Lecture 5 Principles of Marketing Theocharis Katranis Spring Semester 2013 Principles of Marketing 1 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Today’s Lecture 1. Define Product and Product Classification 2. Define and Discuss Consumer and industrial Products 3. Discuss branding, Packaging, Labeling, and product Support Services. 4. Discuss the Product mix Decisions. 5. Discuss the New Product Development Strategy and Process as well as the Product Life-cycle Strategies. Principles of Marketing 2 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 What is a Product? A Product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. Principles of Marketing 3 Theocharis Katranis, MBA, Spring Semester 2013 Lecture 5 What is a Service? A 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. Principles of Marketing 4 Theocharis Katranis, MBA, Spring Semester 2013 Lecture 5 The Three Levels of Product and Services 1. Core Customer Value Level 2. An Actual Product Level 3. Augmented Product Level Principles of Marketing 5 Theocharis Katranis, MBA, Spring Semester 2013 Lecture 5 The Three Levels of Product and Services 1. Core Customer Value Level The Product Planners need to answer the Question “What is the buyer really buying?” Product Planners must first define the core, problem-solving benefits or services that consumers seek. Principles of Marketing 6 Theocharis Katranis, MBA, Spring Semester 2013 Lecture 5 The Three Levels of Product and Services 2. An Actual Product Level Product Planners must turn the core benefit into an actual product. Product Planners need to develop product an services features, design, a quality level, a brand name and packaging. Principles of Marketing 7 Theocharis Katranis, MBA, Spring Semester 2013 Lecture 5 The Three Levels of Product and Services 3. Augmented Product Level Product Planners must build an augmented product around the core benefit and actual product by offering additional consumer services and benefits. Principles of Marketing 8 Theocharis Katranis, MBA, Spring Semester 2013 Lecture 5 The Three Levels of Product and Services Augmented Product Delivery and Credit Actual Product Brand Name Product Support Principles of Marketing 9 Quality Lever Core Customer Value After-sale Service Features Design Packaging Warranty Theocharis Katranis, MBA, Spring Semester 2013 Lecture 5 Product and Services Classifications 1. Consumer Products 2. Industrial Products Principles of Marketing 10 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Consumer Product Definition: It is a Product bought by final consumer for personal consumption. Principles of Marketing 11 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Consumer Products Classifications 1. Convenience Products 2. Shopping Products 3. Specialty Products 4. Unsought Products Principles of Marketing 12 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Consumer Products Classifications 1. Convenience Products It is a consumer product that customers usually buy frequently, immediately and with a minimum of comparison and buying effort. Principles of Marketing 13 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Consumer Products Classifications 2. Shopping Products It is a consumer product that the customer, in the process of selection and purchase, usually compares on such bases as suitability, quality, price, and style. Principles of Marketing 14 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Consumer Products Classifications 3. Specialty Products It is a consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Principles of Marketing 15 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Consumer Products Classifications 4. Unsought Products It is a consumer product that the consumer either does not know about or knows about but does not normally think of buying. Principles of Marketing 16 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Consumer Products Classifications Marketing Considerations Customer Buying Behavior Price Distribution Promotion Examples Principles of Marketing 17 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Industrial Products Definition: It is a Product bought by individuals and organizations for further processing or for use in conducting a business. Principles of Marketing 18 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The Three Groups of Industrial Products 1. Material and Parts 2. Capital Items 3. Supplies and Services Principles of Marketing 19 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The Three Groups of Industrial Products 1. Material and Parts Materials and Parts group include raw materials (farm products like wheat, cotton) and manufactured raw materials (like iron, cement, wires) and parts (like small motors, tires). Principles of Marketing 20 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The Three Groups of Industrial Products 2. Capital Items Capital Items are Industrial products that aid in the buyer’s production or operations including installations (like factories, offices, generators) and accessory equipment (like hand tools, lift trucks, computers, fax machines). Principles of Marketing 21 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The Three Groups of Industrial Products 3. Supplies and Services Supplies include operating supplies (like lubricants, pencils, paper) and repair and maintenance items (like paint, nails, brooms). Business Services include maintenance and repair services (like window cleaning, computer repair) and business advisory services (legal, Management consulting, advertising) Principles of Marketing 22 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Individual Product and Service Decisions Individual Product Decisions Product Attributes Principles of Marketing 23 Branding Packaging Theocharis Katranis, MBA Labeling Product Support Services Spring Semester 2013 Lecture 5 Product and Service Attributes 1. Product Quality 2. Product Features 3. Product Life and Design Principles of Marketing 24 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 1. Product Quality Definition It is the characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs. Principles of Marketing 25 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 2. Product Features Definition: The company decides to add more features to a product in order to differentiate company’s product from competitors products. Principles of Marketing 26 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 3. Product Life and Design Product Designers should think less about product attributes and technical specifications and more about how customers will use and benefit from the product. Principles of Marketing 27 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Branding Definition: A Brand is a name, term, sign, symbol or design or a combination of these, that identifies the maker or seller of a product or service. Principles of Marketing 28 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Packaging Definition: It is the activities of designing and producing the container or wrapper for a product. Principles of Marketing 29 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Labeling Definition: Labels range from simple tags attached to products to complex graphics that are part of the package. Principles of Marketing 30 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Support Services It is the decision of a company to fix any problem related to the company’s products i.e. to solve successfully a complaint by a customer. Nowadays, many companies include support services to their total offerings, because companies realized that … It is important for the customer and helps him to build trust, positive relationship and confidence with the company. Principles of Marketing 31 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Line Decisions Definition It is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. … I.e. BMW car series / HP printers and cartridges Principles of Marketing 32 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Line Decisions 1. Product Line Length It is the number of items in the Product Line. The line is too short if the managers can increase profits by adding items. The line is too long if the managers can increase profits by dropping items. Principles of Marketing 33 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Line Decisions Reasons for Adding Items to the product line 1. Reaching for Extra Profits 2. Satisfying Dealers 3. Using Excess Capacity 4. Plugging holes to keep out competitors Principles of Marketing 34 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Line Decisions Reasons for Dropping Items from the product line. 1. Large decrease in Sales of a product, meaning lower profits for the company. 