THE MARKETING MIX (Product)
PRODUCT MANAGEMENT
Learning objectives/outcome
After completing this chapter, you should be able to do the following:
1.
Define a product
2.
Explain the various levels of a product
3.
Define a product including the core, actual and augmented product.
4.
Explain the main classifications of consumer and industrial products
5.
Describe the decisions companies make regarding individual products, product
lines and product mixes.
6.
Explain the meaning of product packaging, labelling, branding, quality.
Discuss branding strategy in relation to the decisions that companies make in building
and managing brands.
7. Discuss additional branding issues with respect to socially responsible brand
decisions and international marketing.
8. Understand the various levels of a product
9. Discuss the Product packaging and labelling standards and legislations
10.Understand what Product lines are.
11.Explain the concept of the Product life cycle and its practical applicability and
importance in marketing. Explain the various levels of a product life cycle, its
importance, and its usefulness
12. Explain the process of New product development
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Marketing fundamentals
The tools of the marketing management:
THE MARKETING MIX - definition
• It is the strategic blending of product, price, place, promotion,
people, physical evidence and processes in order to achieve
marketing objectives
• It is a combination of 7p’s which marketers use in order to satisfy the
market.
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Marketing fundamentals
The tools of the marketing management:
THE MARKETING MIX – definition Continues
• Marketing mix is the tactical toolkit of the 7’ps ; namely product,
price , place, promotion, people, physical evidence and
processes.
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THE MARKETING MIX - PRODUCT
We will examine the following issues under product:
1. Product Definition
2. Product Classification
3. Various levels of a product
4. The Product Life cycle
5. Product Packaging
6. Product Labeling
7. Product quality
8. Product lines
9. Branding
10. New Product Development Process
11. The importance of New Product Development
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MARKETING MIX (PRODUCT)
Definition
• A product is anything that can be offered to the market for attention, acquisition, use or
consumption that might satisfy a want or need. It includes physical objects, services,
persons, places, organisations and ideas.
•In marketing, a product is anything that can be offered to a market that might satisfy a
want or need.
•A product item is a distinct unit that is distinguishable by size, price, appearance or
some other attribute. An item is sometimes called a stock keeping unit or product
variant.
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PRODUCT
• However it is much more than just a physical object. It is the complete
bundle of benefits or satisfactions that buyers perceive they will obtain if they
purchase the product. It is the sum of all physical, psychological, symbolic,
and service attributes.
• A product is similar to goods. In accounting, goods are physical objects that
are available in the marketplace. This differentiates them from a service,
which is a non-material product. The term goods is used primarily by those
that wish to abstract from the details of a given product. As such it is useful
in accounting and economic models. The term product is used primarily by
those that wish to examine the details and richness of a specific market
offering. As such it is useful to marketers, managers, and quality control
specialists.
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• A service is a non-material or intangible product - such as
professional consultancy, waitressing, or an entertainment
experience.
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PRODUCT CLASSIFICATION SCHEMES
• Nondurable goods: Nondurable goods are tangible goods normally
consumed in one or few uses
• Examples include: beer, soap, toilet tissue, bread, milk, newspaper and salt.
Since these goods are consumed fast and purchased frequently, the
appropriate strategy is to make them available in many locations, charge
only a small mark-up and advertise heavily to induce trial and build
preference. Some of the nondurables are perishables. Nondurables are
conveniently located.
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• DURABLE GOODS: Durable goods are tangible goods that
normally survive many uses. Examples include refrigerators,
machine tools and clothing. Durable goods normally require more
personal selling and service and they command a higher margin and
require more seller guarantees.
• SERVICES: Services are activities, benefits or satisfaction that are
offered for sale. Examples include hair cut, repairs, education,
health etc. Services are intangible, inseparable, variable,
heterogeneous, non transferable and perishable.
• As a result, they normally require more quality control , supplier
credibility and adaptability.
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CONSUMER GOODS CLASSIFICATION
• Consumer goods are those which are bought by final consumers for
personal consumption. Marketers usually classify these goods on the basis
of consumer shopping habits because the way consumers shop for products
has direct implications for marketing strategy.
• We can distinguish among convenience, shopping, speciality, and unsought
goods.
Key definitions
Shopping product- A Consumer product that the customer, in the process of
selection and purchase, characteristically compares with others on such
bases as suitability, quality, price and style.
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SPECIALITY PRODUCT – A consumer product with unique
characteristics or brand identification for which a significant group of
buyers is willing to make a special purchase effort.
UNSOUGHT PRODUCT - A consumer product that the consumer
either does not know about or knows about but does not normally
think of buying.
Non-Durable Product – A consumer product that is normally consumed
in one or few uses.
Durable Product – A consumer product that is usually used over an
extended period of time and that normally survives many uses.
Consumer Product – A product bought by final consumers for personal
consumption.
Convenience Product- A consumer product that the customer usually
buys frequently, immediately, and with a minimum of comparison
and buying effort.
Services – Activities, benefits or satisfactions that are offered for sale.
Core product – The problem solving services or core benefits that
consumers are really buying when they obtain a product.
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Key definitions
Actual product- A product’s parts, quality level, features, design, brand name,
packaging and other attributes that combine to deliver core product benefits.
Augmented Product- Additional consumer services and benefits built around the
core and actual products.
Industrial Product – A product bought by individuals and organisations for
further processing or for use in conducting a business.
