C18FM Fundamentals of Marketing

Product: Value via Brands

Product: Value via Innovation

Previous topics have focussed upon insights and understanding of markets and the components of those
markets – people.

Our attention now turns to how we operationalise those insights within our decisions. These four topics
concern the creation and management of the marketing mix, the management function of marketing.

We will draw on our understanding of consumers, markets and environments.

This topic concerns ‘Product’ – one of the four ‘P’s of Product, Price, Place and Promotion. As you will see,
we use these terms as short-hand for much deep understandings and applications.

You may see some texts avoid using ‘product’ as a term, for various reasons. We will use it here but hope
that you will be cognisant of its limitations as much as its value, as a means of explaining this feature of
Marketing.

Simply, a product typically includes goods, services, experiences, events, persons, places, properties,
organizations, information, and ideas (amongst other things) that is offered to a market to satisfy wants
and/or needs.

Product is a key element in the overall market offering.

Marketing mix planning begins with formulating the offering that brings value to target customers. This
offering becomes the basis upon which the company builds profitable relationship with customers.

This is why some might call the product and ‘offering’, perhaps a ‘proposition’. Indeed, Solomon et all use
‘Value Proposition’ as well as product which notes that we are selling something of value (what the product
give sus) as much as the ‘thing’ itself.

1
 Today
• What is a product?
• What is a product strategy?
• What are the different types of products?
• What is a brand?
• New Product Development (NPD)
• Developing and managing products over time

This is along lecture and this is primarily because it is three lectures in one. One part
focusses upon the nature of Product (e.g. what it is), another on the creation of Products
(e.g. new product development) and the other on the management of products (e.g.
what do we need to do during a products time with us).

We begin with the nature of products.

2
 What is a product?

• A product is anything that is capable of

satisfying consumer needs.
• It includes the tangible and intangible
attributes.
• Not just physical goods but also ideas,
place, people, experiences and a mix
of these.

3
 Three levels of product

The core product consists of all the benefits the product will provide for consumers (B2C; B2B, etc.)

For instance:
A customer purchases a car.

The core benefit it is providing is transportation from point A to point B

Marketing is about supplying benefits - not products

Actual product represents the design, brand name, features, and packaging that delivers the core
benefit to the customer.
Example:
A car’s core benefit is the ability to transport from point A to point B, but the actual product is a sleek
looking automobile with plush seats, air-conditioning, power steering, etc.

Augmented product represents additional benefits of the actual product.

This includes the actual product plus other supporting features such as warranty, credit, delivery,
installation, and repair service after the sale. These are usually service offerings to ‘wrap’ the product
further.

Activity opportunity:

Identify some products/services you use on a daily basis and discuss the levels of product and
services.
Products including packaged drinks, cosmetics, hand phones, laptops etc. work well in this discussion.
You can often find augmented product features on the product’s Web sites including games, features
and support.

Some authors like to add another layer, though this usually relates to Brands rather than products –
yes, brands and products are different:

‘Potential’ (effectively ‘loyalty’)

The problem with this here is that loyalty is a response (output/consequence) rather than an input and,
as you see from above, most of these layers are input related, albeit with the expectation of specified
responses.

4
 An illustration of the three
levels of product

An example:
Qantas, Australia’s national airline.

Notice how the core layer has bene slightly tweaked already – not just transport,
but time critical, it could be other things too !

5
What is a product? Really?

Features Benefits

6
 Netflix
• Core Product = Access to films (Enjoyment; etc.)
• Actual Product = Film
• Augmented Product = unlimited rentals, free
delivery, mobile viewing, multiple
accounts/access; etc.

• Potential (as brand) = rejection of alternatives

5-7

Another example.

Activity opportunity:

Reflect on these Netflix layers and see if you can add to them/develop them.

Then

Compare them to other streaming services and see where the differences lie…

is this difference enough of a Unique selling Point (USP / point of differentiation to cerate
different meaning in the minds of consumers?

Consider the role of Loyalty here –a re some brands using the cumulative value of the
brand to create /offset difference with competitors
(e.g. Apple; Disney; Amazon; etc.)

So is loyalty Product layer or not?

Are there any other layers we are missing?

