Marketing Fundamentals: Razzaque

Lectures 6-7: All about products

MARKETINGMIX.
referstothemarketingelementsthathelp

marketerspositiontheirmarketoffer.

MARKETING MIX ELEMENTS - 1

Produceroriented:4Ps

ALLABOUTPRODUCTS

Product
Price
Promotion
Place

Consumeroriented:4Cs

Commodity
Cost
Communication
Channel

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MARKETING MIX FOR PRODUCTS [GOODS]

MARKETING MIX FOR PRODUCTS [SERVICES]

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L6 3

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L6 2

Products:
BundlesofBenefitsintheformofGoodsandServices

LectureObjectives

Definethetermproductanddescribethenatureof
productinmarketingmanagement.

Goods
(Tangible
Product)

Explainproductandserviceclassifications

Anytangibleobject/thingthatcanbeofferedto
amarketforattention,acquisition,use,or
consumptionthatmightsatisfyawantorneed.

Outlinetherangeofindividualproductdecisions
discussingvariousproductattributes.

Broadlydefinedasproducts.

Discussbranding.

Alsoincludeevents,persons,places,organisations,
ideas,ormixesofthese.

Explainproductlineandproductmixdecisions.
Describenewproductdevelopmentstrategies

SERVICES
(Intangible
Product)

ExplainProductLifeCycle.

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L6 4

L6-5

Aproductintheformofanactivity,benefitor
satisfactionthatonepartycanoffertoanother
thatisessentiallyintangibleanddoesnotresult
intheownershipofanything.

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Marketing Fundamentals: Razzaque

Lectures 6-7: All about products
ProductsandServicesContinuum

ThreeProductLevels

There is nothing called pure product or pure service

Augmented Product
Installation
Packaging
Brand
Name

Features

Core
Benefit
or
Service

Delivery
& Credit
Quality

Styling

AfterSale
Service

Warranty
Core Product

Actual Product
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L6- 7

ProductLevels

L6 - 8

ProductLevels:QANTAS

CoreProduct:thebasicusebenefit,problemsolvingdimensionthat
Augmented Product

makesthepurchasedproductvaluabletoconsumer.
ActualProduct:thetangible,physicalproduct(orintangibleservice)

Qantas Club

thatwebuytoreceivethecoreproductbenefits.
Has5characteristics:

Tours

QualityLevel referstoproductperformance.
Features includecombinationsofproductattributes.
Styling consistsofproductsdesignandaestheticorergonomicaspects.
BrandName mayhelpconsumerspositionandidentifytheproduct.
Packaging servestobothprotecttheproductandtopromoteitto
consumers.

Holliday
Packages

Seat
allocation
Inflight
Services

value totheproductpurchased.[e.g.;credit,delivery,installation,
warranties, andaftersaleservice]

Safety
Record

Hertz
Car
Rental
Booking

Schedules

Frequent Flyer Scheme

helptheconsumerputtheactualproducttosustaineduse.

Actual Product
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Time
Critical
Transportation
Booking
System

AugmentedProduct: thenonphysicalpartoftheproductthatadds

Fly-drive
packages

Meals

Core Product

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L6 - 9

ConsumerProductClassifications

L6- 10

Classification of consumer goods

Consumerproductsarethoseboughtbyfinal
consumersforpersonalconsumption.
Convenience
Products (i)purchased
frequentlywith (ii)aminimum
ofcomparisonandbuying
effort. Examples
arestaples,impulse,emergency

Shopping

Types of
Consumer
Products

Unsought
Goods
Productsunknowntothebuyerornot
normallyconsideredforpurchase;
requirespecialmarketingeffort.
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Products arecomparedon
suchbasesassuitability,
quality,price,andstyle.

