MAR 3023 Exam 3 review
Private Label
70% of products in UK grocery stores are private label - US stores, like Kroger, have about 25% -ASDA is a subsidiary of Walmart in the UK overseas, private label brands are much more popular than they are in the United States
The Business side of New Product Development (NPD)
7 steps to develop new products: 1. idea generation 2. idea screening 3. concept testing 4. business analysis 5. development of physical product 6. beta and market testing 7. product launch
New Product Predictions
"I think there is a world market for maybe 5 computers." - Thomas Watson, chairman of IBM (1943) "This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." - Western Union internal memo (1876) "The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?" - David Sarnoff's associates in response to his urgings for investment in the radio in the 1920s "The concept is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible." - a Yale University management professor in response to Fred Smith's paper proposing reliable overnight delivery service (Smith went on to found Federal Express Corporation) "Who the hell wants to hear actors talk?" - H.M. Warner, Warner Brothers (1927) "A cookie store is a bad idea. Besides, the market research reports say America likes crispy cookies, not soft and chewy cookies like you make." - banker's response to Debbie Field's idea of starting Mrs. Fields' Cookies "We don't like their sound, and guitar music is on the way out." - Decca Recording Company rejecting the Beatles (1962)
Product Adoption Process
*1. awareness* - buyer become aware of the product *2. interest* - buyer seeks information and is receptive to learning about the product *3. evaluation* - buyer considers product's benefits and decides whether to try it *4. trial* - buyer examines, tests, or tries the product to determine if it meets his or her needs -- sampling *5. adoption* - buyer purchases the product and is expected to use it again whenever the need for this general type of product arises -- adopt long term
A Firm You Should Know . . . Better
*Burger King* - did you know: - started as an "InstaBurger King" in Jacksonville, Florida (1953) - owned by Restaurant Brands International -- also owns Popeyes and Tim Horton's (Canada brand) - is headquartered in Miami
Supply Chain Management
*Place* (4 Ps) strategies that ensure products are produced and distributed to the right customers, in the right quantities, to the right locations, and at the time customers need them - involves "upstream" and "downstream" firms *related terms:* distribution channels operations management supply chain intermediaries logistics place EX: Netflix is nothing more than a distribution company --> at a time where you had to watch a movie by going to rent a DVD or go to the movies, they made it where you can get DVDs delivered directly to you and now of course it's all streamed EX: Chick-fil-A --> started off being located only in malls, then 10-15 years ago, they started doing stand alone locations EX: Dunkin Donuts has typically done stand alone companies but they also do different distribution methods --> they have an RV that they send all around the country where they can give good brand impressions EX: vending machines *upstream* closer to the manufacturer (origin of the product) *downstream* closer to the consumer - ultimately, products move from the manufacturer to a wholesaler, to a retailer and then to the consumer
What if we recover really well?
*Recovery Paradox* "A good recovery can turn angry, frustrated customers into loyal ones. It can, in fact, create more goodwill than if things had gone smoothly in the first place." - Hart, Heskett, and Sasser (1990)
Factors Contributing to Growth in Services
*aging population* - Baby Boomers -- longer life expectancies -- as people age, they need more services *increased leisure time* *high per capita income* -- more discretionary (disposable) income *changing social and cultural values* EX: used to be you clean your own pool, mow your own lawn, etc. . . basically you did everything yourself, now, it's very common to hire someone to do those things which of course drives the service economy
Branding
*brand*: a name, term, design, symbol, or other feature that identifies the marketer's product as distinct from those of other marketers *brand mark*: the part of a brand that is not made up of words such as a symbol or design EX: FS for Florida State, baseball brandmark *trademark*: a legal designation of exclusive use of brand - can take many forms EX: that "R" you see on everything for registered trademark of that particular company EX: Tiffany has trademarked the Tiffany blue color EX: Coca Cola bottle shape *logos are sacred to loyal customers* - emotional attachment logos - sometimes they have clever hidden messages EX: FedEx --> spot the arrow EX: Baskin Robbins --> spot the 31 for flavors
Product Types