7
 Classifying
Consumer Products
(Different product types)
• By how long they last • By how consumers
– Durable buy them
– Nondurable – Convenience
– Shopping
– Specialty
– Unsought

5-8

In order to make sense of products we tend to try to ‘type’ them. This allows us to
categorise products according to key characteristics and to therefore be able to
map resources to those categories and products more usefully. This slide
presents some general ‘types’ with details of each noted in subsequent slides.

Durable goods are consumer goods that have a long-life span (e.g. 3+ years) and
are used over time. Examples include bicycles and refrigerators. Nondurable
goods are consumed in less than three years and have short lifespans.
Examples of nondurable goods include food and drinks.

Examples of different types of products. Unsought products include goods like insurance
which we don’t really want to buy but need to. Perhaps talk here about some of the
differences in the rest of the marketing mix for each type of product (but not in detail at
this stage

8
 Convenience Products?

• A convenience product is a non-durable good

or service that consumers purchase frequently
with a minimum of comparison and effort
• Types of convenience products
– staples
– impulse products
– emergency products

5-9

Convenience products are consumer products and services that the customer usually
buys frequently, immediately, and with a minimum buying effort.

Look at the products sold by your neighbourhood convenience store. Items like
Newspapers, Candies/Sweets, Drinks, etc.

Convenience relates in one sense to its availability and accessibility but also relates to
the effort involved in obtaining (easily available requires less effort)

How much buying effort do you take to reach a purchase decision?

Is Fast Food a convenience Product?

Non-planned purchases often link to convenience – (e.g. the accessibility of sweets at

checkouts)

Alternatively, the accessibility of emergency purchases:

Breakdown assistance after puncture on the road
Dental treatment for a sore tooth
Toilet paper during a national lockdown!

Are these all truly ‘convenience’ products though? Why / why not?

9
 Shopping Products?

• A shopping product is a good or service for

which consumers will spend time and effort
gathering information on price, product attributes,
and product quality
• Consumers will tend to compare alternatives
before making a purchase
• Types of shopping products
– attribute-based shopping products
– price-based shopping products
5-10

Shopping products require more effort and may be less accessible/available

For many ‘shopping’ goods, consumers will be looking at specific attributes which
may influence their purchasing decision.

For example computers used for Gaming. In this case they may not be price
sensitive and the priority will be on the features they are looking for.

In other cases consumers will be looking at the best value for money and price
will be a key factor here.

Of course, price, for many, IS an attribute!

Examples include:
Computers
Smartphones
Cars
Home Appliances
Etc.

10
 Speciality Products?

Speciality products are goods or

services bought with much consumer
effort in an extended problem solving
situation
Consumers insist upon a particular item
and may not accept substitutes

5-11

Specialty products have unique characteristics or brand identification for which

the buyers are willing to make a special purchase effort. A person who wants to
buy a red Ferrari may not even settle for a different colour of the same brand!

Examples include:
Medical services
Designer clothes
Branded products
High-end electronics

11
 Unsought Products?

• Unsought products are goods or services for

which a consumer has little awareness or
interest until a need arises
• These require a good deal of advertising or
personal selling to interest people

5-12

In the case of unsought products, a consumer may not even know about the existence of
these products and services
or may know about it but does not normally think of buying it.

Examples include:
Life insurance
Funeral services
Burial Plots

The examples above are rarely sought by typical, younger consumers.

Can you think of any examples of unsought products for typical, older consumers?

Discussion question:
Can you identify a product that could be considered as convenience, shopping, as well
as specialty?

This may sound weird but based on the circumstances you are in, a shopping product
may become a convenience product!
A useful example might be a camera. It could fall into several categories depending on
the buyer and the situation. Certainly, if you are on vacation and you forgot your camera,
you would pick one up, simply and cheaply at a convenience store, or maybe the hotel
store, where you are staying. If you were a professional photographer, a camera
purchase could easily be specialty if you were buying an advanced professional camera.

12
 Business to Business (B2B)
– Capital Items
– Raw materials
– Processed materials
– Component parts
– Maintenance Repair & Operations supplies
– Specialized services

Capital items are industrial products that cater to the buyer’s production process
or operations.

A car manufacturer needs heavy machinery and equipment, assembly lines, etc.
to manufacture the end product, a car.

Materials and parts include raw materials and manufactured materials and parts
usually bought by industrial users. Car manufacturer has to source metal, paint,
tyres etc. to be used in the manufacturing/ assembly process. Some car
manufacturers even source their gear box, engine etc. from other reputable
brands.