Specialty
Productswith(i)uniquecharacteristics
oridentificationwithbuyersand (ii)
arespecificallysoughtbytheconsumer.
L6- 11

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L6 12

Marketing Fundamentals: Razzaque

Lectures 6-7: All about products
IndustrialProducts

ExtendingtheGoodsandServicesClassificationinMarketing

aregoodspurchasedbyindividualsandorganisationsfor

Organisationmarketing: Involves

(i)furtherprocessingorfor (ii)useinconductingabusiness.

creation,maintenanceorchanging
theattitudesandbehaviourof
targetconsumerstowardan
organisation(e.g.NAB/UNSW).

differfromconsumergoodsintermsofthepurposeofuse.
canbeclassifiedinthreegroupsaccordingtohowtheyenterthe

productionprocessandwhattheycost.

Placemarketing: Relatesto

creation,maintenanceorchange
theattitudesandbehaviour
towardparticularplaces.(e.g.,
tourismdestinationsorholiday
resorts).

o Materialsandparts: Includesrawmaterialsandmanufacturedmaterials

andpartsthatenterthemanufacturersproductcompletely.Usuallyare
bulkyandlowpriced.
o Capitalitems:Goodsandservicesthatenterthefinishedproductpartly,

includinginstallations(buildingsandfixedequipment)andaccessory
equipment(portablefactoryequipmentandtools,officeequipment).Do
notbecomepartofthefinishedproduct,butaidintheproductionprocess.

Eventandexperiencemarketing:

Oftenlinkedtoothermarket
offeringssuchasmajorsporting
eventslikeWorldCup,ofteninclude
destinationmarketing,and
marketingcommunicationsto
involvethelocalcommunity.

o Suppliesandservices:Goodsandservicesthatdonotenterthefinished

productatall(e.g.,maintenanceandrepairservices,advisoryservices).

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Marketers are expected to sell benefits, not features.

ProductQuality >>Theabilityofaproductto

performitsfunctions.Includesattributessuchas
durability,reliability,precision,easeofoperations,
and qualityconsistency. Hasleadtoadoptionof
TQM.

Refertothefollowingextractof

anonlineadvertisementfor
Miele ovens.
TheMiele fan forced cooking

system,forexample,enablesyou
tocookonuptothreelevels.
Ratherthanjustcirculatinghot
airwithafanweusea miniturbine togetherwitharing
heater element toforcehotair
evenlythroughouttheoven
interior.Thisreduces cooking
time andthus energy
consumption aboveall

ProductFeatures. Technicalcharacteristicsofthe

offering.Consumersseekvalueandneed
satisfaction.Productfeaturedecisionsmustreflect
consumerneedsandperceptions,affordablevalue
andcompanycost.Featuresirrelevanttoconsumers
costmoneyandareundesirable.

Packaging

Labelling

ProductDesign. Combines attentiontostyle

Product
Support Services

(appearance)withenhancedperformance.Style
alonemayattractattentionbutnotimprove
performance.

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PackagingDecisions
Includesdesigningand
producingthecontaineror
wrapperforaproduct.
Mustsupportmarketing
objectivesofthecompany.
Thepackageincludesthe
immediatecontainer(that
holdstheproductforuse),
a secondarypackage
(discardedpriortouse),
andashippingpackage
(necessaryforstorageand
shipping).
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L6 - 14

ProductFeatures,AdvantagesandBenefits

IndividualProductandServiceDecisions

Branding

maintainance orchangetheattitudes
andbehaviourtowardparticular
people(celebrities,sportsstars,
politicians,andbusinessleaderse.g.,
AngelinaJolie;TigerWoods;Kevin
Rudd;BillGates.
Ideassuchaspoliticalpoliciesand
environmentalandsocialcausescan
alsobemarketed.
Socialmarketing:Useofmarketing
conceptsandtoolsinprograms
designedtobringaboutsocialchange.
(e.g.,reducespeeding,pollutionetc.
Nonprofitmarketing:Involves
activitiesbynotforprofit
organisationssuchasRedCrossinfund
raising.

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L6- 13

Product Attributes

Personmarketing: Relatestocreation,

providing perfectly even

cooking results.

Features:Fan forced cooking

system, mini turbine, and ring

heater element.
Advantages: Cookingonupto
threelevels,hotairforcedevenly
throughtheinterior.
Benefits:Reduced cooking

time, reduced energy

consumption, perfectly even
cooking results.

