Transcript FOUNDATION BUSINESS SIMULATION

CHAPTER 12: PRODUCT AND
PROMOTION
Delivering More Value
PRODUCT DEFINITION: IT’S PROBABLY MORE
THAN YOU THINK
Car Wash ~ Cooking Lesson ~ Computer ~ Soap ~ Car
Product – anything a company offers to satisfy
customer needs and wants… including not only
physical goods, but also services and ideas.
Brand ~ Image ~ Packaging ~ Reputation ~ Guarantee
GOODS V. SERVICES: A MIXED BAG
Intangibility
Most
services
embody
these
qualities:
Inseparability
Variability
Perishability
PRODUCT LAYERS: PEELING THE ONION
Core Benefits
Communications
Image
Entertainment
Actual Product
Ease of use
Lightness
Ring Tone
Augmented Products
Warranty
Insurance
Users Guide
PRODUCT CLASSIFICATION: IT’S A BIRD, IT’S A
PLANE….
Consumer
Products
• Convenience Products
Toothpaste, milk
• Shopping Products
Computer, refrigerator
• Specialty Products
• Installations
Rolex watch Production Robots
• Accessory
• Unsought Products
Home warranty Copiers•
Equipment
Maintenance, Repair, and
Operating Products
Brooms, nails
Business
• Raw Materials
Products
Cotton, oil
• Component Parts & Processed
Payroll servicesMaterials
Batteries
• Business Services
PRODUCT DIFFERENTIATION AND
PLANNING

A Meaningful Difference:
1.
Product Quality
2.
Features & Benefits
3.
Product Lines & Product Mixes
4.
Branding
5.
Packaging
PRODUCT QUALITY
Quality Level – how well a product
performs its core functions.
Product Consistency – how
reliably a product delivers its
promised level of quality.
Product Category
Quality Indicators
Internet Search Engine:
Fast, relevant, far-reaching results
Stylish Blue Jeans:
High-profile designer, high price, celebrity customers
TV Editing Equipment:
Reliability, flexibility, and customer services
Roller Coasters:
Thrill factor, design and setting
Chain Saws:
Effectiveness, safety, and reliability
FEATURES AND BENEFITS
Product Features – specific
characteristics of a product.
Customer Benefit – the
advantage that a customer gains
from specific product features.
Product
Subway Sandwiches
Product Feature
Customer Benefit
Lower Fat
Looser pants
Different Colors
A new-looking you
46-inch screen
The party’s at your house
Hybrid Car
Better gas mileage
More cash for other needs
Triple Latte
Caffeine, Caffeine…
More time to, uh, study
Contact Lenses
High-definition TV
PRODUCT LINE AND PRODUCT MIX
Product Line – products
that are closely
related, either in terms
of how they work, or the
customers they serve.
Product Mix – the total
number of product
lines by a single firm.
Cannibalization –
a producer offers
a new product
that takes sales
away from its
existing product.
BRANDING
Brand - a product’s
identity that sets it
apart from other
players in the same
category.
Brand Equity – the extra
money that consumers
will spend to buy that brand.
Brand Name – a catchy,
memorable name is
a powerful part
of strong brand.
IBM, Coca Cola
COBRANDING
Cobranding - established brands from
different companies join forces to
market the same product.
Examples:
• Ford markets the Eddie Bauer Explorer
• Frito-Lay markets KC Masterpiece BBQ chips
• Betty Crocker markets brownies with Hershey’s syrup
<>
NATIONAL BRANDS VS. STORE
BRANDS
National Brands/
Manufacturer Brands –
Brands owned and marketed by
the producer.
Store Brands/
Private Label Brands –
Brands produced and marketed
by the retailer.
PACKAGING

Protect the Product

Provide Information

Facilitate Storage

Suggest Product Uses

Promote the Brand

Attract Buyer Attention
PRODUCT LIABILITY AN ISSUE?

Toilet brush: “Do not use for personal hygiene.”

Scooter: “This product moves when used.”

Bathroom Heater: “This product is not to be used in bathrooms.”

Cardboard car sunshield: “Do not drive with sunshield in place.”
Thermometer: “Once used rectally, the thermometer should not
be used orally.”

