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UNIT 4.3 Product

Definition

A good

or service that serves to satisfo the needs or wants of customers.

Classifi.catign qf products

Product

Line--) \
'1.

Product Mix

-)

Product Range

Consumer Products

'.

Producer Prducts

Fost Maving Goods

lndustrialGoods

Cansumer Perishables

Consumer Durobles

Fixed Assets

Specia lty

Ca

nsu m

r P rod u cts

Itaqes of. Npur Fr.oduct Developmpnt

Market Research

-)

Product Development and testing

-)

Feasibility Study

-)

Launch

1. Market Research

2. Product Extension
3. Research and Derrelopment 4. 'Me too' Developments

Definitio+

- PLC shows the ffiele*t W

iaruttch

tfut a prtodrfr b filsdy to go dror,rgh from its

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Saturation {h}Srrst

Profit t{one Ettle

Yes, increasing

Cash Flow

Highly ltlegative

Nqative
Positive Positiv

{Har*etirgl
Hig[ {Persrlas E} Irss{mainty remfindirul ErtenslorSartegi,es
High, but little grotrdl Hith, sbHe

Posilire
Positive, but fafiinc

pointl
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little, if any

Ye+

butHling

r3t

Extension Strateeisfor Prodg.f Ufu

qde

7. Prie Redudion

2. Redeslgning 3. Repackoging 4. New Mlarkefs 5. Promotian

PqfiEition -The range of products owned by o business.

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Braqdine
Definition * competitors
o

form of differentiating

firm's prductfrom those of its

Role_and advant?ges of branding

Role

.\

Adnantage Unique and recognizable name and image

Provides cost advantages

As a leaal instrument

As o o looo

As o risk reducer

Better chance at survival, encourages customer loyalty

As an imooe enhancer

Allows businesses to charge a premium price

Reduces price elasticity of demand

As a soles oen?fator

ACvaqtage oJ Brandinqover Product

1. lntangibility 2. Uniqueness 3. Timelessness.

\*t

B,rqnd Na.mSS

Types of Brand Names 9oleed gra,nds

Examples Haagen Dazs

Bona fide names',

.\

Apple, British Petroleum

q

.\r ..\
KFg CNN, BMW

Asorrms

Ilumbers

PlayStation 3, Nike 90, 7-Eleven

Perconpl Namef

Ford Motors, Walt Disney, Michael Dell.

Plpce naqne,s

American Express, The Washington Post.

Brand Lovaltv

Defi4ition - Brand loyalty is when custarners buy the same brand of product repeatedly

AWo,ntaaes of

.\

Bm4

Lglgittv

1. Higher Market Share 2. Ability to charge a premium 3. Demand becomes price inelastic 4. Fosters brandextension strategies 5. Higher barriers to entry

Type Family Branding

Characteristics

Examples

Marketing a range of products under a single brand name

MarkeUng separate products under a range as separate identities
Using the business' narne as the brand

HewlettPackerd,

Product Branding Company Branding Own label brand

Mercedes and Smart cars McDonalds

name
Created and owned by the distributors Created and owned bythe producers

Carrefour Microsoft

Manufacturer brand

IH

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Tvoes of Prornotion

{bove the line

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-radio

Belowthe line -through the usage of non-media -branding

-slogans -logos
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cinema
-newspaper
'magaeines

.outdoor advertisirqg billboards, posters

-word-of-mouth direct marketing

rdl prornotion
'techniques used to stimulate demand .above the line methods

direct mail
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-publicity
-sponsorship
Ptrsh promoti,on

-techniques that rely on intermediaries -belowthe line method

\
Above the llne
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of

:ustomers -more noticeable & appealing

Pull promotion Disadvantage -do not meet the right segments or potential custorners -ignored by customers -relatively costly

Bebuu

ttpf,ne /Pustr
Disadvantage

Advantage
-has direct control over

-reh on intermediaries

advertisements -relatively cheap

rromotional mix -set of promotional methods that can effectively comrnunicate the benefits of the products -raise awareness through attention; appealing promotional methods .stimulate aru* interest customer through interest; interesting ads enerate a desire or feeling through desire; free samples -encourage the customer through action; discount vouchers

*7*

4.6 ?LACE
Channels of Distribution
Long Channel Shart Chonnel

Producer

r r
lntermediary
Wholesaler
Firm

Between rwo ends ofthe channel Involved in selling on the productto the next Break bulk simplifies & reduces

+
Retailer

tltelines of
communication,

transportation

Customer: \ o Consurner (wentually consume) o lndustrial conzumer

lntermediary firms
Agent

Whatthrydo,..

Explanation

lAct

on behalf of other firm ; common in

o . o . o

Commission agent Do not become ownerofthe goods Stocklist agent

import exports

o o

Secure orders from customers

Carries a stock of manufacturers'

products Wholesalers
Buy goods for resale to someone otherthan Provide storage facilities to hold large stock

eventual customers-

reduce need

lmprove manufacturer's cash flow {taking goods off their ands) Hold sme of producers' marketine risk

Retailers

Buy goods from wholesaler/dirertly from

Provides:

manufacturer for sale to the public in shops/ other retailoutlets

Variety of goods, convenient service, information and advice to consumers, delivery of soods

Channel Choice Factor!

