Download - 8/28/20151 Topic 6 Product Policy Assoc. Prof. A. Popissakov 2009-2010 PRINCIPLES OF MARKETING-A2
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Topic 6Topic 6 Product PolicyProduct Policy
Assoc. Prof. A. Popissakov2009-2010
PRINCIPLES OF MARKETING-A2
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1. Basic concept of Product
Basic Product (BP)
Basic physical features and benefits
What is a Product?is a multidimensional offering, a mix of:tangible featuresintangible services and attributes, bundling around a basic or core benefit.
3 Levels of one product
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Basic concept of Product
Core(Basic)product
Core Product (CP)
Basic physical features and benefits
Real (Embodied) Product (RP)
Product make- up
Total (Augmented) Product (TP)
Services and intangible associations
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represents the physical characteristics of a good and basic (or most essential) benefit/s of value to the customer, expressed in a product form.
E.g. A cup of coffee:the taste of coffee (benefit 1)refreshment effect (benefit 2)
Core Product (CP)
Coffee as
a Core Product
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Real (Embodied) Product (RP)
Will comprise the Core product and additional tangible features that make up the listed product or service: design, colour, packing, brand name, etc.
E.g A cup of coffee (Jacob’s coffee):
leading brand name
attractive packing
Coffee (CP) + 2
tangible features
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Real (Embodied) Product (RP)
E.g Jacob’s coffee :
taste + refreshment (benefit 1,2) + (brand name + packing (tangible features 1,2) = Real product
Jacob’s Coffee (benefits +tangible features) transform it to a Real (Embodied)Product
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Total (Augmented) Product (TP)
Will add to the listed product some intangible extra features through services:
credit and financial provisionsreputation of the sellerdelivery servicescustom servicesreplacement servicesquality assurance, etc.
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Total (Augmented) Product (TP)
E.g. If Jacob’s coffee (Real product) is:
a) served for free in a supermarket for promotional testing in a small plastic cup or
b) served in a luxury hotel lounge in gold plated china
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Total (Augmented) Product (RP)
These are two different Total Products.
A) Jacob’s coffee at a supermarket
- as a commodity
B) Jacob’s coffee at a luxury hotel lounge
- as pleasure and prestige.
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2. Product Life Cycle (PLC)
Each new product goes though 4 main Phases of PLC:
IntroductionGrowthMaturityDecline
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Product Life Cycle (PLC) - chart
Sales Profit
time
Revenue and profits
IntroductionGrowth Maturity Decline
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PLC - Introduction phase
Features:this is post-launch period, after much
spending on new product R&D.low saleslow revenueprofit might be negativehard time for companies
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PLC - Growth phase
Features:a product “takes off”gaining market share and early majority of
buyersrevenue and profit grow
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PLC - Maturity phase
Features:usually the longest phase for most products
(the longer the better)beginning with continued sales growthreach saturation (peak) of sales and profitsales and profit dip at the end of phase.
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PLC - Decline phase
Features:sales may fall rapidly or graduallyprofit also follow the trend or could be
negative againthe product become a loosergive way to heavy losses for company.
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3. PLC Analysis
Mapping the PLC path of both company and competitor brands, market researchers can collect valuable information about:
Better exploit current product potential Necessity of product modification Looking for mew markets Take decision about new product
development
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PLC Analysis
PLC Analysis can change the PLC substantially and extending it.
E.g. WV “Beetle” car’s PLC:a) A popular car, cheep, simple and easy to maintain – The total
product
b) New models introduced – Product modification
c) Painted in different colours for/by young ( first hippie car in Europe) – Range extension
d) Shifting production to Brazil – New markets
e) Now brand new models in same shape and silhouette – Model revival
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PLC AnalysisPLC Analysis can change the PLC substantially
and extending it. Revenue and profits
A
BC
D
E
time
A Original product(maturity phase)
B Product modificationC Range extensionD New marketsE Model revival
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4. Classification of products
Just as market segmentation improve marketing programs, it is helpful to separate products into homogeneous classifications.
Two groups;consumer productsbusiness products
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Classification of products
Consumer products are intended for use by household consumers for non-business purposes.
Business products are intended primarily for use in producing other products or for providing services in a business.
The fundamental basis for distinguishing between the two groups is the ultimate user for which the product is intended in its present form.
