Marketing in the Digital World
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4Developingvalue.pptxL4: DEVELOPING VALUE
Module Overview
Application
1. Introduction
2. The Global Marketplace
3. Segmentation, Targeting, Positioning (Connected consumers )
4. Developing Value
7. Delivering Value (Channelnomics)
8. Market Entry Strategies
9. International Sales (Producrts v Services ) B2C & B2B
10. Marketing and the impact of Digital
11. The New Customer Path
12. Summary & Planning
5.Communicating Value
6.Pricing Value
Developing Value Products / Services / Augmented add-ons
DEVELOPING VALUE
Creating value for customers means providing useful products and services that customers consider worthy of their time and money.
For customers to find value in a product or service, its perceived benefits need to outweigh its cost.
Creating value means maximizing benefits within an acceptable price point.
Donner, M., Gohier, R. and de Vries, H., 2020. A new circular business model typology for creating value from agro-waste. Science of the Total Environment, 716, p.137065.
Why is creating value for customers important?
Creating value can increase a brand's reputation, profits and long-term success.
Providing valuable goods and services can increase customers' confidence and trust in a company's offerings.
Customers who feel they've made a good purchase are more likely to buy again and share their positive experience with others.
DEVELOPING VALUE
Pandey, N. and Paul, G., 2020. Marketing at Patanjali Ayurved: Creating value in a herbal way. South Asian Journal of Business and Management Cases, 9(1), pp.99-111.
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
Lecture Notes:
Slide introduces the layers of the product concept.
When marketers develop strategies, they need to consider how to satisfy customers’ wants and needs at each of these three layers – that is, how they can create value.
Layers of the Product
LECTURE NOTES:
A product is everything that a customer receives from a purchase. Figure 8.1 illustrates how a product such an automobile can be broken down into three layers corresponding to the core product, actual product, and augmented product. Marketers need to understand consumers’ needs and wants at EACH level and market their products appropriately. Let’s discuss the three product layers in more detail.
Basic benefits relate to the primary reason why consumers purchase a given product within a product category. Obviously, anyone who purchases a vehicle is looking for transportation – this would be considered a basic benefit. But basic benefits might also be less functional or practical in nature. For example, an individual seeking to enhance their personal status would consider this a basic benefit when purchasing a luxury vehicle. Fun, or driving excitement might also be a primary benefit sought by individuals who purchase sports cars.
The core product is defined as the physical good or delivered service that supplies the desired benefits. Thus the core product includes specific features associated with the physical product, its appearance, the brand, or its package.
The augmented product includes the actual product PLUS other supporting features such as the warranty, service contract, credit and delivery services, installation and training or product use instructions. Many aspects of the augmented product can be adapted or changed much more easily than can the actual product itself. For example, loan rates offered by manufacturer’s fluctuate – low rates may be used to entice consumers to buy at certain times of the year. Similarly, warranties can change, though a change of this nature is more likely to coincide with the start of a new model year.
Phases in NPD
LECTURE NOTES:
Seven phases or steps make-up the new product development process.
New Product Development
Phase 1: Idea generation
Marketers use a variety of sources to come up with ideas for new products
Value creation via collaboration with customers, salespeople, service personnel and other stakeholders
LECTURE NOTES:
Phase 1: Idea generation.
In this stage, marketers brainstorm ideas generated by customers, employees, service providers, or others that provide customer benefits and which are compatible with the firm’s mission. Focus groups can be particularly helpful in tapping into consumer ideas for new products that related to evolving or changing needs.
Some companies encourage their new product designers to “think outside the box” by exposing them to new ideas, people, and places.
The director of culinary innovation at McDonald’s runs the chain’s test kitchen and he’s challenged with finding new menu concepts that work within the context of a McDonald’s store.
Recently, he came up with a simple idea: He took the breaded chicken the chain uses in its Chicken Selects strips, topped it with shredded cheddar jack cheese and lettuce, added a few squirts of ranch sauce, and wrapped it in a flour tortilla. McDonald’s dubbed it the “Snack Wrap” and put it on the menu at a starter price of $1.29.
A hit was born—the Snack Wrap is one of the most successful new product launches in company history with sales exceeding projections by 20 percent.
Instructor may want to also introduce the idea of value co-creation, the process by which an organization creates value via collaboration with customers and other stakeholders
New Product Development
Phase 2: Product concept development and screening
Product ideas are tested for technical and commercial success
Phase 3: Marketing strategy development
Developing a plan to deliver the product to the marketplace
LECTURE NOTES:
Phase 2: Product-concept development and screening
The marketer takes the ideas generated in phase 1 of the process, and expands these ideas into more complete product concepts. Product concepts are screened – meaning they are tested – for both technical AND commercial success. The idea is to weed out those concepts that have little chance of making it if actually produced and released for distribution.
Phase 3: Marketing strategy development
Marketers need to make some fundamental decisions at this stage, including identifying a target market, estimating its size and potential, and determining how to position the product to effectively appeal to the selected target market. Next, planning for pricing, distribution, and promotion is undertaken.
