Marketing Strategy Chapter 8
Instead of focusing solely on its product, Starbucks has been successful selling _________________ which extends beyond drinking coffee to social interaction and lifestyle
"the Starbucks experience,"
Ideas that pass through the screening process move into a development phase to define the product potential and market opportunity. Three specific tasks in this stage are to:
(1) define and test the product idea (2) create a marketing strategy for the product (3) analyze the product's business case.
The three major activities in new product development are to:
(1) identify product opportunities (2) define the product opportunity (3) develop the product opportunity.
3 reasons PLC is a useful tool
(1) provides a strategic framework for market analysis, (2) tracks historical trends (3) identifies future market conditions
Businesses buy a vast array of products that can be classified into three broad areas:
(1) whether or not they are used in the manufacturing process and (2) cost.
Early Adopters:
(13 percent)—Product opinion leaders seek out new products consistent with their personal self-image. This group is not price-sensitive and is willing to pay the price premium for a product. At the same time, early adopters demand a high level of personalized service and product features.
Laggards:
(16 percent)—Product avoiders want to evade adoption as long as possible. Resistant to change, they will put off the purchase until there is no other option.
Innovators:
(2.5 percent)—Product enthusiasts enjoy being the first to try and master a new product. Individuals in this group are prime candidates for beta testing and represent a good source of feedback late in the product development process or early in the product launch phase.
Late Majority:
(34 percent)—Product followers are price-sensitive and risk-averse. They purchase older-generation or discontinued models with lower prices and fewer product features.
Early Majority:
(34.5 percent)—Product watchers want to be convinced of the product's claims and value proposition before making a commitment. This group is considered critical to long-term success as they take the product into the mainstream.
What is the difference between a product and a product item.?
A product is a brand such as Post-it Notes or Tide detergent. Within each product a company may develop a number of product items, each of which represents a unique size, feature, or price. Each combination of scent and size represents a unique product item in the Tide product line.
______ come and go quickly, often reaching only a limited number of individuals but creating a lot of buzz in the marketplace
Fads
Decision Criteria in Market Tests- Marketing & other
Product uniqueness Vendor effort Marketing support Terms of trade: slotting allowances, off-invoice ?allowances, free cases, bill-back provisions Price growth Synergy with existing items
Which industry used reposition existing products to target new markets strategy?
The cell phone market used this strategy successfully to introduce cell phones in the mid-1990s.
Examples of shopping goods:
clothes, furniture, and major appliances such as refrigerators and dishwashers.
Crest Whitestrips are a good low-priced teeth whitener. The system also comes with a standard 60-day money-back guarantee, should you not care for the results. Is an example of:
conformance quality
What are parts?
consist of equipment either fully assembled or in smaller pieces that will be assembled into larger components and, again, used in the production process.
Companies translate the essential benefit into physical, tangible elements known as the _________________
core product
On time, safe, experience matches expectations,: is the
core product
Oil companies produce several grades of gasoline to meet the demands of consumers is an example of:
performance quality
Examples of consumer nondurables: Examples of business nondurables:
personal grooming products such as toothpaste, soap, and shampoo office supplies such as printer ink, paper, and other less expensive, frequently purchased items
__________________________ are purchased less frequently and are more costly than convenience goods.
shopping goods
Apple Watch promotes ________ in the design of the watch as well as the ability to customize through color choice and a variety of watch bands.
style
Products, as opposed to services, have a physical aspect referred to as ____________.
tangibility.
A key to the long-term success of any company is:
the development of new products.
MRO (maintenance, repair, operating) supplies are:
the everyday items that a company needs to keep running
The essential benefit is
the fundamental need met by the product.
What are the 4 ways products can be classified?
the nature of the product: tangibility and durability. who uses the product: consumers or businesses
Repeat purchases?
the number of products purchased by the same customer
Replacement purchases?
the number of products purchased to replace existing products that have become obsolete or have malfunctioned. Estimates are made on the number of product failures in any given year based on the expected product life
Reliability is:
the percentage of time the product works without failure or stoppage
An important issue for consumers is conformance, which is:
the product's ability to deliver on features and performance characteristics promised in marketing communications.
Examples of new-to-the world products:
veggie bullet spiralizer, a nose irrigation device, and an air horn
A new product moves through a ____________________ with a market as different people purchase the product at different times.
diffusion process
Sometimes new-to-the-world products are so innovative they create a fundamental change in the marketplace and are known as __________________.
disruptive innovation
Consumer research and purchase patterns affirm that people find ________________, the projected lifetime of the product under specific operating conditions, an important discriminating product characteristic and are willing to pay a premium for products that can demonstrate greater durability
durability
KitchenAid appliances have a reputation for _________ that has translated into a price premium for their products.
durability
Timberland has a reputation for building high-quality, durable products like these boots that come with a commitment to customer satisfaction is an example of:
durability
Two-thirds of all adopters for a given product fall in the _________________________.
early and late majority
Repairability:
ease of fixing a problem with the product, as part of the product evaluation process.
Ways you can reduce the cost:
eliminating or reducing features using less-expensive materials altering the service or warranty to offer the product at a lower price point to the market
Internal idea sources include:
employees from R&D, marketing, and manufacturing.
Southwest added features such as frequent flyer is an example of
enhanced benefit
Early bird check-ins, Upgraded boarding, frequent flyer programs, experience exceeds expectations: is the
enhanced product
The __________________ extends the core product to include additional features, designs, and innovations that exceed customer expectations
enhanced product
Moving from point A to point B is the
essential benefit
No matter what other value-added product experiences are provided to the customer, the ______________ must be part of the encounter
essential benefit
Nondurable products are:
usually consumed in a few uses and, in general, cost less than durable products.