Materials and parts- Industrial products that enter the manufacturer’s product
completely, including raw materials and manufactured materials and parts.
Capital items – industrial goods that partly enter the finished product, including
installations and accessory equipment.
Supplies and services – industrial products that do not enter the finished
product at all.
Product quality – The ability of a product to perform its functions; it includes the
product’s overall durability, reliability, precision, ease of operation and repair,
and other valued attributes.
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Brand – A name, term, sign, symbol or design, or a
combination of these, intended to identify the goods or
services of one seller or group of sellers and to
differentiate them from those of competitors.
Packaging – The activities of designing and producing the
container or wrapper for a product.
Packaging concept- What the package should be or do for
the product.
Product-support services- Services that augment actual
products.
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THE MARKETING MIX - PRODUCT
PRODUCT CLASSIFICATION:
CONSUMER GOODS CLASSIFICATION
Consumer Products
1.
Convenience goods: e.g. bread, milk, toilet tissue, cigarette,
newspapers, toothpaste, sweets, meat, fish, butter etc. These are mostly
Perishable goods: goods that will deteriorate quickly even without use.
There are also Non durable/consumption/consumable goods: goods that
are used up in one occasion. Convenience goods are conveniently
located. They are not expensive and are consumed regularly. The buyer
most often have a good knowledge of the price for such products and less
time is spend in the purchase decision because of product and price
awareness. Convenience goods are needed almost on a daily basis
(demanded regularly). Most of these products have a short shelf life. The
distribution of these products is more intensive because of the demand
and the necessity for such products. Consumers can’t do without these
products.
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2. Shopping goods: e.g. television, cloths, shoes, watch & cameras. They are more expensive
than
convenience goods. They are selectively located. They are non perishables
and can be kept for very long time. Consumers often compare prices and
quality before making their purchase decision. These products are available at
selective locations.
3. Speciality goods: designer goods for e.g. designer suit, watch, shoes, cars, etc.
There are more expensive than convenience and shopping goods. Most of
them are exclusively located and some are selectively located. There are non
perishables and durable consumer goods. Most of the products are targeted at
wealthy consumers (high income earners). There is also comparison of prices
and quality before the purchase decision is made.
4. Unsought goods: e.g life assurance, grave stones,grave yard; these are goods
which consumers know they exist but are not thinking of consuming such
products at the moment.
Producer products classification
1.
Materials : goods that go into a finished product: e.g. cocoa, rubber, banana,
iron ore, copper, gold, diamond, etc.
2.
Machinery/Capital goods: installations, equipment, and buildings
3.
Parts: Accessories needed to complete the production process: e.g to produce
car, you need parts such as bulbs, engine, wheels, tyre, screen etc
4.
Services: Business services such as financial, transportation, consultancy,
insurance, etc.
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Types of consumer product - Marketing considerations for consumer products
Marketing
consideration
Convenience
Shopping
Speciality
Unsought
Customer buying
behaviour
Frequent purchase,
little planning, little
comparison or
shopping effort, low
customer involvement
Less frequent
purchase, much
planning and shopping
effort, comparison of
brands on price,
quality, style
Strong brand
preference and loyalty,
special purchase
effort, little comparison
of brands, low price
sensitivity.
Little product
awareness or
knowledge; if aware,
little or even negative
interest.
Price
Low price
Higher price
Highest price
Varies
Distribution
Widespread
distribution, convenient
locations
Selective distribution in
fewer outlets
Exclusive distribution
in only one or a few
outlets per market
area
Varies
Promotion
Mass promotion by the
producer
Advertising and
personal selling by
both producer and
resellers
More carefully targeted
promotion by both
producer and resellers.
Aggressive advertising
and personal selling by
producer and resellers
Examples
Toothpaste,
magazines, laundry
detergent
Location: Convenience
stores, supermarkets
Major appliances,
televisions, furniture,
clothing.
Location:
supermarkets and high
street stores e.g
Primark
Luxury goods, such as
Rolex watches or fine
crystal.
Location: House of
Fraser, Next
Life insurance, blood
donations, grave
stones etc.
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Unsought goods
Unsought goods: e.g., cemetery plots, insurance. These are products that we
need but
which we do not actively seek out to buy. They usually require a hard sell
approach by
the seller. Example "what will happen to your family if you die and do not have
life
assurance?". The fear of leaving the family destitute makes us buy almost
against our
will, even though we know that it is the intelligent thing to do. Certain legal
services such
As drawing up a will, will also fall into this category.
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THE MARKETING MIX - PRODUCT
THE VARIOUS LEVELS OF A PRODUCT: - (Adapted from the Chattered
Institute of Marketing (CIM) Any future augmentation
Potential product
What
customers
Expect to
find from
The
product
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After sales
services e.g.
Advise,
guarantee
Repairs,
installation
Augmented product
Expected product
Actual/Basic product
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Tangible product
Intangible product: ideas
Packaging
Labelling
Branding
Styling
Quality
Levels of a product – Adpapted from Philiip Kotler – Principles of
marketing – 4th European Edition
An alternative way of looking at the levels of a product.
Augmented
product
Installation
Packaging
features
Delivery
And
credit
Brand
name
Core Product
benefit or
service
After
sale
service
Styling
Tangible/a
ctual
product
Quality
Guarantee/
Warranty
Core product
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Product packaging and labelling
• Packaging is the activities of designing and producing the container or
wrapper for a product. The container or wrapper is called the package.
