Topic

3
Shaping the market offering

(Lambin_2012: Chapter 13 & Kotler_2019: Chapter 14-15)

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 Marketing management

Product
Strategic
marketing People Price

Process of service Promotion

production

Physical
Evidence Place

Market
response
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 – Goods
– Services
– Events
– Experiences
– Persons
– Places
PRODUCT is anything that
– Properties
satisfies a need or a want
(Kotler) – Organizations
– Information
[set of attributes that can deliver value]:
– Ideas
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 Product Has 5 Levels

When planning a market offer, the marketer needs to address

benefit levels. Each level adds more customer-perceived value.

Exceeds expectations
(competitive offer)

All possible augmentations or

transformations that product
may undergo in the future
(new ways to satisfy
customers)
 Product/market offering classifications
Durability and tangibility Consumer goods Industrial goods
(shopping habits)

Non-durable goods Convenience goods Materials and parts

• Staples • Row materials
• Impulse goods • Manufactured materials
• Emergency goods • Parts

Durable goods Shopping goods Capital items

• Installations
• Equipment

Services Specialty goods Supplies and business

services

Unsought goods
Marketing considerations for consumer goods
 Product:
Innovation

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The World’s Most Innovative Companies (BCG, 2021)

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 Where do good ideas come from?

https://www.youtube.com/watch?v=A8iIQ8TvRvA

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 Innovations

3 COMPONENTS:

• Need (want or demand) to be satisfied

• Concept (new ideas)
• Input (knowledge, materials, technology)

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 Factors that Facilitate Innovation

1. See the future through the eyes of your customer

2. Intellectual property and brand power are key
assets
3. Build a championship team
4. Innovation is a state of mind
5. Speed is critical, so push your organization
6. Partner up if you’re not the best

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

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 New Product Failure

Around 80% of new product introductions fail

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Causes of New Product Failure

• Marketing
• Financial support
• Timing
• Technical issues
• Organisational issues
• Environmental failure

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 Categories of New Products

New-to-the-world 10%

New product lines 20%

Additions 26%

Improvements 26%

Repositionings 7%

Cost reductions 11%

Best gadgets:
https://www.sciencefocus.com/future-technology/cool-gadgets/ 17
New-to-the-World Products
Create entirely new markets

• Penicillin
• Transistor radio
• Polio vaccine
• Microprocessor
• Television
• Copier
• Microwave oven
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 New Product Lines
Allows to enter new or established markets

Toyota
low-priced cars Chuck Taylor shoes
from 30 to 150 $
vs.
Lexus
A-class cars

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 Additions to Existing Lines
Supplement a firm’s established lines

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Improvements & Revisions
“New & Improved”

Kleenex anti-viral tissues

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 Repositioned Products
Existing products targeted at new markets

Diet Dr. Pepper as a dessert

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 Lower-Priced Products
Performance similar to competitors at lower price

LaserJet 3100
“All-in-one Printer”
(scanner, copier, printer & fax)

• Lower price than color copiers

• Much lower price than 4 items

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The New Product Development Decision Process

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 1. Idea Generation
• Methods of functional analysis
• Problem/opportunity analysis – identify consumers’
problems and solve them.

• Attribute listing – list products’ characteristics that can be

changed/ improved.

• Morphological analysis – identify most important structural

dimensions and their relations.

+ =

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 1. Idea Generation
• Creativity groups and brainstorming – synergy effects
of groups and generation ideas with no judgments.
• Customer ideas:
• Observe customers using product

• Ask customers about problems with products

• Ask customers about their dream products

• Form a brand community

• Use websites for new ideas

• Challenge customers to improve products

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 2. Idea Screening
Is idea compatible with the company’s mission,
objectives, resources and interests?
• Evaluations phase – quick, inexpensive, internal
evaluation.

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 3. Concept Development
and Testing

Product and brand Is there a good concept consumers would try?

positioning

• Product idea
• Product concept
• Concept testing

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 3. Concept Testing

• Need level

• Perceived value

• Purchase intention

• User targets, purchase occasions and purchasing frequency

 3. Concept Testing: Example

Example of questions for the all-electric car concept test

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 3. Conjoint Analysis

• What is value of certain product’s characteristics for each target

group?

