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Topic 6 Product Policy

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PRINCIPLES OF MARKETING-A2 Topic 6 Product Policy Assoc. Prof. A. Popissakov 2009-2010 * * – PowerPoint PPT presentation

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Title: Topic 6 Product Policy


1
Topic 6 Product Policy
PRINCIPLES OF MARKETING-A2
  • Assoc. Prof. A. Popissakov
  • 2009-2010

2
1. Basic concept of Product
  • What is a Product?
  • is a multidimensional offering, a mix of
  • tangible features
  • intangible services and attributes,
  • bundling around a basic or core benefit.
  • 3 Levels of one product

Basic Product (BP) Basic physical features and
benefits
3
1. Basic concept of Product
  • Core Product (CP) - Basic physical features and
    benefits
  • Real (Embodied) product (RP) - products make up
  • Total (Augmented) product (TP) - services and
    intangible associations.

Basic Product (BP) Basic physical features and
benefits
4
Basic concept of Product
Core Product (CP) Basic physical features and
benefits
Core(Basic) product
Real (Embodied) Product (RP) Product make- up
Total (Augmented) Product (TP) Services and
intangible associations
5
Core Product (CP)
  • 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)

Coffee as a Core Product
6
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 (Jacobs coffee)
  • leading brand name
  • attractive packing

Coffee (CP) 2 tangible features
7
Real (Embodied) Product (RP)
  • E.g Jacobs coffee
  • taste refreshment (benefit 1,2) (brand name
    packing (tangible features 1,2) Real product

Jacobs Coffee (benefits tangible features)
transform it to a Real (Embodied)Product
8
Total (Augmented) Product (TP)
  • Will add to the listed product some intangible
    extra features through services
  • credit and financial provisions
  • reputation of the seller
  • delivery services
  • custom services
  • replacement services
  • quality assurance, etc.

9
Total (Augmented) Product (TP)
  • E.g. If Jacobs 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

10
Total (Augmented) Product (RP)
  • These are two different Total Products.
  • Jacobs coffee at a supermarket
  • - as a commodity
  • B) Jacobs coffee at a luxury hotel lounge
  • - as pleasure and prestige.

11
2. Product Life Cycle (PLC)
  • Each new product goes though 4 main Phases of
    PLC
  • Introduction
  • Growth
  • Maturity
  • Decline

12
Product Life Cycle (PLC) - chart
  • Sales
  • Profit

Revenue and profits
time
Growth
Maturity
Decline
Introduction
13
PLC - Introduction phase
  • Features
  • this is post-launch period, after much spending
    on new product RD.
  • low sales
  • low revenue
  • profit might be negative
  • hard time for companies

14
PLC - Growth phase
  • Features
  • a product takes off
  • gaining market share and early majority of buyers
  • revenue and profit grow

15
PLC - Maturity phase
  • Features
  • usually the longest phase for most products (the
    longer the better)
  • beginning with continued sales growth
  • reach saturation (peak) of sales and profit
  • sales and profit dip at the end of phase.

16
PLC - Decline phase
  • Features
  • sales may fall rapidly or gradually
  • profit also follow the trend or could be negative
    again
  • the product become a looser
  • give way to heavy losses for company.

17
Key features of PLC
  • Peter Doyles article The realities of the
    product life cycle gives key features of PLC.
  • Summarized in
  • PLC characteristics
  • Market response
  • Product

18
Key features of PLC-characteristics
  • Market characteristics table

19
Key features of PLC-marketing responses
  • Marketing and product response table

20
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

21
PLC Analysis
  • PLC Analysis can change the PLC substantially and
    extending it.
  • E.g. WV Beetle cars 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

22
PLC Analysis
  • PLC Analysis can change the PLC substantially and
    extending it.

Revenue and profits
E
D
B
C
A
time
23
4. Classification of products
  • Just as market segmentation improve marketing
    programs, it is helpful to separate products
    into homogeneous classifications.
  • Two groups
  • consumer products
  • business products

24
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.

25
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.

26
Classification of Consumer products
  • 4 groups
  • A. Convenience goods
  • B. Shopping goods
  • C. Specialty goods
  • D. Unsought goods

27
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.

28
A. Convenience goods
  • General Features
  • no strolling around to buy
  • ready accessible
  • willing to accept several brands
  • low unit price
  • not bulky
  • not affected by fashion
  • no need of special promotion and advertisement
  • purchased frequently

29
B. Shopping goods
  • Products for which customers usually wish to
    compare quality, price and style in several
    stores before purchase.
  • Furniture,
  • major home appliances
  • womens apparel

30
C. Specialty goods
  • Consumers have strong brand preferences and are
    willing to spend special time and efforts in
    purchasing them.
  • Stereo, video, photographic equipment
  • mans suit
  • health food
  • new automobile(special offer)

31
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).