New Product Development
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
LECTURE NOTES:
Phase 4: Business analysis
While the concept development and screening stage estimated the basic commercial viability of the product, the concept is scrutinized in greater detail during the business analysis phase. To be commercially viable, the product concept must make a positive contribution to the overall profit of the firm.
Employees charged with determining the commercial viability of a product estimate product demand, and work hard to determine if the firm has adequate resources to introduce the new product. The new items fit in the overall product mix is also analyzed. In particular, marketers try to estimate if the new offering will cannibalize (e.g., steal sales from) existing brands. Possible synergies with existing brands are also evaluated. The business analysis must be thorough because the costs of new product development begin to climb rapidly from this stage forward.
Phase 5: Technical Development
The technical development stage is expensive for firms because engineers begin refining the product concept, develop detailed blueprints, schemata, and models, and actual product prototypes. Prototypes are fully functioning test versions of the product developed by the R&D department.
Prototypes are often tested during focus groups, or by employees within the firm. For example, Gillette employees constantly test new products by shaving when they first come to work.
Prototypes are used by employees responsible for writing instructions, determining which parts will be manufactured internally versus purchased from a supplier as well as what type of new machinery will be needed for the production process.
Often, firms will patent the product during the technical development stage to protect the firm’s investment.
Technical Development
Even continuous innovations such as new beverage flavours may require multiple prototypes and consumer tests as part of the technical development phase
LECTURE NOTES:
Creating new beverages or other flavored foods can be tricky. Multiple prototypes are often tested so that the variation which BEST satisfies consumers’ expectations is chosen.
New Product Development
Phase 6: Test marketing
The complete marketing plan is tested in a small geographic area similar to the larger market
Phase 7: Commercialisation
The new product is launched into the market
Full-scale production, distribution, advertising, and sales promotion are begun
LECTURE NOTES:
Phase 6: Test Marketing
Once the final product configuration is created, a firm may decide to launch the product in a test market for a limited amount of time. During the test market, the entire marketing plan is tested – the geographic market in which the test takes place is exposed to the actual promotion, distribution, and pricing strategy planned for the final product launch.
Not all products warrant a test market though. A new flavored beverage for an established manufacturer probably wouldn’t warrant the expense. Aside from the tremendous cost associated with test market which often run in the millions of dollars, a firm runs the risk of alerting the competition to the new product, which allows them to begin developing a competitive product that much sooner.
However, the benefits can outweigh the costs. For example, test marketing allows marketers to fine tune their entire marketing strategy before taking the campaign and new product introduction national. Sometimes flaws in the product are discovered and fixed.
Sometimes, the firm saves millions of dollars by pulling a product that “fails” its test market.
As an alternative to actual test marketing, more and more firms are opting for simulated test markets that take place online, or in controlled warehouses which mimic a grocery store.
Phase 7: Commercialization
Commercialization is just what the name implies – a full scale launch of the new product. Sometimes products are rolled nationally all at once; other times, a product may be released first into a specific geographic region, with future regional introductions occurring over time as production gears up or as sales grown in the original region.
Commercialization requires careful preparation. Marketers begin by reaching out to the trade, such as retailers and wholesalers who are part of the distribution chain. These organizations must be convinced to carry the product. Publicity aimed at the media is often used to announce the new product, and accompanied by advertising, sales promotion, and other communication tactics geared towards consumers.
New Product Development
Is this different for a Service ?
How about B2B products / services ?
LECTURE NOTES:
Phase 4: Business analysis
While the concept development and screening stage estimated the basic commercial viability of the product, the concept is scrutinized in greater detail during the business analysis phase. To be commercially viable, the product concept must make a positive contribution to the overall profit of the firm.
Employees charged with determining the commercial viability of a product estimate product demand, and work hard to determine if the firm has adequate resources to introduce the new product. The new items fit in the overall product mix is also analyzed. In particular, marketers try to estimate if the new offering will cannibalize (e.g., steal sales from) existing brands. Possible synergies with existing brands are also evaluated. The business analysis must be thorough because the costs of new product development begin to climb rapidly from this stage forward.
Phase 5: Technical Development
The technical development stage is expensive for firms because engineers begin refining the product concept, develop detailed blueprints, schemata, and models, and actual product prototypes. Prototypes are fully functioning test versions of the product developed by the R&D department.
Prototypes are often tested during focus groups, or by employees within the firm. For example, Gillette employees constantly test new products by shaving when they first come to work.
Prototypes are used by employees responsible for writing instructions, determining which parts will be manufactured internally versus purchased from a supplier as well as what type of new machinery will be needed for the production process.
Often, firms will patent the product during the technical development stage to protect the firm’s investment.
How Marketers Classify Products
How do products differ from each other?
Marketers classify products into categories because they represent differences in how consumers feel about, purchase, and consume products
Categories relate to:
How long do products last?
