Chapter :8

Product and Services Strategy

Course Title :Principles of Marketing Chapter: Section : Course Code:

Levels of Product
Installation Packaging Brand Name

Augmented Product

Delivery & Credit

Quality Level

Core Benefit or Service

Features
AfterSale Service

Design

Warranty Actual Product Core Product

Core Product: Core product is the product solving benefit that consumer seeks. It is the most basic benefits which addresses the question what is the buyer really buying? Actual Product: At the second level product planner must turn the benefits into an actual product. They need to develop and product and service features, design, a quality level, a brand name and packaging. Augmented product: Product planner must build an augmented product around the core benefits and actual product by offering additional consumer service and benefits like delivery and credit, after sales service.

Product Classification

Two Broad Classes of Products

Consumer Products
Products bought by final consumers

Industrial Products
Products bought for further processing or for use in conducting business

Types Of Consumer Product: There are four types of consumer Product:

Convenience Product:

Shopping product:

Specialty product:

Unsought Product:

Convenience Product:
Convenience Products are consumer product that the customer usually buys frequently, immediately, and with a minimum of comparism and buying effort. Customer buying behavior: # Frequent Purchase # Little Planning # Little comparison or shopping effort. # Low customer involvement Price: Low price Distribution: Wide spread distribution, convenience location Promotion: Mass promotion by the producer. Example: Toothpastes, magazines, Laundry Detergent.

Shopping product:
Shopping product are consumer goods that the consumer, in the process selection and purchase, characteristically compares on such base as suitability, quality, price and style. Consumer Buying Behavior: # Less frequent purchase # Muss planning and shopping effort # Comparison of brand on price, quality, style Price: Higher Price Distribution: Selective distribution in fewer outlets. Promotion: Advertising and personal selling by both producer and reseller, Examples: Major appliances, televisions, furniture, clothing,

Specialty product:
Specialty products are consumer product with unique characteristic or brand identification for which significant of buyer is willing to make a special purchase effort. Consumer Buying Behavior # Strong brand preferences and loyalty # Special purchase effort # Little comparison of brand # Low price sensitivity Price: High price Distribution: Exclusive distribution in only one outlet or few outlet of per market area. Promotion: More carefully targeted promotion by both producer and resellers. Examples: Luxury goods, such as Rolex watches or fine crystal.

Unsought Product: Consumer product with that the consumer either does not know about or knows about but does not normally think of buying. Consumer Buying Behavior: Little product awareness, knowledge, negative interest. Price: Varies Distribution: varies Promotion: Aggressive advertising and personnel selling by producer and resellers Examples: Life insurance, Red Cross Blood donation.

Branding: A brand is a name, sign, symbol, or design or combination of these that identifies the maker or seller of a product or service. Consumer view a brand is a important part of a product, and branding can add value to a product.

Brand Equity: The positive differential effete that

knowing the brand name has consumer response to the product and service. A measure of brands equity is the extend to which consumer are willing to pay more for the brand.

Brand Name selection:

A good name can add greatly to a product success. It is a difficult task. It begin carefully review of the product and benefits. Desirable quality for a brand name includes the following; It should suggest something about the products benefits and qualities: Fair & lovely. It should be easy to pronounce, recognize and remember. Ex. Tide ,crest. The brand name should be distinctive. Ex; Kodak, Oracle. Yahoo. It should be extendable. Amazon.com The name should be easily translated into foreign language. Exxon (oil) It should be capable of registration and legal protection.

Brand sponsor: There is several kind of brand sponsor: Manufacturer brand: Brand name owned by the manufacturer; Ex; Bata Private Brand (store Brand): A brand created and owned by reseller of a product or service. Ex: Gemini, Licensing: getting the license to use a brand name from another organization. Ex. Pizz Hat Co Branding: the practice of using the establish brand names of two different companies on the same product. Simenes -BenQ

Brand Strategy
Product Category
Existing New

Brand Name

Existing

Line Extension Multibrands

Brand Extension New Brands

New

Brand Strategy:
Line extension: Line extension occur when a company introduce additional items in a given product category under the same brand name such as new flavors, forms, color, ingredients or package size. Brand extension: A brand name involves the use of successful brand name to launch new or modified product in a new category. Grameen Food. ( Lux soap, body wash) Multibrands: Company introduce additional brands in the same product category. Ex. (clear, clinic +, sunsilk,)( lipton ,Taza) (Lux, lifebou gold,fare & lovely) New brands: A company may create new brand name when it enter a new product category for which none of the companies current brand name is appropriate. Beximco, Bol,

Product Line Decisions

Product Line Length
Number of Items in the Product Line

Stretching
Lengthen beyond current range

Filling
Lengthen within current range

Downward

Upward

 Product line decision:

The group of product that are loosely related because they function in a similar manner, are sold to the same customer groups, are marketed though the same types of outlet or fall within a given price level. For example: Nike produces several Athletic shoes and apparel. Nokia produce several line of telecommunication product. Product line length: The number of item in the product line. If the line is too short manage can increase profit by adding items, the line is too long manager can increase profit by dropping items.