Supplies and services include operating supplies, repair and maintenance items,
and business services.
The car company availing the services of a cleaning company is an example.

Some sectors will utilise SIC – Standard Industry Classification to enable easy
identification of core products.

13
 What is a brand?
A brand gives a product a distinctive identity
through the creation of a name, design or,
more usually, some combination of these.

This is a very common way of defining branding.

Question: Does this still hold true?

It assumes a myopic perspective – one view centred on customers.

Whilst products/services deliver functional benefits (be they physical, functional and/or psychological ones),
a brand is:
“a name that symbolises a long-term engagement, crusade or commitment to a unique set of values,
embedded into products, services and behaviours which make the organisation, person or product stand
apart or stand out” (Kapferer, 2012:12).

This is a definition which acknowledges the competitive nature of branding and this is important, for
example, in creating of communications – you are making a promise to consumers about a particular
product; you are wanting to position it very positively in people’s minds, and you are wanting to ascertain
what worked well and what didn’t (measure performance).

Brands are promises which frame the way they are positioned in the minds of stakeholders, and which
structure their expectations. Ideally these expectations match the promises which are realised and
experienced through brand performances. (Fill, 2013 p. 326).

Effective brands deliver consistently on their promises – by meeting or exceeding expectations – thereby
reinforcing the positioning and the credibility of the promise.

Branding is of high importance to a business because of the overall impact it makes in a very competitive
environment. Branding can change how people perceive your product, leading to brand loyalty and better
business prospects.

Which brands do you tend to purchase consistently?

Why?

14
Brand
is the name, term or design
– or a combination of these
that identifies the maker or
seller of a product or
service.
• Brands should
– be memorable
– have a positive
connotation
– convey a certain
image
Branding
Permits customers to
develop associations with
the brand (e.g.. prestige,
style, low cost) and eases
the purchase decision.
The marketing task is to
ensure positive association
between the chosen
positioning objectives, the
product and the brand.
15
 Effective Brand Names

• Easy to say • Fit the target market

• Easy to spell
• Easy to read
• Easy to remember
• Fit the product’s
benefits
• Fit the customer’s
culture
• Fit legal requirements

5-16

Requirements of effective brand names, theoretically.

But in reality we could see many brand names that are not that easy to spell,
read or remember but are famous!

So, it may be that the key is on some other part of the process other than
following naming conventions (perhaps more I important how often you tell
people how to say the name and offer consistent powerful reinforcement of your
message and opportunities to recall and practice the name.

16
 Branding
• Branding enables manufacturers & retailers to help customers
differentiate between the various offerings in a market.

• It enables customers to make associations with certain

attributes or feelings with a particular brand. If this
differentiation can be achieved and sustained, then a brand is
considered to have a competitive advantage.

• Successful brands create strong, positive & lasting

impressions through their communications and associated
psychological feelings and emotions, not just their functionality
through use.

17
 Symbolic Vs Functional
brands

Functional elements Symbolic elements

•Performance •Imagery
•Judgements •Feelings

A strong brand
will usually
possess both
elements

18
 Brand Policies
Individual Branding:
Once referred to as a multi-brand policy, individual branding requires that
each product offered by an organisation is branded independently of all the
others. Grocery brands offered by Unilever (e.g. Knorr, CiF and Dove) and
Procter and Gamble (e.g. Fairy, Crest and Head and Shoulders) typify this
approach.

Family Branding:
Once referred to as a multi-product brand policy, family branding requires
that all the products use the organisation’s name, either entirely or in part.
Microsoft, Heinz and Kellogg’s all incorporate the company name as it is
hoped that customer trust will develop across all brands.
Corporate Brands:
Many retail and business brands adopt a single umbrella brand, based on
the name of the organization. This name is then used at all locations and is
a way of identifying the brand and providing a form consistent
differentiation, whether on the high street or online. For example, Tesco,
IBM and Caterpillar.

19
 Company
value

Barrier to
Trust
competition

Importance
of strong
brands

Quality
High profits
certification

Base for
brand
extensions

20
 What is Brand Equity?

• Brand equity is a brand’s value to its

organisation over and above the value of the
generic version of the product

• Brand equity provides customer loyalty,

perceived quality, brand name awareness,
competitive advantage

5-21

Brand equity describes a brand’s value and it is determined by consumer’s

perception of the brand and experiences with the brand. If people think highly of a
brand, it has positive brand equity. When a brand continuously under-delivers and
disappoints the customers, it has negative brand equity.

