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The Marketing Mix - Product (Product planning in detail (Step 4 - concept…
The Marketing Mix - Product
'Product' covers both service and psychical goods broadly
Some offerings include a combination of both
Use the interchangeable term 'offering' instead
Dibb et al (2016)
'P' in product is not just the physical manufacturing of the product - it also includes a wide range of product related considerations
Specifying a products development requirements to ensure they are informed by marketing research on customers' needs and emerging expectations
Packaging design
Branding
After care service and support
Three levels of product benefits
See Book 1 p 49
Core product
Core benefit of service
Actual product
Packaging
Features
Styling
Quality
Brand name
Augmented product
After sale service
Installation
Warranty
Delivery and credit
Four main types of product
Convenience
Frequently purchased, low investment and involvement (eg milk, tissues)
Shopping
Less frequently purchased, selected on price, quality and style (eg furniture, computers)
Speciality
Special purchase, expensive, strong brand preferences (eg luxury items)
Unsought
Little knowledge (eg new invention) or little interest (eg insurance)
Incremental product innovations
Involve a lot of expense and risk at the level of actual product rather than the core product level
Examples
New features in mobile phone upgrades
New styling in freezers and washing machines which were traditionally white but are not available in different colours
New quality in new flavours of Coca Cola
Product development
Product performance has to be monitored as market environments change
Only a minority of new products are new inventions, under half are product replacements (improved versions) and the rest being complimentary products or moves into new markets
Crawford et al (2014) 5 step basic new product process
Phase 1
: Opportunity identification and selection
Phase 2:
Concept generation
Phase 3:
Concept/project evaluation
Phase 4
: Development (includes both technical and marketing tasks)
Phase 5
: Launch
Crawford & Kotler & Armstrong (2016) & Dibb et al (2016) extended list of product development
New product planning
Reviewing current product performance and identifying threats and new product opportunities
Idea generation
Generating product ideas in line with organisational objectives
Idea screening
Assessing how well product ideas match organisational objectives and resources
Concept testing
Testing the new product concept on a small sample of potential buyers to assess their reactions to it.
Market/business analysis
Evaluating the new product’s potential sales, costs and profits for the organisation.
Product development
Determining if the new product can be produced both technically and cost-effectively
Test marketing
Introducing the new product in limited geographic areas or a representative marketing channel to determine the reactions of potential buyers (sample launching of the entire marketing mix).
Commercialisation
Refining and settling plans for full-scale production and marketing
Not all companies go through the systematic process of product development
Some smaller companies experience less control and the process is significantly more informal
Product planning in detail
Step 1 - new product planning
Analysis of...
Micro & macro environment
Competitive positions of the organisation and competitors
Differential advantage
Marketing information
Useful tools to use
SWOT
Ansoffs matrix
Step 2 - ideas generation
Ideas may come from the following
Depending on n the nature of the industry and size of an organisation
Research laboratories
Team dedicated to developing new product ideas and prototypes
Periodic reviews
Of products and portfolios
Open calls for product suggestions internally or externally
External invitations to submit ideas for innovations
Website invitations which invites users to share their creations and post to message boards
Serendipitous suggestions
From staff members, suppliers, distributors or customer feedback
Competitors or other organisations
Innovations that can be copied often are, sometimes even when
protected by patents or trademarks
Collaborations
Teaming up with others to create a limited edition product for example
Step 3 - idea screening
Selecting the most promising ideas for further development and screening out less promising ones, using a set of criteria
Can be time-consuming in the case of open competitions for external submission of ideas, which can attract a large number of entries
eg James Dyson Award
Day (2007) example of a set of criteria for screening
Real, win, worth it (R, W, W)
Is it real?
Is the market real?
Is there a need or desire for
the product?
Can the customer buy it?
Is the size of the potential market adequate?
Will the customer buy the product?
Is the product real?
Is there a clear concept?
Can the product be made?
Will the final product satisfy the market?
Can we win?
Can our company be competitive?
Do we have superior resources?
Do we have appropriate management?
Can we understand and respond to the market?
Can the product be competitive?
Does it have a competitive advantage?
Can the advantage be sustained?
How will competitors respond?