Summary:Features describe the

sales item in technical terms.

Advantagesdescribethesalesitem
intermsofwhatthefeaturedoes.
Benefits describe the sales
item in terms of the benefit to
me, the customer.

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L6 - 15

L6 16

ProductLine&MixDecisions

LabelingDecisions
Labels
Identifyproducts:Distinguish one
productfromothers;andsupport
brandstrategies;
Describeproduct:By providing
informationaboutcontents,
production,freshness,and
instructionsonsafeandeffective
use;and
Promoteproducts: Throughthe
useofcolor andgraphicscan
stimulateandarouseconsumer
attentionfortheproduct.
Mustsatisfylegalregulation.

Stretching

Length

Filling

Featuring

Product
Line Decisions
Product Mix
Decisions

Width

Consistency

Length

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L6 - 17

Depth

L6 - 18

Marketing Fundamentals: Razzaque

Lectures 6-7: All about products
ProductMixDecisions

Product Line Decisions

Productmix:Thesetofmerchandiseofferedbyafirmtoitscustomers.

ProductLineLength:Thenumberofproductsintheline.
Alineistooshortifaddingitemsincreasesprofits;toolongifdropping
itemsincreasesprofits. Companyobjectivesoffulllineofferingsmay
decreasestrictprofitcriteriononlength.
ProductLineStretching: Lengtheningacompanysproductline
Downwardstretch offersitemstolowerendofthemarket.
Upwardstretch introducesitemstohighendofmarket.
Twowaystretch extendsthelinebothupwardanddownward.
ProductLineFilling: Addingitemswithintheexistingproductrangeof
theline.
ProductLineFeaturing: Selectingafewitemstoreceivespecial
marketingattentiontoeitherincreasevolumeofthefeatureditemsor
drawcustomersclosertootherproductsintheline

AssortmentDimensions
Width:numberofdifferent

productlinesmarketedbya
singlefirm.
Length:numberofitemssold
byafirmwithineachproduct
line.
Depth:numberofshapesand
modeldesignationofthe
product
Consistency:howclosely
relatedthevariousproduct
linesareinenduse,production
requirements,distribution
channels,orotherways

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ProductMixStrategyofGeneralMotors

L
I
N
E
L
E
N
G
T
H

forafirmvariesacrosstime.
Themixisafunctionof

engineering,production,
andmarketingskills
available;thefinancial
resourcesandtheobjectives
oftheorganization.
Forlongtermgrowth

expandproductmix
continuously

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L6 - 19

P
R
O
D
U
C
T

Optimizingtheproductmix
Theoptimumproductmix

L6 - 20

Product Line Stretching Decisions

Pontiac

Oldsmob

Chevrolet

Buick
Cadillac

GMC

CARS
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School bus

TRUCKS
PRODUCT WIDTH

CHASSIS
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L6- 21

ServicesMarketing

L6 - 22

MarketingStrategiesforServiceFirmsI

CharacteristicsofServices
Inaservicebusiness,thecustomerandfrontlineservice

Synchronousdeliveryand
Almostpureservices,e.g.,a
consumption:
haircut,hasnophysicalelement
Almostpureservices,e.g.,
likecoffee
learningtodrivesessionor
aerobicsinstructionsession,
Highinvolvementand
requireyoutointeractinreal
personalnatureofservices:
timeastheserviceisconsumed.
Whenyourteetharecleaned,
youarereceivingapersonalised Variabilityofservice
service.
encounters:
Almostpureservices,e.g.,a
Perishabilityofservices:
restaurantoroceancruiseinvolve
Almostpureservices,e.g.,a
interactionbetweena
rockconcert,cannotbestored
patron/guestandcustomer
likecoffee.Oncetheconcertis
servicepersonnel.Theyarenot
over,onlyitsmemoryisleft.
necessarilythesameeverytime.
Intangibilityofservices:

