part three: the marketing mix
CHAPTER 6
PRODUCT
an opening challenge
You are a manager in a large confectionery
company which has just taken over another
business. You now have too many chocolate
products which are proving to be complex
to manage. You have been asked to
recommend which should be kept and
which dropped. How will you decide?
agenda
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total product offering
product types
branding
new product development
product life cycle
product portfolio management
total product offering
perceived
augmented
image
features
service
basic
core
support
quality
value
disappointing products
Typical reasons why products may fail to
meet customer expectations:
• non-performance
• not me
• social disapproval
• poor value
• non-delivery
consumer product types
product types
• durable goods
• non-durable goods
• services
• convenience goods:
– impulse buys
– staples
– emergency
• shopping goods
• speciality goods
examples
• fridges, bicycles
• fresh food, toiletries
• theatre seats, haircuts
– snacks, flowers
– bread, washing-up liquid
– headache pills, tissues
• stereos, cars
• antiques, sports cars
b2b product types
product types
• capital goods
• accessories
• raw materials
• subassemblies/
components
• supplies
• services
examples
• fork-lift trucks, computers
• screwdrivers, hard hats
• flour, steel
• engines, wheels
• stationery, paper cups
• cleaning, accountancy
what is a brand?
‘Brands are much more than just logos or names.
They are the culmination of a user’s total
experience with the product … over many years. That
experience is made of a multitude of good, neutral
and bad encounters such as the way a product
performs, an advertising message, a press report, a
telephone call, or a rapport with a sales assistant.’
(CIM, n.d.)
brands
• badges of consistent quality
• add value
– perceived product
– differentiation
– premium pricing
• protect investment
• improve targeting
– distinct product offerings for different
segments
advantages of a strong brand
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high brand equity
increased product awareness levels
the ability to charge a premium price
reduced susceptibility to price wars
competitive edge
a sound basis for strong customer relationships
higher likelihood of repeat purchases
retail leverage
new products have a better chance of success
new products are important
• increase or defend market share by offering more choice
within the range or by updating older products
• appeal to different market segments
• maintain reputation as a leading-edge company
• diversify into new markets and thereby spread risk
• improve relationships within distribution channels
• make better use of resources such as production capacity
• even out peaks and troughs in demand
types of new product
• innovative
– e.g. medical breakthroughs
• replacement
– e.g. MP3 players replaced personal stereos
• variant
– e.g. Kit Kat Chunky
• me-too
– e.g. own-brand Cola
• re-launched
– same product with re-vamped marketing strategy
new product development
AQ – re-set figure type
product life cycle
AQ – re-set figure type
Boston Consulting Group
portfolio matrix
AQ – re-set figure type
(Boston Consulting Group, 1970)
working out the market growth
rate
first, define your market
second, find this year’s and last year’s sales figures
worked example:
current market sales £2,200,000
minus last year’s sales £2,000,000
sales increase
= £200,000
as a % of last year’s sales
£200,000 x 100
£2,000,000
market growth rate
= 10%
GE McKinsey 9-box matrix
AQ – re-set figure type
industry attractiveness
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market size
market growth rate
ease of market entry
competition
profitability
social and environmental impact
technological requirements
legal implications
energy and other resource requirements
competitive strength
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market share
market share growth rate
skills and competences of the management team
product quality
brand strength
distribution channels
promotional effectiveness
production capacity
production efficiency
unit costs
research and development success
summary
• more than the basic product
• competitive edge usually comes from augmented
or perceived product
• brands are valuable
– and must be carefully managed
• companies need innovation to stay alive
– but npd is risky
• product portfolios should be balanced
– plc, BCG matrix
references
• Boston Consulting Group (1970) The BCG Portfolio
Matrix from the Product Portfolio Matrix. Boston:
Boston Consulting Group.
• CIM (n.d.) Defining Brands, Chartered Institute of
Marketing, Maidenhead. Available at:
http://www.cim.co.uk/mediastore/Brand_eGuides/e
Guide1.pdf (accessed 01/03/07).