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
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• 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 ?