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 • • • • • • 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 • • • • • • • • • 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 • • • • • • • • • 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 • • • • • • • • • • • 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).