• Packaging is the enclosing of a physical object, typically a product that
requires protection from tampering.
• Labeling refers to any written or graphic communications on the packaging
or on a separate but associated label.
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PRODUCT PACKAGING AND LABELLING
NUMEROUS FACTORS HAVE CONTRIBUTED TO THE INCREASED
USE OF
PACKAGING AS AN IMPORTANT MARKETING TOOL:
• Self service
• Consumer affluence: Rising consumer affluence means that consumers
are willing to pay a little more for the convenience, appearance,
dependability and prestige of better packages.
• Company and brand image
• Innovational opportunity
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The purpose of packaging and labelling
Packaging and labeling have seven objectives:
1. Protection against physical impact on object - The objects enclosed
in the
package may require protection from, among other things, damage caused
by
physical force, rain, heat, cold, sunlight, pressure, airborne contamination,
automated handling devices, or any combination of one or more of these.
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2. Protection against dust and dirt - In a modern supply chain products are
subject
to different environments. They are packed in boxes and stacked on a pallet. In
about 80% the products end up in a distribution center for commissioning and
fine
distribution to the store where the product will be sold. During this period the
physical protection also applies to dust and dirt that can easily settle on the
consumer packaging. Especially products packed in plastic containers like
shampoos, detergents and ketchups due to static charging easily attract dust
and
dirt. As a consumer we don't want to get dirty hands when picking up a product
from
the shelf. Transportation packaging keeps our products clean and neat till the
shelf
and so helps cut cleaning costs on the shop floor.
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The purpose of packaging and labelling
3. Agglomeration - Small objects are typically grouped together in one
package for reasons of efficiency. For example, a single box of 1000 pencils
requires less physical handling than 1000 single pencils. Alternatively, bulk
commodities (such as salt) can be divided into packages that are a more
suitable size for individual households.
4. Information transmission - Information on how to use, transport, or dispose
of the product is often contained on the package or label. An example is
pharmaceutical products, where some types of information are required by
governments.
5. Marketing - The packaging and labels can be used by marketers to
encourage potential buyers to purchase the product. Package design has
been an important and constantly evolving phenomenon for dozens of years.
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6. Reducing theft - Some packages are made larger than
they need to be so as to make theft more difficult. An
example is software packages that typically contain only
a single disc even though they are large enough to
contain dozens of discs. These packages may also be
deliberately difficult to open, to hamper thieves from
removing their contents without drawing notice.
Packages also provide opportunities to include anti-theft
devices, such as dye-packs or electronic article
surveillance tags, that can be activated or detected by
devices at exit points and require specialized tools to
deactivate. Using packaging in this way is a common
tactic for loss prevention.
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The purpose of packaging and labelling
7. Prevention of pilferage and tampering - Products are exposed to
many contacts in the supply chain. Persons handling could steal
products (pilferage), replace full products with empty ones or add
constituents to the contents (tampering). Packaging that cannot be
reclosed or gets physically damaged (shows signs of opening) is
very helpfull in the prevention of these acts. The flaps of corrugated
and cardboard boxes are therefore glued in such a way that illegal
opening becomes visible.
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Product packaging and labelling
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Product packaging and labelling
Packaging types
Aseptic packages
Bags
Bales
Blister packs
Bottles
Boxes
Cans
Cartons
Envelopes
Molded Pulp
Pallets
Wrappers
There are also special containers that combine different technologies for
maximum durability:
Bags-In-Boxes (used for soft drink syrup and other liquid *Wine box (used for
wine)
products)
PN
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Product labelling
Information found on the packaging material include the following
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Product name
Production/expiry date
Country of origin
Ingredients/ composition of the product
Nutritional information
Logos, trademark or and company name
Advise on how to use the product and any precaution to take
when using the product.
Bar code
Price tag
Graphic design/product description
Contact details of the company / helpline.
Promotional material – slogans etc.
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PRODUCT LABELLING
• The law in the UK on food labelling is multifaceted and is spread over many
reforms and parliamentary acts, making the subject complex. However, there
are general laws which should be implied on any food product:
• Name – This must also inform the customer the nature of the product. It may
also be necessary to attach a description to the product name. However,
there are certain generic names which must be only used for their
conventional uses, for example: Muesli, Coffee, prawns.
•
• Ingredients – All ingredients of the food must be stated under the heading
Ingredients and must be stated in descending weight. Moreover, certain
ingredients must be identified by a specific name, such as preservatives
must be identified as ‘Preservatives’, and then identified by its standardised
European serial number, e.g. sodium nitrate or E250.
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• Nutritional Information – Although it is not a legal requirement to
declare Nutritional Information on the product, if the manufacturer
makes claims that the product is ‘Low in Sugar’, it must be
supported with nutritional information (normally in tabulated form).
However, as a rule it is recommended to declare nutritional
information as consumers more than ever are investgating this
information before making a purchase. Moreover, there are two
European nutritional labelling standards which must be adhered to if
nutritional information is shown.
• Medicinal or Nutritional Claims – Medicinal and Nutritional claims
are tightly regulated, some are only allowed under certain conditions
while others are not authorised at all. For example, presenting
claims the food product can treat, prevent or cure diseases or other
‘adverse conditions’ are prohibited. While claiming the food is
reduced in fat or rich in vitamins require the food to meet
compulsory standards and grades, in addition, the terms must be
used in a form specified in regulations.
