SESI 4 solomon marketing managementt.pdf

SESI 4 solomon marketing managementt.pdf

1. Marketing: Real People, Real Choices
Ninth Edition
Chapter 8
Product I
Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.

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Learning Objectives
8.1Explain how value is derived through different
product layers.
8.2Describe how marketers classify products.
8.3Understand the importance and types of product
innovations.
8.4Show how firms develop new products.
8.5Explain the process of product adoption and the
diffusion of new innovations.

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Real People, Real Choices:
Under Armour
•Which option should Neal pursue?
Option 1:Approach the decision as a product problem,
building new product offerings to get into retail ASAP.
Option 2: Approach the decision as a marketing
problem. Stay the course with the current product line
and invest resources into ramping up its messaging to
target markets.
Option 3: Start over with a new business plan and
rebuild the Baselayerproduct from the ground up.

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Build a Better Mousetrap …
and Add Value
•“Build a better mousetrap and the world will beat a
path to your door.”
Old adage, but not always true!
WoodstreamCompany’s “Little Champ” failure …
•Next set of chapters relate to developing value
propositions for the customer.
Emphasis on the word develop

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Layers of the Product Concept
•A product represents all that a
customer receives in an
exchange.
•Marketers distinguish among
three distinct “layers” of the
product:
Core product
Actual product
Augmented product

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Figure 8.1 Layers of the Product

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How Marketers Classify Products
•Based on how consumers feel about, purchase, and
consume products
How long products last
How consumers buy products
How businesses buy products

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How Long Do Products Last?
•Durable goods are consumer products that provide
benefits over a period of months, years, or even
decades.
Cars
Furniture
Appliances
•Nondurable goods are consumed over the short
term.
Magazines
Sushi

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Figure 8.2 Classification of Products

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How Do Consumers Buy Products?
•Marketers also classify
products based on where and
how consumers buy the
product.
Similar to how consumer
decisions differ in terms of
effort they put into habitual
decision making vs. limited
problem solving vs. extended
problem solving (Chapter6)

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Convenience Products
•Convenience productsare typically nondurable
goods or services bought with minimal effort.
Staples (e.g., milk, bread)
Consumer packaged good (CPG) or fast-moving
consumer good (FMCG)
Impulse products
Emergency products
•Consumers expect convenience products to be low
priced and widely available.

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Shopping Products
•Shopping products are goods and services for which
consumers will spend time and effort to gather
information on price, product attributes, and product
quality.
Computers
TVs
Appliances
•Consumers are more likely to compare alternatives
before they buy.

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Specialty Products
•Specialty products have unique characteristics that
are important to buyers at almost any price.
Generally, an extended problem-solving purchase that
requires a lot of effort to choose
Marketers have to go to a lot of effort to make their
products stand out.
Customers tend to be very loyal.

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Unsought Products
•Unsought products are goods and services for
which a consumer has little awareness or interest
until a need arises.
Retirement plans
Life insurance
•Often require a good deal of advertising or personal
selling to interest buyers

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Business to Business Products
•Marketers classify B2B
products based on how
organizations use them.
•Knowledge of customer product
use enables marketers to:
improve product designs.
craft an appropriate marketing
mix.

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Categorizing B2B Products
(1 of 2)
•Equipment, often called installations or capital
equipment, is used in daily operations.
•Maintenance, repair, and operating (MRO) goods
are consumed relatively quickly.
•Raw materials are products of fishing, lumber,
agricultural, and mining industries used to in the
final product.

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Categorizing B2B Products
(2 of 2)
•Processed materials:produced by firms when
they transform raw materials from their original
state
•Specialized services:services which are essential
to the organization but are not a part of the actual
production of a product
•Component parts: manufactured goods or
subassemblies of finished items an organizations
needs to complete their own goods

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Classification of Consumer
and B2B Products
•Categorizing consumer and B2B products helps
marketers to:
develop better new products
improved marketing mixes
•Product durability, purchase process, and product
use provide useful information.
Are consumer product classifications for a given
product permanent? Can you think of products that
have moved from one class to another?