*consumer products*: purchased to satisfy personal and family needs and are classified according to how buyers generally behave when purchasing them *~ convenience products* - relatively inexpensive, frequent; also where branding becomes really important EX: most people don't variety seek their toothpaste or variety seek their soda -- we believe in one brand we like and we stick with it because of that cognitive miser effect *~ shopping products* - more effort in planning/purchasing EX: these are appliances or sometimes things like motorcycles where you're thinking quite a bit about this particular product but not to the extent of specialty products *~ specialty products* - unique characteristics (tends to be expensive and a lot of times are luxury items) EX: Rolex watches and Michael Kors handbags *~ unsought products* - these are products that no one seeks out EX: car repair, tow truck, emergency room, plumber -- we (marketers) should aim to convert unsought goods to sought goods *business products*: purchased to use for operations, to resell, or to use in manufacturing of other products - most products produced in the U.S. are for other businesses -- installations -- business services (consulting, legal, e-verify, janitorial, software) -- raw materials -- component parts -- MO supplies (maintenance, repair, operations)
Product Hierarchy (Product Classifications)
*core products*: the physical or intangible service that the customer receives - generic product or service *branded products*: the core products plus the characteristics that allow the consumer to differentiate it from similar products - packaging, styling, quality, brand name *augmented products*: have characteristics that enhance value beyond that of the core and branded product - installation, return and recycling, warranty, repair and service, delivery; terms, conditions, & credit
Heterogeneity (Variability): Strategy Implications
*customize a physical good; standardize a service* - Nike versus McDonald's - curriculum at FSU (6 or 7 classes) *keys: risk, experience* --> you should under promise and over deliver
Inseparability: Strategy Implications
*employees are key* - you remember how you were treated -- bank, airline, fast food, etc. *key: the physical environment* - why go to Fenway Park? - how do you select a restaurant, bar? *other customers are a factor* - perceived similarity, crying babies, drunks EX: flight etiquette
Branding Policies
*family brands* a series of products in the same brand family that are all connected to each other EX: Heinz --> ketchup, cocktail sauce (ketchup and horseradish), Heinz 57 (ketchup based steak sauce) *individual brands* one brand and that's what the company sells *private brands* brands that are connected to the retailer selling the products EX: Great Value is Walmart's brand EX: Kirkland is Costco's brand
Products Defined
*goods*: a tangible, physical entity EX: clothing, cell phone *services*: an intangible, result of application of human mechanical efforts to people or objects (hybrids) EX: Dr. Brady's lectures *ideas*: concept, philosophy, image or issue
Product Life Cycle (graphs - several kinds)
*high-technology products* - go really fast, then with the release of a new model, the sales drop EX: iPhone 4 then iPhone 5 then iPhone 6 *fads* - where everyone has to have one until they don't, and then no one wants one EX: silly bands, pet rocks *styles or fashion* - become really popular then fall off and they become popular again EX: skinny ties, high waisted jeans (popular in the '80s and their back now)
Characteristics of Services: The "Big Four"
*intangibility* - lack of tangible assets which can be seen, touched, or smelled prior to purchase *perishability* - inability of a service to be inventoried or stored *inseparability* - simultaneous production and consumption of a service *heterogeneity (variability)* - unwanted or random levels of service quality customers receive when they patronize a service firm
PLC (cont'd)
*introductory stage* - *high failure rates* - little competition - frequent product modification - limited distribution - *high advertising and production costs* - *negative profits* - promotion focuses on awareness and information - intensive personal selling to channels *growth stage* - *increasing rate of sales* - *entrance of competitors* - market consolidation - initial healthy profits - aggressive advertising of the differences between brands - *wider distribution* - prices normally fall *maturity stage* - sales increase at a decreasing rate - *saturated markets* - annual models appear - lengthened product lines - service and repair assume important roles - heavy promotion to dealers and consumers - marginal competitors drop out - *prices and profits fall* - niche marketers emerge *decline stage* - *long-run drop in sales* - large inventories of unsold items - *elimination of all nonessential marketing expenses*
Perishability: Strategy Implications
*manage supply and demand* - the marketing mix *pricing* - movies, airlines, 5:00pm (happy hour) *promotions* - frequent flier restrictions (e.g. blocked out for holidays), buddy passes, Tuesday skiing (always discounted because other people normally wouldn't go on this day)