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employeeinteract tocreatetheservice.
Theserviceprofitchainconsistsoffivelinks:
Internalservicequality:superioremployeeselectionandtraining,a

qualityworkenvironment,andstrongsupportforthosedealing
withcustomers,whichinturnresultsin...
Satisfiedandproductiveserviceemployees:moresatisfied,loyal,
andhardworkingemployees,whichresultsin...
Greaterservicevalue:moreeffectiveandefficientcustomervalue
creationandservicedelivery,whichresultsin...
Satisfiedandloyalcustomers:satisfiedcustomerswhoremainloyal,
repeatpurchase,andreferothercustomers,whichresultsin...
Healthyserviceprofitsandgrowth:superiorservicefirm
performance.
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L7 24

Marketing Fundamentals: Razzaque

Lectures 6-7: All about products
BrandingI

Servicemarketingrequires (i)internalmarketing,
(ii)externalmarketing and (iii)interactivemarketing

Abrandisaname,term,sign,symbol,design,
Product Attributes

External marketing :
what this course is
covering

Internal marketing:
Orienting and

Branding

Brandsarethe majorenduringassetofa

motivating firms
customer-contact
employees and
supporting service
people to work as a
team to provide
customer satisfaction.

companyasthey
Interactive marketing:
Developing quality the
buyer-seller
interaction during the
service encounter.

allowcontroloverchannelofdistribution.
Labelling

Developpermanentpricequalityimageofthe

product
Powerfulbrandnameshaveconsumer

franchise theycommandconsumerloyalty.

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L7 25

Branding - II

BrandEquity

purchase.
Simplify theintroductionofnewproductsand

Product
Support Services

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Safety]

Facilitateeasyproductrecognitionandrepeat

Packaging

Hence,servicecompaniesmustincrease threemajormarketingtasks:
(i)theirservicedifferentiation,(ii)servicequality,and(iii)serviceproductivity.

Theaddedvalue
thatknowledge
aboutabrand
bringstoaproduct
overandaboveits
basicfunctional
qualities.
Thefoundationsof
brandequity:
(i)extensivebrand
awareness;and
(ii)strong,unique
andfavorable
brandassociations
[e.g.,VOLVO>>

oracombinationofthese,thatidentifiesthe
goodsorservicesofonesellerorgroupofsellers
anddifferentiatesthemfromthoseof
competitors

L7 26

WORLDs TOP BRANDS 2013

Measuresof
BrandStrength
differentiation
(whatmakesthe
brandstandout),
relevance (how
consumersfeelit
meetstheir
needs),
knowledge (how
muchconsumers
knowaboutthe
brand),and
esteem (how
highlyconsumers
regardandrespect
thebrand).

Highlevelof
consumerbrand
awarenessand
loyalty.
Moreleveragein
bargainingwith
resellers.
Moreeasily
launchlineand
brandextensions.
Defenceagainst
fierceprice
competition.
Formsthebasis
forbuildingstrong
andprofitable
customer
Brand
relationships.

Valuation

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Brand
Name

Region/
Country

Sector

Brand
Value
($m)

Change in
Brand
Value

Apple

United
States

Technology

98,316

28%

Google

United
States

Technology

93,291

34%

Coca-Cola

United
States

Beverages

79,213

2%

IBM

United
States

Business
Services

78,808

4%

Microsoft

United
States

Technology

59,546

3%

GE

United
States

Diversified

46,947

7%

McDonald
's

United
States

Restaurants

41,992

5%

Samsung

South Korea

Technology

39,610

20%

Intel

United
States

Technology

37,257

-5%

10

10

Toyota

Japan

Automotive

35,346

17%

2013 Rank

2012 Rank

Brand

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L7 27

BrandingIII:BuildingBrandNames

L7 28

To Brand or Not to Brand: Positioning

:P
Brand
No Brand

Costofestablishingabrandnameisveryhigh,often

rangesbetween50150milliondollars. Yetchancesfor
successinestablishingabrandnameareratherlow.
Companieswithstrongbrandsoftenattempttobuild
brandportfoliosbyacquiringbrandswithstrongbrand
equityfromothercompanies.