 Product line stretching:

It occurs when a company lengthens its product line beyond its current length. Company can stretch its line Downward Upward or both ways. Downward: company may stretch downward to plug a market hole that otherwise to attract a new competitor to respond a competitors attacks on the upper hand. For examples: Mercedes Introduce C class car to attack Japanese automaker. Upward: companies stretch upward in order to add prestige to their current product. For example: Toyota launch Lexus, Nissan Lunch Infinity, Honda lunch Acura.

Product line filling:

Adding more items within the present range of product line. There are several reasons: Reaching the extra product Using excess capacity Satisfying dealer Being the lading full line company Plugging holes to keep out the competitors

Product Mix Decisions

The set of all product line and items that a particular seller offers for sales. Avons Product mix consist of four major product line; .Beauty product wellness product, Jewelry and accessories Inspirational product (Gift book Music).

Width - number of different product lines

Consistency

Length - total number of items within the lines Depth - number of versions of each product

Product Mix all the product lines offered

Service decision: Characteristics of Services

Intangibility
Cant be seen, tasted, felt, heard, or smelled before purchase. Cant be separated from service providers. Quality depends on who provides them and when, where and how. Cant be stored for later sale or use

Inseparability

Variability

Perishability

New product development:

The development o original products, product improvements, and new brands through the firms own R&D Strategies for Obtaining New Product
Acquired Companies Original Products Product Improvements

Acquired Patents Acquired Licenses

Product Modifications
New Brands

New Product Development Process

Marketing Strategy Concept Development and Testing Idea Screening Idea Generation

Business Analysis

Product Development

Test Marketing Commercialization

Step 1. Idea Generation

Idea Generation is the Systematic Search for New Product Ideas. Idea can be obtained both from Internal source and external source .
External source may be:
C U S T O M E R S C O M P E T I T O R S D I S T R I B U T O R S S U P P L I E R S

Step 2. Idea Screening

Idea screening is the process to spot good ideas and drop poor ones as soon as possible. Many companies have systems for rating and screening ideas which estimate: Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return Then, the idea is evaluated against a set of general company criteria.

Step 3. Concept Development & Testing

1. Develop Product Ideas into Alternative Product Concepts: A detailed version of the new product idea stated in the meaningful consumer terms.

2. Concept Testing - Test the Product Concepts with Groups of Target Customers to find out if the concept have strong consumer appeal

3. Choose the Best One

Step 4. Marketing Strategy Development

Marketing Strategy Statement Formulation
Part One Describes Overall:
Target Market Planned Product Positioning Sales & Profit Goals Market Share

Part Two Describes Short-Term:

Products Planned Price Distribution Marketing Budget

Part Three Describes Long-Term:

Sales & Profit Goals Marketing Mix Strategy

Step 5. Business Analysis Step 6. Product Development

Business Analysis Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

If No, Eliminate Product Concept

If Yes, Move to Product Development

Step 7. Test Marketing

Standard Test Market
Full marketing campaign in a small number of representative cities.

Controlled Test Market

A few stores that have agreed to carry new products for a fee.

Simulated Test Market

Test in a simulated shopping environment to a sample of consumers.

Step 8. Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.

When?

Where?

To Whom?

How?

Product life cycle:

The course of a product sales and profits over its lifetime. PLC involves five distinct stage: 1) Product development: begins when the company finds and develops new product ideas. 2) Introduction; is a period of slow growth as the product is introduces in the market. 3) Growth: is a period of rapid market acceptance and increasing profits. 4) Maturity: is a period of slowdown in sales growth because the product has achieve acceptance by most potential buyers 5) Decline: is the period when sales all off and profit down.