The 7 Ps The Services Mix: 3 New Ps
*people - functional quality* - employees and customers ("other") - appearance, belonging (cruises) - sometimes people are the service (consulting) -- both employees and customers *process - the operational flow* EX: Southwest vs. Delta - Southwest has a very different boarding process than Delta EX: McDonald's vs. Wendy's - the line at Mcdonald's vs. the line at Wendy's -- Mcds has several lines (people can game the lines) whereas Wendy's is one straight line --- different processes *physical evidence - the tangible aspects* - AKA "servicescape" EX: our campus is the servicescape that goes with the core product of education here at FSU - provide competitive advantage -- can override core aspects of something else EX: Disney did a list of their worst restaurants and Rainforest Cafe was #1 - the foods terrible but the environment is nice -- the environment overrides the core product
The Services Marketing Mix: The 7 Ps
*price* denotes quality, changes by the minute, bundling (value meals) - price/quality relationships -- price is an indicator of quality
The Services Marketing Mix: Even the Traditional Mix is Different
*product - core vs. peripheral* - people tend to buy services based on the peripheral aspects of the core product you're buying -- unique to service products EX: airline --> transportation (core) vs. meal service EX: hotel --> bed, roof (core) vs. bellhop, maid service -- your decision doesn't really have anything to do with shelter ... irrelevant because all hotels give you shelter, where you make the decision is on things like bed quality, does it have a pool?, continental breakfast?, where is it in town?, etc. EX: education? --> education is the core product ... but think about why you came to Florida State --> it's cheaper, great campus, good football team, party school and these kind of things that are peripheral to the core product EX: restaurant? *place -- typically direct* - in other words, the distribution channel -- almost always direct --- because of inseparability, the production and the consumption have to be simultaneous --> there's a direct channel ---- manufacturer to consumer directly *promotion - key: sell expertise to reduce risk* - manage expectations, offer guarantees -- drives comfort for service customers which drives their purchase process
What if we recover really poorly?
*rage incidents are growing rapidly*: - 61% of consumers said that customer rage would impact their life as an employee, employer, or customer EX: road rage, air rage, fan rage -- happening because people feel powerless to get their problems resolved and get very upset consumer created websites (AKA "suck sites") EX: Walmart has 4 suck sites --> they've made people so mad that 4 different people created websites directly or specifically with the purpose of telling everyone how much Walmart sucks EX: United EX: Home Depot - many prominent companies up to 24% of current websites are negative
Extending the PLC
*selling to new segments* EX: Harley Davidson --> very successful when started selling to women *promoting more varied use* EX: varied use of dryer sheets *stimulate more frequent use* EX: Gillette razors --> came out with bands on the razors and once that band disappears that means it's time for a new razor -- because they want you to use more razor blades *encourage more use per occasion* EX: toothpaste companies (like Crest) --> advertising campaigns showing how much toothpaste you should use on your toothbrush -- they want you to use more than your using now
Intangibility: Strategy Implications
*stress tangible cues* - in other words, if something's intangible, let's make it more tangible so that people can understand it EX: financial service companies --> Merrill Lynch (bull symbol), Prudential (Rock of Gibraltar symbol) -- symbols makes more tangible EX: hotels --> leaving a mint on your pillow, a mint is a tangible reminder *price-quality relationship in services* - price tends to be an indicator for quality far more for services than for physical goods EX: lawyers *customer referrals* - word of mouth -- strategic implications of managing tangibility EX: TD Bank in Canada --> humanize an impersonal transaction
Where Are Services? (density map & list)
- United States very service dominant - so is Canada, Australia, and Western dominant countries and GDP from services: Hong Kong 91% U.S. 79% France 77% Netherlands 74% . . . . . . India 61% Brazil 54% Thailand 45% China 40% -- what's the difference from the countries at the top of the list versus the countries at the bottom? --> developed countries are services dominant and developing or underdeveloped countries are physical goods dominant --- as countries develop over time, they go from producing agriculture and physical goods to producing services and the reason for that is you need a highly educated workforce for service employees
Why Are They [Services] Important?