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PRODUCT LABELLING
• Date Tagging – There are two types of date tagging:
• Use by Date – ‘Use by Date’ must be followed by a day or/and month which
the product must be consumed by. To be employed on perishable foods that
usually would be kept cold, for example, fish, meat, dairy products and
‘ready to eat’ salads.
• Best Before Date – 'Best Before Date is used as an indicator of when the
product will begin to degrade from optimal quality: this includes when the
food becomes stale, begins to taste ‘off’ or decays, rots or goes mouldy.
There are also regulations on which type of best before date must be
applied:
– Best before + Day for foods with a shelf life of up to 3 months.
– Best before end + Month for foods with more than a 3 month shelf life.
– Best before end + Year for food with more than an 18 month shelf life.
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• Storage Conditions – If there are any particular storage
conditions for the product to maintain its shelf life, these must
be pointed out. However, as a rule it is recommended to
always describe the necessary storage conditions for a food
product.
• Business Name and Address – In addition to the business
name and address, it is necessary to indicate the
manufacturer or packager, if independent to the main business
and the seller established within the European Union.
• Place of Origin – The food is required to specify its place of
origin, especially if the name or trademark is misleading - such
as if the product is called ‘English Brie Cheese’ when the it is
produced in France.
• Instruction for Use – This is only necessary if it is not obvious
how to use or prepare the product, in which case the
consumer's own initiative must be used.
• Presentation – The label must be legible and easy to read,
also it must be written in English, however, the manufacturer
may also include other languages.
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PRODUCT LABELLLING- LEGISLATION
• Lot Mark or Batch Code – It must be possible to identify individual batches
with a lot mark or batch code - the code must be prefixed with the letter ‘L’ if
it can not be distinguish from other codes, however, the date mark can be
used as a lot mark. Manufacturers must bear in mind that the smaller the
size of a batch, the smaller financial consequences in the case of a product
recall.
• Sectioning – All of the following must be in the same field of vision:
– Product name
– Date mark
– Weight
– Quantity
– Alcohol strength (if applicable).
•
However, there are many other Laws and European regulations for different
types of food products.
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Branding
• A brand is a collection of feelings toward an economic producer; more
specifically, it refers to the concrete symbols for the brand, such as a name
and design scheme.
•
Feelings are created by the accumulation of experiences with the brand,
both directly relating to its use, and through the influence of advertising,
design, and media commentary. A brand is a symbolic embodiment of all the
information connected to a company, product or service.
•
A brand serves to create associations and expectations among products
made by a producer. A brand often includes an explicit logo, fonts, color
schemes, symbols, which are developed to represent implicit values, ideas,
and even personality.
The brand, and "branding" and brand equity have become increasingly
massive components of culture and the economy, now being described as
"cultural accessories and personal philosophies"
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Examples of brands
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Branding
• Some marketers distinguish the psychological aspect of a brand from
the experiential aspect. The experiential aspect consists of the sum of all
points of contact with the brand and is known as the brand experience.
The psychological aspect, sometimes referred to as the brand image, is
a symbolic construct created within the minds of people and consists of
all the information and expectations associated with a product or
service.
•Marketers seek to develop or align the expectations comprising the brand experience
through branding, so that a brand carries the "promise" that a product or service has
a certain quality or characteristic which make it special or unique. A brand image may
be developed by attributing a "personality" to or associating an "image" with a product
or service, whereby the personality or image is "branded" into the consciousness of
consumers. A brand is therefore one of the most valuable elements in an advertising
theme, as it demonstrates what the brand owner is able to offer in the marketplace.
The art of creating and maintaining a brand is called brand management. You're
creating the story.
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Branding
• A brand which is widely known in the marketplace acquires brand
recognition. Where brand recognition builds up to a point where a brand
enjoys a mass of positive sentiment in the marketplace, it is said to have
achieved brand franchise. One goal in brand recognition is the
identification of a brand without the name of the company present. Disney
has been successful at branding with their particular script font (originally
Walt Disney's signature, but later translated to go.com).
• Brand equity measures the total value of the brand to the brand owner, and
reflects the extent of brand franchise. The term brand name is often used
interchangeably with "brand", although it is more correctly used to
specifically denote written or spoken linguistic elements of a brand. In this
context a "brand name" constitutes a type of trademark, if the brand name
exclusively identifies the brand owner as the commercial source of products
or services. A brand owner may seek to protect proprietary rights in relation
to a brand name through trademark registration.
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• The act of associating a product or service with a brand has become part of
pop culture. Most products have some kind of brand identity, from common
table salt to designer clothes. In non-commercial contexts, the marketing of
entities which supply ideas or promises rather than product and services
(eg. political parties or religious organizations) may also be known as
"branding".
• Consumers may look on branding as an important value added aspect of
products or services, as it often serves to denote a certain attractive quality
or characteristic. From the perspective of brand owners, branded products
or services also command higher prices. Where two products resemble
each other, but one of the products has no associated branding (such as a
generic, store-branded product), people may often select the more
expensive branded product on the basis of the quality of the brand or the
reputation of the brand owner.
• Advertising spokespersons have also become part of some brands, for
example: Mr. Whipple of Charmin toilet tissue and Tony the Tiger of
Kellogg’s.