How do consumers buy products?
How do businesses buy products?
LECTURE NOTES:
Products differ from one another in several ways and it is common for marketers to attempt to classify products in categories, especially when buyers feel differently or behave differently towards products of different categories.
One way that marketers classify products is according to their level of durability, that is, how long they are expected to last.
Nondurable goods are sometimes called consumables, because they are typically depleted or used up in a relatively short amount of time. What are some other examples of nondurable, or consumable items?
Durable goods last much longer and almost always cost more than nondurable goods. Cost and longevity differences are two reasons why durable goods are usually purchased under conditions of high involvement, compared to the low involvement levels which characterize nondurable good purchases.
Marketers must understand how consumer needs for augmented products as well as information differ for durable and nondurable goods. For example, all things being equal, would you expect the warranty to more important for a durable, or nondurable purchase? {Answer: Durable of course}.
Since those who are highly involved in a purchase decision spend more time gathering information and comparing alternatives, marketers can cater to the needs of those looking to purchase a durable good by providing extensive information on the website, via the FAQ section or specific web pages devoted to important actual product features or augmented product aspects.
What other actions might marketers take to satisfy the needs of consumers of each type of good?
DISCUSSION NOTE:
Creating a Facebook page, monitoring and responding to tweets, creating a community forum or blog where users can talk about the product are all actions that may be appropriate for durable goods.
Since those who purchase nondurable goods are less likely to spend much time and effort shopping for alternatives, marketers should strive to keep their current users of the brand happy. As long as these users are satisfied, they are likely to continue purchasing the product. Marketers might consider creating new uses for the existing product, rewarding their loyalty via a continuity program (such as a frequency card, buy X items get the X+1 item free), etc.
Classification of Products
LECTURE NOTES:
Marketers also classify products based on their intended usage (by consumers for personal use vs. for business use) and according to either where it is bought (consumer) or the type of item it is (business).
In some cases, the same item (such as a laptop) may be sold to both consumers (as a shopping good) or to a business (as equipment). We’ll discuss the different classifications of consumer and business products in more detail on the following slides.
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
Lecture Notes
Marketers classify products based on where and how they buy the product.
Discussion Notes:
The instructor should point out how this framework parallels ideas presented in Chapter 6 on consumer decision-making
Convenience Products
Convenience products are typically nondurable goods or services bought with minimal effort
Staples (e.g., milk, bread)
FMCG / Consumer
Impulse products
Emergency products
Consumers expect convenience products to be low priced and widely available
LECTURE NOTES:
Convenience products are frequently purchased nondurable products that are purchased with a minimum of time and effort. As the name implies, consumers want easy and convenient access to these products, so marketers often try to make them available in as many locations as possible that make sense given the specific type of product in question. Consumers who can’t find their preferred brand will simply purchase a competitive product because they aren’t that invested in the purchase decision.
There are three common subtypes of convenience products:.
Staple products are basic or necessary items that we simply can’t do without. Gasoline and milk are a couple of examples. Can you think of some others?
Impulse products are bought on the spur of the moment. Package designs of items like candy bars need to be bright and colorful so they catch the consumers attention, enhancing the likelihood of an impulse by. In-store placement is also important; many manufacturers of impulse items try to obtain special point-of-purchase displays to make the product standout, or seek to have them stocked near the cash registers where they may be noticed by bored shoppers waiting their turn in line. What’s another example of an impulse item?
Emergency products are items that have to be purchased immediately because of dire need. Because immediate access to the product takes priority, consumers may not consider price or product quality when making their choice. Some examples of emergency products include drain cleaner (when the sink is stopped or overflowing), diapers (when the baby is wet and none are in the house), or an umbrella when you’re outside somewhere and have to stay there, despite the fact that it is raining. Other examples?
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
Lecture Notes:
Shopping products are purchased after considerable time and effort is spent gathering information related to prices, stores, different features offered by different manufacturers, and product quality. Since consumers are likely to compare alternatives before making a decision, advertising that facilitates these comparisons can be helpful.
There are a variety of intelligent agents or shopbots that can help both businesses and consumers make comparisons among shopping products. Intelligent agents are computer programs that find sites selling a particular product.
For example, CNET.com hosts a shopping bot that finds not only different web sites that sell a particular product, but also different brands within a product category or class. Let’s visit CNET now and see how this works.
WEB VISIT NOTES:
Once you arrive at the CNET website, SEARCH for a particular product class or category, such as voice recorders The search will review results for a number of different brands that fall within a product class or category, along with editor ratings, user ratings, and in some cases, full product reviews. Clicking on the COMPARE box (right hand column) for multiple brands allows the user to compare the different products side-by-side in terms of ratings, features, and price. At the bottom of the comparison, the locations where each brand can be found are shown, along with pricing and in-stock information.
Alternately, if a buyer has selected a particular brand, clicking on the prices shown in the original search results page generated by CNET will bring up a list of vendors who sell the product, their customer rating, and price, inventory, tax, and shipping information.