Brand equity can be measured based on:

-Brand dominance
A measure of its market strength and financial performance

-Brand loyalty:
A measure of its base and potential market

-Brand associations
A measure of the beliefs held by buyers about what the brand represents

-Brand prospects
a measure of its capacity to grow and extend into new areas

21
Product Lines Vs Product Mixes
• A product line is a group of brands that are
closely related in terms of their functions and the
benefits they provide.
• A product mix is the total set of brands marketed
in a company: the sum of the product lines
offered. Thus, the width of the product mix can
be gauged by the number of product lines an
organization offers.2
• A category or extensions is when an existing
brand name is applied to a product category that
is new to the firm

22
 Brand extension and stretching
Potential Benefits.
• Positive association of core brand rubs off on
brand extension.
• Awareness of core brand helps to reduce costs.
• Lower perceived risk of purchase on the part of
consumers and distributors.
• Established brand name raises willingness to try
new brand.

23

23
Brand extension and stretching
Potential Limitations:
• Poor performance of brand extension rebounds on core
brand.
• Loss of credibility of brand name if stretched too far.
• Cannibalisation of core brand.
• Focus on minor brand modifications rather than true
innovation.

24

24
Ethical issues concerning products

• Product safety.

• Planned obsolescence.

• Deceptive packaging.

• Anti-Branding and developing economies.

25

25
Developing New Products

26
 New and Improved

• What is a new product?

– A new product is one that is entirely
new or changed significantly and that
product may be called new for only six
months
– From a marketing perspective, new is
anything a customer perceives as new
and different

5-27

The term NEW PRODUCT can have many interpretations in marketing.

A genuinely new product offers innovative benefits.

For example when apple launched I Pod, it was an entirely new product in the
market. But in reality it need not be so. Products that are different and distinctly
better or repositioned in the market are also considered ‘new’. When Sprite
launched a version with ‘real lemon’ it was considered new! As long as the
consumer perceives something to be new, the product can be considered ‘new’
from a marketing perspective.

From a legal perspective this differs form place to place, legislature to legislature,
with some places having a time limit on using the word ‘new’ and other shaving
no restrictions.

Whether we can have something that is BOTH new AND improved is a question
for another day!

27
 Products that
Have Changed How We ….

• Work • Live
– Personal Computers – Vacuum cleaner
– (Blackberry) PDA – TV remote
– (Xerox) photocopier – Microwave oven
– (Intel) microprocessor – Internet
– Laptops – Mobile Phone
– Smartphones – Smartphones
– Internet / Remote Access – (Driverless Cars?)

5-28

Here are some products that have changed work and non-work lives significantly.

Consider how the change is not simply having that product in our lives but the
changes needed to accommodate it within our lives.

Many technological products arrive because of technological advancements and

a discovered ability to be more efficient and effective in processing and
presenting information BUT what are the social and psychological consequences
of such products and were these part of the original design brief.

e.g. photocopiers allow efficient copying of information BUT they also create
places in a workspace where people gather and talk or hide! Some buildings not
incorporate this idea into floor space designs, creating open corridors with
photocopiers/printers to facilitate more ’organic’ meeting spaces to foster
collegiality, belonging and idea generation!

28
 Types of
Innovations

• Innovations differ in their degree of newness

and this helps to determine how quickly
products will be adopted by a target market
• The more novel the innovation, the slower the
diffusion process
• Innovation continuum is based on the amount
of disruption or change

5-29

The innovation continuum describes the range from incremental to truly

transformative innovations.

At one end of the continuum is incremental improvement—minor innovations that

simply take an existing process, product or service and increase its effectiveness,
quality or value. Incremental improvement occurs when you take something that
you’re already doing and do it better. At the other end of the continuum is total
transformation—radical / overarching change. Diffusion gets slower when you
move from one end of the continuum to the other end as there is a higher degree
of disruption or change.

29
 Innovation Continuum

Continuous Dynamically Discontinuous

Continuous

Little to no change Extreme changes

5-30

On one end is continuous innovation where an existing product undergoes marginal

changes, without altering customer habits much. For instance, a shampoo adding a new
addition to its product line by just changing its brand name, fragrance, colour and
packaging.