Brand Name Selection

Selection
Protection

Brand Sponsor
Manufacturers Brand
Private Brand
Licensed Brand

Brand Strategy
New Brands
Line/Brand Extensions Multibrands

Brand Repositioning
Brand Repositioning
No Brand Repositioning
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L7 - 30

Marketing Fundamentals: Razzaque

Lectures 6-7: All about products
Major Branding Decisions III: BrandSponsorship.

Major Branding Decisions II

Amanufacturerhasfoursponsorshipoptions.
Launchtheproductasamanufacturersbrand (ornational
brand)[e.g.,IBM,Kellogg].ProducerownstheBRAND.
Selltoresellerswhogiveitaprivatebrand (alsocalledastore
brandor distributorbrand).Privatebrands [Inghamschicken
alsosoldbyColesasFarmlandandSavings].Resellercreate
andowntheBRAND.
Useotherbrandsnameunderlicense[e.g.,Gucci,CalvinKlein].
Joinanothercompanyandcobrand aproduct.[e.g.Visaand
CommonwealthBank]

BrandDecision. Thecompanymustdecidewhetherornot
toplaceabrandnameonitsproductorusegenericnames
(e.g.Paracetamol).Brands(e.g.PanadolorHeffron)
usuallycommandhigherprofitmarginsthannonbrands.

BrandNameSelection. Agoodbrandnameshould:
1. suggest something about the products benefits [Navigator>Netscape];
2. be easy to pronounce and remember [Total, Tide];
3. be distinctive [Lexus];
4. Be extendable
5. translate easily into foreign languages [Exxon,(formerly standard oil of
New Jersey) translated in 54 languages]; and
6. be eligible for registration and legal protection.
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Mixedbrand strategiescombinebothapproaches[IBMand

itsSecondarybrandsoldthrudirectmail].

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L7 - 31

BrandDevelopmentStrategy
Occurswhenacompany
extendsexistingbrand
namestonewforms,
colours,sizes,ingredients,
orflavoursofanexisting
productcategory.

MegabrandStrategy

Product Category
Existing

New

Brand Name

Add decaf Coffee.

Existing

New

Line
Extension

Multibrands
[Flanker]

Brand
Extension
[Brand
Leveraging]

New
Brands

Develops additional
products in the same
product category.
P & G pioneered
multibranding

A company seeks to
extend existing brand
qualities to launch
new products or
modified products in
a new category.
Quaker oatmeal >
Quaker Granola bar

Involvesdropping

weakerbrandsand
focusingonlyon
brandsthatcan
achievethenumber
oneornumbertwo
marketshare
positionsintheir
categories.

A company creates a
new brand name when
it enters a new product
category for which
none of the companys
current brand names
are appropriate

BrandRepositioning.
Maybenecessaryinresponseto

changeinthecompetitivemarket.
Couldbeveryexpensive
Couldalsobechallengingto

marketersastherepositioningthe
imageofthesameproductmaynot
beeasytocommunicatetothetarget
market.
KentuckyFriedChicken toKFC
KraftsVelveetaBrandfromcooking

cheesetogoodtasting,naturaland
nutritioussnackcheese.
Shouldbedonecarefully.

Coca Cola > Dasani

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L7 - 33

L7 - 34

NewProducts

ProductNewness

Rapidchangesintastes,technologyandcompetition,prompt

A.Newtotheworld >>productsthatcreateentirelynew
markets.
B.Newproductlines >>entriesintoexistingmarketsthatare
newtothefirm.
C.Lineextensions >>newproductsallowingfirmstoextend
servedmarketthroughdifferentbenefits.
D.Improvementstoexistingproducts >>replacementsfor
existingproduct.
E.Repositioning >>modesttechnicalimprovementsthat
allowaproducttooffernewapplications
F.Costreductions >>versionsofexistingproductsproviding
comparableperformanceatlowercost.

customerstowantnewandimprovedproducts.
Newproducts:Includeoriginalproducts,modifications,newbrands.
Newness"dependsonwhomakestheassessment buyerorseller.
Successofanewproductdependsonauniquesuperiorproduct

newfeatures,higherqualityandvalueinuse.
Acompanycanobtainnewproductsintwoways.
1.

