P 6 -1 P 6 -2 Chapter

P 6 -1

P 6 -2 Chapter 6 Product Strategy

P 6 -3 A. Classes of Consumer Goods-Some Characteristics and Marketing Considerations Type of Product Characteristics and Marketing Considerations Characteristics Time and effort devoted by consumer to shopping Time spent planning the purchase Convenience Shopping Specialty Very little Considerable Cannot generalize: consumer may go to nearby store and buy with minimum effort or may have to go to distant store and spend much time and effort Very little Considerable (continued) SOURCE: Michael J. Etzel, Bruce J. Walker, and William J. Stanton, Fundamentals of Marketing, 11 th ed. © 1997, New York, Mc. Graw. Hill, Inc. , pp. 195, 198. Reproduced by permission of the Mc. Graw-Hill Companies.

P 6 -4 A. Classes of Consumer Goods-Some Characteristics and Marketing Considerations Type of Product Characteristics and Marketing Considerations Convenience Shopping Specialty How soon was it satisfied after it arises? Immediately Relatively long time Are price and quality No compared Yes No Price Usually low High Frequency of purchase Usually frequent Infrequent Importance Unimportant Often very important Cannot generalize (continued) SOURCE: Michael J. Etzel, Bruce J. Walker, and William J. Stanton, Fundamentals of Marketing, 11 th ed. © 1997, New York, Mc. Graw. Hill, Inc. , pp. 195, 198. Reproduced by permission of the Mc. Graw-Hill Companies.

P 6 -5 A. Classes of Consumer Goods-Some Characteristics and Marketing Considerations Type of Product Characteristics and Marketing Considerations Convenience Shopping Specialty Marketing considerations Length of channel Long Short to very short Importance of retailer Any single store is relatively unimportant Important Very important Number of outlets As many as possible Few; Often one in a market Stock turnover High Lower SOURCE: Michael J. Etzel, Bruce J. Walker, and William J. Stanton, Fundamentals of Marketing, 11 th ed. © 1997, New York, Mc. Graw. Hill, Inc. , pp. 195, 198. Reproduced by permission of the Mc. Graw-Hill Companies.

P 6 -6 A. Classes of Consumer Goods-Some Characteristics and Marketing Considerations Type of Product Characteristics and Marketing Considerations Convenience Shopping Specialty Gross margin Low High Responsibility for advertising Producer Retailer Joint responsibility Importance of pointof-purchase display Very important Less important Brand or store name important Brand name Store name Both Importance of packaging Very important Less important SOURCE: Michael J. Etzel, Bruce J. Walker, and William J. Stanton, Fundamentals of Marketing, 11 th ed. © 1997, New York, Mc. Graw. Hill, Inc. , pp. 195, 198. Reproduced by permission of the Mc. Graw-Hill Companies.

P 6 -7 B. Classes of Organizational Products-Some Characteristics and Marketing Type of Product Characteristics Fabricating and Marketing Parts and Consideration Raw Materials Example Iron ore Characteristics Unit price Very low Length of life Very short Quantities purchased Frequency of purchase Installations Accessory Equipment Operating Supplies Engine blocks Blast furnaces Storage racks Paper clips Very high Very long Medium Long Low Short Large Low Depends on final product Large Very small Small Frequent delivery; longterm purchase contract Infrequent purchase, but frequent delivery Very infrequent Medium frequency Frequent Irwin/Mc. Graw-Hill (continued) Copyright © 2001 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

B. Classes of Organizational Products-Some Characteristics and Marketing Type of Product Characteristics Fabricating and Marketing Parts and Consideration Raw Materials Installations Standardization Very much; of competitive grading is products important Quantity of supply Very much Limited supply Usually no can be inproblem creased slowly or not at all Accessory Equipment Operating Supplies Very little; custommade Little Much No problem Usually no problem P 6 -8 (continued) Irwin/Mc. Graw-Hill Copyright © 2001 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

B. Classes of Organizational Products-Some Characteristics and Marketing Type of Product Characteristics Fabricating and Marketing Parts and Consideration Raw Materials Marketing considerations Nature of Short; no channel middlemen Negotiation period Price competition Presale/postsale service Hard to generalize Important Not important Installations Short; middle- Short; no men for small middlemen buyers Medium Long Important Not Important Accessory Operating Equipment Supplies Middlemen used Medium Short Not man factor Very important Important Very little P 6 -9 (continued) Irwin/Mc. Graw-Hill Copyright © 2001 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