What is a product ?
Anything that delivers value to satisfy a need or want and includes physical merchandise, services, events, people, places, organizations, information, even ideas.
An individual moves through five stages before adopting a product:
Awareness—know of the product, but insufficient information to move forward through the adoption process. Interest—receive additional information (advertising, word of mouth) and motivated to seek out added information for further evaluation. Evaluation—combine all information (word of mouth, reviews, advertising) and evaluate the product for trial purchase. Trial—purchase the product for the purpose of making a value decision. Adoption—purchase the product with the intent of becoming a dependable user.
_____________________________________________ is called the product mix
Combining all the products offered by a company
___________________ have a longer product life and are often more expensive.
Durable products
What are convenience goods?
Frequently purchased, relatively low-cost products for which customers have little interest in seeking new information or considering other options and rely heavily on prior brand experience and purchase behavior
Decision Criteria in Market Tests- Financial
Gross margin Profit per unit shelf space Opportunity cost of capital needed to obtain ?the new item
Examples of unsought goods:
Insurance, particularly life insurance, is not a product people want to purchase. In general, customers do not want to purchase products or services related to sickness, death, or emergencies because, in part, the circumstances surrounding the purchase are not pleasant.
When is a business case analysis done?
It is often done when there are changes to an existing marketing plan, such as an increase in the marketing communications budget
Decision Criteria in Market Tests- Competition
Number of firms in the trading area Number of competing brands
What are shopping goods?
Products that require consumers to do more research and compare across product dimensions such as color, size, features, and price
Examples of convenience goods:
These products include most items people buy regularly such as toiletries, gasoline, and paper products and fall into four categories.
The criteria used to prioritize ideas vary by company but often include:
Time to market (how long will it take to develop and get the product to market). ROI (what is the expected return for the dollars invested in the project). New product fit with overall company product portfolio.
Consumer Product Market Tests, management must make four key decisions:
Where: The location of the market test is based on how well it reflects the potential target markets. How long: Most test markets run less than a year. Data: Critical information needed to make necessary decisions must be identified Decision criteria: Metrics for further action must be identified
Two types of mistakes are associated with rejecting or moving forward with a new product design, and both are potentially expensive for the company. The first is the go-to-market mistake made when:
a company fails to stop a bad product idea from moving into product development.
A stop-to-market mistake happens when:
a good idea is prematurely eliminated during the screening process
A product line is:
a group of products linked through usage, customer profile, price points, and distribution channels or needs satisfaction.
Cost reduction, as the name implies, is:
a specific method for introducing lower-cost products that frequently focus on value-oriented product price points in the product mix.
What is an SKU?
a unique identification number used to track a product through a distribution system, inventory management, and pricing.
A feature is:
any product attribute or performance characteristic and is often added to or subtracted from a product to differentiate it from competitors.
Specialty goods?
are a unique purchase made based on a defining characteristic for the consumer.
What are capital goods?
are major purchases in support of a significant business function
Materials?
are natural (lumber, minerals such as copper) or farm products (corn, soybeans) that become part of the final product.
What are unsought goods?
are products that consumers do not seek out and, indeed, often would rather not purchase at all.
Without the essential benefit, other benefits may actually increase the ____________________ with the experience
customer's dissatisfaction
The most elemental method of differentiating a product is to change its ________—size, shape, color, and other physical elements.
form
The innovation diffusion process is:
how long it takes a product to move from first purchase to last purchase (the last set of users to adopt the product).
External idea sources come from:
individuals and organizations not directly connected with the company.
Services are
intanglible
Companies create, launch, and transform products as market conditions change over time. This product evolution is referred to as the product life cycle (PLC) and defines the life of a product in four basic stages:
introduction, growth, maturity, and decline
The business case analysis ___________________________________________________.
is an overall evaluation of a product and usually assesses the product's probability of success.
Each combination of scent and size represents a unique product _______ in the Tide product _____.
item, line
Examples of consumer durables:
microwave ovens, washer/dryers, and certain electronics such as televisions.
___________________ has not been available before
new-to-the-world product
sustaining innovations, are:
newer, better, faster versions of existing products that target, for the most part, existing customers
Staples are:
usually food products people buy weekly or at least once a month such as Folgers coffee or Boar's Head ham.
The PLC generally refers to a ____________________________________ rather than a _______________________
product category (fitness bicycles) product item (Cannondale Quick bicycles),
The __________________________ is the essential element in delivering value to the customer
product experience
While customers are buying a cup of coffee, a new car, and a pair of jeans, they are also buying a ___________________.
product experience
Once a product has been developed and is on the market, the company can extend the product by creating additions to existing ___________________.
product lines
What is an example of an impulse product?
products available in vending machines
Business durables include:
products that may be used in the manufacturing process such as IT networks, as well as equipment such as office furniture and computers to facilitate the running of the business
What is durability?
references the length of product usage.
Companies may create new products or market conditions may change, which can:
reinvigorate the product and start a new growth phase.
Total Demand Sales are defined in two ways:
revenue (unit sales × price) and unit sales.
The ___________________ increases dramatically in the introduction and growth stages as the product moves through the consumer adoption process.
sales revenue line
New purchases—first-time sales. With new products, these sales are called ___________________.
trial purchases.
This is also calculated as the__________ which is how many individuals in a particular target market have tried the product.
trial rate
Sustaining innovations can be revolutionary by taking the market in a new direction. They can also be:
upgrades or modifications to existing products and represent incremental enhancements to current products
