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10

Setting Product Strategy


and Marketing through
the Life Cycle
Chapter Questions
ƒ What are the characteristics of products, and
how do marketers classify products?
ƒ How can a company build and manage its
product mix and product lines?
ƒ How can companies use packaging, labeling,
warranties, and guarantees as marketing tools?
ƒ What are the main stages in developing and
managing new products?
ƒ What factors affect the rate of diffusion and
consumer adoption of new products?
ƒ What marketing strategies are appropriate at
each product life-cycle stage?
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Components of the Market
Offering

10-3
What is a Product?
A product is anything that can be offered to
a market to satisfy a want or need, including
physical goods, services, experiences,
events, persons, places, properties,
organizations, information, and ideas.

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Five Product Levels

10-5
Product Classifications
Nondurable goods
Durability / Tangibility Durable goods
Services
Convenience goods
Shopping goods
Consumer Goods Specialty goods
Unsought goods

Raw Materials
Manuf. Materials
Industrial Goods
Capital Items
Supplies/Services
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Product Differentiation

ƒ Product form
ƒ Features
ƒ Customization
ƒ Performance
ƒ Conformance
ƒ Durability
ƒ Reliability
ƒ Repairability
ƒ Style

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Service Differentiation

ƒ Ordering ease
ƒ Delivery
ƒ Installation
ƒ Customer training
ƒ Customer
consulting
ƒ Maintenance and
repair
ƒ Returns
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The Product Hierarchy

Item

Product type

Product line
Product class
Product family
Need family
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Product-Line Analysis

Core product Staples

Convenience
Specialties
items

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Product Systems and Mixes

ƒ Product system
ƒ Product mix
(Product
assortment)
ƒ Depth
ƒ Length
ƒ Width
ƒ Consistency

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Product-Mix Pricing

ƒ Product-line pricing
ƒ Optional-feature
pricing
ƒ Captive-product
pricing
ƒ Two-part pricing
ƒ By-product pricing
ƒ Product-bundling
pricing

10-12
Product-Line Analysis

10-13
Product Map for a Paper-Product
Line

10-14
Product-Line Length:
Line Stretching

Down-Market
Down-Market Stretch
Stretch

Up-Market
Up-Market Stretch
Stretch

Two-Way
Two-Way Stretch
Stretch

10-15
Co-Branding and Ingredient
Branding
Ingredient branding is
a special case of co-
branding that involves
creating brand equity
for materials,
components, or parts
that are necessarily
contained with other
branded products.

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What is the Fifth P?

Packaging, sometimes called the 5th P,


is all the activities of designing and
producing the container for a product.

Primary package
Secondary package
Shipping package

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Factors Contributing to the
Emphasis on Packaging

Self-service

Consumer affluence

Company/brand image

Innovation opportunity

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Packaging Objectives

ƒ Identify the brand


ƒ Convey descriptive and persuasive
information
ƒ Facilitate product transportation and
protection
ƒ Assist at-home storage
ƒ Aid product consumption

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Functions of Labels
ƒ Identify the product/brand
ƒ Demonstrate product grading
ƒ Describe the product, use and precautions
ƒ Promote the product/brand

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Warranties and Guarantees
General Warranty is a formal or implied
promise of product performance by
manufacturer with remedy to resolve non-
performance.
Guarantees reduce buyer’s perceived risk.

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Categories of New Products

New-to-the-world

New product lines

Additions

Improvements

Repositionings

Cost reductions

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New-Product Development
Decision Process

10-23
Idea Generation:
Ways to Find Great New Ideas
ƒ Run informal sessions with customers
ƒ Allow time off for technical people to “play” on pet
projects
ƒ Make customer brainstorming a part of plant tours
ƒ Set up a keyword search to scan trade publications
ƒ Treat trade shows as intelligence missions
ƒ Have employees visit supplier labs
ƒ Set up an idea vault
ƒ Observe customers using product, ask customers about
problems with products and their dream products
ƒ Use a customer advisory board or a brand community of
enthusiasts to discuss product
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Idea Generation:
Creativity Techniques
ƒ Attribute listing
ƒ Forced relationships
ƒ Morphological analysis
ƒ Reverse assumption analysis
ƒ New contexts
ƒ Mind mapping

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Lateral Mapping

ƒ Gas stations + food


ƒ Cafeteria + Internet
ƒ Cereal + snacking
ƒ Candy + toy
ƒ Audio + portable

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Factors That Limit
New Product Development
ƒ Shortage of ideas
ƒ Fragmented markets
ƒ Social and governmental constraints
ƒ Cost of development
ƒ Capital shortages
ƒ Faster required development time
ƒ Shorter product life cycles

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Concept
Development
and Testing

ƒ Product idea
ƒ Product concept
ƒ Category concept
ƒ Brand concept
ƒ Concept testing

10-28
Concept Testing

ƒ Communicability and believability


ƒ Need level
ƒ Gap level
ƒ Perceived value
ƒ Purchase intention
ƒ User targets, purchase occasions,
purchasing frequency

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Test Market Decisions

ƒ How many test cities?


ƒ Which cities?
ƒ Length of test?
ƒ What information to collect?
ƒ What action to take?

10-30
Conjoint Analysis
Conjoint Analysis is a method
for driving the utility values that
consumers attach to varying
levels of a product’s attributes.