- approximately 82% of total US employment (55% in 1929) -- very important to US economy - roughly 80% of GDP - $250 billion trade surplus -- McDonald's, AMEX, FedEx -- exporting services and bringing back physical goods --- increasing over time
A History: GDP (bar graph)
- consistent upward trend since 1950 with respect to the percentage of services that account for GDP - manufacturing is declining -- we're exporting manufacturing because it's cheaper to do in other countries, especially labor -- *skilled labor, however, is what you need for services and we retain that in the United States* - percentage of jobs in the service industry goes up over time
Best Global Brands
1. Apple 2. Google 3. Coca-Cola 4. Microsoft 5. IBM 6. Toyota (japanese) 7. Samsung (korean) 8. GE - if we could put a value on brand names, these 8 would have the highest value -- they're respected, understood and the images that come from those brands are very positive
Services Marketing Mix: 7 Ps
1. Product 2. Price 3. Place 4. Promotion *5. People* (employees and customers) *6. Process* *7. Physical Evidence*
Two Goals for NPD
1. understanding new product development from the firm's perspective 2. understanding new product adoption from the customer's perspective
What Do These Brands Have in Common?
Astroturf, Aspirin, Kleenex, Band-Aid, Dumpster, FedEx, Tivo, Q-tips, Scotch Tape, Tupperware, Xerox, Zamboni, Ziploc, Velcro, ... --> *genericized brands* - brand and product category are one and the same --- so omnipresent and big that they start to represent the whole product category; for most of these, a product became so popular and so well known that it represented the whole product category
Examples of Goods Companies Expanding into Services
Boeing John Deer IBM Otis SAP Cisco Kodak GE -- 50% of their revenue or more comes from service
Challenges Associated with the Service Industry
Business Week had two separate covers - "why service stinks" - JetBlue had its problem and they kind of scratched them off the list of the pillars of great service
The Next Generation
Corning The Future of Glass - pushing the envelope of what glass can do
Space Saving
EX: Guinness came out with a t-shirt that comes in the shape of a Guinness bottle -- clever and space saving EX: appeal to people bringing food for lunch --> expandable bowl so saves space when you pack your lunch
New Old Product
EX: Harley Davidson motorcycle --> fully electric, quiet - designed to appeal to young, urban riders
Idea Generation - Crowdsourcing
EX: Lays, Pepsi - offer a contest for people who come up with the best new flavor for something - whittle it down to the best options -- they do this a lot around the Super Bowl EX: Siracha Lays chips
Promoting Varied Use
EX: Listerine (mouthwash) over the years --> has been used as: floor cleaner, cold remedy, treatment for gonorrhea
Some Pillars of Great Service
Disney Publix Starbucks FedEx Nordstrom USAA Southwest Airlines jetBlue Chick-fil-a Enterprise Ritz Carlton
The Evolving Supply Chain
EX: Amazon (Amazon key, Amazon prime, ...) --> distribution company; their business model revolves around getting products to consumers in a way that's very efficient and at a low cost - distribution methods are how they make their money EX: Zipline (company) --> changing medical supply chain in remote areas -- using parachutes to deliver medicine in areas where it's difficult to get (i.e. areas in Africa and India)
Space Taking
EX: Grey Goose (Kirkland) by Sidney Frank --> tall, beautiful frosted glass -- he wanted to make sure that Grey Goose was perceived to be high-end brand vodka and made it a tall bottle because he wanted Grey Goose to be on the top shelf (typically in restaurants and bars, the best alcohol goes on the top -- that's why it's called top-shelf liquor) - started in 1996 - sold in 2004 for $2.2 billion
Test Market Products (Examples)
EX: McDonald's spaghetti - sold abroad ; test marketing burgers like the Maestro Fresh EX: Jack in the Box - trying things with bacon like bacon-flavored milkshakes and sundaes EX: Burger King - launched the veggie burger
Service Strategy
EX: McDonalds fast food companies are using self-service ordering kiosks a good solution to heterogeneity -- reduces variation from incorrect order taking also helps with inseparability -- takes the employee out of the interaction
Attention Grabbers
EX: Nike --> came out with Nike Air but they didn't put it in a shoe box, they actually put it in an air-filled bag to reinforce the fact that its light and that it's Nike Air EX: Adidas --> put soccer shoes in a bullet-shaped package to make people interested in it EX: a cookie company came out with a package that looks like an oven so the cookies slide out of what looks like an oven