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Classification of products
Difficult distinction:A personal computer may be considered a
Consumer good if it is purchased by a student to use at home but
if his father uses it for accounting work for his shop, it is classed as a Business product.
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Classification of Consumer products
4 groups:
A. Convenience goods
B. Shopping goods
C. Specialty goods
D. Unsought goods
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A. Convenience goods
Consumers have adequate knowledge of the product before going to but it and they purchased such products with a minimum of efforts.
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A. Convenience goods
General Features:no strolling around to buyready accessiblewilling to accept several brandslow unit pricenot bulkynot affected by fashionno need of special promotion and
advertisementpurchased frequently
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B. Shopping goods
Products for which customers usually wish to compare quality, price and style in several stores before purchase.
Furniture,major home applianceswomen’s apparel
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C. Specialty goods
Consumers have strong brand preferences and are willing to spend special time and efforts in purchasing them.
Stereo, video, photographic equipmentman’s suithealth foodnew automobile(special offer)
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D. Unsought goods
2 sub-groups:New products, customers are not aware of
(some latest model of Hi-Tech i-Phone or palm computers)
Products that customers do not want right now (burial insurance, gravestone, declaration of will).
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Classification of business goods(B2B goods)
5 groups:
A. Raw materials
B. Fabricating parts and materials
C. Installations
D. Accessory equipment
E. Operating supplies
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A. Raw materials
3 groupsgoods found in their natural state (land,
water, oil, minerals, seas, forests)agricultural products (wheat, cotton, fruits)animal products (eggs, raw milk,)
Marketing is quite different for these groups.
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B. Fabricating parts and materials
Business goods that become part of a finished product - 2 selections:
Fabricating materials - will go further processing
e.g. flour becoming part of bread,
Fabricating parts – will be assembled with no further change of form
zippers attached to clothing, semiconductor chips - to computers
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C. Installations
are manufactured business products – the long-lived, expensive, major equipment of a business user
factory buildinglarge generators in a dam, jet airplanes, highwayscontainer terminal, etc.)Installations directly affect the scale of operation in a
firm.
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D. Accessory equipment
is used in the production operation of a business firm, but it does not affect significantly the scale of operations
cash register, company car, telephone network, copy machine, etc)
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E. Operating supplies
are the “convenience goods” of the business sector, help a firm’s operation but do not become a part of finished product
short-lived, low-priced items;pencils, stationary, toner, washroom supplies, etc.)
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5. The NPD (New Product Development)
What is a new product?
Three categories requiring different marketing approach.
Really innovative productsSignificantly different productsImitative products
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Really innovative products
Truly unique products hair restorercancer, (AIDS) cure “time machine”, etc.
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Significantly different products
Replacements for existing products that are significantly different.
Eye glasses - contact lensesTube TV – LCD, plasma TVline phones - GSMstereo record player - CD player
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Imitative products
New to a particular company but not new to the market.
“Me-too products”
E.g.
Polaroid camera - audio/video cassettes, CD, DVD, etc.
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5.2 New Product Development Process
1. Idea generation
2.Idea screening
and evaluation
3.Business analysis
4. Product prototype
development
5.Test marketing
6. Commercialisation
1, 2, 3 -Concept testing stage
4, 5-Most resource consuming stages
Last turn back point
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Step 1. Generation of New product idea
NP development starts with an idea.
Management responsibilities:Develop a system within the organisation
for stimulation of NP idea generation.Customers can also be encouraged to do so.Allow freewheeling.
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Step 2. Screening and evaluation of ideas
NP ideas are evaluated to determine which one could be given further consideration.
Management responsibilities:Technical feasibility - fly a car???Social acceptance - cloning???
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Step 3. NP Business analysis
Management responsibilities: to converted NP ideas into a concrete business proposal.
Identify product featuresEstimate market demandEvaluate competition,Calculate profitability Establish a program for NP development
8 criteria (fits)
expressed in figures
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Step 1+2+3 = Concept testing phase
Pre-testing of the product idea Most critical stage for a NP development.75 % of NP ideas failed at this stage.
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Step 4. Product prototype development
The product idea on-paper is converted into a physical product.
pilot models manufacturingsmall quantitieslaboratory teststechnical and production evaluations, etc.
