Section 5: What We Market

Definitions
Product – is anything that can be offered to a market for attention, acquisition, use or consumption
that might satisfy a need or want.

Service – is any activity or benefit that one party can offer to another that is essentially intangible
and does not result in the ownership of anything.

The Levels of Products and Services

Core Benefit

Actual Product
•Brand name
•Product features
•Design
•Packaaging
•Quality

Augmented
Product
•Delivery
•After-sale service
•Warranty
•Installation

The most basic level is the core benefit, which addresses the question, what is the buyer really
buying? When designing a product, marketers must first define the core, problem-solving benefits or
services that consumers seek.

At the second level, product planners must turn the core benefit into an actual product. They need to
develop product and service features, design, a quality level, a brand name and packaging.

Finally, product planners must build an augmented product around the core benefit and actual
product by offering additional consumer services and benefits.

What Must You Do When Developing Products

1. Identify the core consumer needs the product will satisfy.
 2. Design the actual product.
3. Find ways to augment in order to create the bundle of benefits that will provide the most
satisfying customer experience.

The Products Life Cycle

Kotler, P., Armstrong, G. and Tait, M. (2010). Principles of marketing. Cape Town: Pearson Education
South Africa, p.288.

The Introduction Stage

When the new product is first distributed and made available for purchase.

The Growth Stage

When a product’s sales start climbing quickly.

The Maturity Stage

When sales growth slows or levels off.

The Decline Stage

When a product’s sales decline.

Strategies for Each Stage of the Product’s Life Cycle

Strategy during the Introductory Stage

 A rapid-skimming strategy – Launch the product at a high price, but supported by high
levels of advertising expenditure;
 A slow-skimming strategy – Launch the new product at a high price, but with limited
advertising expenditure;
 A rapid-penetration strategy – Low launch price accompanied by heavy advertising; and
  A slow-penetration strategy – Low price level accompanied by a low level of advertising
expenditure.

Strategies during the Growth Stage

 Slightly lowering prices to raise the barriers to entry for potential new competitors;
 Improvements to the product’s quality, adding new features or new styles;
 Change package sizes;
 Product line extensions;
 Selectively expand the distribution network; and
 Shift the advertising objective from product awareness to brand insistence.

Strategies during the Maturity Stage

 Promote more frequent use of the product by current customers;
 Find new target markets for the product;
 Find new uses for the product;
 Price the product below the market to attract more price-sensitive buyers;
 Develop new distribution channels;
 Add new ingredients or eliminate old ingredients;
 Make a dramatic (new) guarantee;
 Improve quality or add new product features; and
 Reposition the product.

Strategy during the Decline Stage

The main strategy is to reduce marketing expenditure to the absolute minimum or to re-establish
the product’s market position. The re-establishment could entail a makeover or rebranding of the
product. For example, Coca-Cola made Diet Coca-Cola, and when it started to decline, they made a
few modifications and came out with Coke Zero, which was seen as a brand new product yet it was
simply Diet Coke rebranded with a few changes to the ingredients.

Key Points to Keep in Mind When Using the PLC Concept

 The stages of the life cycle, the time span of the life cycle and the shape of the life cycle
vary by product and by industry;
 External factors may have a major impact on the performance of a product and shorten
or lengthen its life cycle;
 An individual firm may do better or worse than ‘average’ for its industry at any stage in
the product life cycle;
 A firm may be able to manage the life cycle of a product category or industry; and
 Some firms may be able to engage in a self-fulfilling prophecy, whereby they predict that
sales will decline and then ensure that this will occur by reducing or removing marketing
support.
Major Stages in New-Product Development

3. Concept
1. Generate Ideas 2. Screen Ideas Development
and Testing

6. Develop a 5. Business 4. Develop the

Marketing Strategy Analysis Product

8.
7. Test Marketing
Commercialisation

1. Idea Generation
Idea generation is the systematic search for new-product ideas.

Generally, major sources of new-product ideas include the following:

Internal sources (from inside the firm); and
External sources (from customers, competitors, distributors, suppliers and others)

2. Idea Screening
Idea screening is screening new-product ideas in order to spot good ideas and drop poor ones as
soon as possible.

3. Concept Development and Testing

Product idea is an idea for a possible product that the firm can see itself offering to the market.

Product concept is a detailed version of the idea stated in meaningful consumer terms.

Product image is the way consumers perceive an actual or potential product.

Concept testing is testing new-product concepts with a group of target consumers to find out if the
concepts have strong consumer appeal.

4. Marketing Strategy Development

Marketing strategy development is designing an initial marketing strategy for a new product based
on the product concept.

You learnt how to do this in Section 4.

5. Business Analysis
Business analysis is a review of the sales, costs and profit projections for a new product to find out
whether these factors satisfy the firm’s objectives.

6. Product Development
Product development is developing the product concept into a physical product in order to ensure
that the product idea can be turned into a workable product.

This step calls for a large jump in investment. It will show whether the product idea can be turned
into a workable product.

7. Test Marketing
Test marketing is the stage in new-product development in which both the product and the entire
marketing programme are tested in more realistic market settings.

When using test marketing, consumer-products firms usually choose one of the following
approaches:
1) Standard test markets:
Here, the firm finds a small number of representative test cities, conducts a full marketing
campaign in these cities and uses store audits, consumer and distributor surveys, and other
measures to gauge product performance.

2) Simulated test markets:

The firm or research firm shows ads and promotions for a variety of products, including the new
product being tested, to a sample of consumers.

8. Commercialisation
Commercialisation is introducing a new product into the market.

The firm launching a new product must first decide on introduction timing.
Next, the firm must decide where to launch the new product.
They will develop a planned market rollout over time.
The Consumer Decision-Making Process
1 – Problem recognition of an unfulfilled need;
2 – Information search;
3 – Evaluation of alternatives;
4 – Purchase; and
5 – Post-purchase behaviour.