Transcript Chapter 3 Effects of IT on Strategy and Competition

Part 4
PRODUCT AND PRICE
DECISIONS
Dr. Chen, Principle of Marketing
10: Product, Branding, and
Packing Concepts
11: Business Markets and Buying
Behavior
12: Developing and Managing
Prices
13: Marketing Channels and
Supply-Chain Management
14: Retailing, Direct Marketing,
and Wholesaling
Dr. Chen, Principle of Marketing
Chapter 11
Developing and Managing
Goods and Services
Professor Jason C. H. Chen, Ph.D.
School of Business Administration
Gonzaga University
Spokane, WA 99258
[email protected]
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Marketing Applications
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 1. A company often test-markets the proposed product in a
specific area or location. Suppose you wish to test-market
your new revolutionary SuperWax car wax, which requires
only one application for a lifetime finish. Where and how
would you test-market your new product?

 The aim of test marketing is to determine the extent to which
potential customers will buy the product. It is not an extension
of the development stage but a sample launching of the entire
marketing mix.
 Students will have a variety of suggestions for test markets,
including geographic areas with more extreme weather
conditions to reduce the risk of failure in larger markets. They
should keep in mind that they should be testing other elements
of the marketing mix, not just the product.
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 4. The characteristics of services affect the
development of marketing mixes for services.
Choose a specific service and explain how each
marketing mix element could be affected by these
service characteristics.

 Services have six basic characteristics intangibility, inseparability of production and
consumption, perishability, heterogeneity, clientbased relationships, and customer contact.
 Students’ answers will vary based on the services
they choose.
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Internet Exercise
 Merck
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 Merck (Summary)

 Merck, a leading global pharmaceutical company, develops,
manufactures, and markets a broad range of health-care
products. In addition, the firm’s Merck-Medco Managed
Care Division manages pharmacy benefits for more than 40
million Americans. The company has established a website
to serve as an educational and informational resource for
Internet users around the world. To learn more about the
company and its research, visit its award-winning site at
www.merck.com.
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Discussion Point
 Merck & Company
 Merck develops, manufactures and markets
a broad range of health-care products
 The firm’s Merck-Medco Managed Care
Division manages pharmacy benefits for
more than 40 million Americans
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of Marketing
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2014Principle
South-Western,
Cengage Learning. ALL RIGHTS RESERVED.
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 1. What products has Merck developed and
introduced recently?

 Answers will vary depending on Merck’s
current products. Look on the Research tab
under Pipeline to see what products are
currently in development, and check the
Newsroom for new product releases.
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 2. What role does research play in Merck’s success? How does
research facilitate new-product development at Merck?

 Companies such as Merck must invest heavily in research and
development in order to ensure that they always have new products
in the pipeline. Merck provides the following summary of the
importance of the research process:

 “The process of identifying and developing medicines is long and
challenging. It begins by exploring the roots of a disease or
condition. Which aspect of a disease should we target, and with
what type of molecule? If a candidate molecule proves promising,
it then continues through years of rigorous testing and must obtain
regulatory approval before it reaches the market. A very small
fraction of the candidates that begin evaluation will ultimately
survive
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 3. Find Merck’s mission statement. Is Merck’s
focus on research consistent with the firm’s
mission and values?

 According to the website, “We have made it our
mission to provide innovative, distinctive products
and services that save and improve lives, satisfy
customer needs and to be recognized as a great
place to work.” Research helps the company to
meet all of these goals.
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Video Case 11.1
 DO AXE PRODUCTS MAKE MEN
MORE DESIRABLE?
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Discussion Point




Do AXE Products Make Men More Desirable?
To effectively manage the brand, Unilever has
regularly developed new products
AXE’s product features are both tangible and
psychological
Love them or hate them, AXE commercials
leave an indelible impression
Take a look at the website
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Chen,
of Marketing
Copyright
2014Principle
South-Western,
Cengage Learning. ALL RIGHTS RESERVED.
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 SUMMARY

 AXE is the number one male grooming brand in both the
United States and Canada. The company’s advertisements
feature women who are very attracted to men who wear
AXE body spray. AXE believes the provocative ads are
important because they get the attention of men 18-24 years
old, the company’s target demographic. AXE has extended
their product line to include other grooming products such
as shower gel to continue to meet the needs of young men.
However, the ads and the products also appeal to pre-teens
who want to feel more confident, which could damage
AXE’s “sexy” perception.
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 1. How has AXE managed its product mix?