32
Classification of business goods(B2B goods)
  • 5 groups
  • A. Raw materials
  • B. Fabricating parts and materials
  • C. Installations
  • D. Accessory equipment
  • E. Operating supplies

33
A. Raw materials
  • 3 groups
  • goods 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.

34
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

35
C. Installations
  • are manufactured business products the
    long-lived, expensive, major equipment of a
    business user
  • factory building
  • large generators in a dam,
  • jet airplanes, highways
  • container terminal, etc.)
  • Installations directly affect the scale of
    operation in a firm.

36
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)

37
E. Operating supplies
  • are the convenience goods of the business
    sector, help a firms operation but do not become
    a part of finished product
  • short-lived, low-priced items
  • pencils,
  • stationary,
  • toner,
  • washroom supplies, etc.)

38
5. The NPD (New Product Development)
  • What is a new product?
  • Three categories requiring different marketing
    approach.
  • Really innovative products
  • Significantly different products
  • Imitative products

39
Really innovative products
  • Truly unique products
  • hair restorer
  • cancer, (AIDS) cure
  • time machine, etc.

40
Significantly different products
  • Replacements for existing products that are
    significantly different.
  • Eye glasses - contact lenses
  • Tube TV LCD, plasma TV
  • line phones - GSM
  • stereo record player - CD player

41
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.

42
5.2 New Product Development Process
1. Idea generation
1, 2, 3 -Concept testing stage
2.Idea screening and evaluation
Last turn back point
3.Business analysis
4. Product prototype development
5.Test marketing
6. Commercialisation
4, 5-Most resource consuming stages
43
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.

44
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???

45
Step 3. NP Business analysis
  • Management responsibilities to converted NP
    ideas into a concrete business proposal.
  • Identify product features
  • Estimate market demand
  • Evaluate competition,
  • Calculate profitability
  • Establish a program for NP development

8 criteria (fits) expressed in figures
46
Step 123 Concept testing phase
  • Pre-testing of the product idea
  • Most critical stage for a NP development.
  • 75 of NP ideas failed at this stage.

47
Step 4. Product prototype development
  • The product idea on-paper is converted into a
    physical product.
  • pilot models manufacturing
  • small quantities
  • laboratory tests
  • technical and production evaluations, etc.

48
Step 5. Test marketing
  • Market test (real marketing) in limited
    geographic areas.
  • customers reaction and acceptance
  • production variables (colour,sizes, etc.)
  • price adjustments
  • final decision where to go on marketing the
    product or stop. Last turn back point.

49
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.

50
Producers criteria for NP
  • As a part of NP Business analysis some basic
    questions must be answered.
  • Should the NP be added to companys existing
    product assortment?
  • 8 criteria or products fits

51
5.3. Producers criteria- 8 Fit for a NP
  • 1. Marketing fit
  • 2. Financial fit
  • 3. Standard fit
  • 4. Fit companys marketing structure
  • 5. Fit companys production structure
  • 6. Fit the law
  • 7. Companys management fit
  • 8. Fit companys image and objectives

52
Marketing fit
  • Do enough people really want this product?
  • Will the NP fit into our sales force?

53
Financial fit
  • Is enough financing available?
  • Will the NP increase profitability?
  • Will the NP improve seasonal and cyclical
    stability of the company?

54
Standards fit
  • Will the NP meet current environmental and social
    standards?
  • Safty
  • harmful
  • save energy features (class A, A, B, C,)
  • recycling potential, etc.

55
Fit companys marketing structure
  • Can the existing sales force be used?
  • Can the present channels of distribution be used?
  • E.g. Children cloths - children toys/books.

56
Fit companys production structure
  • Will the NP fits in with
  • existing production facilities
  • labour force (skills)
  • management capabilities

57
Fit the law
  • NP should not have any legal objections
  • patents application
  • copy right application
  • packaging, labeling regulation, etc.

58
Companys management and RD fit
  • Will the management and/or RD 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.

59
Fit companys image and objectives
  • Will the NP keep the companys image and fit with
    its objectives?
  • E.g. Low priced, low quality product could not
    contribute to companys prestige.

60
Hypothetical example of NP idea rating sheet
61
Calculation of NP criteria
  • All criteria are weighted according companys
    corporate objectives.
  • Weighted factors are screened through NP rating
    scale
  • Final score is calculated and analysed.
  • Score key 0- 89 poor idea
  • 90 - 139 fair
  • 140 good

62
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.

63
Stages in adoption process
64
Adopter Categories
  • 1. Innovators
  • 2. Early adopters
  • 3. Early majority
  • 4. Late majority
  • 5. Laggards

65
Adopter Categories-Innovators
  • A venturesome group, about 3 of the customers,
    first to adopt an innovation.
  • Features
  • younger
  • higher social status
  • better financial position

66
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)

67
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

68
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

69
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.

70
Adopter Categories-Laggards
  • Normal distribution Bell curve for NP diffusion
    process.

Adoption rate
Early majority
Late majority
Early adopters
Laggards
Innovators
3
34
34
16
13
Time
71
The End
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