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Brand monopoly
• Brand Monopoly
In economic terms the "brand" is, in effect, a device to create a
"monopoly" - or at least some form of "imperfect competition" –
so that the brand owner can obtain some of the benefits which
accrue to a monopoly, particularly those related to decreased
price competition. In thiscontext, most "branding" is
established by promotional means. However,
there is also a legal dimension, for it is essential that the brand
names and trademarks are protected by all means available.
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The monopoly may also be extended, or even created, by patent,
copyright and
other sui generis intellectual property regimes (eg: Plant Varieties Act,
Design Act, confidential
means of manufacture (secret recipe) etc).
In all these contexts, retailers' "own label" brands can be just as
powerful. The "brand",
whatever its derivation, is a very important investment for any
organization. RHM (Rank Hovis
McDougall), for example, have valued their international brands at
anything up to twenty times
their annual earnings.
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Branding policies
• There are a number of possible policies.
Company name
• Often, especially in the industrial sector, it is just the company's name
which is promoted (leading to one of the most powerful statements of
"branding"; the saying, before the company's downgrading, "No-one
ever got fired for buying IBM").
• Family branding is a marketing strategy that involves selling several
related products under one brand name. It is contrasted with individual
branding in which each product in a portfolio is given a unique identity
and brand name.
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• There are often economies of scope associated with family branding
since several products can efficiently be promoted with a single
advertisement or campaign. Family branding facilitates new product
introductions by providing a 'foot-in-the-door' in potential customers'
evoked set. When considering purchasing a new type of product,
potential customers will tend to evoke in their minds a product with a
familiar brand name. Being a part of this evoked set could lead to
trial purchase, product acceptance, or other advantages.
• Family branding imposes on the brand owner a greater burden to
maintain consistent quality and brand equity. If the quality of one
product in the brand family is compromised, it could reduce sales of
all the others. Family branding should only be done when a product
line consists of products of similar quality.
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An umbrella brand/FAMILY BRAND
• Umbrella brand
An umbrella brand is a brand that covers diverse kinds of products which
are more or less related.
• It applies also to any company that is identified only by its brand and
history. Such a company now only acts as designer and distributor.
• A company under the umbrella brand designation no longer
manufactures its own product, but its licenses and designs are sold to
other manufacturers. The most common products to be rebranded are
televisions, video cassette recorders, DVD players/recorders, and
portable CD players.
• Along similar lines, an umbrella place brand is a brand used by a locality
to attract the attention of different kinds of audiences, e.g. incoming
tourists, investors, students or settlers.
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Individual branding
Individual branding, also called MultiBranding is the marketing strategy of
giving each product in a product portfolio its own unique brand name. This is
contrasted with family branding in which the products in a product line are given
the same brand name. The advantage of individual branding is that each
product has an image and identity that is
unique. This facilitates the positioning process. That means that there are less
Halo effects and one can position all products differently without making trade
offs.
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Derived brands
• Derived Brands
In this case the supplier of a key component, used by a number of suppliers
of the end-product, may wish to guarantee its own position by promoting that
component as a brand in its own right. The most frequently quoted example
is Intel (in the PC market, with the slogan 'Intel Inside'), but the sweetener
Aspartame used much the same approach (to lock in the soft drinks
manufacturers who represented a major market for the product).
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Brand development
• Brand Development
• In terms of existing products, brands may be developed in a number of
ways:
• Brand extension
The existing strong brand name can be used as a vehicle for new or modified
products;
for example, after many years of running just one brand, Coca-Cola launched
"Diet Coke“
and "Cherry Coke"; although its subsequent change to its main brand and the
retrenchment to 'Classic Coke' demonstrated some of the problems this may
cause!
Procter & Gamble (P&G), in particular, has made regular use of this device,
extending its
strongest brand names (such as Fairy Soap) into new markets (the very
successful Fairy
Liquid, and more recently Fairy Automatic).
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Multi brands
• Multibrands
• Alternatively, in a market that is fragmented amongst a number of
brands a supplier can choose deliberately to launch totally new
brands in apparent competition with its own existing strong brand
(and often with identical product characteristics); simply to soak up
some of the share of the market which will in any case go to minor
brands. The rationale is that having 3 out of 12 brands in such a
market will give a greater overall share than having 1 out of 10 (even
if much of the share of these new brands is taken from the existing
one). In its most extreme manifestation, a supplier pioneering a new
market which it believes will be particularly attractive may choose
immediately to launch a second brand in competition with its first, in
order to pre-empt others entering the market.
• Individual brand names naturally allow greater flexibility by
permitting a variety of different products, of differing quality, to be
sold without confusing the consumer's perception of what business
the company is in or diluting higher quality products.
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Branding
• Once again, Procter & Gamble is a leading exponent of this
philosophy, running as many as ten detergent brands in the US
market. This also increases the total number of "facings" it receives
on supermarket shelves. Sara Lee, on the other hand, uses it to
keep the very different parts of the business separate --from Sara
Lee cakes through Kiwi polishes to L'Eggs pantyhose. In the hotel
business, Marriott uses the name Fairfield Inns for its budget chain
(and Ramada uses Rodeway for its own cheaper hotels).
• Cannibalism is a particular problem of a "multibrand" approach, in
which the new brand takes business away from an established one
which the organization also owns. This may be acceptable (indeed
to be expected) if there is a net gain overall. Alternatively, it may be
the price the organization is willing to pay for shifting its position in
the market; the new product being one stage in this process.