Baby stroller cautions: “Remove child before folding”



Electric blender: “Never remove food or other items from the
blades while the product is operating.”
Hand-held massager: “Not for use while sleeping or unconscious.”
NEW PRODUCT DEVELOPMENT
Idea Generation
 Brand new ideas that
radically change how
people live
Records > Tape >
CD’s > Downloads
Idea Screening
Analysis
 Characterized by
changes to existing
products
New operating
system for your PC
 Slight modification of
an existing product
New packaging,
additional sizes
Development
Testing
Commercialization
PRODUCT DIFFUSION RATES
Observability
How visible is the product
to other potential consumers?
Trialability
How easily can potential
consumers sample the new product?
Complexity
Can potential consumers easily understand
what your product is and how it works?
Compatibility
How consistent is your product
with the existing way of doing things?
Relative Advantage
How much better are the benefits of your
new product compared to existing products?
PRODUCT LIFE CYCLE
AND MARKETING STRATEGIES
Phase
Examples
Sales/Profits
Marketing Strategies
Low sales, low
profits
Build awareness, trial, and distribution
Introduction
3D TV, fuel cell
technology
Growth
Hybrid cars, video cell
phones,
Increasing sales
and profits
Reinforce brand positioning, often through
heavy advertising
Airlines, DVD players
Flat sales and
declining profits
Target competitors, new product features,
competitive advertising, promotion, and
price cuts
Pagers, videocassettes
Declining sales
and profits
Reduce spending and consider terminating
the product
Maturity
Decline
PROMOTION IN CHAOS:
DANGER OR OPPORTUNITY?
• Technology has empowered consumers
to choose when they interact with media
• Internet users spent an average of
nearly 33 hours per week surfing the
web
• Network television watching is declining
• Consumers watching TV are zapping ads
with TiVo
• Rising consumer power and the
breakneck pace of technology have
created a growing need and stunning
opportunity
AN INTERNATIONAL PERSPECTIVE

DeBeers tried running ads in Japan using a proven
western strategy
But a Japanese woman would shed tears and feign anger that
her husband would spend so much money.

The revised DeBeers campaign featured a man
and wife in their tiny apartment


Receiving a diamond, the wife chides her extravagant
husband “Oh, you stupid!”
Taking a big idea to a foreign market requires careful
research
THE PROMOTIONAL MIX:
COMMUNICATING THE BIG IDEA
• Advertising
These tools can
help communicate
the Big Idea
to your target
market
• Sales Promotion
• Direct Marketing
• Personal Selling
• Emerging Tools
EMERGING PROMOTIONAL TOOLS: THE
LEADING EDGE
 Product Placement
 Advergaming
 Minimovies
 Buzz Marketing
 Sponsorships
A MINI CAMPAIGN WITH MAXIMUM
PUNCH
• BMW’s promotional budget for the Mini was 10% of the
typical BMW budget
• The team developed a quirky campaign with the message:
Let’s Motor!
• Ads appeared in Playboy, Rolling Stones and on billboards
• A 40-page booklet inserted in U.S. Magazines
• The car played a feature role in the movie Italian Job
• Brand awareness rose from 2% to 60%
• Mini sales exceeded expectations by 50%
• In 2009 Mini launched an official public field trial of the
environmentally friendly Mini E
TRADITIONAL PROMOTIONAL TOOLS:
A MARKETING MAINSTAY
• Advertising
• Sales Promotion
• Public Relations
• Personal Selling
TRADITIONAL PROMOTIONAL TOOLS:
ADVERTISING
• Television
• Broadcast
• Cable
• Newspapers
• Direct Mail
• Radio
Which media
effectively
reaches your
target
market?
•
•
•
•
Yellow Pages
Magazines
Outdoor
Internet
TRADITIONAL PROMOTIONAL TOOLS:
CONSUMER PROMOTION
• Premiums
• Promotional Products
• Samples
• Coupons
• Rebates
• Displays
designed to stimulate
immediate sales
TRADITIONAL PROMOTIONAL TOOLS:
TRADE PROMOTION
•
•
•
•
•
•
Special Deals
Allowances
Trade Shows
Contests
Sweepstakes
Special Events
Designed to simulate wholesalers and retailers
to push specific products.
IF YOU’RE NOT BLOGGING, YOU’RE
SLOGGING
Great ideas and scandals spread quickly.
Blogs offer great opportunity for savvy firms,
here are some tips:

Surf through the blogosphere everyday.

Consider launching a company blog.

Consider advertising on blogs

Consider using the blogosphere to generate
word-of-mouth.

