PRODUCT CONCEPTS

Product Classifications
(Part 2 of 3)

Business Products used to create other products Characteristics of Business Products:

1. 2. 3. 4.

Derived demand carsteelglass Price elasticity industry vs. company Volatility of demand inventory fluctuation Buyer expertise rational - - emotional

Production Based Products

 

Raw Materials

Installations (Capital Projects)

 Process Materials

Component Parts

Operations Based Products

Accessory Equipment

 MRO Supplies maintenance & repair

Business Services

Consumer Products end users.

Durable & Non Durable Consumer Products
Durable goods Services Non durable goods
Short Time of consumption

The Product Goods Classification Sequence

CONSUMPTION BEHAVIOR (Leads to) PRODUCT CLASSIFICATION Level of effort Level of reward Convenience Shopping Specialty
(Which leads to)

MARKETING MIX STRATEGY

Consumer Product Goods

Classification
Convenience Products

(M. Copeland)
Specialty Products

Shopping Products

Is based on Level of Effort expended

. . To satisfy information needs & buying motives

CONVENIENCE GOODS
Convenience goods consumers use minimal effort for frequently purchased low cost items


Staples - goods purchased on a regular basis (ex. milk, eggs)

MILK

Emergency goods - purchased when the need is urgent (ex. umbrella, boots)

Impulse Purchase
(no conscious pre planning effort)
(Donut)

CHEESE POOFS

70 % of cheese purchases are unplanned * Ordering a drink in a bar

CONSUMER TREND CONVENIENCE. . . CONVENIENCE. . . CONVENIENCE. . . Average consumer (a woman) takes just 21 minutes to do her supermarket shopping  buys 18 items (average) out of 30-40,000 30 browse time decreased 25% over 5yrs.  doesn t bother to check prices (Proctor + Gamble,WSJ/99)

Convenience Products
Strategy Implications
- Provide convenient locations and hours of operation - Mass Distribution/Pre Sold TOMS - Self-Service/Brand Name SelfMARKET - Low Markup - Substantial substitution Open
24 hrs.

Case Example: Ice Cream Rivals

  

UNILEVER 17% Mk Sh  Nestle (Dreyer s)- 16% s)Ben & jerrys  Haagen Daz Good Humor, Breyers  Drum Stick Brands

Nestl's task
 

Improve (intensive) distribution techniques Introduce new branded vending machines & freezers in big gas stations & convenience stores. (aim for 100,000 non grocer outlets) Create new novelty products & specialty items: ex. Coffee Almond Crunch Bar at Starbuck s
WSJ, June,03

Valued freezer space



Costs are up to 6x higher to keep food in the freezers of non grocer venders because of electricity and maintenance costs Ice cream covers 35% of convenience freezer space but items offer 25% higher profit margins than super market tubs Out of home consumption is growing 10% per year compared to 8% in home (* 80% of ice cream consumption is in home)

Shopping Products
goods - consumers make a considerable effort to evaluate
Shopping

Consumers make product comparison(s), They seek information before purchase, they are not impulsive Moderate substitutions are made Products last a considerable time Monetary & social costs may be high

Television As a Shopping Product (1950 s --2007) --2007)

AttributeAttribute-based Plasma LCD screen Price-based PriceLOW PRICE

PICTURE SIZE WARRANTY

REMOTE CONTROL

Brand Name

Shopping Good Principles



Homogeneous shopping goods (TV s, cars, alcohol) have a lot of substitutes, which are similar in quality and features but they are different in price. Principle: Principle: you need to find a way to make your good stand out and make people want it

Strategy Implications (Principles)

Product Differentiation (Quality,design,etc.) - Selective Distribution - Brand Name Focus - Moderate Markup - Somewhat Knowledgeable sales force
-

Specialty Products
 Specialty

goods - consumers make a significant effort to acquire the desired brand.

infrequently (seldom) purchased relatively expensive little or no substitution**

  

Specialty Products have a high Level of Involvement

High visibility to others

 High financial commitment  High need/want intensity and duration  High involvement/Well informed

Specialty Products
Strategy Implications (Principles) - Have a knowledgeable sales force
Limited Distribution High Markup Be Innovative Maintenance of differential advantage (product improvements)
Tony M. drove a Ford explorer to a Mercedes showroom. Where are the sales people?

Consumer Behavior Product Classification Market Strategy

Market Coverage


Product Category (convenience) (shopping) (specialty)

Intensive Distribution Selective Distribution Exclusive Distribution

WIDENING GULF THEORY

-

Consumer behavior is so complex that marketers do not understand what consumers want Conclusion: Product classifications overlap & have limited influence on strategy
CAUSES:

- Rapid technological changes - Fierce Competition - Changing consumer values

What Do You Think?



Do you think the consumer product classification sequence has an impact on marketing strategy?

Product mix

Product line

Product Mix - the total group of products offered consistency: consistency: relatedness Product Line - a group of of items closely related products

LAMPS Table Ceiling Track Desk

CONCEPTUALIZATION OF PRODUCT MIX

WIDTH

# of lines = 4 # of items = 12

D E P T H

A wide product mix facilitates one stop shopping

PRODUCT MIX FIGURE

Width (# of product lines)
HAIR CARE Shampoo SALTY SNACKS Chips DENTAL CARE
Tooth Brush Tooth Paste Dental Floss

SOFT DRINKS Cola Ginger Ale Root Beer

Conditioner Nuts Hair Spray Crackers Brush

Complimentary products peanut butter & jelly

THE GILLETTE PRODUCT MIX

Selected Product Items Product Lines Product Mix (% of Total 1985 Sales by line)

*Atra Razor & Cartridges *Trac II Razor & Blades *Disposable Razors *Foamy Shaving Cream *Adorn Hair Spray *Silkience Shampoo *Right Guard Deodorant *Toni Hair Preparation

BLADES & RAZORS

33

TOILETRIES & COSMETICS

31

Product Lines
     

Sprite Cherry Coke Dr. Pepper Surge Mellow Yellow Canada Dry

      

Five Alive Minute Maid Powerade Hi-C HiDasani Water Nestea Fruitopia

Product Portfolio Concept



  

. . The sales revenue (cash flow) for the complete mix of products is emphasized rather than (isolated) problems of individual products . . Focus on the interrelatedness among products Issue: Cannibalism

A small percentage of the organization s products contribute to a large % of profits.(80/20 rule) Implications:  Protect best sellers  Delete marginal products  Reallocate marketing support

ORGANIZATION FORMS FOR MANAGING PRODUCTS



Brand Manager Product Line Manager Marketing Manager Venture Team

Market Manager


is responsible for all marketing activities that serve a group of products effective approach when serving diverse customer groups

Venture Team

Cross - functional group that creates entirely new products Team members come from different functional areas of the organization

Keys in Business Success

1. Calculated Risk Taking - investing money - P (B) of failure - success 2. Borrowing Ideas 3. Specialty Products - imaginative services 4. Structured Marketing Mix
Assumption: target market problem solution & skilled personnel (Sales&Mktg. Exe. Inst., 1974)

SUCCESS

Companies (people) hopping to do well in the future atmosphere (competitive environment) have little choice but to produce radically improved products

Any questions?