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
LECTURE NOTES:
Specialty products have unique characteristics important to buyers at almost any price. One example is the Rolex watch. Can you think of another? Consumers are usually pretty knowledgeable about specialty products and tend to be brand loyal. That’s nice, because it means that consumers are willing to go out of their way and travel to purchase their preferred brand.
Specialty products often involve extended problem-solving and consumers may require a lot of time to make their initial decision. Marketers should strive to communicate any type of unique differential (or competitive) advantage offered by their product, if it could be important to the consumer.
Unsought Products
Unsought products are goods and services for which a consumer has little awareness or interest until a need arises
Burial plots
Life insurance for young people
Often require a good deal of advertising or personal selling to interest buyers
Lecture Notes:
Unsought products are those in which consumers have little interest until a need arises. While the same could be said of emergency products, a type of convenience good , unsought products tend to be higher priced, and are often are much more important in the long-term. The challenge then to the marketer is to convince consumers that not only should they be interested in the product, but that they need to buy it now. For this reason, personal selling is often the key to selling many types of unsought products.
Burial plots, and insurance are two examples of unsought products.
B2B Products
Marketers classify B2B products based on how organisations use them
Knowledge of customer product use enables marketers to:
Improve product designs
Craft an appropriate marketing mix
LECTURE NOTES:
Categorising B2B Products
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 manufacture finished goods
Lecture Notes:
B2B products are classified by how organizational customers use them.
Equipment is used in daily operations. One form is heavy equipment, which is sometimes called capital equipment or installations. Examples might include a conveyor system used in a warehouse or as part of a production line, or the robotics used by Ford in the manufacturing of their vehicles. Computers, copy machines, and water fountains are examples of light or accessory equipment. Normally these types of items are more portable, cost less, and do not last as long as heavy equipment.
Regardless of the type of equipment, marketers commonly rely heavily upon personal selling of equipment in B2B situations.
Maintenance, repair, and operating (MRO) goods are consumed relatively quickly. Maintenance items include light bulbs, mops, etc., in comparison to repair products, which include small tools, nuts, bolts, and the like. Operating supplies include paper, toner, and the oil that keeps machines running smoothly.
The low cost and straightforward, non-technical nature of these items means most marketers use e-commerce or catalog marketing as the primary method of selling these items, as opposed to personal selling. However, sometimes inside sales representatives will be used to telephone business buyers for supply orders.
Raw materials are products of fishing, lumber, agricultural, and mining industries that are used in the manufacture of finished goods. Milk, soybeans, trees, and ore would be considered examples of raw materials.
Categorising B2B Products
Processed materials are produced by firms when they transform raw materials from their original state
Specialised services are those which are essential to the organization buy are not a part of the actual production of a product
Component parts are manufactured goods or subassemblies of finished items that firms need to complete their own goods
Lecture Notes:
Processed materials are produced by firms when they transform raw materials from their original state. So trees are trimmed, cut into boards, and treated. This treated lumber is then purchased by contractors for use in building homes or decks.
Specialized services are also purchased by business buyers. For example, a company that manufactures steel panels for use in metal buildings or roofing may purchase painting services from an outside supplier. Alternately, a firm may buy market research or legal services.
Finally, component parts are manufactured goods or subassemblies of finished items that organizations buy to incorporate into a larger product that are building. Ford buys tires – a finished item – and puts those tires on the vehicles they manufacture.
Marketing strategies for component parts, specialized services, and processed materials involve creating and maintaining relationships with customers, a strength of personal selling.
New and Improved: The Process of Innovation
Innovation is a hot topic 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
LECTURE NOTES:
Marketer’s are fond of using the phrase, “new and improved” on packaging and in advertising. But what does this mean? Well, according to the Federal Trade Commission . . .
A product must be entirely new or changed significantly to be called “new”, and
A product may be called “new” for only six months.
While it’s good to know the legal definition of “new”, from a marketing perspective, we define an innovation as anything that a consumer PERCEIVES to be new or different from existing products. Remember, to the consumer, perception IS reality.
New Product Development
The new product development model is based on categories of R&D expenditures
In most organisations, this process is well-defined and systematic
R&D is a central metric for measuring and organisation’s commitment to innovation relative to its rivals
LECTURE NOTES:
For many firms, new products are critical for their long-term growth and success.
Apple has often been heralded for their new product success stories, particularly the iPod. However, they’ve had their fair share of failures too. An interesting article lists Apple’s top 10 failures (with the Apple Newton taking “first place” honors) can be found at: www.newlaunches.com/archives/top_10_apple_products_which_flopped.php.
Key reasons for new product failure include: 1) creating a product with no discernable benefit over existing alternatives; 2) overestimating the size of the market; 3) poor positioning strategy; 4) poor implementation of the marketing mix (bad product quality, pricing too high or low; inadequate distribution; targeting the wrong market; ineffective advertising).