2. Too many competitors in one Market Segment. 3. Increase of the Production Costs mainly to the increase in the prices of Raw Materials. Principles of Marketing 35 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Mix or Product Portfolio Decisions Definition A Product Mix consists of all the Product Lines and Items that a particular seller offers for sale. i.e. Sony Electronics, Sony Computer Entertainment, Sony Pictures Entertainment and Sony Financial Services. Principles of Marketing 36 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Mix or Product Portfolio Decisions The FOUR important Dimensions 1. Width 2. Length 3. Depth 4. Consistency Principles of Marketing 37 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Mix or Product Portfolio Decisions The FOUR important Dimensions 1. Width It refers to the number of different product lines the company carries. Principles of Marketing 38 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Mix or Product Portfolio Decisions The FOUR important Dimensions 2. Length It refers to the total number of items the company carries within its corder line. Principles of Marketing 39 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Mix or Product Portfolio Decisions The FOUR important Dimensions 3. Depth It refers to the number of versions offered to each product in the line. Principles of Marketing 40 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Mix or Product Portfolio Decisions The FOUR important Dimensions 4. Consistency It refers to how closely related the various product lines are in end use, production requirements, distribution channels. Principles of Marketing 41 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 International Product Decisions Companies must pay special attention when making Product decisions in foreign markets. Companies should collect and analyze all possible and available information and then to decide their actions. Principles of Marketing 42 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Designing Product: New Product Development and Product Life-Cycle Strategies New-product development is the development of original products, product improvements, product modifications, and new brands through the firm’s own product-development efforts. Principles of Marketing 43 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Reasons for Failure of New Products 1. Overestimation of market size 2. Poor Design 3. Incorrectly Positioned 4. Launched at the wrong time 5. Priced too high 6. Poorly Advertised Principles of Marketing 44 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 New Product Development Process The EIGHT steps of the process 1. Idea Generation 2. Idea Screening 3. Concept Development and Testing 5. Business Analysis 6. Product Development 7. Test Marketing Principles of Marketing 45 Theocharis Katranis, MBA 4. Marketing Strategy Development 8. Commercialisation Spring Semester 2013 Lecture 5 New Product Development – Idea Sources 1. Internal Data Sources Ideas within the company i.e. Executives, Scientist, Sales people, Manufacturing Staff. 2. External Data Sources Ideas from Distributors and Suppliers. Principles of Marketing 46 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The EIGHT steps Definitions 1. Idea Generation It is the systematic search for New-product ideas. Principles of Marketing 47 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The EIGHT steps Definitions 2. Idea Screening It is the screening of New-product ideas in order to spot good ideas and drop poor ones as soon as possible. Principles of Marketing 48 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The EIGHT steps Definitions 3. Concept Development and Testing Concept Development is a detailed version of the new-product idea stated in meaningful consumer terms. Concept Testing is the testing of new-products concepts with a group of targets consumers to find out if the concepts have strong consumer appeal. Principles of Marketing 49 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The EIGHT steps Definitions 4. Marketing Strategy Development It is the designing of an initial marketing strategy for a new product based on the product concept. Principles of Marketing 50 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The EIGHT steps Definitions 5. Business Analysis It is the review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives. Principles of Marketing 51 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The EIGHT steps Definitions 6. Product Development It is the development of a product concept into a physical product in order to ensure that the product idea can be turned into a workable market offering. Principles of Marketing 52 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The EIGHT steps Definitions 7. Test Marketing It is the stage of a new-product development in which the product and marketing program are tested in realistic market settings. Principles of Marketing 53 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 The EIGHT steps Definitions 8. Commercialisation It is the introduction of a new product into the market. Principles of Marketing 54 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Life-Cycles Strategies Definition of a Product Life-Cycle It is the course of a product’s sales and profits over its lifetime. Principles of Marketing 55 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Life-Cycles Strategies The FIVE stages of a Product Life-Cycle 1. Product Development. 2. Introduction 3. Growth 4. Maturity 5. Decline Principles of Marketing 56 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Life-Cycles Strategies 1. Product Development. It begins when the company finds and develops a new-product idea. During this period, sales are zero and the company’s investments costs mount. Principles of Marketing 57 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Life-Cycles Strategies 2. Introduction It is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction. Principles of Marketing 58 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Life-Cycles Strategies 3. Growth It is a period of rapid market acceptance and increasing profits. Principles of Marketing 59 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Life-Cycles Strategies 4. Maturity It is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition. Principles of Marketing 60 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Product Life-Cycles Strategies 5. Decline It is a period when sales fall off and profits drop. Principles of Marketing 61 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Principles of Marketing 62 Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Summary - Lecture 5 1. Defined Product and Product Classification 2. Defined and Discussed Consumer and industrial Products 3. Discussed branding, Packaging, Labelling, and product Support Services. 4. Discussed the Product mix Decisions. 5. Discussed the New Product Development Strategy and Process as well as the Product Life-cycle Strategies. Principles of Marketing Theocharis Katranis, MBA Spring Semester 2013 Lecture 5 Chapters 8 and 9 END of Lecture 5 Thank you for your attention Principles of Marketing 64 Theocharis Katranis, MBA Spring Semester 2013