Servicescape
EX: Singapore Airlines --> next generation of airline seats -
New Service Product
EX: Vedantu online learning company - people in developing countries often don't have access to schools - fully online degrees for K-12, with faculty
Clever [Branding]
EX: anti-theft lunch bags --> Ziploc bag "looks" like there's mold on it to deter people from stealing your food EX: NYC pasta --> pasta that when you open the box the raw noodles are in the shape of an NYC building EX: fit buns six pack abs --> protein buns with a picture of a six pack on the packaging EX: goldfish tea bag EX: the last cigarette --> shaped like a coffin
Reposition and Improvements
EX: repositioning --> Arm & Hammer baking soda - you rarely need baking soda except for maybe cooking (e.g. baking cookies) or doing laundry . . . now they are promoting it as refrigerator deodorizers -- repositioned from a cooking ingredient to something you stick in your refrigerator and it was very successful EX: improvement --> Coca Cola Zero - modifications to product formulas or service processes . . . they modified the formula recently and its called the new and improved formula -- you're supposed to go out and buy it because it's new and improved EX: improvement --> extension cords - now they are flat so that you don't trip
Luxury Appeal
EX: spirits industry, particularly with vodka --> because people can't tell the difference between vodkas -- to sell at a high price point, they make the package look more luxurious to convey a higher end brand image and people will buy it
Idea Screening
Shark Tank does this very well - is this viable? - who's your market? - what's your profit margin? EX: doggie air conditioner - air conditioner you can use in your car when your car isn't on
New Products (cont'd)
Fast Company article asked anonymous marketing industry leaders to convey which companies are getting marketing right. Here are their answers: "Amazon is absolutely crushing it. Because they are risk tolerant . . . they've had more than their share of [failures], but the successes are big and bold, and the customer is always first." - with new product development you have to be okay with accepting risks EX: they have robotics now, especially with Amazon prime EX: recent innovation to address that packages were being stolen off people's porches --> Amazon key -- mildly successful . . . now for garages
Why Services?
How many manufacturing companies can you name in Tallahassee? - breweries; Tallahassee is mainly service oriented How many can you name in Florida? - Tropicana -- these examples are few and far between; typically what derives the economy in the state of Florida, 90% or more are all services
Alternatives to NPD
New Product Development (NPD) is *risky* -- the vast majority of new products fail less risky alternatives: *line extensions* - product developed is closely related to one or more (successful) products in existing product line but specifically designed to meet a somewhat different need - fail less often EX: take the core product like Oreos and extend it in a way that you're developing a closely related product that's anchored to the brand *product modifications* - product modification means changing one or more of the product's characteristics; different from line extensions because the original product is removed from product line
Current State of the Service Industry
United Breaks Guitars - over 19 million views and an appearance on 20/20 - caused a 10% reduction in United stock price within 4 weeks -- now a book, written by one of the band members -- service issues like this tend to go viral because we can all relate to it most hated companies list: 1. Equifax 2. Fox 3. the NFL 4. the University of Phoenix 5. Electronic Arts -- e.g. EA Sports Brady's List of Shame: United Airlines - lifetime member - #19 on the most hated companies list -- ahead of the Weinstein Company Capital Eurocars - stole everything inside of car - never said sorry, just handed him the bill
Company You Should Know: *Newell Brands*
a consumer product conglomerate (based in Atlanta) - owns Sharpie, Expo, Paper Mate, Contigo, Crock Pot, Yankee Candle, Graco, etc.
What is a Product?
a product is a good, service, or idea (or combination of two or more of these) - includes supporting services, installations, guarantees, warranties *product ecosystem with the product itself*
Services: What are They?