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“New and Improved!”:
The Process of Innovation
•Innovation is a hot topic in
the boardroom today!
•For marketers, an
innovation is anything
customers perceive as new
or different.
May be a minor or game
changing alteration to an
existing good or service
May be a brand new
product entirely

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Figure 8.3 Types of Innovations

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Continuous Innovation
•A continuous innovation is a modification to an
existing product.
Customer doesn’t have to learn anything new
•A knockoffis a new product that copies, with slight
modification, the design of an original product.
Harder to legally protect designs than technological
innovations

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Dynamically Continuous Innovation
•A dynamically continuous innovation is a
pronounced modification to an existing product.
•Requires a modest amount of learning for consumers
to use

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Discontinuous Innovation
•To qualify as a discontinuous innovation, the
product must create major change in the way people
live.
Consumers have to learn a great deal in order to be
able to effectively use the product.
What’s the next “killer app?”

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Convergence
•Convergence is the coming together of two or more
technologies to create a new system.
•One of the most talked about forms of dynamically
continuous innovation

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New Product Development (NPD)
•The new product development model is based on
categories of R&D expenditures.
In most organizations, this process is well-defined
and systematic.
•R&D investment is a central metric for measuring an
organization’s commitment to innovation relative to its
rivals.

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Figure 8.4 Phases in New
Product Development

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New Product Development
(1 of 4)
•Phase 1: Idea generation
(Ideation)
Marketers use a variety of
sources to come up with ideas
for new products.
Value co-creation via
collaboration with customers,
salespeople, service personnel,
and other stakeholders

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New Product Development
(2 of 4)
•Phase 2: Product-concept
development and screening
Product ideas are tested for
technical and commercial
success.•Phase 3: Marketing strategy
development
Developing a plan including
identifying the target market and
developing strategies for the four
Ps.

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New Product Development
(3 of 4)
•Phase 4: Business analysis
The product’s commercial viability
is assessed.
•Phase 5: Technical development
Engineers work to develop and
refine a working prototype.
Firm may need to apply for a
patent.

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Technical Development
•Even continuous
innovations such as
new beverage flavors
may require multiple
prototypes and
consumer tests as part
of the technical
development phase.

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New Product Development
(4 of 4)
•Phase 6: Market Test
The complete marketing plan is
tested in a small geographic area
similar to the larger market or via a
simulated market test.•Phase 7: Commercialization
The new product is launched into
the market.
Full-scale production, distribution,
advertising, and sales promotion are
begun.

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Adoption and Diffusion of
New Products
•Product adoption is the process by which a
consumer or business customer begins to buy and
use a new good, service, or idea.
•Diffusionis the process by which the use of a product
or innovation spreads throughout a population.

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Figure 8.5 Adoption Pyramid

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Adoption Pyramid
(1 of 2)
•Awareness
Customers see that innovation exists.
Media blitz
•Interest
Customers see how the product satisfies a need.
Seek out information•Evaluation
Costs and benefits
Impulse purchase

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Adoption Pyramid
(2 of 2)
•Trial
Actually experience or use the product
•Adoption
Purchase is made
•Confirmation
Expected versus actual benefits and costs

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Figure 8.6 Categories of Adopters

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Categories of Adopters
(1 of 2 )
•Innovators
Extremely adventurous
Risk takers
Well-educated
•Early Adopters
Concerned about social acceptance
Heavy media users

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Categories of Adopters
(2 of 2)
•Early Majority
Avoid being first or last
Middle class
Deliberate and cautious
•Late Majority
Older
Conservative
Lower than average education and income
•Laggards
Lower education and income
Bound by tradition

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Product Factors That Affect
the Rate of Adoption
•The degree to which a new product has each of these
characteristics affects the speed of diffusion.
Relative advantage
Compatibility
Complexity
Trialability
Observability

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Characteristics of Innovations
(1 of 3 )
•Relative advantageis the degree to which a
consumer perceives a new product as offering superior
benefits.
Greater relative advantage means faster adoption
•Compatibilityis the extent to which an innovation is
consistent with existing cultural values, customs,
practices, and norms.
Lack of perceived compatibility slows adoption

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Characteristics of Innovations
(2 of 3)
•Complexityrefers to the degree to which consumers
perceive a new product as difficult to understand and
use.
Higher the degree of perceived complexity, the slower
the rate of adoption.
•Trialabilityrefers to the ease of sampling a new
product and its benefits.
Lower costs associated with trial usage can speed rate
of adoption.

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Characteristics of Innovations
(3 of 3)
•Observabilityrefers to the degree to which others can
see the new product and the benefits it provides.
An innovation that is more visible will drive more word-
of-mouth communication.

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Copyright

44. Marketing: Real People, Real Choices
Ninth Edition
Chapter 9
Product II
Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.