However, following the new-product development process can help firms avoid many of these pitfalls. Let’s talk about this process now.
Ethical/Sustainable Decisions in the Real World
New product development is a greater challenge today as marketers must also keep sustainability in mind
Adidas systematically applies environmental and health considerations at the design stage
One new Adidas shoe, the Element Voyager, is made from sustainable fabrics and recycled polyester.
Do you believe marketers are doing enough to create sustainable products?
Discussion Note:
Are Adidas’ Design for Environment (DfE) principles applicable to other industries?
How might colleges and universities apply this approach in creating a more sustainable approach to higher education?
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
Diffusion is the process by which a product or innovation spreads throughout a population
LECTURE NOTES:
The last stage of the new product development process occurs when a new product is introduced commercially. Let’s talk about what happens after the product hits the marketplace.
Product adoption is the process by which a consumer or business customer begins to buy and use a new good, service, or idea
In contrast, Diffusion is a process by which the use of a product spreads throughout a population. The point where a product’s sales spike from a slow climb to a new level is called the tipping point. Marketers work hard to reach the tipping point as soon as possible, and undertake a variety of actions to reach and motivate consumers during each stage in the consumer adoption process.
Adoption Pyramid
LECTURE NOTES:
The process that leads to consumers’ adoption of an innovation is illustrated in Figure 8.5. The process begins at the ground level, and marketers first task is to create awareness among consumers. Different tactics used by marketers to create interest, spur product evaluations, and stimulate trial, adoption and confirmation are also shown in figure 8.5.
However, not everyone who becomes aware of an innovation is interested in learning more. The pyramid shape of Figure 8.5 symbolizes the fact that some consumers “drop out” at each level despite the best efforts of marketers.
Let’s briefly discuss each step of the adoption pyramid:
A media blitz, or massive advertising campaign and publicity efforts are commonly used to create awareness among the target market.
Prospective adopters become interested when they see how the new product might satisfy a need. Teaser advertising is often used to stimulate curiosity and the desire to look for more information.
Consumers weigh the costs/benefits of the new innovation during the evaluation stage, though some types of products, such as those bought on impulse, may be bought with very little evaluation.
Sampling is the premiere technique for stimulating trial usage of the product among potential adopters, and demonstrations can be critical as well.
During Adoption, the prospect actually buys the product for the first time. But that’s not the end of the process!
After initially adopting the product, the consumer weighs the expected vs. actual benefits and costs. If he or she is satisfied following a favorable experience, the individual is likely to continue using the product for as long as it meets his or her needs better than the competition. Marketers can encourage confirmation via marketing communications by reinforcing the idea that the consumer made the correct choice.
Categories of Adopters
LECTURE NOTES:
Recall from our earlier discussion that diffusion describes how a product spreads throughout the marketplace. Some consumers are eager to try new innovations, while others may take a “wait and see” attitude, or be downright skeptical of new offerings. The simple fact is that different people adopt innovations at different times.
Figure 8.6 illustrates this idea – the first to adopt a new product are innovators. These risk-taking, adventurous individuals are young, well educated, and better off financially than most others.
Early adopters are concerned about their standing with peers, and gravitate towards products that will enhance their social acceptance by making them appear to be fashionable or cutting-edge. Marketers will often spend more money targeting the early adopters than they will innovators, knowing that innovators are going to try the product anyways if it is at all relevant to them.
More cautious than either of the first two groups mentioned, those who fall under the early majority are cautious and deliberate in their decision-making. Once they adopt a product, it is no longer considered to be new or all that different. Early majority are middle-class consumers, with slightly above average levels of education and income.
The late majority tends to be comprised of older consumers with lower levels of education and income. Those in the late majority are risk adverse, so they’ll only purchase a product once it has a proven track record and is no longer considered to be a risky buy.
Laggards, the very last group to adopt a product, are rarely, if ever actively targeted by marketers. Tradition bound to the core, laggards often only adopt a product when there is no other alternative. For example, there is a still a small group of men who use a strait razor to shave. As it becomes more difficult for these people to find a replacement razor or to sharpen and existing blade, straight razor users may be forced to purchase either an electric razor or disposable razor.
PRODUCT FACTORS THAT AFFECT THE RATE OF ADOPTION
Each product characteristic affects the speed of innovation diffusion
Relative advantage
Compatibility
Complexity
Trialability
Observability
LECTURE NOTES:
Not all products are successful, and the reason for most failures lies in the fact that consumers don’t perceive the new offering as better than what they are already using. Lack of a relative advantage therefore is a key characteristic tied to new product failures. Relative advantage is one of five product factors that researchers have found to affect the speed with which new innovations are adopted.
Product Quality
LECTURE NOTES:
Figure 9.3 summarizes the many meanings of product quality. Different customer expectations, such as durability, versatility, and precision, are important for different types of products, though all should satisfy needs. Some customers value reliability, while others value ease of use. Regardless, it is important to recognize that each of these factors contributes to the level and consistency of product quality.