Product Life Cycle

Sales and Profits Over the Products Life From Introduction to Decline
Sales and Profits ($)
Sales

Profits Time

Product Development
Losses/ Investments ($)

Introduction

Growth

Maturity

Decline

Introduction Stage of the PLC

Summary of Characteristics, Objectives, & Strategies

Sales
Costs Profits
Marketing Objectives

Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus Build selective distribution Build product awareness among early adopters and dealers

Product Price Distribution Advertising

Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies

Sales Costs Profits
Marketing Objectives

Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer product extensions, service, warranty Price to penetrate market Build intensive distribution Build awareness and interest in the mass market

Product Price Distribution Advertising

Maturity Stage of the PLC

Summary of Characteristics, Objectives, & Strategies

Sales Costs Profits
Marketing Objectives

Peak sales Low cost per customer High profits Maximize profit while defending market share Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits

Product Price Distribution Advertising

Decline Stage of the PLC Summary of Characteristics, Objectives, & Strategies

Sales Costs Profits
Marketing Objectives

Declining sales Low cost per customer Declining profits Reduce expenditure and milk the brand Phase out weak items

Product Price Distribution Advertising

Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers

Chapter 11: Product Pricing: Pricing strategies

PRICE The amount of money charged for a product or service o the sum of value that consumers exchange for the beneath of having or using the product or service.

Price - Quality Strategies

Higher Higher
Price

Lower

Quality

Premium Strategy
Overcharging Strategy

Good-Value Strategy
Economy Strategy

Lower

New Product Pricing Strategies

Market Skimming
>Setting a High Price for a New Product to Maximize Revenues from the Target Market.
>Results in Fewer, More Profitable Sales.

Market Penetration
> Setting a Low Price

for a New Product in Order to Attract a Large Number of Buyers. >Results in a Larger Market Share.

Product Mix Pricing Strategies

Product Line Pricing
Setting Price Steps Between Product Line Items i.e. $299, $399

Optional-Product Pricing
Pricing Optional or Accessory Products Sold With The Main Product i.e. Car Options

Product Mix Pricing Strategies

Captive-Product Pricing
Pricing Products That Must Be Used With The Main Product i.e. Razor Blades, Film, Software

By-Product Pricing
Pricing Low-Value By-Products To Get Rid of Them i.e. Lumber Mills, Zoos

Product-Bundle Pricing
Pricing Bundles Of Products Sold Together i.e. Season Tickets, Computer Makers

Price-Adjustment Strategies
Price Adjustment Strategies Discount & Allowance
Reducing Prices to Reward Customer Responses such as Paying Early or Promoting the Product.

Segmented
Adjusting Prices to Allow for Differences in Customers, Products, or Locations.

Cash Discount
Quantity Discount Functional Discount Seasonal Discount Trade-In Allowance

Customer
Product Form Location Time

Price-Adjustment Strategies
Psychological Pricing
Adjusting Prices for Psychological Effect. Price Used as a Quality Indicator. Temporarily Reducing Prices to Increase Short-Run Sales. i.e. Loss Leaders, Special-Events

Promotional Pricing

Geographical Pricing

Adjusting Prices to Account for the Geographic Location of Customers. i.e. FOB-Origin, Uniform-Delivered, Zone Pricing, Basing-Point, & Freight-Absorption.
Adjusting Prices for International Markets. Price Depends on Costs, Consumers, Economic Conditions & Other Factors.

International Pricing

Initiating and Responding to Price Changes

Competitor Reactions to Price Changes

Initiating Price Cuts

Price Changes
Buyer Reactions to Price Changes Initiating Price Increases

PRICING OBJECTIVES Survival. Maximize current profit. Maximize market share. PRICING APPROACHES Cost plus pricing: Adding a standard markup to the cost of the product. Ex- 5(cost) + 3(markup) =8 Break even pricing: Setting price to breakeven on the cost of making and marketing a product or setting price to make a target price.

Value based pricing: Setting price based on buyers perceptions of value rather than on seller cost. Consumer Value Price Cost Product Competition based pricing: Setting prices based on the prices that competitors charge for similar products. Ex- Lux tk.14, Tibbet tk.14.

Chapter 12
Marketing Channels and Logistics Management

What is a Distribution Channel?

A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.
Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.

Distribution Channel Functions

All Use Up Scarce Resources All May Often Be Performed Better Through Specialization All Can Often Be Shifted Among Channel Members

Risk Taking Financing

Information Promotion

Physical Distribution Negotiation

Contact

Matching

Information: Gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and acing exchange Promotion: Developing and spreading persuasive communication about a offer. Contact:Finding and communicating with prospective buyers. Matching:Shaping and fitting the offer to the buyers needs including activities such as manufacturing, grading. Negotiation:Reaching the agreement of price. Physical distribution: Transporting and storing goods. Financing: Acquiring and using funds to cover the cost. Risk taking: assuming the risked carrying out the channel

Channel Level - A Layer of Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Buyer.