B. Classes of Organizational Products-Some Characteristics and Marketing Type of Product Characteristics Fabricating and Marketing Parts and Consideration Raw Materials Promotional activity Very little Moderate Sales people very important Generally low High Important Not too important High Low Important long-term contracts used Not usually used P 6 -10 Brand None preference Advance buying Important contract long-term contracts used Installations Accessory Operating Equipment Supplies Irwin/Mc. Graw-Hill Copyright © 2001 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

P 6 -11 Elements of Brand Equity Name awareness Perceived Quality Brand loyalty Brand associations Brand equity Provides value to customer by enhancing customer’s: Interpretation/processing of information Figure 6 -1 Name symbol Other proprietary brand assets Provides value to firm by enhancing: Efficiency and effectiveness of marketing programs Brand loyalty Prices/margins Brand extensions Confidence in the purchase decision Trade leverage Competitive advantage Use satisfaction SOURCE: David A. Aaker, Managing Brand Equity. © 1991, New York, by David A. Aaker. Reprinted with the permission of The Free

P 6 -12 The Product Life Cycle Irwin/Mc. Graw-Hill Figure 6 -2 Copyright © 2001 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

P 6 -13 Marketing Strategy Implications of the Product Life Cycle Life-Cycle Stage Strategy Dimension Introduction Growth Maturity Decline Basic Objectives Establish a market for product type; persuade early adopters to buy Build sales and market share; develop preference for brand Defend brand’s share of market; seek growth by luring customers from competitors Limit costs or seek ways to revive sales and profits Product Provide high quality; add services to enhance value Improve quality; add features to distinguish brand from competitors Provide high quality; select a good brand; get patent or trademark protection Continue providing high quality to maintain brand’s reputation; seek ways to make the product new again. (continued) SOURCE: Gilbert A. Churchill, Jr. , and J. Paul Peter, Marketing: Creating Value for Customers, rev. ed. (Burr Ridge, IL: Richard D. Irwin, 1998), p. 238.

P 6 -14 Marketing Strategy Implications of the Product Life Cycle Life-Cycle Stage Strategy Dimension Introduction Growth Maturity Decline Pricing Often high to recover development costs; sometimes low to build demand rapidly Somewhat high because of heavy demand Low; reflecting heavy competition Low to sell off remaining inventory or high to serve a niche market Channels Limited number of channels Greater number of channels to meet demand Greater number of channels and more incentives to resellers Limited number of channels (continued) SOURCE: Gilbert A. Churchill, Jr. , and J. Paul Peter, Marketing: Creating Value for Customers, rev. ed. (Burr Ridge, IL: Richard D. Irwin, 1998), p. 238.

P 6 -15 Marketing Strategy Implications of the Product Life Cycle Life-Cycle Stage Strategy Dimension Introduction Communication Aimed at early adapters; messages designed to educate about product type’ incentives such as samples and coupons to induce trial Growth Maturity Decline Aimed at wider audience; messages focus on brand benefits; for consumer products, emphasis on advertising Messages focus Minimal, to keep on differentiating costs down brand from its competitors heavy use of incentives such as coupons to induce buyers to switch brands SOURCE: Gilbert A. Churchill, Jr. , and J. Paul Peter, Marketing: Creating Value for Customers, rev. ed. (Burr Ridge, IL: Richard D. Irwin, 1998), p. 238.

P 6 -16 Some Requirements for the Effective Use of Cross-Functional Teams in Product Management and New Product Development A growing number of organizations have begun utilizing cross-functional teams for product management and new product development. Having representatives from various departments clearly has its advantages; but most important, effective teams must have the nurture and support of management. Some requirements for effective teams are 1. Commitment of top management and provision of clear goals. Organizations that successfully use cross-functional teams in product management or development have managers who are deeply committed to the team concept. As a result, high performance teams have a clear understanding of the product management and development goals of the organization. The importance of these goals encourages individuals to defer their own functional or departmental concerns to team goals. 2. Trust among members. For cross-functional teams to work, a high level of trust must exist among members. The climate of trust within a team seems to be highly dependent on members’ perception of management's trust of the group as a whole. (continued) Irwin/Mc. Graw-Hill Figure 6 -3 Copyright © 2001 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Some Requirements for the Effective Use of Cross-Functional Teams in Product Management and New Product Development 3. Cross-functional cooperation. If a team is to take responsibility and assume the risk of product development, its members will need detailed information about the overall operation of the organization. It often requires that the functional units be willing to share information that previously was not shared with other departments. P 6 -17 4. Time and training. Effective cross-functional teams need time to mature. They require massive planning and intense and prompt access to resources, financial and other. Because members have to put aside functional and departmental loyalties and concerns training is usually necessary. Irwin/Mc. Graw-Hill Figure 6 -3 Copyright © 2001 by The Mc. Graw-Hill Companies, Inc. All rights reserved.