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Learning Objectives
9.1Discuss the different product objectives and
strategies a firm may choose.
9.2Understand how firms manage products throughout
the product life cycle.
9.3Explain how branding and packaging strategies
contribute to product identity.
9.4Discuss how marketers structure organizations for
new and existing product management.

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Real People, Real Choices:
Quaker Oats
•Which option should Becky pursue?
Option 1:Continue the current path with the same
brand positioning and target through the master brand
approach.
Option 2:Explore a new positioning and target through
a consumer deep dive that could halo across all
products, yet be customized.

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Product Planning: Develop Product
Objectives & Product Strategy
•What makes one product succeed while another fails?
•Effective product planning is guided by a continuous
process of product management.
A systematic and usually team-based approach to
coordinating all aspects of a product’s strategy
development and execution

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Figure 9.1 Steps to Manage Products

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Getting Product Objectives Right
•Clearly stated product objectives provide focus and
direction.
Should support broader marketing objectives of
business unit
Should be consistent with the firm’s overall mission
•To be effective, objectives must be:
Measureable
Clear
Realistic
Indicate a specific time frame

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Figure 9.2 Objectives for Single and
Multiple Products

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Objectives and Strategies for
Individual Products
•Objectives and strategies for individual products:
Successful introduction of new products
Taking regional product nationwide
Breathing new life into mature products while
maintaining a distinct brand personality

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Objectives and Strategies for Multiple
Products
•A product line is the firm’s total product offering
designed to satisfy a single need or desire of target
customers.
Product line length is determined by the number of
stock keeping units (SKUs).
•Product line strategies:
Full-line vs. limited-line strategies
Upward, downward, or two-way line stretch
Filling out or contracting a product line•Cannibalization is a risk

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Product Mix Strategies
•A product mix is the total set
of products a firm offers for
sale.
•Product mix strategies
Width of product mix must be
considered.
Product lines in mix usually
have some things in
common.

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Ethical/Sustainable Decisions in the
Real World
•Kimberly Clark made great strides toward going green
but how green is green enough?
•“Pure and Natural” diapers are a “super-premium
diaper that includes natural and organic materials and
ingredients to provide gentle protection for new
babies, as well as initial steps toward environmental
improvements without sacrificing performance.”
Should marketers be allowed to promote a product to
consumers as “green” or “natural” if they know that
such claims are only partially accurate?

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Quality as a Product Objective: TQM
and Beyond
•Product quality is often a
key objective.
•A philosophy of total
quality management
(TQM) can help
companies achieve
quality objectives.

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Quality Guidelines
•ISO 9000
Standards for quality management
•ISO 14000
Standards for environmental management
•Six Sigma methodology
Process allows no more than 3.4 defects per million
units (getting it right 99.997% of the time)

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Figure 9.3 Product Quality

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Use Product Objectives to Decide on
a Product Strategy
•Product management systematically guides product
strategy development and execution.
•Process begins with clear product objectives.
Objective setting underlies product line/mix decisions
and quality management efforts.
How can you apply criteria for effective objective
setting to attainment of your personal career and
educational goals?

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Marketing throughout the Product
Life Cycle
•Many products have long
lives, while others are fads
that are “here today, and
gone tomorrow.”
•The product life cycle
(PLC) is a useful way to
explain how market
response and marketing
activities change over the
life of a product.

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Figure 9.4 The Product Life Cycle

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Introduction Phase of PLC
•New products that are offshoots of well-known brands
have an advantage.
•Many products never make it out of the introduction
phase due to low awareness.
As many as 95% of new products ultimately fail!
Effective advertising and promotion is essential.

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Growth, Maturity, and Decline Stages
of the PLC
•Growth stage of the PLC
The product is accepted and sales rapidly increase.
•Growth stage of the PLC
Typically longest phase
Sales peak while profit margins narrow.
•Decline stage of the PLC
Sales decrease as customer needs change.

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Figure 9.5 Marketing Mix Strategies
throughout the Product Life Cycle

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Product Life Cycles Phases
•PLC framework a useful tool to think about how
marketing tactics change over time.
Sometimes hard to know when a product passes from
one stage to the next.
Some companies are now using social media to bring
products “back from the dead.”
Up to 95% of new products ultimately fail. What are
some implications of this statistic for marketers?

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Branding and Packaging: Create
Product Identity
•What do you think of when you hear the word
“Disney?”
•Disney achieved its strong identity through decades of
great branding.

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What’s in a Name (or a Symbol)?
•A “good” brand name:
maintains relationships with customers.
positions a product by: (1) portraying an image or (2)
describing how the product works.
is easy to say, spell, read, and remember.
fits the target market, product benefits, customer’s
culture, and legal requirements.