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PRODUCT QUALITY
WHAT IS QUALITY
Quality refers to the distinctive characteristics or properties of a person,
object, process or other thing .
• ISO 9000 defines quality as “the degree to which a set of inherent
characteristic fulfils requirements".
• For Six Sigma quality is the value added by a productive endeavor.
Quality comes in two flavors: potential quality and actual quality.
Potential quality is the known
maximum possible value added per unit of input. Actual quality is the
current value added per unit of
input. The difference between potential and actual quality is waste.
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WHAT IS PRODUCT QUALITY
Product Quality refers to the distinctive characteristics of a product.
Such characteristics may enhance a subject's distinctiveness, or may denote
some degree of achievement or excellence. When used in relation to people,
the
term may also signify a personal character or trait. When used in relation to
management, the term may be easily defined as "reduction of variability" or
"compliance with specifications".
QUALITY CIRCLE
• A quality circle is a volunteer group composed of workers who meet
together to discuss workplace improvement, and make presentations to
management with their ideas. Typical topics are improving safety, improving
product design, and improvement in manufacturing process. Quality circles
have the advantage of continuity, the circle remains intact from project to
project. (For a comparison to Quality Improvement Teams see Juran's
Quality by Design, referenced below).
• Quality Circles were started in Japan in 1962 ( Kaoru Ishikawa has been
credited for creating Quality Circles) as another method of improving quality.
The movement in Japan was coordinated by the Japanese Union of
Scientists and Engineers (JUSE).
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PRODUCT QUALITY
• Many different techniques and concepts have evolved to improve
product or service quality, including SPC, Zero Defects, Six Sigma,
quality circles, TQM, Quality Management Systems(A quality
management system (QMS) is a system that outlines the policies
and procedures necessary to improve and control the various
processes that will ultimately lead to improved business performance.
One of their purposes is quality control in manufacturing. (ISO 9001
and others) and continuous improvement.
• The meaning for the term quality has developed over time. Seven
distinctive interpretations:
• "Conformance to specifications" (Phil Crosby in the 1980s). The
difficulty with this is that the specifications may not be what the
customer wants; Crosby treats this as a separate problem.
• "Fitness for use" (Joseph M. Juran). Fitness is defined by the
customer.
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• A two-dimensional model of quality (Noriaki Kano and others). The
quality has two dimensions: "must-be quality" and "attractive
quality". The former is near to the "fitness for use" and the latter is
what the customer would love, but has not yet thought about.
Supporters characterise this model more succinctly as: "Products
and services that meet or exceed customers' expectations". One
writer believes (without citation) that this is today the most used
interpretation for the term quality.
• The concept of quality evolved from inspection, measurement, and
testing, which had been in practice for many, many years. Long ago,
an artist or a sculptor took pride in his work and as a result always
tried to excel in what was created. Mass production systems brought
the concept of inspection by someone other than the craftsman in
the first half of the 20th century.
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PRODUCT QUALITY
• "Value to some person" (Gerald M. Weinberg)
• (W. Edwards Deming), "Costs go down and productivity goes up, as
improvement of quality is accomplished by better management of
design, engineering, testing and by improvement of processes. Better
quality at lower price has a chance to capture a market. Cutting costs
without improvement of quality is futile." "Quality and the Required Style
of Management" 1988 See http://www.deming.org/
• "The loss a product imposes on society after it is shipped" (Genichi
Taguchi). Taguchi?s definition of quality is based on a more
comprehensive view of the production system.
• Energy quality, associated with both the energy engineering of industrial
systems and the qualitative differences in the trophic levels of an
ecosystem.
• However, the American Society for Quality defines "quality" as "a
subjective term for which each person has his or her own definition."
Source: http://www.asq.org/glossary/q.html
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PRODUCT QUALITY
• Six Sigma is a methodology to manage process variations that cause
defects, defined as unacceptable deviation from the mean or target; and to
systematically work towards managing variation to eliminate those
defects[1]. The objective of Six Sigma is to deliver high performance,
reliability, and value to the end customer. It was pioneered by Bill Smith at
Motorola in 1986[2] and was originally defined[3] as a metric for measuring
defects and improving quality; and a methodology to reduce defect levels
below 3.4 Defects Per (one) Million Opportunities (DPMO). Six Sigma has
now grown beyond defect control.
• Six Sigma is a registered service mark and trademark of Motorola, Inc
Every organisation should therefore ensure that the product quality is improved
Upon. Product quality is also very important in so far as marketing is concerned.
Quality can affect the demand for a product. When product quality is very low,
May also decrease for that product and vice-versa.
Management should ensure the quality of its products:
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PRODUCT QUALITY
Six Sigma has two key methodologies[16] – DMAIC and DMADV. DMAIC is
used to
improve an existing business process. DMADV is used to create new product
designs or
process designs in such a way that it results in a more predictable, mature and
defect
free performance. Sometimes a DMAIC project may turn into a DFSS project
because
the process in question requires complete redesign to bring about the desired
degree of
improvement.
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• DMAIC
1. Basic methodology consists of the following five phases:
2. Define formally define the process improvement goals that are
consistent with customer demands and enterprise strategy.
3. Measure to define baseline measurements on current process for
future comparison. Map and measure process in question and
collect required process data.
4. Analyze to verify relationship and causality of factors. What is the
relationship? Are there other factors that have not been considered?