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Development of Marketing
Strategy
ƒ Target market’s size, structure, and behavior
ƒ Planned price, distribution, and promotion for
year 1
ƒ Long-run sales and profit goals and
marketing-mix strategy over time

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Product Development
Quality function deployment (QFD)
ƒ Desired customer attributes

ƒ Engineering attributes

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Prototype and Market Testing
ƒ Alpha testing
ƒ Beta testing
ƒ Rank-order method

ƒ Paired-comparison method

ƒ Monadic-rating method

ƒ Market testing
ƒ Sales-Wave Research

ƒ Simulated Test Marketing

ƒ Controlled Test Marketing

ƒ Test Markets

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Commercialization:
Timing of Market Entry
ƒ First entry
ƒ Parallel entry
ƒ Late entry

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What is Adoption?
Adoption is an individual’s decision to
become a regular user of a product.

Awareness

Interest

Evaluation

Trial

Adoption
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Adopter Categorization on the
Basis of Relative time of Adoption

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Product Life Cycles
ƒ Products have a limited life
ƒ Product sales pass through
distinct stages each with
different challenges and
opportunities
ƒ Profits rise and fall at different
stages
ƒ Products require different
strategies in each life cycle
stage
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Sales and Profit Life Cycles

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Marketing Strategies:
Introduction Stage
Characteristics: Low sales, high cost per customer,
negative profits, few competitors
Objective: Create product awareness and trial
Strategies:
ƒ Offer a basic product
ƒ Charge cost-plus
ƒ Build selective distribution
ƒ Build product awareness among early adopters
and dealers
ƒ Use heavy sales promotion to induce trial
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Marketing Strategies:
Growth Stage
Characteristics: Rapidly rising sales, average cost
per customer, rising profits, growing competition
Objective: Maximize market share
Strategies:
ƒ Offer product extension, service, warranty
ƒ Price to penetrate market
ƒ Build intensive distribution
ƒ Build awareness and interest in the mass market
ƒ Reduce sales promotion to take advantage of
heavy consumer demand
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Strategies for Sustaining Rapid
Market Growth
ƒ Improve product quality, add new features,
and improve styling
ƒ Add new models and flanker products
ƒ Enter new market segments
ƒ Increase distribution coverage
ƒ Shift from product-awareness advertising to
product-preference advertising
ƒ Lower prices to attract the next layer of price-
sensitive buyers

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Stages in the Maturity Stage

Decaying
Growth Stable
maturity

10-43
Marketing Strategies:
Maturity Stage
Characteristics: Peak sales, low cost per customer,
high profits, stable competition declining
Objective: Maximize profit while defending market
share
Strategies:
ƒ Diversify brands and items
ƒ Price to match or best competitors
ƒ Build more intensive distribution
ƒ Stress brand differences and benefits
ƒ Increase sales promotion to encourage brand
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switching
Marketing Strategies:
Maturity Stage
ƒ Market modification to expand the market for
the mature brand by increasing the number
of users and usage rate.
ƒ Product modification to simulate sales by
improving quality, feature, or style.
ƒ Marketing program modification through
prices, distribution, advertising, sales
promotion, personal selling, and services.

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Ways to Increase Sales Volume

ƒ Convert non-users
ƒ Enter new market segments
ƒ Attract competitors’ customers
ƒ Have consumers use the product on more
occasions
ƒ Have consumers use more of the product on
each occasion
ƒ Have consumers use the product in new
ways

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Marketing Strategies:
Decline Stage
Characteristics: Declining sales, low cost per
customer, declining profits, declining competition
Objective: Reduce expenditure and milk the brand
Strategies:
ƒ Phase out weak
ƒ Cut price
ƒ Go selective, phase out unprofitable outlets
ƒ Reduce advertising to retain hard-core loyals
ƒ Reduce sales promotion to minimal level
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Marketing Strategies:
Decline Stage
ƒ Harvesting strategy – cut R&D, plant and
equipment costs to maintain sales, reduce
quality, sales force size, marginal services and
advertising.
ƒ Divesting strategy – selling the product to
another firm if the offering has strong
distribution and goodwill.
ƒ Liquidate – either quickly or slowly

10-48
Product-Life Cycle Characteristics
and Objectives
Introduction Growth Maturity Decline

Sales Low sales Rapidly rising Peak sales Declining


sales sales

Costs High cost per Average cost Low cost per Low cost per
customer per customer customer customer

Profits Negative Rising profits High profits Declining


profits

Customers Innovators Early adopters Middle majority Laggards

Competitor Few Growing Stable number Declining


s number beginning to number
decline

Marketing Create product Maximize Stable number Declining


Objectives awareness & market share beginning to number
trial decline
Product-Life Cycle Strategies
Introduction Growth Maturity Decline

Product Offer a basic Offer product Diversity brands Phase out weak
product extensions, and items
service,
models
warranty

Price Charge cost- Price to Price to match or Cut price


plus penetrate best competitors’
market

Distributi Build selective Build intensive Build more Get selective:


distribution distribution intensive phase out un-
on
distribution profitable outlets

Advertisin Build product Build Stress brand Reduce to level


awareness for awareness & differences and needed to retain
g early adopters interest in the benefits hard-core loyals
& dealers mass market

Sales Use heavy Reduce to Increase to Reduce to


sales take encourage brand minimal level
promotion advantage of
promotion to switching
heavy
entice trial consumer
demand
Marketing in an
Economic Downturn
ƒ Invest
ƒ Get close to
customers
ƒ Review budgets
ƒ Use a compelling
value proposition
ƒ Fine-tune offerings

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Common PLC Patterns:
Growth-Slump-Maturity
(E.g., handheld mixers, bread maker)

10-52
Common PLC Patterns:
Cycle-Recycle
(E.g., a new drug)

10-53
Common PLC Patterns:
Scalloped
(E.g., nylon)

10-54
Style, Fashion, and Fad Life
Cycles

10-55