Class of

Short Channel fDirectl

tom Channel
Consumer Hieh

produd

lndustrial
Low

Number of customers Control towards product Product characteristics : Bulky, expensive, custorn made, hieh unit value. oerishaHe
Purchasing pattem Tvpe : Good/service

lmportant

Unimportant

v
Hish Service

Low Goods

$as

Disribufion sfategr:
lnlur+i,tttz

I f I I

Place product in many retail

outleB

Does not require explanation

High

ma*et exposure & sales revenue

Conveniencegoods:candy,drinks

Sdtt{wez

I I r I

\. Custorner*epect after-sah seryice Market is sffkier* to warrant hi8lrer iaBr$r,e dlstrihrtion

E-g:

Preferred group of rctailer in aa area

Fumiture,

&ths

Erd*ti,tru

I I I I

Exclusiveproduct Only 1 retail outlet in a single geographkal area Eetter service, pay more attention
Rolex, Ferrari

tx

4.6 PI.ACE
Channels of Distribution
Long Chonnel Producer

Slnrt Chdnnel

o o
lntermediary
Wholesaler

Between rwo ends ofthe channel Involved in selling

onthe productto

t
Retailer

Firm

the next

Breakbulksimplifies & reduces

the lines of communication,

transporbtion

Customer: .\ r Co*sumer (eventually o lndustrial consumer

lntennediary
firnrs
Agent

consume)

Whettheydo.-

Explanation

*Ast

on behalf of other firm ; cornmon in

o o

importelportr

Commission agent o Secure orders from customers o llo not becorne ownerofthe goods

Stortlistagent

Carries a siock of manufacturers'

prodr.6
Wholesalers
Buy goods for resale to someone o*trer

tfigr

o o o

Prwide storqe facitities

eventual customers-

reduce need

to hdd larBe stok

lmprsve manufacture/s cash flow {tating goods orff their ands) Hold sme of producers' marketinc risk

Retailers

Buy goo& frun rftolesdsldiredy

frsn

rnanufacturer for s.{e to the puHlc in drops/

ds

rtu{l

qdets

Provides: Varie'fy of goodq conyenient service, informationand advice to consumers, delivery

ofeoods

Channd Clrcice
Factors
Chss of product

SlprtGhampl {Direct}
lndustrial
Low

tong Orannel
Consumer
High

Numberof customers Control towards aroduct

Product characteristics
Bulky, expen$vq
:

lmportant

Unimportant

a$torn made,

'l
High Service

high unit valug perishable

Purchasing pattern Low Goods

Iype : Good/service

r37

Distribution stlategn

Mvs f I * *
Pbce productin manyrcbil oudeB
Does not reSrire explanation High

marketexpcrrre&sahs revenue

Convenisagoods:erdy,drinb

Scredfues

f Preferredgrurpof r*InandEr * Ctstsrssryect*e*seryioe

* *

fffieaissnfficiectbrarr:rrthfuhrinten**=dlstrihnion \ Eg:fun*Ere,dothes

Exctdra: * I * ;
Exdrsive product

&rly 1reail outlet in a single geographical area

Better service, pay more attention
Rolex, Ferrari

e$

4.7 INTERNATIONAI{
Definition

MARKETING

lnternational

is the marketing of a

firm's products in foreign countries.

Hgly a fifm sains entry into intgrnalipnal parkets

Method
Expofting

Notes
to an overseas buyer.

business (c.ost and risk)

Direct Iavestment
distribution facilities in foreign countries Wider distibution channel but high cost of inveshent Trading viathe intemet

E-commerce

[,ow costs and risk

Joint Ventures
shared business project to form a separate busiuess.

companies ftom the target country to gain access to the foreign market.

Strategic Alliance
forrr
a separat legal identity.

Franehising
its name in return for a fee and share of the profits while marketing its product overseas from those \ilho us the licensins fr,om the oarent comDanv.

f**

Mergers
single organization. companies to gain access to intemational markets.

Acq uisitions (takeovers)

by purchasing majority stake in the target company.

international markets.

Benefits of International M,arketing

. . . .
o

Wider customer base

Econ'omies of scale -.\

Increased brand recognition Spread risks Extend the product life cycle

Gain more pro{it

#*ta

Problems in Entering Intefnational Markets.

Issue

Notes

Cultural Issues

Thecultrral exportsfromone country may not be sitable with

another as different cormtries has different local preferences The dtfference in language may interfere with marketing

\.\ \'ir.

Differentethics incultursmay pose different rules forthe firm to follow.

Business etiquette is also ditrerent

Political Issues

depending on the cormE5r, ftms must be aware of it to please the foreein coilsumers

Legal Issues

Copyright andpatent legislation must be dhered to (nemes, slogans, etc)

kicingdecisions{regulationof ma*tpo\rer) Tradepracticesfr,om&e

goverru[ent Comumerprotection laws that ditrer from cormtry to country (labelling, informatiorq advertisins)
Quotas, Tariffs, Embargoes, Administrative Barriers and

Subsidies.

Social and Demographic issues

Different socio-economic and demographic conditions in overseas markets mean different mixesmustbe
considered
Pressure groups mustalso be

considered (e.g. influence

of

PETA)

ECOnOmiC

ISSUeS

I I |

- E:rc@srates - Ifferdrdes - Commmicdimcosts.

Degrce of competition Traosportationcosts

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