5. Improve optimize the process based upon the analysis using
techniques like Design of Experiments.
6. Control setup pilot runs to establish process capability, transition to
production and thereafter continuously measure the process and
institute control mechanisms to ensure that variances are corrected
before they result in defects.
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PRODUCT QUALITY
• DMADV
1. Basic methodology consists of the following five phases:
2. Define formally define the goals of the design activity that are consistent
with customer demands and enterprise strategy.
3. Measure identify CTQs, product capabilities, production process capability,
risk assessment, etc.
4. Analyze develop and design alternatives, create high-level design and
evaluate design capability to select the best design.
5. Design develop detail design, optimize design, and plan for design
verification. This phase may require simulations.
6. Verify design, setup pilot runs, implement production process and
handover to process owners.
7. Also see Design for Six Sigma quality.
8. Some people have used DMAICR (realize). Others contend that focusing
on the financial gains realized through Six Sigma is counter-productive and
that said financial gains are simply byproducts of a good process
improvement.
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PRODUCT QUALITY
WHAT CAN AFFECT PRODUCT QUALITY
• The use of say the wrong ingredients in producing a product, can affect its
quality
• Wrong procedures can affect the product quality
• Failure to clean hands and production areas can affect product quality
• Failure to follow the quality procedure in an organisation
• Unhygienic and unsanitary conditions can affect product quality.
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Quality can be a big issue of concern in companies,
because it can have serious
implications on demand.
QUALITY IMPLEMENTATION management and
implementation is very vital to
ensure that products are of the right quality. There should
be quality policies,
objectives, standards, measurement, control and
implementation and
documentation.
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DESIGNING PRODUCTS
NEW PRODUCT DEVELOPMENT STRATEGY
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The New Product Development Process - NPD
1.
Idea generation:
2.
Idea screening
3.
Concept development and testing
4.
Outlining Marketing strategies
5.
Business Analysis
6.
Product development
7.
Test marketing
8.
Commercialisation
9.
Monitoring
Controlling
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Idea generation
• ideas for new products obtained from customers, the R&D department,
competitors, focus groups, employees, or trade shows
• formal idea generating techniques include attribute listing, forced
relationships, brainstorming, morphological analysis, problem analysis,
virtual prototyping, and rapid prototyping
IDEA SCREENING
• eliminate unsound concepts
• must ask three questions:
• will the target market benefit from the product
• is it technically feasible to manufacture the product
• will the product be profitable
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NPD
Concept development and testing
• develop the marketing and engineering details
• who is the target market
• what benefits will the product provide
• how will consumers react to the product
• how will the product be produced
• what will it cost to produce it
• test the concept by asking a sample of prospective customers what they
think of the idea
BUSINESS ANALYSIS
• estimate likely selling price
• estimate sales volume
• estimate profitability and breakeven point
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TEST MARKETING
• produce a physical prototype or mock-up
• test the product in typical usage situations
• make adjustments where necessary
• produce an initial run of the product and sell it in a test
market area to determine customer acceptance
COMMERCIALISATION
• launch the product
• produce and place advertisements and other promotions
• fill the distribution pipeline with product
• critical path analysis is useful at this stage
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PRODUCT LINE DECISION
• A product line is a group of products that are closely related, either
because they function in a similar manner, are sold to the same
customer group, are marketed through the same types of outlets or fall
within given price ranges.
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PRODUCT LINE
Product line width
A
Television
Panasonic
Sharp
Sony
LG
Technics
Samsung
Product
Line
length
6
B
Laptops
HP
Packard bell
Microsoft
Dell
PC world
Sony
6
C
D
E
Cars
Mobile
Watches
Jaguar
Mercedes
Rover
Vauxhall
Corolla
Nissan
Audi
Ferrari
Opel
BMW
Honda
Pajero
Toyota
Camri
Nokia
Motorola
Samsung
LG
Siemens
Sargem
Sony E
Rolex
Seiko
Seconda
3
7
Samsung
Sony
Panasonic
LG
4
Digital
Cameras
Tooth
paste
Sony
McCleans
Samsung Crest
Philips
LG
2
Panasonic
Sharp
6
Product
Line
Length
14
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PRODUCT LINE
• PRODUCT LINE FEATURING DECISION
PRODUCT MIX DECISION
An organisation with several product lines has a product mix. Philip Kotler
defines product mix as follows
A product mix also called product assortment) is the set of all product lines and
items that a particular seller offers for sale to buyers
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PRODUCT LIFE CYCLE
Introduction Growth Maturity Decline
Sales &
profit
Profit
Loss
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Time (period)
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Loss
PRODUCT LIFE CYCLE
Sales
Time
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PRODUCT LIFE CYCLE
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PRODUCT LIFE CYCLE
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PRODUCT LIFE CYCLE
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PRODUCT LIFE CYCLE
• The Product Life Cycle refers to the succession of stages a product goes
through. Product Life Cycle Management is the succession of strategies used
by management as a product goes through its life cycle.
•The product lifecycle goes though many phases and involves many professional
disciplines and requires many skills, tools and processes. Product life cycle
management (PLC) is to do with the life of a product in the market with respect to
business/commercial costs and sales measures; whereas Product Lifecycle
Management (PLM) is more to do with managing descriptions and properties of a
product through its development and useful life, mainly from a business/engineering
point of view.
