Marketing Mix (4ps) Slide 5 Place

Direct Distribution Indirect Distribution

Manufacturer Manufacturer

Retailer

Consumer Consumer

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Product anatomy

Product definition

A product is a physical good, service, idea, person or place that is capable of offering tangible and intangible attributes that individuals or organisations regard as so necessary, worthwhile, or satisfying that they are prepared to exchange money, patronage or some other unit of value in order to acquire it.

WHAT IS A PRODUCT?
People buy want satisfaction, not objects. Example: Consumers buy televisions because they want entertainment, not because they want a box with a screen. Product Bundle of physical, service, and symbolic attributes designed to satisfy a customers wants and needs.

WHAT ARE GOODS AND SERVICES?

Services Intangible tasks that satisfy the needs of consumer and business users.
Goods Tangible products that customers can see, hear, smell, taste, or touch.

The anatomy of a product

Figure 7.1

Product layers

All four layers of a product contribute to the buyers satisfaction.

The outer two depend on the core product to determine how they are realised.

Product based classifications

Durable products - last for many uses and over a long period before having to be replaced. Non-durable products - can be used once or a few times before having to be replaced. Service products - intangible products comprising activities, benefits or satisfactions that are not embodied in physical products, e.g. financial services, holidays, etc.

User based classifications: consumer goods/services

Convenience goods - relatively inexpensive, frequent purchases which respond to routine response buying situations. Shopping goods - represent more of a risk and an adventure to consumers.

Speciality goods - high risk, expensive and infrequently purchased products.

Unsought goods - e.g. sudden emergencies.

User based classifications: B2B goods/services

Capital goods - buildings and fixed equipment that contribute to production. Accessory goods - items that give peripheral support to the production process. Raw materials. Semi-finished goods. Components and parts. Supplies and services.

The product mix

The sum of all the products and variants offered by an organisation. The product mix can be split into the following: Product lines. Product items. Product line length. Product line depth.

Product mix width.

DEVELOPMENT OF PRODUCT LINES

Product line Series of related products offered by one company.

DESIRE TO GROW
Growth potential limited if company focuses on a single product. Example: L. L. Bean began selling a single style of boots but has grown by selling a variety of products.

ENHANCING COMPANYS POSITION IN THE MARKET

Entire lines of products make company more important to consumers and marketing intermediaries.

OPTIMAL USE OF COMPANY RESOURCES

Spreading operations costs over a series of product lines reduces the average production and marketing costs of each product.

THE PRODUCT MIX

Assortment of product lines and individual product offerings that the company sells. Product mix widthNumber of product lines a firm offers. Product mix lengthNumber of different products a firm sells. Product mix depthVariations in each product that the firm markets in its mix.

PRODUCT MIX DECISIONS

Firms evaluate the effectiveness of the width, length, and depth to make decisions about adding or eliminating products from their offerings. Line extensionadding individual offerings that appeal to different market segments while remaining closely related to the existing product line.

Marketing mix Blending of the four strategy elements product, place promotion, and priceto fit the needs and preferences of a specific target market. Marketers develop strategies to sell both tangible goods and intangible services.

CLASSIFYING GOODS AND SERVICES FOR CONSUMER AND BUSINESS MARKETS

Consumer (B2C) products Product destined for use by ultimate consumers. Business (B2B) products. Product that contributes directly or indirectly to the out- put of other products for resale; also called industrial or organizational product. Some products fall into both categories. Example: Prescription drugs, which are marketed to doctors and to end users.

QUALITY AS A PRODUCT STRATEGY

Total quality management (TQM) Continuous effort to improve products and work processes with the goal of achieving customer satisfaction and world-class performance.

WORLDWIDE QUALITY PROGRAMS

Leadership of several large U.S. corporations led to quality revolution of the 1980s. U.S. Congress established the Malcolm BaldrigeNational Quality Award to recognize excellence in quality management. ISO 9002 standards implemented by the European Union define international criteria for quality management and assurance. U.S. member body of ISO is National Institute of Standards and Technology.

THE PRODUCT LIFE CYCLE

Product life cycle Progression of a product through introduction, growth, maturity, and decline stages.

Stage 1: Market Introduction

Sales are low as the new idea is first introduced to the market. Customers may not be aware of the products benefits and features and may not be aware of the product itself. Most companies experience losses during the market introduction stage.
A lot of money is spent on promotion and product development to build product awareness. Promotion is aimed at innovators and early adopters.

Pricing:
Low penetration pricing High skim pricing

Stage 2: Market Growth

Rapid growth in sales and profits
More product awareness

Competitors see the opportunity and enter the market.

Some competitors will copy the product or may try to make it better or more appealing to other target markets. The new entries result in more product variety.

 Additional features and support services may be added to:

Combat competition Retain customers

Promotion is aimed at a broader audience. More distribution channels are established.

 Most common stage in the cycle. Sales begin to level off. The competition gets tougher as more competitors have entered the market.

Stage 3: Market Maturity

Increased competition creates a downward movement in prices.

Industry profits are largest, but it is also when industry profits begin to decline. Promotion is targeted to create brand differentiation.

Stage 4: Sales Decline

Sales continue to decline.
Shrinking market

New products replace the old. Firms will often try to use extension strategies. Companies may be able to keep some sales by appealing to their most loyal customers.

 When in the decline stage, a firm may:

Maintain: enhance the product by finding new uses or by adding new features. Harvest: reduce costs and continue to offer the product to a targeted niche. Discontinue: sell the product to another firm, or liquidate inventory.

Example: New Flavor of Pepsi

Stage 1: Market Introduction
Pepsi bottles the new flavored product and places it on the market for consumers. Pepsi also spends a lot of money advertising the new flavor creating awareness.

Stage 2: Market Growth

Customers like the flavor and begin to make routine purchases. Coke introduces their competing flavor.

 Stage 3: Market Maturity

More competitors enter the market taking some of Pepsis profits.

Stage 4: Sales Decline

Customers have moved on to the next new flavor. Some loyal fans stay behind.

Pros
The product life cycle is a useful model when deciding possible stages of a product or service. Useful to help demonstrate how marketing strategies can vary at different stages of a product's life. Promotion

Cons
Tends to be backward looking We only know which stage we have been in after it has been completed.

Only looks at a single product when most firms have many products.

EXTENDING THE PRODUCT LIFE CYCLE

Product life cycles can be extended indefinitely as a result of marketers decisions.

INCREASING FREQUENCY OF USE

Convincing current customers to buy a product more frequently boosts total sales even if no new buyers enter the market. Example: Custom Printed M&Ms that allow consumers to order their own initials or sayings.

INCREASING THE NUMBER OF USERS

Attracting new customers who have not previously used the product. Example: Walt Disney markets its theme parks to adults.

FINDING NEW USES

New applications extend a products life cycle.

WD-40 identified the top 2,000 uses for its oil.

CHANGING PACKAGE SIZES, LABELS, OR PRODUCT QUALITY

Example: Food marketers produce packages designed to appeal to oneperson households.
Example: Krafts 100-calorie Snack Packs, which package snacks in 100 calorie amounts.

PRODUCT DELETION DECISIONS

Marketers prune product lines and eliminate marginal products to preserve limited resources. Firms may carry poor performing items to carry a complete product line. Example: Grocery stores carry bulky, low-unit value items like salt to meet shopper demand. Shortages or raw materials can prompt a firm to discontinue production. Firm may drop products that dont fit into the direction in which it plans to grow.