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.
LECTURE NOTES:
Introductory slide for Chapter 9, learning objective 2.
DISCUSSION NOTE:
Can students think of products that they have purchased in the past that were part of fads? Embarrassing?
Can students think of goods and services that they regularly use that were similarly purchased by their parents and grandparents?
The Product Life Cycle
LECTURE NOTES:
Figure 9.4 helps marketers understand how a product changes over its lifetime. The model suggests that products go through four distinct stages from birth to death—introduction, growth, maturity, and decline. Sales and profits vary with each stage as shown here.
Understanding the product life cycle is important because different strategies are appropriate at different stages of the product’s life.
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 communication and awareness strategy is essential.
LECTURE NOTES:
In 2009, the five most memorable new products were KFC’s Grilled Chicken, McDonald’s McCafé, the Beatles Rock Band video game, the Blackberry Storm, and the “Snuggie” blanket.
DISCUSSION NOTE:
Are students surprised by the 95% failure rate figure?
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, alternatives proliferate, prices dropped….
LECTURE NOTES:
Growth stage of the PLC:
The product is accepted by the marketplace, and sales increase rapidly during the growth stage of the PLC. Marketers’ key objective is to encourage brand loyalty by convincing consumers of the brand’s superiority. Firms often introduce product variations to attract market segments with different needs and to increase market share. Advertising and sales promotions are especially important to this phase of the life cycle, and price competition may begin to develop between different brands.
Maturity phase of the PLC:
For brands that make it past introduction, maturity is usually the longest phase of the PLC. Sales are at their peak, but the high level of competition often results in price competition and frequent sales promotion, which narrow profit margins. Firms monitor consumer trends and adapt existing products, or bring out new variants, to keep pace with changing consumer needs. Other aspects of the marketing mix may be altered as well.
Decline phase of the PLC:
A steady decrease in sales and profits characterizes the decline phase of the PLC. Often the root cause of declining sales is product obsolescence forced by new technology, or a radical change in consumer needs. The goal of the firm is to remain profitable, and marketers typically must decide whether to stay in the game or phase out a product. A phase out can occur in stages until existing inventory runs out, or the firm can have a fire sale and dump inventory immediately. Firms that decide to keep a product in decline attempt to maximize their profit by minimizing costs: very little investment in advertising or other forms of marketing communications are undertaken. The e-commerce marketplace has extended the life of many products that would have otherwise died without advertising support.
Marketing Mix Strategies throughout the Product Life Cycle
LECTURE NOTES:
Introduction stage:
Slow growth occurs for newly introduced product as the company’s key objective is to get first-time buyers to try product.
The firm does not usually make a profit during this stage. A great deal of money is spent on marketing communications which create awareness for the product and where it can be found. The initial pricing strategy may set a high price more quickly to recover R&D expenditures, or a low price to encourage greater sales and market penetration.
It’s impossible to know how long any product will spend in the introduction or any other stage of the product life cycle. The product characteristics discussed in the previous chapter (relative advantage, complexity, compatibility, etc.) influence the rate of adoption. Also, the amount of money that a manufacturer is willing to invest in the product’s start-up can shorten or prolong the introduction stage. And of course, unfortunately, many products never make it out of the introduction, and lack of a budget for marketing communications is often the problem.
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 for marketers?
LECTURE NOTES:
Summary slide for Chapter 9, learning objective 2 (Product Life Cycle).
Instructor should point out that the PLC framework is a generalization. Some products do not move evenly through the stages.
As illustrated in “The Cutting Edge” feature, companies are using social media to bring back products that had been terminated for various reasons.
DISCUSSION NOTE:
There are several implications that students may uncover. Two key ideas are:
Given the challenges in successfully bringing new products to market, marketers should have a clear understanding of what their best consumers truly value in current successful products. Conversely, why are non-customers not purchasing their goods and services?
Need for effective product management
Low awareness is a recipe for product failure. Effective marketing communications, especially during introductory phase, are essential.
Branding and Packaging: Create Product Identity
What do you think of when you hear the word “Disney?”
LECTURE NOTES:
Branding provides the recognition factors products need to succeed in the marketplace. The branding process creates an identity and personality for the product that helps to set it apart from the competition.
Of course, the brand name itself is a major consideration in any branding strategy.
Brand marks such as the Nike Swoosh and trade characters like the Keebler Elves are part of the branding process. Logos are also brand marks.
DISCUSSION NOTE:
The instructor should ask students to list the words that immediately come to mind when they hear the word “Disney.”
The Disney brand name evokes positive emotions, with themes centered around fun, playfulness, family, and casting day-to-day cares out the window.
The instructor should ask students why they believe the Disney brand creates such consistently, strong and positive associations.?
Students may be asked to provide other examples of brands that evoke strong emotions.
Students may also be asked to provide examples of brands that used to be very positive but have been marred recently by events that create negative emotions.
