CH18 : MM - PRODUCT

CRM process

*customer information 1. Gain as much information as possible about each existing customer -> e.g. - income - product preferences - buying habits 2. adapt the 4Ps to meet these needs as closely as possible *virtually segmenting each customer -> opposite of mass marketing

MM - Product

- Consumers require the right product -> can be 1. an existing product 2. an adaptation of an existing product 3. a newly developed product

MM - Place

- How the product is distributed to the consumers - Has to be available at the right time at the right place

Product life cycle stage 2 - Growth -> description

- If the product is effectively promoted & well received by the market = significant sales growth - cannot last forever - sales will eventually slow down or even stop altogether after a period of time -> because of e.g. : 1. increasing competition 2. technological changes - product is less appealing 3. changes in consumer tastes 4. saturation of the market.

MM - Price

- If too low = consumers might think it's bad quality - If too high = consumers may be unable / unwilling to pay

MM - Promotion

- Telling consumers about the product & persuading them to buy it

What is meant by factory capacity

- The ability of a factory to produce with the present resources & facilities which it commands - e.g. 50 machines in a factory that can operate for 8 hours per day -> capacity : 50 x 8 = 400 hours per day

uses of the product life cycle : Identifying the need for a balanced product portfolio

- a balanced product portfolio allows for a balanced cash flow -> as one product declines, other products are being developed & introduced to take its place -> have products at every stage so positive cash flows of the successful ones can be used to finance the cash deficits of others - factory capacity kept at constant levels -> declining output of goods replaced by increasing demand for new products

Brand - definition - what can it do?

- an identifying symbol, name, image or trademark that distinguishes a product from its competitors. - it can 1. create a powerful image / perception in the minds of consumers -> either negative or positive 2. can give a firm's products a unique identity.

Product Portfolio Analysis

- analysing the range of existing products of a business to help allocate resources effectively between them. - helps business make decisions such as when to 1. launch a new product 2. update an existing product

New Product Development (NPD) - what is it based on? - who is it crucial to? - what does it mainly involve?

- based on attempting to satisfy consumer needs that have been identified through research - crucial to the success of businesses in rapidly changing & dynamic markets - involves research & development - drawbacks 1. expensive 2. many initially developed products will never reach the final market -> waste of time & money

Product life cycle stage 1 - Introduction -> 4Ps

1. Price : - compared to competitors can be - high (skimming) - low (penetration) 2. Promotion : - high levels of informative advertising to make consumers aware of the product's arrival on the market 3. Place : - restricted outlets (e.g. high-class outlets for skimming strategy) 4. Product : - basic model

Product life cycle stage 3 - Maturity / Saturation -> 4Ps

1. Price : - competitive level -> competitors entering market 2. Promotion : - more brand imaging -> increased importance to market the product as different from competitors' 3. Place : - highest geographical range of outlets possible - developing new outlets where possible 4. Product : - extension strategies so new -> models -> colours -> accessories

Product life cycle stage 4 - Decline -> 4Ps

1. Price : - lower prices -> to sell off stock - if product has a small 'cult' following = increase prices 2. Promotion : - limited advertising -> only used to inform of lower prices 3. Place : - eliminate unprofitable outlets 4. Product : - prepare to replace with other products - slowly withdraw from certain markets

Linking the 4Ps with the 4Cs

1. Product = Customer solution 2. Price = Cost to customer 3. Promotion = Communication with customer 4. Place = Convenience to customer

5 benefits of an effective USP

1. allows for effective promotion that focuses on the differentiating feature of the p/s 2. can charge higher prices -> due to exclusive design/service 3. Free publicity from business media reporting on the USP 4. Higher sales than undifferentiated products 5. Customers more willing to be identified with the brand because 'it's different'

Product positioning process

1. identify the features of the product considered to be important to consumers (from market research) which will be different for each product category. -> e.g. : 1. price 2. quality of materials used 3. perceived image 4. level of comfort offered (hotels)

4 factors of customer expectations that the product must meet in order to sell successfully in the long term

1. quality 2. durability 3. performance 4. appearance

4 Ways to develop effective long-term relationships with consumers

1. targeted marketing -> giving each customer the products & services they have indicated (from past purchases) they most need 2. customer service & support -> essential to building customer loyalty (e.g. call centres) 3. providing as much information to customers as possible -> about - product materials / quality / features - service levels 4. using social media -> to track & communicate with customers -> Enterprise Feedback Management software platforms combine a company's internal survey data with trends identified through social media -> to allow businesses to make more accurate decisions - regarding which products to supply to satisfy customers

Product life cycle stage 1 - Introduction -> description

- when the product has just been launched after development & testing. - Sales = -> low to begin with -> may slowly increase

Customer Relationship Management (CRM) - definition - main aim

- using marketing activities to establish successful customer relationships -> so that existing customer loyalty can be maintained - main aim = to keep existing customers

The 4Cs - Customer solution

- what the firm needs to provide to meet the customer's needs & wants

uses of the product life cycle : Identifying how cash flow might depend on the product life cycle

- cash flow = vital to business survival - cash flow in stages : 1. development = - high costs - nothing has been sold so no income 2. introduction = - no more development costs - heavy promotional expenses - unused factory capacity (strains costs) - cash flow improves as sales increase (when this will happen depends on the length of consumer credit being offered) 3. maturity = - most positive cash flow -> high sales -> limited promotion costs -> low spare factory capacity 4. decline = - reduced cash flow -> price reductions -> falling sales

Product portfolio analysis - evaluation - what does effective product portfolio management help achieve? - what must be done for a product in order for it to be profitable? - why is the product considered the most important element of the MM? - what is essential for the product to be successful?