Acquisition buyingawholenewcompany,patentorlicenceto
producesomeoneelsesproduct.

2.

Newproductdevelopment.

Degreeofnewnesstobuyer/sellerimpactstheamountofrisk

takenandinfluencesthenewproductdevelopmentprocess.
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L7 - 36

Marketing Fundamentals: Razzaque

Lectures 6-7: All about products
What it takes to launch one commercially
successful new product

NewProductSuccessandFailure
Ahighrateofnew

productfailure;
80%newconsumer

goods;

33%newB2Bproducts;

Reasonswhynew

productsfail:

negativeperception,
wrongtiming,
poormarketresearch,
poormarketing

communicationsetc.

Identifysuccessfulproductsand

findoutwhattheyhavein
common
Developasuperiorproduct
Haveawelldefinedproduct
conceptpriortodevelopment
Inadequatepromotionalbudget
andsupportmaycausefailure
Topmanagementcommitmentis
vital
Acompanymustunderstandits
consumers,marketsand
competitors.<>

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L7 - 37

NewProductDevelopmentProcess
Marketing
Strategy

L7 38

StagesinNewProductDevelopmentI
Business
Analysis

IdeaGeneration. Thisstageisthesystematicsearchfor

newproductideas.
Sourcesfornewproductideasincludeinternalsources,

Concept
Development
and Testing

customers,competitor'sproducts,distributors&suppliers,
andothersources.+HT

Product
Development

Screening. Thisstagefocusesonreducingthenumberof

ideasbydroppingpoorideasassoonaspossible.
Idea
Screening

Idea
Generation

Helpsreducecostsandfocusattentionmoreproductively.

Test
Marketing

ConceptDevelopmentandTesting. Thisstageinvolves

translatingideasintoproductconceptsordetailedversions
oftheideasstatedinmeaningfulconsumerterms.
Conceptsarethentestedontargetconsumers.

Commercialisation

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L7 - 39

StagesinNewProductDevelopmentII

L7 - 40

Managingnewproductdevelopment

MarketingStrategy. Consistsofthreeparts
(i)describethetargetmarket,
(ii)outlinetheproduct'sprojectedprice,distribution,andbudgetfor
thefirstyear,and
(iii)describelongrunsales,profitgoals,andmarketingmixstrategy.
BusinessAnalysis. Reviewsthesales,costs,andprofitprojectionsforthe
producttofindoutiftheysatisfyoverallcompanyobjectives.
ProductDevelopment. Involvesconvertingtheproductconceptintoa
physicalproducttoensurethattheideaisaviableproduct.
TestMarketing. Involvesimplementationofmarketingprograminone
ormorerealisticmarketsettings.
Commercialization. Actualintroductionofthenewproductintothe
marketplace.Thecompanymustmakedecisionsinvolvingwhento
introduce,where,towhom,andhow.

Customercentred Focusesonfindingnewwaystosolve
customersproblemsandcreatemore
newproduct
customersatisfyingexperiences.
development

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Teambased
newproduct
development

Companydepartmentsworktogetherin
crossfunctionalteams,overlappingthesteps
intheproductdevelopmentprocesstosave
timeandincreaseeffectiveness.

Systematic
newproduct
development

TheNPDprocessshouldbesystematicand
holistictoensurethatnewideasthatmay
emergedonotfalter.Goodmanagementsystem
systemtomanagenewproductideas.

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L7- 42

Marketing Fundamentals: Razzaque

Lectures 6-7: All about products
ProductLifeCycle

Commonorganizationalarranagements
Howcompaniesorganizefornewproductdevelopmentisalso
importantforitssuccess.