WHAT’S IN A NAME (OR A SYMBOL)?
A “good” brand name:
Keep the product top of mind
Ensures inclusion in buying decisions / evaluations
maintains relationships with customers through .
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.
LECTURE NOTES:
Good brand names are used to build relationships with customers from the cradle to the grave. For this reason, it is extremely rare for a brand to change it’s name because the constancy of brand name is important. Brand names often help to position products via the image the name portrays or by describing how the brand works or what it actually is, such as “Weedeater.”. For example, many brand names use symbolism to imply that a product contains beneficial attributes or certain characteristics. For example, consider the following brand names and what they imply about the product’s characteristics:
Eagle Claw Fishhooks: association—hooks fish deeply and doesn’t let go. Perhaps the PPT author watched too many episodes of Wild Kingdom as a child, but “Eagle claw” evokes vivid mental imagery of an Eagle swooping down, grabbing a fish out of the water with its claws, and flying away into the great blue beyond.
Jaguar: association—exotic, sleek, dangerous, and wild. All positive attributes for a high-end sports car.
However, some brand names can also provide negative cues. Unfortunately, this can sometimes happen when small business people decide to brand their business using their last name. Would you want to do business with “Crook’s” Locksmith company?
Brand names need to be easy to say, so consumers don’t feel self-conscious asking for the product. Making the name easy to spell, read, and remember is also important. Visual impact is important as this helps names be memorable. Incorporating the name into a logo (brand mark) that appears in ads, package designs, and websites also aids in creating memorability. For many packaged goods companies good brands also need to be short, so they can be prominently displayed on the product’s package.
Finally, good brand names must fit the target market, fit the product’s benefits, fit the customer’s culture, and fit legal requirements.
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 organisation 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.
LECTURE NOTES:
A brand is a lot more than just the product it represents—the best brands build an emotional connection with customers which in turn contributes to the brand’s equity.
Brand equity refers to a brand’s value to its organization over and above the value of the generic version of the product. Therefore, brands with strong equity create competitive advantage for the firm by enabling the firm to: (1) hold onto a larger share of the market and (2) sell their products at prices with higher profit margins.
How is this possible? High equity brands—especially those that build an emotional attachment with customers—benefit from highly loyal customers who are strongly attached to the brand. Brand loyal customers are far less likely to respond to sales or promotional efforts offered by competitors. Without the need to compete on the basis of price, the manufacturer of a high equity brand can charge higher prices and limit sales promotion offers.
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.
LECTURE NOTES:
Recall that brand meaning stems from the beliefs and associations a consumer has about the brand. With the increasingly popularity of social networking and all forms of digital communication, marketers are using brand storytelling as a method of building brand meaning. This technique can be particularly effective as brand stories spread virally online from person to person.
Products with strong brand equity provide brand extension opportunities for marketers, in which new products can be introduced and sold under the same brand name. The new product will attract customers immediately, just because of the name, and the marketers may be able to price it higher than would if introducing an entirely new brand that consumers don’t know.
Touchstone films are targeted at older audiences and often feature more adult content in terms of language and sexual situations that is not appropriate for young children. When Disney decided to expand their movies beyond those targeting young children, they realized the importance of creating a sub-brand that could be marketed separately from existing Disney films, and the Touchstone film brand was born.
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).
LECTURE NOTES:
Strong brand equity provides a resource that marketers can use to increase market share as well as expand into new markets.
Brand extensions and sub-branding are related approaches.
DISCUSSION NOTE:
Ask students whether they can come up with examples of successful brand extensions or sub-branding efforts.? What about unsuccessful ones? What are the implications for the original brand if a brand extension or sub-brand fails to live up to the quality of the original brand?
Branding Strategies
LECTURE NOTES:
The benefits associated with creating a successful brand are so important that branding decisions should not be taken lightly. In fact, marketers spend a great deal of time and effort trying to determine which branding strategy approaches are best used by a firm.
Figure 9.6 illustrates the different branding strategies from which marketers may choose. Each is described in more detail in the following slides.
B2C MARKETING
B2C marketing is any marketing activity that occurs between a brand or business and an individual consumer who plans to use the product for personal use.
Good B2C marketing can hasten and improve customer acquisition, but it’s also essential for customer retention.
The goal behind any B2C marketing campaign is to convince a consumer to buy your product.
Pandey, N. and Paul, G., 2020. Marketing at Patanjali Ayurved: Creating value in a herbal way. South Asian Journal of Business and Management Cases, 9(1), pp.99-111.
Connect with online prospects on a human level
- In content marketing – focus on building relationships with prospects, treat prospects like human beings — not like potential cash cows who will dispense cash for products.
- Share a story – when sharing your company story or helping them understand their frustrations, the idea here is to present the business as a solution to whatever pain points the customers are experiencing.