Draw up commensurate blogging guidelines
for your employees.
TRADITIONAL PROMOTIONAL TOOLS:
PUBLIC RELATIONS
•
•
•
•
The media looks for newsworthy stories
Smart firms push potential news of their company
The advantage of PR is that it is usually credible
The disadvantage is that marketers don’t control
media perceptions
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TRADITIONAL PROMOTIONAL TOOLS:
PERSONAL SELLING
Prospect and
Qualify
• Today selling means
building relationships
• Personal selling is best
for:
• High-ticket items
• Complex products
• High volume customers
Prepare
Present
Handle
Objections
Close Sale
Follow-up
CHAPTER 11: MARKETING
Building Profitable Connections with Your Customers
MARKETING IS MORE THAN ADVERTISING
Marketing – the activity, set of institutions, and
processes for creating, communicating, delivering,
and exchanging offerings that have value for
customers, clients, partners, and society at large.

PRODUCTS PROVIDE UTILITY IN A NUMBER OF WAYS
Think UPS or FedEx
Think Smoothie King
Satisfies wants
by converting
Form
products into a
Utility
finished form
Time
Utility
The ability of goods
Satisfies wants
by providing
goods and
services at a
convenient
place
and services to
satisfy wants.
Place
Utility
Think ATM’s
Ownership
Utility
Think hassle free
purchasing
Satisfies wants
by providing
goods and
services at a
convenient time
Satisfies wants
by smoothly
transferring
ownership of
goods and
services from
seller to buyer
THE SCOPE OF MARKETING: IT’S EVERYWHERE

People Marketing

Place Marketing

Event Marketing

Idea Marketing
THE EVOLUTION OF MARKETING: FROM
THE PRODUCT TO THE CUSTOMER
What is Customer Relationship Management?
 The on-going process of acquiring,
maintaining, and growing profitable customer
relationships by delivering unmatched value.
 Requires collecting, managing, and applying
the right data at the right time for the right
person (and every repeat customer is the “right
person”!)
THE CUSTOMER:
FRONT AND CENTER
Customer Relationship
Management (CRM)
Limited
Relationships
Full
Partnerships
Perception is key

Value
Relationship between the
cost and the benefit of
your product

Customer Satisfaction
Delivering perceived value
above and beyond customer
expectations.

Customer Loyalty
The payoff from
delivering value and
generating satisfaction.
They come back!
Customer Relationship Management

Customer acquisition/retention tool
 Sales
and marketing support
 Data collected at all contact points
 Stored in data warehouse
 Data
analysis and data mining
 Ultimate
objective is lock-in
 Vested
interest not to change
Joe’s home page
Customer Relationship Management

Did you know ????

It cost 6x more to sell to a new customer than to an existing one…

A typical dissatisfied customer will tell 8 to 10 people about his/her
experience…

Annual Customer Retention of 90% means that a business will lose half
of their customers every 5 years…

A company can boost it’s profits 85% by increasing it’s customer
retention by just 5%…

70% of complaining customers will do business with a company again if
it quickly takes care of the service “snafu”...
THE MARKETING MIX
Product
Strategy
Price
Strategy
Promotion
Strategy
Place
Strategy
Product
Price
Promotion
Place
And now – a fifth P
Service
MARKETING STRATEGY
Marketing Mix assists in answering ….
• Where are you going and how will you get there?
• Who is your target audience and how will you reach them?
Competitive
Economic
Social /
Cultural
Political /
Legal
Technological
MARKET SEGMENTATION
Selecting a target market
begins with dividing your
market into segments.
Marketers may select
multiple segments to target.
CONSUMER MARKETS VS BUSINESS MARKETS

Consumer
Markets
Products for personal
consumption.
A Well Chosen Target
Market:

Size

Profitability

Accessibility

Limited Competition
How will the
buyer use the
product?
Business
Markets
Products used
directly or indirectly
to produce other
products.
Different approaches to select target markets.
THE GLOBAL MARKETING MIX


Do you need to change your
marketing mix for every
country?
Most consumer products
require a new marketing mix
for each global market.
MARKET SEGMENTATION
CONSUMER
BUSINESS
Market segmentation based on
Market segmentation based on
the
the characteristics
concentration of
of customers.
customers.
how customers use the product.
For
For example,
example, schools
the “auto
or
For example, sensors.
corridor”
hospitals
Senior citizen living facilities

Demographic
• Geographic
Pickups in southern US

Geographic
Porshe, Sports Illustrated


Psychographic
Behavioral
Miller Lite
• Customer-based
• Product-use based
CUSTOMER BEHAVIOR: DECISIONS,
DECISIONS, DECISIONS
CONSUMER DECISION MAKING PROCESS
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Postpurchase Behavior
INFLUENCE IN DECISION MAKING
Cultural:
• Values, attitudes, customs,
social class
Social:
• Family, friends & reference
groups
Personal:
• Demographics, personality
attitudes,
Psychological: • Motivation,
perceptions, learning
BUSINESS BUYER BEHAVIOR

Rationale Criteria

Specific Purchase Criteria

Objective Standards

Input from Multiple Internal Sources

Formal Process

Frequently Seek Customized Goods
REQUEST FOR PROPOSAL (RFP)

An invitation for suppliers, through a bidding process, to
submit a proposal on a specific commodity or service.