Channel 1
M Channel 2 M Channel 3 M Channel 4 M

Direct Indirect

Vertical Marketing system: A distribution channel structure in which producers,whole seller, and retailer act as a uniform system.One channel member own the another, has contract with them, and has so much power that hey all cooperate. Types of vertical marketing system: Greater Degree of Direct Control
Corporate Common Ownership at Different Levels of the Channel

Contractual Contractual Agreement Among Channel Members

Lesser

Administered Leadership is Assumed by One or a Few Dominant Members

Innovations in Marketing Systems

Horizontal Marketing System

Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity. Example: Banks in Grocery Stores

Hybrid Marketing System

A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments.

Example:
Retailers, Catalogs, and Sales Force

Intensive distribution: Stocking the product in as much as possible. Exclusive distribution Giving a limited number of dealers the exclusive right to distribute the companys products in their territories Selective distribution: The use of more than on but fewer than all, of the intermediaries who are willing to carry the companys products.

Marketing logistics and supply chain management: Marketing logistic( Physical distribution) The task involved in planning, implementation,and controlling the physical flow of materials,final goods,and related information from points of origin to consumption to meet customer requirement at a profit. Supply chain management: Managing upstream downstream value-aided flows of materials, goods, and related information among the suppliers,the company,resellers,and the final consumers.

Nature and Importance of Marketing Logistics

Involves getting the right product to the right customers in the right place at the right time. Companies today place greater emphasis on logistics because: effective logistics is becoming a key to winning and keeping customers. logistics is a major cost element for most companies. the explosion in product variety has created a need for improved logistics management. information technology has created opportunities for major gains in distribution efficiency.

Major Logistics Function

Costs
Minimize Costs of Attaining Logistics Objectives

Order Processing
Submitted Processed Shipped

Logistics
Transportatio n Water,
Truck, Rail, Pipeline & Air

Functions

Warehousing
Storage Distribution

Inventory
When to order How much to order Just-in-time

Transportation Modes
Nations largest carrier, cost-effective for shipping bulk products, piggyback

Rail

Truck
Flexible in routing & time schedules, efficient for short-hauls of high value goods

Water
Low cost for shipping bulky, low-value goods, slowest form

Pipeline
Ship petroleum, natural gas, and chemicals from sources to markets

Air
High cost, ideal when speed is needed or to ship high-value, low-bulk items

Choosing Transportation Modes

Checklist for Choosing Transportation Modes

1. Speed. 2. Dependability. 3. Capability. 4. Availability. 5. Cost.

Chapter 14

Integrated Marketing Communication Strategy

The Marketing Communications Mix

The specific mix of marketing communication tools a company uses
Advertising
Any Paid Form of Nonpersonal Presentation by an Identified Sponsor.

Personal Selling

Personal Presentations by a Firms Sales Force.

Sales Promotion

Short-term Incentives to Encourage Sales.

Building Good Relations with Various Publics by Obtaining Favorable Unpaid Publicity. Direct Communications With Individuals to Obtain an Immediate Response.

Public Relations
Direct Marketing

The Communication Process

Noise Noise Noise Noise Noise Noise Sender Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Encoding Feedback Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Message Noise Noise Noise Noise Noise Noise Media Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Response Noise Noise Noise Noise Noise Noise Decoding Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Receiver Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise Noise

Sender: Party sending the message to another party- ex: HP Encoding: The process of putting thought into symbolic form H.Ps advertising agency assembles words and illustrations into an advertisement that will convey the intended message. Message: The set of symbolic that the seender transmitsThe actual H.P copier ad. Media: the communication channel through which the message moves from sender to receiver- in this case the specific magazine that HP selects Decoding: the process by which the receivers assign meaning of the symbols encode by the sender- a consumer reads the HP copier ad and interprets the words and illustrations it contains.

Receivers: the party receiving the message sent by the another party- the home office or business customer who read the HP copiers ad. Response: The reaction of the receivers after being exposed to the message- any hundreds of possible responses, such as the consumer is more aware of the attributes of HP copiers, actually buys an HP copies or does nothing Feedback: The part of the receivers response communicated back to the sender show that consumer are struck by and remember the ad, or consumers write or call HP praising or criticizing the ad of HP product. Noise: the unplanned static or distortion during the communication process, which result the receiver getting the different message than the one the sender sent

Steps in Developing Effective Communication

Step 1. Identifying the Target Audience Step 2.Determining he Communication Objectives Buyer Readiness Stages
Awareness Knowledge Conviction Liking Purchase Preference

Step 3. Designing a Message

Message Content Rational Appeals Emotional Appeals Moral Appeals Attention Interest Message Structure Draw Conclusions Argument Type Argument Order Desire Action