a "deed, process, or performance" some overlap: service exists in ALL physical goods too ~ "customer service" in support of manufactured goods -- ordering ~ distribution of physical goods -- even bulk goods have service ~ return of defective goods EX: Amazon (aspects of both)
Product Mix
all of the products a company sells EX: Coca Cola --> sells soda, vitamin water, Powerade, Dasani, Tab EX: Proctor and Gamble sells all sorts of things
Product Launch
all the steps have to be completed successfully you can fail at any one of the stages and then when you get to the final stage of launching the product, 80% of the time they go wrong EX: Sun Chips - tried to change their bags to be 100% compostable - these bags were ridiculously loud and they had to get rid of it
Test Markets
at this point, it looks like the product will work out, people want it, it's profitable, and then it goes to a test market city cities that most resemble the US population: 1. Nashville, TN 2. Cincinnati, OH 3. Indianapolis, IN 4. Charleston, SC *5. Jacksonville, FL* 6. Greenville, SC 7. Oklahoma, OK 8. Phoenix, AZ 9. Albuquerque, NM 10. Winston, NC -- mirrors demographic population of the country Tallahassee is a terrible test market - #314 out of 379
Branding Strategies
brand extension brand stretching co-branding genericized brands
Florida Business
businesses with headquarters here: CSX transportation Office Depot Fidelity investments Raymond James investment services Publix Disney Darden restaurants
Functional Modifications
changes that impact versatility, effectiveness, convenience, or safety of the product usually requires redesign of the product EX: Campbell came out with soup in a cup that you can pop in the microwave then peel the top off . . . don't need a bowl EX: Heinz ketchup modification that was based on mothers and minivans EX: Crystallite --> used to be sold in big containers and you would scoop the crystallite into a pitcher . . . maybe 10 years ago now, they started selling in individual packages for bottled water
Product Modifications
changes to one or more characteristics of a product (the old version usually doesn't stay in the line) EX: Subaru --> the original is no longer sold when the next version came, when the next version came out then that one was no longer sold
Cost Reduction (Quality Modification)
changing dependability and/or durability of a product altering materials or the production process products at a lower price products at the same price at lower manufacturing costs EX: Hamburger Helper --> reduced the number of spices and by doing so you increase your margins EX: Hershey's kissables --> took out cocoa butter which is more expensive and substituted it with a cheaper alternative, vegetable oil EX: Pillsbury did this with their turtles --> turtle cookies replaced pecans with walnuts because they are less expensive
Green Washing
companies using packaging to convey the fact that they're a green and a socially responsible company EX: Scott (toilet paper) --> took the tube out of the toilet paper because that's extra paper that's wasted and less expensive to make EX: paper water bottles, boxed water -- plastic water bottles are a huge problem EX: thumb drive made of wood instead of plastic
Product Line
consists of the closely related products marketed by an organization EX: Oreo --> double stuff, vanilla, mint, watermelon, pumpkin spice, limeade flavor etc. EX: Excedrin (pain reliever) --> they have with extra strength, for treating migraines, for sinus headaches, etc.
Idea Generation
consumers often don't know why they buy or like things - we are very impulsive EX: found that Cheetos lovers actually like the orange mess on their fingers -- neuroscience
Brand Counterfeits
estimated losses to counterfeits are $250-350 billion most targets are mass market products or products with high profitability -- targeting prominent and lucrative brands what is the most counterfeited brand? --> Louis Vuitton
Examples: Core vs. Brands
generic cereal vs. Honey Nut Cheerios Stop n' Shop sparkling Cola vs. Coca-Cola acetaminophen vs. Tylenol beer vs. Keystone vs. Coors vs. Blue Moon - when you put a brand name on it, it creates something else . . . it's something you recognize, it gives you that extra boost of emotional gratitude - brand name gives you a different perspective
So What can We Do??? [recovering from failure]
how exactly should a firm recover from service failure? strategies: - zero defects! -- get the bugs out - act quickly EX: Amazon eliminates any seller with a complaint rate greater than 1% - encourage complaints - contingency planning - empowerment [for employees] - learn from lost customers
Business Analysis
how much will it cost? how much will consumers pay for it? how will this affect profits? -- financials
Down Market Extensions
introduce a cheaper alternative than the original EX: Mercedes did this with the B-class EX: Tesla also did this with the Model 3 -- more affordable
Up Market Extensions
introduce something more expensive than the base product EX: KitKat (Nestle product) and Hershey have done this where they're making more of their products with more expensive ingredients and/or with more cocoa [KitKat is very popular overseas because Nestle's a European brand) EX: Sam Adams beer --> bottle called Utopias sells for $600 on Ebay EX: Volkswagen --> brand portfolio: also makes Porsche, Bentley and Audi (typically more expensive car brands)
