P 6-1. P 6-2 Chapter 6 ProductStrategy P 6-3 A. Classes of Consumer Goods-Some Characteristics and Marketing Considerations Type of Product Characteristics

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MarketingManagement

6th Edition

Knowledge and Skills

J. Paul Peter•

James H. Donnelly, Jr.

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Chapter 6

Product Product

StrategyStrategy

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A. Classes of Consumer Goods-Some Characteristics and Marketing Considerations

Type of ProductCharacteristicsand MarketingConsiderations Convenience Shopping Specialty

CharacteristicsTime and effort Very little Considerable Cannot generalize: consumer devoted by consumer may go to nearby store and buyto shopping with minimum effort or may

have to go to distant store and spend much time and effort

Time spent planning Very little Considerable Considerablethe purchase

SOURCE: Michael J. Etzel, Bruce J. Walker, and William J. Stanton, Fundamentals of Marketing, 11th ed. © 1997, New York, McGraw-Hill, Inc., pp. 195, 198. Reproduced by permission of the McGraw-Hill Companies.

(continued)

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How soon was it Immediately Relatively long Relatively long timesatisfied after it arises? time

Are price and quality No Yes Nocompared

Price Usually low High High

Frequency of purchase Usually frequent Infrequent Infrequent

Importance Unimportant Often very important Cannot generalize


(continued)

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Marketing considerationsLength of channel Long Short Short to very short

Importance of retailer Any single store Important Very importantis relativelyunimportant

Number of outlets As many as Few Few; Often one in possible a market

Stock turnover High Lower Lower


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Gross margin Low High High

Responsibility for Producer Retailer Joint responsibilityadvertising

Importance of point- Very important Less important Less importantof-purchase display

Brand or store name Brand name Store name Bothimportant

Importance of Very important Less important Less importantpackaging


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B. Classes of Organizational Products-Some Characteristics and Marketing

Type of ProductCharacteristics Fabricatingand Marketing Parts and Accessory OperatingConsideration Raw Materials Materials Installations Equipment Supplies

Example Iron ore Engine blocks Blast furnaces Storage racks Paper clipsCharacteristicsUnit price Very low Low Very high Medium LowLength of life Very short Depends on Very long Long Short

final productQuantities Large Large Very small Small SmallpurchasedFrequency of Frequent Infrequent Very Medium Frequentpurchase delivery; long- purchase, infrequent frequency

term purchase but frequentcontract delivery (continued)

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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Standardization Very much; Very much Very little; Little Muchof competitive grading is custom-products important made

Quantity of Limited supply Usually no No problem Usually no Usually no supply can be in- problem problem problem creased slowly or not at all

(continued)


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Marketing considerationsNature of Short; no Short; middle- Short; no Middlemen Middlemenchannel middlemen men for small middlemen used used

buyersNegotiation Hard to Medium Long Medium Shortperiod generalizePrice competi- Important Important Not Important Not man Importanttion factorPresale/post- Not important Important Very important Important Very littlesale service

(continued)


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Promotional Very little Moderate Sales people Important Not tooactivity very important

importantBrand None Generally low High High LowpreferenceAdvance buying Important Important Not usually Not usually Not usuallycontract long-term long-term used used used

contracts contractsused used


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Elements of Brand Equity

Brand equity

Namesymbol

Nameawareness

PerceivedQuality

Brandassociations Other

proprietarybrand assets

Brandloyalty

Provides value to customerby enhancing customer’s:

Interpretation/processingof information

Confidence in thepurchase decision

Use satisfaction

Provides value to firm byenhancing:

Efficiency andeffectiveness of

marketing programs

Brand loyalty

Prices/margins

Brand extensions

Trade leverage

Competitive advantage

SOURCE: David A. Aaker, Managing Brand Equity. © 1991, New York, by David A. Aaker. Reprinted with the permission of The Free Press, a division of Simon & Schuster.

Figure 6-1

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The Product Life Cycle

Figure 6-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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SOURCE: Gilbert A. Churchill, Jr., and J. Paul Peter, Marketing: Creating Value for Customers, rev. ed. (Burr Ridge, IL: Richard D. Irwin, 1998), p. 238.

Marketing Strategy Implications of the Product Life Cycle

Life-Cycle Stage

StrategyDimension Introduction Growth Maturity Decline

Basic Objectives Establish a market Build sales and Defend brand’s Limit costs orfor product type; market share; share of market; seek ways topersuade early develop seek growth by revive sales andadopters to buy preference for luring customers profits

brand from competitors

Product Provide high Provide high Improve quality; Continue provi-quality; select a quality; add add features to ding high quality good brand; services to distinguish to maintain get patent enhance value brand from brand’s reputa-or trademark competitors tion; seek ways to protection make the product

new again. (continued)

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Life-Cycle Stage


Pricing Often high to re- Somewhat high Low; reflecting Low to sell off cover develop- because of heavy remaining ment costs; heavy demand competition inventorysometimes or high to servelow to build a niche marketdemand rapidly

Channels Limited number Greater number Greater number Limited numberof channels of channels to of channels and of channels

meet demand more incentivesto resellers

(continued)SOURCE: Gilbert A. Churchill, Jr., and J. Paul Peter, Marketing: Creating Value for Customers, rev. ed. (Burr Ridge, IL: Richard D. Irwin, 1998), p. 238.

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Life-Cycle Stage


Communication Aimed at early Aimed at wider Messages focus Minimal, to keepadapters; mes- audience; on differentiating costs downsages designed to messages focus brand from itseducate about on brand benefits; competitorsproduct type’ for consumer heavy use ofincentives such as products, em- incentives suchsamples and phasis on as coupons tocoupons to advertising induce buyersinduce trial to switch brands

SOURCE: Gilbert A. Churchill, Jr., and J. Paul Peter, Marketing: Creating Value for Customers, rev. ed. (Burr Ridge, IL: Richard D. Irwin, 1998), p. 238.

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Some Requirements for the Effective Use of Cross-Functional Teams in Product Management and New Product Development

A growing number of organizations have begun utilizing cross-functional teams for product management and new product development. Having representatives from various departments clearly has its advantages; but most important, effective teams must have the nurture and support of management. Some requirements for effective teams are

1. Commitment of top management and provision of clear goals. Organizations that successfully use cross-functional teams in product management or development have managers who are deeply committed to the team concept. As a result, high performance teams have a clear understanding of the product management and development goals of the organization. The importance of these goals encourages individuals to defer their own functional or departmental concerns to team goals.

2. Trust among members. For cross-functional teams to work, a high level of trust must exist among members. The climate of trust within a team seems to be highly dependent on members’ perception of management's trust of the group as a whole. (continued)


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Some Requirements for the Effective Use of Cross-Functional Teams in Product Management and New Product Development

3. Cross-functional cooperation. If a team is to take responsibility and assume the risk of product development, its members will need detailed information about the overall operation of the organization. It often requires that the functional

units be willing to share information that previously was not shared with other departments.

4. Time and training. Effective cross-functional teams need time to mature. They require massive planning and intense and prompt access to resources, financial and other. Because members have to put aside functional and departmental loyalties and concerns training is usually necessary.


Documents

P 6-1. P 6-2 Chapter 6 ProductStrategy P 6-3 A. Classes of Consumer Goods-Some Characteristics and Marketing Considerations Type of Product Characteristics