 AXE’s product mix must satisfy its target market—
men between the ages of 18 and 24.
 When they first entered the American market, the
company needed to get young men to purchase
body spray. Once AXE body spray was successful,
the company engaged in line extensions and
product modifications in order to keep existing
customers and attract new ones. AXE’s products
help young men develop an “AXE Lifestyle.”
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 2. How has AXE used line extensions to increase
its reach among consumers?

 AXE uses line extensions in several ways. It release
new scents every year, and it has introduced
hairstyling, aftershave, skin care, and shower gel
products.
 AXE has also developed products for women that
compliment its men’s products.
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 3. Why are younger generations attracted to AXE
products?

 During preadolescence many young men become
more conscientious of their appearance and how
attractive they are to the opposite sex.
 AXE provides a way for them to feel more
confident about their body image.
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PORTER’S FIVE COMPETITIVE
FORCES MODEL
NEW
MARKET
ENTRANTS
•Switching cost
•Access to
distribution channels
•Economies of scale
THE FIRM
INDUSTRY
COMPETITORS
•Cost-effectiveness
•Market access
•Differentiation of
product or service
•Selection of suppler
•Threat of backward
integration
SUPPLIERS
SUBSTITUTE
PRODUCTS
& SERVICES
Threats
Bargaining power
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Marketing
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Trends of the Information Systems Technology
•Redefine products
and services
•Improve
price/performance
•Buyer selection
•Switching costs
•Differentiation
CUSTOMERS
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TM -20
N
Generic Strategies Framework
 Michael Porter describes how businesses can build a
sustainable competitive advantage
 “fundamental basis of above-average performance in
the long run is sustainable competitive advantage.”
 He identified three primary strategies for achieving
competitive advantage:
______
Cost leadership - lowest-cost producer
Differentiation- product/service is with unique feature
_____________
Focus - limited scope; occupy narrow market niche
_______
where the products/services can stand out by virtue of
their cost leadership or differentiation.
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Dr. Chen, Principle of Marketing
Figure 1.2: Porter’s Generic Strategy Framework –
3 Strategies for achieving Competitive Advantage
Competitive Advantage
Lower Cost
Position
Industrywide
(Broad
Target)
Particular
Segment only
(Narrow
Target)
Overall Cost
Leadership
Uniqueness
Perceived by
Customer
Differentiation
Focus
N
Competitive Mechanism
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The Trends
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Information Systems Technology
TM -22
22
Business Strategies
and its Competitive Advantage
Lower Cost
Position
Industry
wide
(Broad
Target)
Particular
Segment
only
(Narrow
Target)
Uniqueness
Perceived by
Customer
Cost
Leadership
Differentiation
Cost Focus
Differentiation
Focus
Industrial economy
Knowledge-based
economy
Competitive Mechanism
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Dr. Chen,
The Trends
Principle
of the
of Marketing
Information Systems Technology
N
TM -23
23
Dynamic Environment Strategies
 Porter’s model is useful for diagnostics, or
understanding how a business seeks to profit in
its chosen marketplace, and for prescriptions, or
building new opportunities for advantage
 Porter model was developed at a time where the
rate of change in any given industry was
slow and _________.
manageable (i.e., stable)
relatively _____
 Newer models were developed to take into
account the increasing turbulence and velocity
of the marketplace
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