Chapter Six
The Marketing Mix
Key Words / Outline
Tangible product, Extended product, Generic product,
Marketing myopia, Buyer derives, Vertical market,
Horizontal market, Quality Value, Product mix, ,line
extension, Brand extension, Franchise extension, Dual
branding, Multi branding, Fashions, Fads, Innovators,
Laggards, Market dimensions
McGraw-Hill/Irwin
Marketing Management, 8e
© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
Three Views Of Product
• Tangible – physical entity or service
• Extended – tangible product plus a whole cluster of services
that accompany it
• Generic – the essential benefits the buyer expects to receive
from the product
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Product Definition
• A product is the sum of the physical, psychological,
physiological, and sociological satisfactions the buyer
derives from purchase, ownership and consumption
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Product Classification
• Two basic criteria of product classification
- End use or market
- Degree of processing or physical transformation
• Three categories of products
- Agricultural products and raw materials
- Organizational goods
- Consumer goods
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Agricultural Products and Raw Materials
•
•
•
•
Grown or extracted from the land or the sea
Fairly homogeneous
Sold in large volume
Low value per unit
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Organizational Goods
• Purchased by firms for the purpose of producing other
goods
• Raw materials and semi-finished goods
• Major and minor equipment
• Parts or components needed to complete other finished
goods
• Supplies or items used to operate the business but not an
element of a finished good
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Consumer Goods
• Convenience goods – such as food which require minimal
effort
• Shopping goods – such as appliances, which are purchased
after some time and energy is spent comparing
• Specialty goods – which are unique in some way to the
consumer and are characterized by special effort
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Organizational Market Characteristics
• A primary purchasing motive for organizational goods is
profit
• Organizational markets are concentrated geographically as
in the case of steel or auto
• Can be categorized into
- Vertical market: Limited number of buyers
- Horizontal market: Limited number of industries
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Quality and Value
• Buyers expect . . .
- Quality
• The degree of excellence or superiority that an organization’s
product possesses
- Value
• What the customer gets in exchange for what the customer
gives
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Product Mix
• The full set of products offered for sale by an organization
• May consist of several product lines, or groups of products
sharing common characteristics, distribution channels,
customers, or uses
• Product mix exhibits
- Width – number of product lines in the organization
- Depth – average number of products in each line
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Branding
• A brand identifies one seller’s good or service as distinct
from competitors
• Brand can be
-
A name
A term
A design
A symbol
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Branding
• Line extension: Uses brand name to facilitate entry into a
new market segment
• Brand extension: Uses an existing brand to enter a different
product class
• Family branding: Attaches the corporate name to a product
to either enter a new market or a new product class
• Dual branding: Concept where two or more branded
products are integrated
• Multibranding: Assigning different brand names to each
product
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Advantages of a Multi-branding strategy
• The firm can distance products from other offerings it
markets
• The image of one product is not associated with other
products the company markets
• The products can be specifically targeted
• If the product fails, the effect on other products is
minimized
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Brand Equity
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Packaging
• Differentiates relatively homogeneous products
• Contributes to “Brand Equity” by creating new attributes
or value
• Creates urgent salability within a target market
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Product Lifecycle
• Introduction
- High costs, low or no profit
• Growth
- Reduced costs, profits increase, maximum value
• Maturity
- Marginal cost, marginal profit, high competition
• Decline
- Low costs, high profits, competition lessens
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Product Lifecycle - Limitations
•
As useful as the product life cycle can be to managers, it
does have limitations that require it to be used cautiously
-
Accuracy pertaining to the longevity of the product can’t be
predicted
Variations in life cycle exists
•
•
Fashion: These are accepted and popular product styles
Fads: Products which experience high but brief popularity
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Product Lifecycle and Strategy
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Product Adoption And Diffusion
•
Adopter categories
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•
Innovators
Early adopters
Early majority
Late majority
Laggards
Diffusion: The spread of the product through the
population is known as the diffusion of innovation
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Product Audit
•
The product audit is a marketing management technique
whereby the company’s current product offerings are
reviewed to ascertain whether each product should be
continued as is, improved, modified, or deleted
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Deletions
•
Deletion decisions are difficult because of the potential
impact on customers and the firm
Considerations in the deletion decision include
•
-
Sales trends: Have sales moved over time? What has happened
to market share?
Profit contribution: What has been the profit contribution of the
product to the company?
Product life cycle: Has the product reached a level of maturity?
Customer migration patterns: If the product is deleted, will
customers switch to another product marketed by our firm?
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Product Improvement
•
•
•
Another important objective of the audit is to ascertain
whether to alter the product in some way or leave things
the way they are
Attributes: Refer to main features of the product such as
design, package and so forth
Marketing dimensions: Refer to features like pricing,
promotion strategy and distribution channels
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Product Improvement
•
Benchmarking: Continuous process of measuring
products, services, and practices against those of the
toughest competitors
Advantages of benchmarking include
•
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Boosting product quality
Developing more user-friendly products
Improving customer order processing activities
Shortening delivery lead times
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Product Rejuvenation
•
•
•
•
•
Less risk
Lower costs
Less time
Cheaper market share
Higher profits
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Product Management
•
•
Market management system: One person is responsible
for overseeing an entire product line with all of the
functional areas of marketing such as research,
advertising, sales promotion, sales, and product planning
Brand management system: A manager focuses on a
single product or a very small group of new and existing
products
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Cross Functional Teams
•
Use of cross functional teams has become an important
way to manage the development of new products
Requirements of managing a cross functional team
include
•
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Commitment of top management and provision of clear goals
Trust among members
Cross functional cooperation
Time and training
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