Sales and
Profits ($)

ProductManagers. He/sheisclosesttothemarketandassuchisthemost
knowledgeableofall.Howeverhe/shemaybepreoccupiedwithexisting
productsandlackspecificknowledgeandskillsrelatedtonewproduct
development.
NewProductManagers. Anewmanagerassignedtothetaskofnewproduct
development; however,he/shemightthinkintermsofmodificationsand
lineextensions.
NewProductCommittees. Usesspecialistsfromseveralfunctionalareasto
evaluatenewproductconceptsandplans.
NewProductDepartments. Setsupaseparatedepartmentwiththelineand
staffauthoritytodevelopnewproducts.Thedepartmentalmanageralso
hasaccesstotopmanagement.
NewProductVentureTeams. Bringstogetherspecialistsfromotheroperating
departmentsandreassignsthemtotheventureteam.
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Sales

Profits
Time
Product
Development
Stage

Growth

Maturity

Decline

SalesandProfitsOver
theProductsLifeFrom
InceptiontoDemise

Losses/
Investments($)

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ProductLifeCycleStagesI

L7- 44

ProductLifeCycleStagesII

1. Introductionstage.

Promotetheproductheavilytoinformthemarketaboutitsdebut.

Low/negativeprofitsmayleadtosethighpricetooffset
expenses.

Adoptskimmingstrategies togeneratehighprofitsnow or
penetrationstrategies tobuildmarketshareanddominatethe
marketforlargerprofitsoncethemarketstabilizes.

3. Maturitystage.
Slowergrowthoveralongerperiodoftime.Growthstage
decisionsareinappropriate.
Mustmodify(i)themarkettoincreaseconsumption,or(ii)
theproduct(quality,feature,andstyleimprovements)to
attractnewusers,or(iii)themarketingmixtoimprove
competitiveposition

2.Growthstage.

Theproductexperiencesbothincreasingsalesandcompetition.

Promotioncostsarespreadoverlargervolumeandstrategic
decisionsfocusongrowthstrategies.

Strategiesincludeaddingnewfeatures,improvingquality,
increasingdistribution,andenteringnewmarketsegments.

4. Declinestage.
Costsofmanagingtheproductmayexceedprofits.
Managementmaykeepthebrandascompetitorsdropout,
harvest thebrandbyreducingcostsofsupportforshortterm
profit,ordivest (i.e.,drop)theproduct.
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DifferenttypesofPLC

L7- 46

TheProductLifeCycle

Videogameconsoleand
softwarelifecyclesbyproduct
classandproductform

Sales
Volume

Competitive turbulence

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Introduction

$ 0.00
Unit
Cost
Unit
Price

TypicalFashion,StyleandFad

Introduction

Growth

Maturity

Profitability

Decline

Time
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L7 - 48

Marketing Fundamentals: Razzaque

Lectures 6-7: All about products
Product Lifecycle Stage Strategies

ProductLifeCycleStageCharacteristicsI
LIFECYCLE
STAGE

LIFECYCLE
STAGE

INTRODUCTION GROWTH

Sales

Low

Rapidly rising

Prices

High

Lower

Unit Profits

Negative

High, Rising

Declining

Customers

Innovators

Early Adopters Early Majority Middle Majority

Laggards

Competition

Few

Growing

More Decline

COMPETITIVE
TURBULENCE

MATURITY

DECLINE

Slowing

Peak, Cyclical

Declining

Low

Low

Falling

Average

Declining

Shakeout

Declining, Fewer

INTRODUCTION GROWTH

MATURITY

DECLINE

Market
awareness,
R&D critical

Market share Protect,

penetration strengthen
niche

Protect share Reduce

manage earnings expenditures
and costs
and harvest

Product

Basic

Add service Tighten line,

and features up quality

Diversify brands
and models

Price

Cost plus

Market
broadening

Match or beat Defensive

competitors

Maintain
profit margin

Distribution

Selective

Intensive
coverage

Strong dealer Intensive and

support
extensive

Selective

Stimulate
wider trial

Maintain
consumer
franchise

Stress brand
differences and
benefits

Phase out,
maintenance
only

Long runs
Stable
process

Decentralize
Many short runs

Revert to
subcontracting

Communication Create
awareness
Manufacturing

RAZZAQUE:UNSW

COMPETITIVE
TURBULENCE

Overall

Subcontract Centralize
Short runs
Mass prod.
Overcapacity Undercap'ty

Phase out
weak items

RAZZAQUE:UNSW

L7 - 49

L7 - 50

Exploiting the Product Life Cycle

How stages of the product life cycle relate to a firms

marketing objectives and marketing mix actions

Emphasize

PromotionDistributionPriceCostreduction

Dollars

Total
Market
Sales

Total
Market
Profit

New product features

New uses
New Markets

Status quo
New product features
New uses
New Markets

Status quo
Introduction Growth Maturity
Decline
<------------------------------TIME--------------------------------->