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Step 5. Test marketing
Market test (real marketing) in limited geographic areas.
customers reaction and acceptanceproduction variables (colour,sizes, etc.)price adjustmentsfinal decision where to go on marketing the
product or stop. Last turn back point.
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Step 6. Commercialisation
Full-scale production and marketing programs are planned and the product is launched.
NP is “born” and enters its life cycle.So far a company has complete control over
the product After commercialization it is subjected to
external competitive environment.
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Producer’s criteria for NP
As a part of NP Business analysis some basic questions must be answered.
Should the NP be added to company’s existing product assortment?
8 criteria or product’s fits:
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5.3. Producer’s criteria- 8 Fit for a NP
1. Marketing fit2. Financial fit3. Standard fit 4. Fit company’s marketing structure5. Fit company’s production structure 6. Fit the law7. Company’s management fit8. Fit company’s image and objectives
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Marketing fit
Do enough people really want this product?Will the NP fit into our sales force?
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Financial fit
Is enough financing available?
Will the NP increase profitability?
Will the NP improve seasonal and cyclical stability of the company?
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Standards fit
Will the NP meet current environmental and social standards?
Saftyharmfulsave energy features (class A+, A, B, C,)recycling potential, etc.
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Fit company’s marketing structure
Can the existing sales force be used?
Can the present channels of distribution be used?
E.g. Children cloths - children toys/books.
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Fit company’s production structure
Will the NP fits in with:
existing production facilities
labour force (skills)
management capabilities
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Fit the law
NP should not have any legal objections:
patents application
copy right application
packaging, labeling regulation, etc.
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Company’s management and R&D fit
Will the management and/or R&D unit have the time, expertise, ability, experience to deal with the NP?
If “Yes” how shell these affect the other products and processes?
If “No” - how shell we comply with leased professionals, how much to pay?, etc.
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Fit company’s image and objectives
Will the NP keep the company’s image and fit with its objectives?
E.g. Low priced, low quality product could not contribute to company’s prestige.
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Hypothetical example of NP idea rating sheet
Product selection criteria
crite
ria
wei
ght
criteria rating (B)score
A 1 2 3 4 5 6 7 8 9 10 A*B1. Company corporate
objectives4 x 36
2. Financial capability 4 x 323. Marketing capability 4 x 284. Relation to present
production3 x 30
5. R&D, management fit 2 x 166. Manufacturing
capabilities2 x 16
7. Suppliers / resources fit 1 x 58. Environment / social
standard competability1 x 9
total
172
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NP adoption and diffusion processes
Adoption process -decision making activity of an individual through which the NP is accepted.
Diffusion process - is the process by which the NP is spread trough society over time.
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Stages in adoption process Stage Activity in than stage
1. Awareness Individual is exposed to the innovation, becomes aprospect.
2. Interest Prospect is interested enough to seek information
3. Evaluation Prospect mentally measures relative merits
4. Trial Prospect adopts the innovation on a limited
base.(buys sample or small quantity)
5. Adoption Prospect decides whether to use the innovation on afull-scale basis.
6. Postadoptionconfirmation
The innovation is adopted, then the user continues toseek assurance that the right decision was made.
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Adopter Categories
1. Innovators
2. Early adopters
3. Early majority
4. Late majority
5. Laggards
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Adopter Categories-Innovators
A venturesome group, about 3% of the customers, first to adopt an innovation.
Features:youngerhigher social statusbetter financial position
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Adopter Categories-Early adopters
about 13% of the market - tent to be a part or
leaders of local social system.
(Doctors, mayors, MPs, artists, layers)
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Adopter Categories- Early majority
More deliberate group of 34% of the market - accepting the innovation just before the “average” adopters
above average in social and economic measures
rely quite a bit on advertisements, and contact with other people
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Adopter Categories- Late majority
More deliberate group of 34% of the market - more skeptical.
Adopt to innovation in response of economic necessity (mobile phones are cheaper now)
rely on word-of-month information rather than advertising
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Adopter Categories-Laggards
Tradition-bound group, 16% of the market, are last to adopt if at all.
Suspicious,
older
usually at the low end of the social and economic scale.
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Adopter Categories-Laggards
Normal distribution ‘Bell curve” for NP diffusion process.
3% 34% 34% 16%13%
LaggardsInnovators
Early majority Late majority
Early adopters
Adoption rate
Time
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The End