Brand Loyalty
levels of brand loyalty: *recognition* buyer is aware that a brand exists and considers it as an alternative if the preferred brand unavailable *preference* buyer prefers over competitive offerings *insistence* product is strongly preferred; buyer will accept no substitute EX: Gillette sends you a free razor on your 18th birthday; also sends materials that teach you how to shave; also teaches you how to dress in a suit and cut your hair like a grown up --> recognized this as a great way to create brand loyalty at an age that makes sense and get you in the habit of using this particular brand which generally carries over long-term
Brand Crises
many prominent and established brands deal with brand crises, which erode brand loyalty almost instantly EX: happened to Jet Blue EX: Jimmy Johns --> owner is a big game hunter (i.e. he kills rhinos, cheetahs, elephants, ...) -- many people do not agree with this and refuse to eat their food (still dealing with today) EX: NFL EX: Fairlife (owned by Coca-Cola) --> undercover person went to a dairy plant/farm that Fairlife used and found that they treated the cows very improperly/unethically
Concept Testing
now . . . what will my target market think? idea was screened and it looks like it's going to be viable then develop a beta version of it (i.e. an example of it) and take it to a focus group focus groups are a big part of the process of developing new products
Brand Extensions (cont'd)
product developed is not closely (but should still be somewhat) related to one or more products in existing product line EX: Reese's Peanut Butter Cups came out with Reese's peanut butter - successful EX: Life Savors came out with soda EX: Starbucks (they have coffee) came out with coffee flavored chocolate and coffee flavored liquor - again based on the core attribute of good coffee that people understand and like -- Starbucks very successful EX: Virgin (owned by Richard Branson) --> started out as a record company but it has really extended . . . now there is Virgin Atlantic (airline company), Virgin Mobile, Virgin Trains, Virgin Cola (failed miserably), and more
Strategic Product Management
product mix product lines - depth, width - extensions -- up and down product life cycle (PLC) modification
Brand Extensions
product that's connected to the home brand that's offered in a different product category - 81% of new products offered each year (remember most new products fail) -- companies will always try to attach these products to a successful brand because it lowers the chance that they fail EX: Jell-O --> came out with Jell-O pudding which is now more successful than the gelatin -- successful EX: Tide --> came out with the Tide pen -- successful EX: Virgin Cola --> Richard Branson tried to unseat Coca-Cola and Pepsi but it was an epic failure EX: Harley Davidson --> cake making kit -- did not work out at all
Why Good Service? (pie chart)
reasons for customer switching: - don't know (21%) -- could be inertia, boredom, ... - too expensive (8%) - inferior product (8%) - other reasons (30%) - *poor service (40%)* -- drives customer loyalty
Why Are Services Important? (graph)
services account for most new U.S. job growth since the recession when our economy grows, that growth is tied to services - retail trade, professional and business services, education and health services, leisure and hospitality
Recovering from Failure
services are not very good at it: - of the failures reported, the recovery response to over half of those only reinforces dissatisfaction (Hart, Heskett, and Sasser 1990) -- makes it worse - so .5% - 22.5% of failures are currently being resolved
One Stop Shopping
some Nielsen BASES Products: - product concept screening: pre-BASES/BASES snapshot; neuroscience - product pricing: price advisor - product launch: BASES launch advisor - early adjustments: BASES product advisor - product modifications: BASES restager -- one stop market for all things marketing and product development
Utility
some packages are meant to be handy to create utility EX: wine bottle that also has glasses built into the package that detach and open up to get the wine bottle out EX: Stride gum came out with a package that made the gum easier to get out
When Recovery Isn't an Option
sometimes we have to fire customers because they are impacting our good customers
New Products
successful --> EX: Mercedes new model EX: aquatic drone EX: LG wallpaper TV EX: phone charger backpack EX: language translation headphones 80% of new products fail unsuccessful --> EX: before the Ipad, there was the Apple Newton (1993) -- ahead of its time, market wasn't ready EX: Crystal Pepsi - healthier version of Cola and won't stain your teeth; meant to compete with Sprite -- people have schemas that Cola is brown (even though it's not natural, it's brown food coloring) and people didn't want it . . . massive failure EX: Colgate was making TV dinners EX: BIC was making underwear EX: Cheetos lip balm
Tangibility Spectrum (graph)