B2C DIGITAL MARKETING STRATEGIES
Pandey, N. and Paul, G., 2020. Marketing at Patanjali Ayurved: Creating value in a herbal way. South Asian Journal of Business and Management Cases, 9(1), pp.99-111.
HOST CREATIVE AND ENGAGING CONTESTS:
Host contests on social media. Many entrepreneurs use webinars to hold contests. This way, you boost attendance for your webinar and gain exposure through the contest at the same time.
RUN RETARGETING PROGRAMS:
Reconnecting with consumers who have connected with your business in the past.
B2C DIGITAL MARKETING STRATEGIES
Pandey, N. and Paul, G., 2020. Marketing at Patanjali Ayurved: Creating value in a herbal way. South Asian Journal of Business and Management Cases, 9(1), pp.99-111.
SET UP A B2C MARKETING FUNNEL
Top of Funnel (awareness). Introduce target audience to the brand for the first time. At this stage, target audience may well have never heard of the brand and they might not even be aware that they need the products.
Middle of Funnel (consideration). At this stage, target customers have defined their problem clearly and are now considering products that will solve that problem.
Bottom of Funnel (conversion). When customers reach the bottom of the marketing funnel, they’re primed to make a purchase. This is the time to go hard on the sell, with marketing techniques like urgency, FOMO and discount incentives. Set your brand apart from your competitors.
B2C DIGITAL MARKETING STRATEGIES
Pandey, N. and Paul, G., 2020. Marketing at Patanjali Ayurved: Creating value in a herbal way. South Asian Journal of Business and Management Cases, 9(1), pp.99-111.
Velikova, D. (2019, March 6). Marketing Funnel for B2C Startups. Medium. https://medium.com/design-for-growth/marketing-funnel-for-b2c-startups-55fac7cd2b78
In the B2B space, your customers are other businesses.
B2B: there are multiple stakeholders which need convincing through a concerted marketing and sales efforts.
B2B: longer sales cycles due to factors such as having multiple stakeholders and larger, more complex purchases.
B2B: sales process often involves a myriad of salespeople and account managers
B2B: purchase decisions are heavily influenced by motivators like logic and metrics like return on investment (ROI).
B2B MARKETING
W. (2022, November 28). B2B Digital Marketing Guide: 10 Top Strategies | Nutshell. Nutshell. https://www.nutshell.com/blog/digital-marketing-strategies-for-b2b-companies
Specify the company’s positioning: setting the company’s position apart from everyone else so that customer can easily remember the company’s unique identity.
Understand your target audience: Use CRM to create and segment buyer personas.
Have a user-friendly B2B website: Have a well-designed, easy to navigate, responsive, mobile-friendly and informative website.
Search engine optimization (SEO): With a good SEO strategy, the company’s website pages rank high in relevant search results. More prospects are able to locate the website, learn more about the products and services, and turn into business customers.
B2B DIGITAL MARKETING STRATEGIES
W. (2022, November 28). B2B Digital Marketing Guide: 10 Top Strategies | Nutshell. Nutshell. https://www.nutshell.com/blog/digital-marketing-strategies-for-b2b-companies
Kaviani, S. (2020, April 1). What is B2B Marketing Industrial Marketing Strategy to Help More Sales. Medium. https://siavoshkaviani.medium.com/what-is-b2b-marketing-industrial-marketing-strategy-to-help-more-sales-19a0a67e5232
Chaffey, D. (2022, July 26). Digital marketing for B2B compared to B2C: What’s the difference? Smart Insights. https://www.smartinsights.com/digital-marketing-strategy/b2b-b2c-digital-marketing/
- long tail occurs when sales are made for goods not commonly sold. These goods can return a profit through reduced marketing and distribution costs.
- Complex touch strategy customer service is when high-value recurring revenue customers with complicated packages and integrations get personalized and
NEW PRODUCTS AND SERVICES
The digital revolution has spurred innovations in many different industries. Companies in all parts of the world are developing a new generation of products, services, and technologies.
These include broadband networks, mobile commerce, wireless connectivity, and smartphones.
A broadband communication system is one that has sufficient capacity to carry multiple voice, data, or video channels simultaneously.
Broadband offers multiple marketing opportunities to companies in a variety of industries. It also allows Internet users to access streaming media such as streaming audio and streaming video.
Streaming media are also having a profound impact on the television industry, with Amazon.com, iTunes, Netflix, YouTube and other services offering movie and TV show downloads
CLOUD COMPUTING
Cloud computing means that instead of installing software such as iTunes or Microsoft Office on a computer hard drive, such applications are delivered through a Web browser.
Cloud computing means that archives—including music and movie files, photos, and documents—are stored on massive remote servers and data centers rather than on individual users’ computers.
Computer files can be accessed remotely, via the Internet, from any location and from any computer
SMARTPHONES
Cell phones have been one of the biggest new-product success stories of the digital revolution.
Worldwide, 1.5 billion smartphones were shipped in 2017.
Smartphones have much greater functionality than feature phones, incorporating many of the capabilities of computers