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Trademarks
•Trademark is the legal term for a brand name, brand
mark, or trade character.
Trademarks legally registered by a government
obtain protection for exclusive use in that
country.
® is the trademark symbol used in the U.S.
Common-law protection
Visit the U.S. Patent and Trademark Office
(USPTO)

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Why Brands Matter
•A brand is a lot more than just the product it
represents.
Strong brands build emotional connections with
customers.
•Brand equity refers to a brand’s value to its
organization over and above the value of the generic
version of the product.
Brand equity provides competitive advantage.
Brand equity results in brand loyal consumers and
attachment.

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Brand Meaning
•Strong brands forge lasting bonds with customers
based on brand meaning.
Brand meaning encompasses the beliefs and
associations a consumer has about the brand.
•Today, brand meaning builds virally as people spread
its story online.
Through brand storytelling, marketers seek to
engage consumers with compelling stories about
brands.

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Characteristics of World Class
Brands
1.The brand excels at delivering the benefits customers desire.
2.The brand stays relevant.
3.The pricing strategy is based on consumer’s perceptions of value.
4.The brand is properly positioned.
5.The brand is consistent.
6.The brand portfolio and hierarchy make sense.
7.The brand coordinates a full repertoire of marketing activities to build
equity.
8.The brand’s managers understand what the brand means to
consumers.
9.The brand is given proper support.
10.The company monitors sources of equity.

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Brand Extensions and Sub-Branding
•Products with strong brand equity provide exciting
opportunities for marketers.
Brand extensions arise from a firm leveraging brand
equity to sell new products using the same brand
name.
Sub-branding occurs when a firm creates a
secondary brand to help differentiate a product line
(e.g., Virgin Mobile, Virgin Atlantic, Virgin Galactic).

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Figure 9.6 Branding Strategies

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Individual vs. Family Brands
•Family brand strategy is
when product items share a
common brand name.
•Family brands such as
Campbell’s provides an
umbrella under which
multiple products can be
effectively marketed.

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National and Store Brands
•National brands are those produced and marketed by
a manufacturer.
•Store (or private label) brands are those which are
offered by a retail store or chain under an exclusive
trade name.
Costco: Kirkland’s
Wal-Mart: Sam’s Choice
Others?

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Generic Brands
•Generic brands is a strategy in which products are
not branded and are sold at lowest price possible.
Typically packaged in white with black letters that only
names the product itself (“Green Beans”)

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Licensing
•Licensingis when one firm sells toanother firm the
right to use a brand name for a specific purpose for a
specific period of time.

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Cobranding
•Cobranding:Two brands
agree to work together to
market a new product
•Ingredient branding:
Branded materials become
“component parts” of other
branded products.

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Packages and Labels:
Branding’s Little Helpers
•A packageis the covering or container for a product.
•Serves both functional and communication purposes
Branding
UPC codes

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Figure 9.7 Functions of Packaging

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Design Effective Packaging
(1 of 2)
•Effective packaging design
entails many decisions
How are other products
in category packaged
and displayed?
Copycat packaging

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Design Effective Packaging
(2 of 2)
•Effective packaging also considers:
Choice of packaging material and the image it projects
Environmental impact of packaging
Shape and color influences on image
Graphic information to be portrayed

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Labeling Regulations
•Fair Packaging and Labeling Act (1966):
Federal legislation aimed at making labels more
helpful to consumers by providing useful information.
•Nutrition Labeling and Education Act (1990)
Law requires food labels to state how much fat,
saturated fat, cholesterol, calories, carbohydrates,
protein, and vitamins are in each product serving.

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Branding and Packaging
•Branding and packaging decisions play an essential
role in shaping how consumers view a product.
While there are many types of decisions to be made,
each should conform with the overall product strategy
and needs of target markets.
Is it fair for retailers like Walgreens and Wal-Mart to use
copycat packaging on store branded products?

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Organize for Effective
Product Management
•Product strategies are only as effective as the
managers that create them and carry them out.
•In larger firms, various types of managers may be
involved in the process:
Brand managers
Product category managers
Market managers

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Figure 9.8 Types of Product
Management

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Organize for New Product
Development
•Launching new products is so important; many firms
pay special attention to the introductory phase of the
PLC
•Within larger companies, cross-functional teams are
formed by enlisting specialists from different areas.
Skunk works: venture teams located away from
traditional company offices

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Copyright