- effective product portfolio management = achievement of marketing objectives - for profitable sales, product must be : 1. developed 2. marketed 3. managed - product = most important because extensive advertising & low prices won't help sales much if the product itself : 1. fails to work 2. is poorly designed 3. looks ugly * but a balanced & integrated marketing mix = essential for product to be successful

What are consumer goods?

- finished products that are sold to & used by consumers

Product life cycle - evaluation - what is it important for? - what are its limitations? - what does it need to be used with for it to be most helpful?

- important for : 1. assessing the performance of the current product range 2. measuring performance of the marketing strategy - limitations : 1. based on past & current data = can't be used to predict the future -> e.g. just because a product's sales has grown a lot recently, doesn't mean it will continue to grow into a long maturity period - sales could crash quickly with no chance of an extension strategy (but sales can also grow & grow) - to effectively assist with product planning = must be used with 1. sales forecasts 2. management

uses of the product life cycle : Assisting with the planning of marketing-mix decisions

- managers have to be aware of the product life cycle e.g. : 1. which stage should the firm lower the price of its product? 2. which phase is advertising most important? 3. when should variations of the product be made? -> these influence decisions on the 4Ps *analysis = final decisions will also depend on 1. competitors' actions 2. state of the economy 3. business' marketing objectives

Consumer durable

- manufactured product that can be reused & is expected to have a reasonably long life - e.g. a car / washing machine

What are industrial goods?

- materials used in the production of other goods - e.g. : 1. machinery 2. manufacturing plants 3. raw materials

Tangible attributes of a product

- measurable features of a product that can be easily compared with other products.

The 4Cs - Convenience to customer

- providing 1. easily accessible pre-sales information & demonstrations 2. convenient locations for buying the product

The 4Cs - Communication with customer

- providing up-to-date & easily accessible two-way communication links with customers to both 1. promote the product 2. gain back important consumer market research information

Product life cycle stage 4 - Decline -> description

- sales decline steadily - Either because 1. no extension strategy has been tried 2. extension strategy has not worked 3. the product is so obsolete that the only option is replacement. 4. newer competitors' products has replaced it (*most common cause) - product is withdrawn either when : 1. it becomes unprofitable 2. it's replacement is ready for the market

Product life cycle stage 3 - Maturity / Saturation -> description

- sales fail to grow but do not decline significantly - saturation of consumer durables markets -> caused by most consumers who want a certain product having already bought one. -> e.g. mobile phones - market grew so quickly but sales plateaued because most consumers already bought one so will only buy one when theirs breaks down / is replaced by newer technology

Intangible attributes of a product

- subjective opinions of customers about a product that cannot be measured or compared easily. - e.g. preferred colour / size - uses effective branding to meet these expectations for a product

Marketing mix

- the 4 key decisions that must be taken in the effective marketing of a product - a range of tactical marketing decisions for a product - made up of the 4Ps : 1. Product 2. Price 3. Promotion 4. Place - the 4Ps must fit together into a coherent & integrated plan

Product positioning - definition - what does it use?

- the consumer perception of a product or service as compared to its competitors. - uses market mapping

What is meant the term 'product'? - definition - what does it include

- the end result of the production process sold on the market to satisfy a customer need - includes : 1. consumer goods 2. industrial goods 3. services - goods = physical existence - services = no physical existence

Product Life Cycle

- the pattern of sales recorded by a product from launch to withdrawal from the market - one of the main forms of product portfolio analysis - records the sales of the product over time - stages : 1. Introduction 2. Growth 3. Maturity / Saturation 4. Decline

Unique Selling Point (USP)

- the special feature of a product that differentiates it from competitors' products - best form of product differentiation

The 4Cs - Cost to customer

- the total cost of the product -> including 1. extended guarantees 2. delivery charges 3. financing costs

Extension strategies - definition - aim - examples of methods

- these are marketing plans to extend the maturity stage of the product before a brand new one is needed. - aim : to lengthen the life of an existing product before the market demands a completely new product - e.g.s 1. selling in new markets (e.g. export markets) 2. repackaging & relaunching the product 3. finding new uses for the product 4. add value (e.g. new features)

3 Main uses of the product life cycle

1. Assisting with planning marketing-mix decisions (e.g. new product launches / price or promotion changes) 2. Identifying how cash flow might depend on the cycle. 3. Recognising the need for a balanced product portfolio.

The 4Cs

1. Customer solution 2. Cost to customer 3. Communication with customer 4. Convenience to customer - puts customers first in marketing decisions -> key feature of customer relationship management.

Product life cycle stage 2 - Growth -> 4Ps

1. Price : - (if successful) higher price than initial penetration price - (for skimming) lower prices 2. Promotion : - convincing consumers to make repeat purchases (e.g. brand identification to help establish consumer loyalty) 3. Place : - growing numbers of outlets in areas with high consumer demand 4. Product : - planning product improvements & developments to maintain consumer appeal