RAZZAQUE:UNSW

L7 51

RAZZAQUE:UNSW

ManagingthePLCduringthedeclinestage

Lengthofproductlifecycle

Thethreewaystomanageaproductthroughitslifecycle

Howlongisaproductlifecycle?

include:

Whatdeterminesitslength?

Productmodification strategies:alteringaproductcharacteristic,

suchasquality,performance,orappearancetotrytoincreaseand
extenditssalesandlifecycle.
Marketmodification strategies:increasingaproduct'suseamong
existingcustomers,tocreatenewusesituations,ortofindnew
customers.
Productrepositioningstrategies:changingtheplaceaproduct
occupiesinaconsumer'smindrelativetocompetitiveproducts.

Thereisnoexacttimethataproducttakestomove

throughitslifecycle.
Asarule,consumerproductshaveshorterlifecyclesthan

businessproducts.Theavailabilityofmass
communicationvehiclesinformsconsumersfasterand
shortenslifecycles.
Also,technologicalchangetendstoshortenproductlife
cyclesasnewproductinnovationreplacesexisting
products

Afirmcanrepositionaproductbychangingoneormoreofthefour

4Ps

RAZZAQUE:UNSW

L7 - 52

RAZZAQUE:UNSW

L7 - 53

L7 - 54

Marketing Fundamentals: Razzaque

Lectures 6-7: All about products
Peoplediffergreatlyintheirreadinesstotrynewproducts.
Therearefivedifferentcategoriesofadopters

NewProductAdoptionProcess
Consumerspassthroughfivestagesintheprocess
ofadoptinganewproduct:

RAZZAQUE:UNSW

Early
Adopters

34%

Late Majority

34%

Laggards

16%

13.5%
2.5%
Early

Time of Adoption

Late

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L7 55

Individualdifferencesintheadoptionof
innovations[FromCh.5]

L7 56

InfluenceofProductCharacteristicsonRateofAdoption

1. Innovators.
Innovators help get the product exposure: but are not typical
consumers.

RelativeAdvantage:thedegreetowhichaninnovation
appearssuperiortoexistingproducts.
Compatibility:thedegreetowhichtheinnovationfitsthe
valuesandexperiencesofpotentialconsumers.

2. Early Adopters.
Serves as opinion leaders to the rest of the market.

Complexity:thedegreetowhichtheinnovationisdifficultto
understandoruse.

3. EarlyMajority.
The"typicalconsumer;adoptinnovationsearly.

4. LateMajority.

Divisibility:thedegreetowhichtheinnovationmaybetried
onalimitedbasis.

Thescepticals;adoptsaftermostinthemarket.

5. Laggards.

Communicability:thedegreetowhichtheresultsofusingthe
innovationcanbeobservedordescribedtoothers.

Thesuspicious;adoptslastwhentheproductisnolongeran
innovation.
RAZZAQUE:UNSW

Early Majority

Innovators

Percentage of Adopters

1. Awareness:Theconsumerbecomesawareofthenew
product,butlacksinformationaboutit.
2. Interest:Theconsumerseeksinformationaboutthenew
product.
3. Evaluation:Theconsumerconsiderswhethertryingthe
newproductmakessense.
4. Trial:Theconsumertriesthenewproductonasmallscale
toimprovetheirestimateofitsvalue.
5. Adoption:Theconsumerdecidestomakefullandregular
useofthenewproduct.

RAZZAQUE:UNSW

L7 57

10

L7 - 58