Is it worth doing?
Will the product be profitable at
an acceptable risk?
Are forecasted returns greater than costs?
Are the risks acceptable?
Does launching the product
make strategic sense?
Does the product fit our overall growth strategy?
Step 4 - concept testing
test a more detailed idea as a product concept with target consumers to gauge their reactions to it
Questions might cover
Product attractiveness
Benefits
Uses
Purchase intentions
Focus groups traditionally used to gain feedback
Data collection includes online forums and online brand communities
Concept testing allows product ideas to be refined before expensive further development is pursued for promising products
Step 5 - market and business analysis
Kotler & Armstrong (2016) developing a marketing strategy in 3 steps
Target market
The planned value proposition - the planned price, distribution and marketing budget for the first year
The sales, market share, and profit goals for the first few years
Involves evaluating the sales, cost and profit estimates against the objectives and determining the contribution and attractiveness of the product concept
Costs include...
Research and development
Manufacturing
New facilities
Additional staffing
Marketing of the new product
Financial stability may be assessed using break-even analysis - the number of sales needed to cover costs
Step 6 - product development
Translating the product concept into an actual prototype of the product which can be used to gauge consumer reactions to the physical product rather than just a description or image of it
Step 7 – test marketing
Testing not only a prototype product with a sub-set
of target consumers but also the full marketing mix
Time consuming and expensive
A product may be tested...
In a laboratory
Virtual stores (simulated test markets)
A panel of consumers (controlled
test markets)
A limited real market setting (standard test markets)
Less costly than a full scale roll out
Allows elements of the marketing mix to be adjusted if needed
Step 8 – commercialisation
Full-scale launch of a new product, having evaluated the feedback from the test marketing and incorporated any required amendments to the marketing mix
Costliest stage
It may take a long time to recoup costs
Timings of a new product launch needs to be considered as its likely to impact the organisations product portfolio
Failure or success?
Developing a new product may be costly and a product can be dropped at any of the 8 stages
Only a few products are good enough for commercial success
Product failure rates are around 80-90%
Research has actually reported that it is around 40%
Reasons new products fail (Kotler & Armstrong, 2016)
Overestimation of market size
Disregarding market research
Higher than expected product development costs
Poor product design
Incorrect positioning
Unsuitable launch timing
Inappropriate pricing
Poor promotion
Aggressive competition from competitors
Schneider and Hall (2011)
Most product failures are due to a lack of preparation
There are a number of flaws of launches failing and lessons that arise because of this
The company can't support fast growth
Lesson - Have a plan to ramp up quickly if the product takes off
The product falls short of claims
and gets bashed
Lesson - Delay your launch until the product is really ready
The new item exists in 'product limbo'
Lesson - Test the product it make sure its difference will sway buyers
The product defines a new category and
requires substantial consumer education -
but doesn't get it
Lesson - If consumers can’t quickly grasp how
to use your product, it’s doomed
The product is revolutionary, but
there’s no market for it
Lesson - Don’t gloss over the basic questions ‘Who will buy this and at what price?’
A way that companies can avoid risk is through vertical integration
Buying other businesses to acquire newly developed products or services
Eight critical success drivers (Cooper 2011/12)
A unique superior product
A differentiate product that deliver unique benefits
Compelling value proposition
Driver of profitability
Building in the voice of the customer
Market driven
Customer focused
Product process
Doing the homework and front end loading the product
Due diligence done before product development gets
underway pays off!
Getting sharp and early product and project definition
Avoiding scope creep and unstable specifications
Spiral development
Build, test, obtain feedback and revise:
Putting the product in front of the customer early and often will help get it right
The world product
Global and glocal product (locally tailored) targeted at international markets is far more profitable than the product designed to meet one-country needs.
A well-conceived, properly executed launch
Central to new product success
A solid marketing plan is at the heart of the launch
Speed counts!
Making sure it goes effectively but not at the expense of quality of execution.
An MNC must consider additional factors
Adapting marketing research approaches to local conditions where customers are located and involving local opinion leaders
Designing simper products from the outset using creative thinking' establishing local networks and partners
Employing, where necessary, unconventional marketing
distribution and communication channels to suit local conditions