On the other extreme is the discontinuous innovation, which is discontinuous to all

customer segments as they comprise new-to-the-market products only. These new
products are so fundamentally different from products that already exist in the market
and they reshape markets and competition. For example, when mobile phones were first
launched in the market, it drastically changed the way people communicate.

Dynamically continuous innovation falls between the discontinuous and continuous

innovation. The changes in customer habits caused by such an innovation are not as big
as in a discontinuous innovation, and not as minor as in a continuous innovation. The
progression from a manual to an electronic typewriter is a good example.

The categorisation of an innovation in the above continuum is done on the basis of the
extent to which the innovation causes change in existing customer habits. Hence, the
type of innovation depends on the type of customer, towards which it is targeted. The
same innovation may be continuous for one set of customers but dynamically continuous
for another. The discontinuous innovation causes a drastic change in customers’ existing
habits.

30
 New Product Development

Idea Generation
Product Concept Development
Marketing Strategy Development
Business Analysis
Technical Development
Test Marketing
Commercialisation
5-31

Typically, New product development (NPD) is achieved via two routes:

New products, product improvements and product modifications can be
developed from the firm’s own research and development activities.

OR

The firm can acquire a whole company, a patent, or a license to produce

someone else’s product.

New Product Development Process consists of various stages and will be

discussed in detail in the next few slides.

31
 Phase 1:
Idea Generation
• Sources of new ideas
– customers
– salespeople
– service providers
– anyone with direct customer contact

5-32

Ideas may be sourced internally, from within the organisation, or externally.

Brainstorming and incentives/rewards for new ideas are common methods for
stimulating idea generation within the organisation.

The idea for ‘Post-It’ notes came from a 3M employee!

P&G gets 35% of its new ideas from outside the organisation and this includes
inventors and outside consultants.

See how an effective market research function can feed into NPD.

32
 Phase 2:
Product Concept Development
and Screening

• Expand ideas into more complete product

concepts
• Describe features the product should have
and benefits those features will provide
• Evaluate chance for success

5-33

Not all ideas are useful and/or feasible. Ideas need to be developed into product
concepts and screened to pick the viable ones. The Product Concept is a
detailed version of the idea stated in meaningful consumer terms.

Companies may have systems in place for screening product concepts by

estimating Potential Market Size, Product Price, Manufacturing Costs, Rate of
Return etc.

R-W-W Screening Framework may help:

Is it Real?
Can we Win?
Is it Worth doing?

33
 Phase 3:
Marketing Strategy
Development

• Develop a marketing strategy that can be used

to introduce the product to the marketplace
– Identify the target market
– Estimate its size
– Determine how the product can be
positioned
– Plan pricing, distribution, and promotion
expenditures necessary for roll-out

5-34

An initial marketing strategy should be developed for introducing the product to

the market.

This strategy includes:

Description of the target market

Potential size of the market
Value proposition to be offered
Marketing mix elements
Sales and profit goals

Consider how this matches and/or overlaps the ideas within STP

34
 Phase 4:
Business Analysis

• Assess how the new product will fit into the

firm’s total product mix

• Evaluate whether the product can be a

profitable contribution for organization’s
product mix

5-35

Before the company invests huge amounts on the development of prototypes,

additional information is gathered to decide whether the significant costs that
development will require are justified.

Business analysis involves a review of the sales, costs, and profit projections to
find out whether they fit with the company’s objectives.

35
 Phase 5:
Technical Development

• Work with engineers to refine the design

and production process
• Develop one or more prototypes
• Evaluate prototypes with prospective
customers
• If applicable, apply for a patent

5-36

Technical development involves the creation and testing of one or more physical
versions (prototypes), typically by the research and design, or engineering
departments. Once the prototypes have been developed and evaluated with the
prospective customers, manufacturing methods research can be undertaken to
plan the best way of making the product in commercial quantities. This is an
important step, because there is a significant difference between what the
engineer assembles in a laboratory and what a worker produces in a factory.

Of course, different types of products and/or services will require different levels
of technical validation.

36
 Phase 6:
Test Marketing

• Try out the complete marketing plan - product,

price, place, and promotion - in a small
geographic area that is similar to larger target
market
– Traditional test marketing is expensive and
gives competition a chance to evaluate the
new product
– Simulated test markets eliminate competitive
viewing and cost less

5-37

Before commercialisation of the product, all the variables in the marketing plan
should be tested in a real-world setting.