Step 4. Choosing Media

Personal Communication Channels Nonpersonal Communication Channels

Step 5. Selecting the Message Source Step 6. Collecting Feedback

1) Identifying the target audience: A marketing communication starts with a clear target audience in mind. The audience may be potential buyer or current user, these who make the buying decision or who influence it. 2) Determining the communication objectives: Once the target audience has been defined, the marketing communicator must decide what response it sought. Of course the final response is purchase. The marketing communicator need to know where the target audience now stands and what stage it need to moved. the target audience may be any six of buyer readiness stages:

Buyer readiness stages: The stages consumer normally pass through on their way to purchase, including awareness, knowledge, liking, preference, conviction and purchase. 3) Designing a message Having defined the desire audience response, the communicator turn to developing effective message .Ideally message should get attention, hold interest, arouse desire and obtain action ( A frame work known as the AIDA model) In putting the message together, the marketing communicator must decide What to say( Message content) and how to say it ( Message structure and format)

a) Message content: The communicator has to figure out an appeal or theme that will produce the desire response. There are three types of appeal: 1)Rational appeal; rational appeal relates to the audience self interest they show the product will produce the desire benefits,. 2) Emotional appeal: Emotional appeals attempt to stir up either positive( Love, pride ,joy and humor) or negative ( fear, guilt or shame) emotion that can motivate purchase. 3) Moral Appeal: Moral appeal are directed to the audience sense of what is right: and a" proper (cleaners environment , equal rights for women and aid to the disadvantages)

b) Message structure: the communicator must also decide how to handle three message structure issue. 1) The first is whether to draw a conclusion or leave it to audience. 2) The second is whether to present strongest argument first or last. 3) The thirds is whether to present on sided argument ( mentioning only the product strengths) or two sided argument (touting the product strengths while also admitting its shortcoming) C) Message format: the marketing communicator needs a strong format for the message. In a print ad, the communicator has to decide on the headline ,copy illustration and color.

 4) choosing Media:
The communicator must select the channel of communication. There are two types of communication: 1) Personal communication: Channel to which two or more people communicate directly with each another, including face to face ,person to audience, over the telephone or through the mail. 2) Non Personal presentation: Media that carry messages without personal contact or feedback including major media and events. Print media: Newspaper, Magazine, Broadcast media: Radio, Television Display Media : e-mail, Web sides, etc

5) Selecting the message source: In either personal and non personal communication, the messages impact on the target audience is also affected by how the audience views the communicator. Message delivered by highly credible source are more persuasive. Company hire celebrity endorser- well known actor athletes and even cartoon characters- to deliver their message. 6) Collecting feedback: After sending the message, the communicator must research its effects on the target audience. This involve asking the target audience members whether they
remember the message, how many times they sow it, what points they recall, how they felt about the messages and their past and present attitudes toward the products and company.

Setting the Total Promotion Budget

Affordable Method

Percentageof-Sales Method

CompetitiveParity Method

Objectiveand-Task Method

Affordable Method: Setting the promotion budgets at the level management think the company can afford. Percentage of sales Method: Setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price. Competitive parity Method: Setting the promotion budget to match the competitors outlets. Objectives- and-task method: Developing the promotion budget by 1) Defining specific objectives 2) Determining the task that must be performed to achieve this objectives. 3) estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget

Setting the Promotion Mix

Nature of Each Promotion Tool
Advertising
Reaches Many Buyers, Expressive Impersonal

Personal Selling
Personal Interaction, Builds Relationships Costly

Sales Promotion
Provides Strong Incentives to Buy Short-Lived

Public Relations
Believable, Effective, Economical Underused by Many Companies

Direct Marketing
Nonpublic, Immediate, Customized, Interactive

Promotion mix strategy;

Push Strategy - Pushing the Product Through

Distribution Channels to Final Consumers. Pull Strategy - Producer Directs Its Marketing Activities Toward Final Consumers to Induce Them to Buy the Product.
Producer marketing activities: ( personal selling, trade promotion Others. Resellers Marketing activities; ( Personal selling, adverting, Sales promotion, other.

Producer

Retailing & Wholesales

Customer

Push Strategy Producer

Demand Demand Retailing & Wholesales

Customer

Producer Marketing activities: ( customer advertising , sales promotion others)

Pull Strategy

Integrated Marketing Communications

Company Carefully Integrates and Coordinates Its Many Communication Channels to Deliver a Clear, Consistent, Compelling Message.
Packaging Advertising

Event Marketing

Message

Personal Selling

Direct Marketing
Public Relations

Sales Promotion