• What is relative importance of these characteristics?

• What are potential trade-offs for buyers?

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Utility Functions Based on
Conjoint Analysis

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 4. Marketing Strategy Development
Most effective marketing strategy is dependent on:

• Target market’s size, structure and behavior

• On the product-life cycle of your product

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Product (market offer)
life-cycle stages

Alternative industry
life-cycles
Summary of product life cycle characteristics,
objectives and strategies

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Marketing strategies: the introduction stage

• Inform potential consumers

• Induce customers to trial the market offering
• Secure distribution in retail outlets
– Pioneer advantage? (rewards, risks, expenses)
 Marketing strategies: the growth stage

• Improve quality and add new attributes

• Add new models, accessory items, options, flavors
• Enter new market segments
• Increase distribution coverage and use new distribution
channels
• Shift advertising from product-awareness to product-
preference
• Lower prices to attract the next layer of price-sensitive
buyers
 Marketing strategies: the maturity stage

3 sub-stages: growth, stable (market saturation) and decaying

maturity (intensified competition looking for niches)

• Market modification (to increase volume: # of brands, frequency)

• Product modification (improve quality, new features, style)
• Marketing program modification (7 Ps)
 Marketing strategies: the decline stage

Some companies appoint a review committee with representatives

from marketing, R&D, manufacturing and finance, who, based on
available information, make recommendations for each brand in the
portfolio:
• Harvesting (reducing costs while maintaining sales)
• Modify marketing strategy
• Drop it (if it has goodwill, it can be sold to another firm)
Product Life-Cycle Sales for
3 Types of Products

One-time purchased products

Useful: > 10 years
Bikes, ice skates, musical instruments,
tennis rackets, furniture

Infrequently purchased products

Useful: > 3 years
Cars, PC, Electronics

Frequently purchased products

Useful: immediately or < 3 years
Food, cloth, cosmetics 40
 5. Business Analysis
Will this product meet profit goals?

Projected five year cash flow statement (in €1000)

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Accessing financial risks

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 6. Product Development:
Prototype Testing

• Alpha testing
• Beta testing
– Rank-order method
consumer responds with A>B>C
– Paired-comparison method
e.g., consumer is presented with the pairs AB, AC, and BC and
says that she prefers A to B, A to C, and B to C.
– Monadic-rating method
consumer rates each product on scale, e.g., A = 6, B= 5, C= 3
• Market testing of the product
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 7. Market Testing
• Simulated test marketing - consumers are exposed
to staged advertising and purchase decisions to
observe their response to a new product.
• Sales-wave research – initial product for free, then
check how many re-purchased.
• Controlled test marketing – panel data of the
stores.
• Test markets
Project Evaluation Procedure

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The New Product Development Decision Process

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 What is Adoption?

Adoption is an individual’s decision to

become a regular user of a product.

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 There are 6 Stages of Adoption
1. Awareness
customer knowledge about the product’s existence.
2. Comprehension
customer knowledge about product’s functions.
3. Attitude
mental evaluation of products as “good” or “bad”.
4. Preference
customer idea about superiority of the product.
5. Trial
first and limited use of the product.
6. Adoption
customer acceptance of the product.
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Adopter Categorization

1. Innovators (2.5%)
First to try, and risk taking

2. Early adopters (13.5%)

Opinion leaders, carefully adopt

3. Early majority (34%)

Follow leaders, need more information

4. Late majority (34%)

Follow majority, skeptical

5. Laggards (16%)
Resistant to change, conservative
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 Speed of Diffusion

• Relative advantage (↑) – degree of improvement.

• Complexity (↓) – how difficult is new product.

• Compatibility (↑)- how well product fits existing use

patterns.

• Communicability (↑) – ease of conveying information about

the product.

• Triability (↑) – possibility of trial before actual purchase.

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The New Product Development Decision Process

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 Effective organization of the process

C Market research M
O A R&D
N Concept test R Prototype request
Prototype
S KE development
Prototype
U Product test T Product
M I Modifications suitability
Market test
E N Modifications Final product
development
R Comercialization G
Final product

Economic analysis Finance

COMPANY
 Marketing management

Topic 3
Shaping the market offering

Questions
Comments

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