The Test Market should be a representative (should exhibit most of the

characteristics) of the market within which the company plans to launch its
product.

Test marketing is meant to serve as a close simulation of the intended market

and helps to reduce risks associated with commercialisation. It would enhance
the new product ‘s probability of success and allow for final adjustments in the
marketing mix before the product goes to commercialisation stage.

It is important for the firms to do test marketing especially when the new product
launch involves large investment or there is uncertainty about the product or
marketing program.

37
 Phase 7:
Commercialisation

• Launch the product!

– Full scale production
– Distribution
– Advertising
– Sales promotion
– and more

5-38

Finally, the product has survived the development process and is ready for the market!

‘ Commercialization ‘ is the fully-fledged manufacturing and marketing of a new product.

In this stage, heavy investments will be made in advertisements and promotional activity
and the distribution channels will be loaded with the product to ensure availability.

It is important to consider the following during the commercialisation stage:

Timing of launch:
Questions to be asked - Will this launch affect the sales of company’s other products?
can the product be improved further?
is the country’s economic situation favourable?

Launch coverage:
Should it be one off launch covering whole of the intended market or should it be
incremental launch?
This decision will be influenced by the company’s resources and operational capacities.

Consider other factors of which organisations may need to be mindful at this stage…

38
 Adoption and Diffusion
Processes

• Adoption is the process by which a consumer

or business customer begins to buy and use a
new good, service, or idea

• Diffusion describes how the use of a product

spreads throughout a population

5-39

Rogers (1962) developed the Diffusion of Innovation (DOI) Theory. It explains

how, over a period of time, an idea or product gains momentum and diffuses (or
spreads) through a specific population.

Adoption of a new product, service or idea does not happen simultaneously in a

social system.

Some people are more likely to adopt a new product than others and researchers
have grouped them into five different adopter categories.

Each of these categories has different characteristics and it is important for a

marketer to understand these characteristics that will help or hinder adoption
process. The five different categories will be identified over the next slides.

39
 Categories of Adopters
Sales/Adoption

- Time +

5-40

Innovators

2.5%, the first to accept a new idea or product

Venturesome and willing to take risks
Rely heavily on impersonal information sources

Early Adopters

13.5%, the second to adopt an innovation

Heavy media users
Members include opinion leaders
E.g., Apple iPhone appealed to early adopters

Early Majority

34% adopt the product prior to the mean time of adoption

Deliberate and cautious
Spend more time in the innovation decision process
Slightly above average in education and social status

40
Late Majority

34% follow the average adoption time

Older, more conservative
Peers are the primary source of new ideas
Below average in education, income and social status
Wait to purchase until product has become a necessity and/or peers pressure to
adopt

Laggards

16% - last to adopt an innovation

Lower in social class than other categories
Bound by tradition
Product may have already been replaced by another innovation

Now, ask yourself: how useful is this approach?.

Here are some questions for you (some suggested answers on next slide):

This is about ‘adoption’ so who is missing from this measure?

Does this hold true for all types/sectors of products?
What is this really measuring?
_________________

This is about ‘adoption’ so who is missing from this measure?

- those who don’t adopt! – some people may never adopt your product – do you
need to know about them?

Does this hold true for all types/sectors of products?

Yes and no – the categories may hold true but the people may change – that is, an
innovator in one sector/product (e.g. fashion) may be a laggard in some other
sector/product type (e.g. technology).

What is this really measuring?

This descriptions of categories claim that these measure not only behaviour but

40
also ways of thinking. The reality though is if you don’t behave (i.e. adopt) then
you cannot be included in the measure. So it is a general measure of potential but
that potential is limited by who will uptake.

Can you find any more problems with this measure? Keep searching…

40
 Factors Affecting the
Rate of Adoption

Relative
Advantage

Compatibility
Observability

Trialability Complexity

5-41

Relative advantage:
A product innovation is perceived as better than existing alternatives
Positively correlated with an innovation’s adoption rate
Exist when a new product offers: Better performance, increased comfort, saving in time
and effort, or immediacy of reward

Compatibility:
An innovation is perceived to fit into a person’s way of doing things
The greater compatibility, the more rapid a product’s rate of adoption
Overcome perception of incompatibility through heavy advertising to persuade
consumers.

