and the benefit of

your product

Perception is key

Delivering perceived value above and beyond customer

expectations.The payoff from

delivering value and generating satisfaction.

They come back!

Customer Relationship Management

Customer acquisition/retention tool Sales and marketing support Data collected at all contact points Stored in data warehouse

Data analysis and data mining Ultimate objective is lock-in

Vested interest not to changeJoe’s home page

Customer Relationship Management Did you know ????

It cost 6x more to sell to a new customer than to an existing one…

A typical dissatisfied customer will tell 8 to 10 people about his/her experience…

Annual Customer Retention of 90% means that a business will lose half of their customers every 5 years…

A company can boost it’s profits 85% by increasing it’s customer retention by just 5%…

70% of complaining customers will do business with a company again if it quickly takes care of the service “snafu”...

ProductStrategy

PriceStrateg

y

PlaceStrategy

THE MARKETING MIX

ProductPricePromotionPlace

PromotionStrategy

And now – a fifth P Service

MARKETING STRATEGYMarketing Mix assists in answering ….

• Where are you going and how will you get there?• Who is your target audience and how will you reach them?

Target

Market

Pricing Strateg

y

Distribution

Strategy /Place

Promotion

Strategy

Product

Strategy

Economic

Political / Legal

Technological

Social / Cultural

Competitive

MARKET SEGMENTATION

Marketers may select multiple segments to target.

Marketers may select multiple segments to target.

Selecting a target

market begins with

dividing your market

into segments.

CONSUMER MARKETS VS BUSINESS MARKETS

How will the buyer use the

product?

Consumer Markets

Business Markets

Products for personal

consumption.

Products used directly or

indirectly to produce other

products.

Different approaches to select target markets.

A Well Chosen Target Market: Size

Profitability

Accessibility

Limited Competition

THE GLOBAL MARKETING MIX

Do you need to change your marketing mix for every country?

Most consumer products require a new marketing mix for each global market.

MARKET SEGMENTATION

• Geographic

• Customer-based

• Product-use based

CONSUMER BUSINESS

Demographic

Geographic

Psychographic

Behavioral

Senior citizen living facilities

Pickups in southern US

Porshe, Sports Illustrated

Miller Lite

Market segmentation based on the

concentration of customers. For example,

the “auto corridor”

Market segmentation based on the

characteristics of customers. For example,

schools or hospitals

Market segmentation based on how customers

use the product. For example, sensors.

CUSTOMER BEHAVIOR: DECISIONS, DECISIONS, DECISIONS

CONSUMER DECISION MAKING PROCESS

Need Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Postpurchase Behavior

INFLUENCE IN DECISION MAKING

• Values, attitudes, customs, social classCultural:

• Family, friends & reference groupsSocial:

• Demographics, personalityPersonal:

• Motivation, attitudes, perceptions, learning

Psychological:

BUSINESS BUYER BEHAVIOR

Rationale Criteria Specific Purchase Criteria Objective Standards Input from Multiple Internal Sources Formal Process Frequently Seek Customized Goods

REQUEST FOR PROPOSAL (RFP)

An invitation for suppliers, through a bidding process, to submit a proposal on a specific commodity or service. One of the best methods for leveraging a company's

negotiating ability and purchasing power with suppliers. Brings structure to the procurement decision and allows the

risks and benefits to be identified clearly upfront. Is lengthier than others, so it is used only where its many

advantages outweigh any disadvantages and delays caused.

Dictates the structure and format of the supplier's response.

The creativity and innovation that suppliers build into their proposals are used to judge supplier proposals

MARKETING RESEARCH: SO WHAT DO THEY REALLY THINK?

Monitor and predict customer behavior

Evaluate and improve marketing mix

Better marketing decisions

More value for consumers

More profits for business

Marketing Research – the process of gathering, interpreting and applying information to uncover opportunities

and challenges for your business.

CONDUCTING MARKET RESEARCH

1. Define the problem2. Access available information3. Gather additional information4. Review internal records; interview

employees5. Collect outside data6. Organize and interpret data7. Make a decision and take action8. Assess the results of the action

DEFINE THE PROBLEM

List the possible causes Eliminate any that can not be measured

Beware of symptoms Your company has missed its revenue

targets Symptom – sales declined Possible causes:

Have your customers changed? Have their tastes changed? Have their buying habits changed? Have you changed your product? Are there new competitors?

GATHERING INFORMATION

Assess what you already have available

If you need more… Stay as close to home as possible

Sales records Complaints Receipts Credit records

Ask your employees

MARKETING RESEARCH DATA

Already published material Trade associations Google????

Direct mail Questionnaires Telephone or street surveys Focus Groups Test marketing

• Lower Cost

• May not be Specific

• Frequently Outdated

• Available to Competitors

Secondary Data:

Existing

•

Primary Data: New

Data

• More Expensive • Customized

• Fresh, New

• Proprietary

ORGANIZING AND INTERPRETING DATA

Prioritize the data with the most important on top What strategies are suggested? How can they be accomplished? How are they different from what I’m doing? What current activities should be increased? What current activities should be decreased

or dropped?

MAKING DECISIONS AND TAKING ACTION

Prioritize each possible strategy from the standpoint of: Immediate goal to be achieved Cost to implement Time to accomplish Measurements

Select those with the greatest impact Develop tactics to implement

ASSESS THE RESULTS

Analyze your progress measures Adjust if necessary At the conclusion..

Did you achieve your goal ? Should the decision be renewed or

expanded ?

A MAJOR MARKETING SHIFT: SOCIAL RESPONSIBILITY

Marketers have responded to social demands: Setting higher standards for environmentalism Abolishment of sweatshops Involvement in the community

Many companies have begun to employ green marketing GO GREEN Target consumers who buy based on their

convictions

A MAJOR MARKETING SHIFT: TECHNOLOGY

Technology has revolutionized marketing

Power has shifted from producers to consumers

Customers have 24/7 access to information

Marketers have an abundance of promotional opportunities

Data can be used to develop one-to-one relationships with customers

Companies can mass customize products for customers

Marketing To Your Foundation Simulation Customers

Product Questions:

What do the customers want? What are the characteristics of the product that

are important to customers? What is the most important product

characteristic• In the low tech segment?• In the high tech segment?

What is “perceived age” of a product? How is reliability measured?

Pricing Questions:

What do the customers want? What is the price range for low / high tech

products? How price sensitive are the customers? What are the competitors charging? Can I lower my price and still earn a ‘fair

return’ on my investment?

Promotional mix

You will invest money in a “promotion” budget and create “awareness”. It relates to your advertising efforts. The awareness you create is specific to a

single product.

You will invest money in a “sales” budget and create “access” to your products. Accessibility applies to the segment, not the

product Sales Budget is spent on distribution, order

entry, customer service, etc.

Sales Forecast

Assess how the total market will perform What is the overall economic climate ?

Assess your performance and market share Will customers make decisions on the

same basis they have in the past ? How will your competitors perform

Will there be new competitors ? Will they introduce new products ? Will some competitors leave the market ?