tangible dominant --> see, touch, taste, ... EX: salt, soft drinks, detergents, automobiles, cosmetics middle --> products that are a mix of physical goods and services EX: fast-food outlets (food component and convenience in the form of service) intangible dominant --> EX: advertising agencies, airlines, investment management, consulting, teaching/education
Managing Existing Products
tend to be really extensive with targeting different types of consumers with different product lines
Packaging
the development of a container and graphic design for a product - gets attention and sends signals about product attributes and quality - induces trial EX: Jim was packaging peanuts and things that go with alcohol EX: Leggs pantyhose --> put pantyhose in an egg-like package -- very successful; created huge demand for their particular product just by putting in an interesting package *about 1/3 of product decision-making is based on packaging* - almost 40% of all consumers share photos of interesting packaging on social media don't get it wrong! EX: Tropicana (owned by Pepsi) --> redesigned its packaging in early 2009 . . . after the launch, sales dropped 20% between January 1 and February 1 -- the result is Pepsi reverted to the old package on February 23 EX: a Finnish beer company recently responded to its competitor that introduced a 100-pack of beer, with their own 1000-pack! (cost is "only" $2,340 ... $2.34 per beer)
Brand Equity
the marketing and financial value associated with a brand's strength in a market ~ brand name awareness ~ brand associations ~ perceived brand quality ~ brand loyalty sometimes measured as the difference in price associated with a brand versus unbranded products
Product Line Width
the number of different lines that a company or SBU markets EX: Excedrin --> Novartis Consumer Health markets 40 lines of consumer health products, so their width score would be 40
Product Line Depth
the number of items in a product line EX: Excedrin --> the product depth would be 8
So Why Don't People Adopt?
the psychology of new product adoption 3 reasons people don't adopt: *1. losses versus gains* - (prospect theory) losses have a far greater impact on consumers than similarly sized gains ~ called "loss aversion" ~ Kahneman & Tversky - Nobel prize ~ accounts for why consumers prefer even suboptimal existing products that they know over trying a new one *2. the endowment effect* - people value products they already possess more than products they could buy ~ people demand 2-4 times more to give up products they already possess than they are willing to pay to obtain these items in the first place ~ Richard Thaler - Nobel prize *3. status quo bias* - people tend to stick with what they have even if a better alternative exists ~ Kahneman & Tversky ~ may explain why consumers prefer to fix an old product instead of buying a new one
Discussion: What Separates Services from Products?
think about your most recent haircut now think about a hair product you bought recently how do they differ? - risk how do you evaluate each? - tolerance for variability
New Product Adoption (broader context)
types of adopters: *innovators* - first to adopt new product -- rare *early adopters* - choose new products carefully, help spread word-of-mouth *early majority* - adopt just prior to average person -- 34% *late majority* - skeptics who adopt new products when they feel it is necessary -- 34% *laggards* - last to adopt a new product -- 16%
Product (Service) Life Cycle
typical progress from introduction to decline ~ impacts distribution, promotion, price, and profits stages: *introduction* - low sales - high costs - no profits *growth* - increasing sales - reducing costs - some profits *maturity* - constant sales - reducing costs - increasing profits *decline* - reducing sales - constant costs - reducing profits EX: PLC in the beverage industry --> Diet coke is in decline, Coke Zero is in the maturity phase, 7Up 10 is in the growth phase, Orange Vanilla Coke is in the introduction phase -- You can advertise a lot of the growth phase because it's really like an investment. And the way it really works is that the products that are at maturity that are making all the profits then feed the ones that are in the introduction and growth phase. That's where you get the money for the introduction products. -- cycle back --> example of what Coca Cola has done through the years to create a healthy product line
Brand Stretching
using an established brand in an unrelated market - success depends on strength of the original brand and consumers' pre-existing brand associations EX: Yamaha (pianos) --> also makes outboard motors EX: Ralph Lifshitz (Ralph Lauren polos) --> also makes bedding and home decorations EX: Hooters --> came out with an energy drink -- stretched too far and did not work out
Co-Branding
when two brands are presented together - sometimes from different companies -- are often from the same company (Kraft) EX: Betty Crocker co-branded with Hershey's EX: Twix co-branded with Briar EX: Kraft connected to Oscar Meyer (owned by same company) --> lunchables EX: Best Western and Harley Davidson --> co-branded on a credit card EX: Nike co-branded with Apple