Complexity:
The more complex the product, the more slowly a product’s rate of adoption
Overcome perception of complexity with demonstrations, personal selling, and emphasis
on ease of use

Trialability:
The trial experience serves to reduce the risk of a consumer’s being dissatisfied with a
product after having permanently committed to it through outright purchase

Observability:
The product user or other people can observe the positive effects of new product usage
The higher the visibility, the more rapid the adoption rate

41
 Marketing Throughout
the PLC

• The Product Life Cycle (PLC) explains how

features change over the life of a product
• Marketing strategies must change and evolve
as a product moves through the PLC
• The PLC relates to a product category

5-42

If you have come across your parent's old video tapes or are looking to buy the
latest smartphone, you’re unknowingly experiencing different stages of the
product life cycle, or PLC.

What is PLC?

Just like human beings have a life cycle, a new product entering the market may
also have its own life cycle, that carries it from being new and useful to most of
the market to eventually being retired out of circulation in the market ( this means
that it may still be useful to some, but not enough to make production viable).
This is a continual process moving from their introduction stage all the way
through their decline and eventual exit from the market.

Examples of products which have gone through a full product life cycle are film
cameras, typewriters, video and audio cassettes etc. (yet, some of these are still
being made and sold – just in very small numbers compared to previously))

42
 Product Life Cycle

5-43

The diagram shows four stages of product life cycle: Introduction, Growth, Maturity and
Decline.

The blue line shows the sales and red line the profits.

We could see that when the product moves through different stages of its life cycle, sales
volume and profitability also changes. As the market characteristics faced by each of the
stages are different, it is important to have PLC stage specific strategies for all the
marketing mix elements to ensure maximum life for the product in the market. The next
few slides elaborates each of the stages in PLC, its characteristics, and related
strategies.

Now, consider if there are any problems with the PLC (return to this after the next few
slides if necessary) answers on a subsequent slide?

Here are some questions again to help focus your thinking:

Are 4 stages enough?

Is this valid across all sectors?
Is this natural function of sector behaviour?
Is following a fixed set of activities always useful
How might following this approach make you vulnerable to competitors?

43
 Introduction

• Full-scale launch of new product into marketplace

• Sales are low, high failure rate
• Little competition
• Frequent product modification
• Limited distribution
• High marketing and product costs
• Promotion focused on product awareness, to stimulate
primary demand
• Intensive personal selling to retailers and wholesalers

5-44

Product example: Self driving automobiles.

44
 Growth

• Sales grow at an increasing rate

• Many competitors enter market
• Large companies may acquire small pioneering
firms
• Profits are healthy
• Promotion emphasizes brand advertising and
comparative ads
• Wider distribution
• Towards end of growth stage, prices fall
• Sales volume creates economies of scale

5-45

Example: Electric and Hybrid Cars

45
 Maturity
• Sales continue to increase but at a decreasing rate
• Marketplace is approaching saturation
• Typified by annual models of products with an
emphasis on style rather than function
• Product lines are widened or extended
• Marginal competitors drop out
• Heavy promotions - sales promotions
• Prices and profits fall

5-46

Petrol and Diesel cars? Are they in maturity stage yet?

46
 Decline

• Signalled by a long-run drop in sales

• Rate of decline is governed by how rapidly consumer
tastes change or how rapidly substitute products are
adopted.
• Falling demand forces many out of market
• Few specialty firms left

5-47

Typewriters, Film Cameras etc.

47
 Managing Products:
Portfolio Planning and Product
Growth Strategies

48
 Portfolio planning

The process of managing products as

groups (portfolios) rather than separate,
distinct and independent entities.

49

49
 The Boston Consulting Group
Growth-Share Matrix
15%

Stars Problem
Market children
Growth 7%
Rate
Cash cows Dogs

0%
10 0
Market Share
50
 Product growth strategies:
the Ansoff Matrix

Existing Market Product

penetration or development
expansion
Markets

New Market Diversification

development

Existing New
Products 51
 So now we know

• What is a product, product

strategy, types of products, brand?
• New product development (NPD)
• Why and how to manage products
• The importance of a portfolio
• Not a better mousetrap

52
 Reading

Fillis, I. (2002) An Andalusian Dog or a Rising

Star? Creativity and the
Marketing/Entrepreneurship Interface. Journal
of Marketing Research, 18(1): 379-395.
Johne, A. (1992) Don’t Let Your Customers
Lead You Astray in Developing New Products.
European Management Journal, 10(1): 80–4.

53