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PRODUCT LIFE CYCLE
New product development stage
• very expensive
• no sales revenue
• losses
Introduction stage
• cost high
• sales volume low
• no/little competition - competitive manufacturers watch for
acceptance/segment
growth
• losses
• Price skimming is possible for some companies, others may decide to
use penetration pricing.
• Promotion is informative. Businesses use television, radio, newspapers
etc to inform customers about the product.
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Growth stage
• costs reduced due to economies of scale
• sales volume increases significantly
• profitability
• public awareness
• competition begins to increase with a few new players in
establishing market
prices to maximize market share
• Price increases due to increase in demand.
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PRODUCT LIFE CYCLE
Maturity stage
• costs are very low as businesses are well established in market
• sales volume peaks
• increase in competitive offerings (increase in competitive activities).
• prices tend to drop due to the proliferation of competing products
• brand differentiation, feature diversification, as each player seeks to
differentiate from competition with "how much product" is offered
• very profitable, but profitability starts to decline due to more
competition and price reduction.
Decline stage
• costs become counter-optimal
• sales volume decline or stabilize
• prices, profitability diminish (very low)
• profit becomes more a challenge of production/distribution efficiency
than increased sales.
• Profits drop significantly.
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MARKETING MIX and the PRODUCT LIFE CYCLE
In this section, we are going to examine how the marketing mix changes
throughout the different stages of the product life cycle
INTRODUCTION
• Price: Price skimming or penetration
• Product: New products being introduced
• Place: Selective distribution
• Promotion: informative promotion to inform customers about new products
over radio, television, newspapers, internet & outdoor.
• People: Satisfaction of employees is very important.
• Physical evidence: The product needs to be more attractive, appealing and
should include all product features to attract the market.
• Process: Customers needs to get access to the products. Therefore
accessibility is very vital. The goods needs to be produced following the right
production process and it should be made available to the market after
production, following the distribution network.
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GROWTH
• Price: Price depends on the market situation: at this stage it will tend to increase
because of growing demand.
• Product: The product at this stage should be a topmost priority for businesses. The
quality should be improved upon because of competitors entering the market.
• Place: Distribution tends to be intensive, due to growing demand. Distribution will
depend on the kind of products. For convenience products it will be more intensive
and for shopping products, it will be selective and for Speciality goods, it will be
selective.
• Promotion: More aggressive promotion to inform and persuade customers about the
products. Due to more competition, promotion tends to be more intensive.
• People: At this stage employee satisfaction and customer satisfaction is vital.
• Physical evidence: Products should be made to be more attractive to customers.
• Process: Customers should know where the products are and they should have
access to these products through the channel of distribution.
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MARKETING MIX AND THE PRODUCT LIFE CYCLE
MATURITY
• Price: Price will tend to reduce at this stage because of growing
competition.
• Product: Product adjustment in terms of design, quality etc because of
more competitive activities.
• Place: Distribution will depend on the product. But it tends to be more
intensive.
• Promotion: More aggressive promotion due to high competition. More
sales promotion such as BOGOG, BOG2F, price and quantity discounts,
coupons, vouchers, money off, games and competitions, free samples etc.
• People: Employee satisfaction becomes a major priority because the
more employees are satisfied, the more services they will perform and the
more products they will produce.
• Physical evidence: Product attractiveness becomes a major issue.
• Process: Products are made available to customers. Accessibility of the
products is very important.
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DECLINE
• Price: More price reductions due to fall in demand.
• Product: Product redesign and rebranding are possible. Product
quality may be improved, new products may be introduced and
products may be repackaged because of total fall in demand.
• Place: Intensive distribution – again distribution will depend on the
type of product.
• Promotion – more sales promotion in order to cover up the loss due
to fall in demand.
• People – The satisfaction of staff is vital in the production of goods
and services
• Physical evidence – Products are remodified and quality is
improved upon to make the product more attractive and to offer
value for money.
• Process – Goods should be made available to customers.
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THE PRODUCT LIFECYCLE CHARACTERISTICS
CHARCTERISTICS
INTRODUCTION
GROWTH
MATURITY
DECLINE
Sales
Low
Increasing
High
Declining
Profits
Loss
Peaking
High
Low to Zero
Cash flow
Negative
Moderate
High
Low
Customers
Innovative
Mass Market
Mass Market
Laggards
Strategic focus
Expanding market
Market penetration
Defensive marketing
Productivity
Marketing
expenditure
High
High-declining
Falling
Low
Product plan
Market to
innovators, early
adopters; high
product failure rate;
basic- developing
Expand for early and
late majority; less
product
distinctiveness;
improve models.
Widen product lines,
rationalize brand;
less competition;
differentiate.
Niche marketing;
reinforce brand
loyalty; rationalize
Competitor reaction
No reaction
Maximum new
entrants - high
Marginal
competitors exit
Competition
declines
Pricing plan
High skimming
Differentiated for
each segment
Lowest - competitive
Price cutting rises
for niches
Distribution plan
Unstable pattern –
widen channels,
seize shelf space.
Increasing pattern –
competitor activity
increasing.
Control passing to
fewer firms
Segmented,
fragmented and
localized.
Promotional plan
Push for awareness
Create ‘pull’
Withdraw
Cease
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IMPORTANCE OF THE PRODUCT LIFE CYCLE
1.
2.
3.
4.
5.
The product life cycle is important in planning and control
Strategic formulation, implementation and analysis
Advertising strategy
Product management
Targeting and positioning
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