One of the best methods for leveraging a company's negotiating ability and
purchasing power with suppliers.
Brings structure to the procurement decision and allows the risks and benefits
to be identified clearly upfront.
Is lengthier than others, so it is used only where its many advantages
outweigh any disadvantages and delays caused.
Dictates the structure and format of the supplier's response.
The creativity and innovation that suppliers build into their
proposals are used to judge supplier proposals
MARKETING RESEARCH: SO WHAT DO THEY
REALLY THINK?
Marketing Research – the process of gathering,
 Monitor and predict customer
interpreting and applying
information to uncover
behavior
opportunities and challenges for your business.

Evaluate and improve marketing
mix

Better marketing decisions

More value for consumers

More profits for business
CONDUCTING MARKET RESEARCH
1.
2.
3.
4.
5.
6.
7.
8.
Define the problem
Access available information
Gather additional information
Review internal records; interview employees
Collect outside data
Organize and interpret data
Make a decision and take action
Assess the results of the action
DEFINE THE PROBLEM

List the possible causes
 Eliminate

any that can not be measured
Beware of symptoms

Your company has missed its revenue targets
 Symptom – sales declined
 Possible causes:





Have your customers changed?
Have their tastes changed?
Have their buying habits changed?
Have you changed your product?
Are there new competitors?
GATHERING INFORMATION


Assess what you already have available
If you need more…
 Stay
as close to home as possible
 Sales
records
 Complaints
 Receipts
 Credit records
 Ask
your employees
MARKETING RESEARCH DATA
Secondary
Data: Existing
Primary Data:
New Data
• Lower Cost
• More Expensive
• May not be Specific
• Customized
•
• Frequently Outdated
• Fresh, New
• Available to Competitors
• Proprietary
 Already published material
 Trade associations
 Google????
 Direct mail
 Questionnaires
 Telephone or street surveys
 Focus Groups
 Test marketing
ORGANIZING AND INTERPRETING DATA

Prioritize the data with the most important on top
 What
strategies are suggested?
 How can they be accomplished?
 How are they different from what I’m doing?
 What current activities should be increased?
 What current activities should be decreased or
dropped?
MAKING DECISIONS AND TAKING ACTION

Prioritize each possible strategy from the standpoint
of:
 Immediate
goal to be achieved
 Cost to implement
 Time to accomplish
 Measurements

Select those with the greatest impact
 Develop
tactics to implement
ASSESS THE RESULTS



Analyze your progress measures
Adjust if necessary
At the conclusion..
 Did
you achieve your goal ?
 Should the decision be renewed or expanded ?
A MAJOR MARKETING SHIFT: SOCIAL
RESPONSIBILITY

Marketers have responded to social demands:
Setting higher standards for environmentalism
 Abolishment of sweatshops
 Involvement in the community


Many companies have begun to employ green
marketing
GO GREEN
 Target consumers who buy based on their convictions

A MAJOR MARKETING SHIFT: TECHNOLOGY

Technology has revolutionized marketing
 Power
has shifted from producers to consumers
 Customers
have 24/7 access to information
 Marketers
have an abundance of promotional
opportunities
 Data
can be used to develop one-to-one relationships
with customers

Companies can mass customize products for customers
Marketing To Your Foundation
Simulation Customers
Product Questions:
 What do the customers want?
 What are the characteristics of the product that are
important to customers?
 What is the most important product characteristic
• In the low tech segment?
• In the high tech segment?
 What is “perceived age” of a product?
 How is reliability measured?
Pricing Questions:
 What do the customers want?
 What is the price range for low / high tech products?
 How price sensitive are the customers?
 What are the competitors charging?
 Can I lower my price and still earn a ‘fair return’ on my
investment?
Promotional mix
 You will invest money in a “promotion” budget and
create “awareness”.


It relates to your advertising efforts.
The awareness you create is specific to a single product.
 You will invest money in a “sales” budget and create
“access” to your products.


Accessibility applies to the segment, not the product
Sales Budget is spent on distribution, order entry, customer
service, etc.
Sales Forecast

Assess how the total market will perform


Assess your performance and market share


What is the overall economic climate ?
Will customers make decisions on the same basis they
have in the past ?
How will your competitors perform
Will there be new competitors ?
 Will they introduce new products ?
 Will some competitors leave the market ?
