1. A FRAMEWORK for MARKETING MANAGEMENT Kotler KellerCunningham Chapter 10 Setting Product Strategy and Marketing Through the Life Cycle

2. Chapter Questions What are the characteristics of products, and how can they be classified? How can a company build and manage its product mix and product lines? How can companies use packaging, labelling, warranties, and guarantees as marketing tools? © Copyright 2008 Pearson Education Canada 10-2

3. Chapter Questions What are the main stages in developing and managing new products? What factors affect the rate of diffusion and consumer adoption of new products? What marketing strategies are appropriate at each stage of the product life cycle? © Copyright 2008 Pearson Education Canada 10-3

4. Profile: Canadian Marketing Excellence RUMBA GAMES Launched in 1999, Rumba Games has become a leader in the creation and distribution of board games The Mississauga-based company has won numerous awards and attracted international press attention Between 2000 and 2002, the company grew a massive 1907%, making it third on Profit magazines list of fastest growing companies The company continues today to innovate, with games such as Survivor and Read’em, which combines word building skills with poker smarts Creativity and innovation are rife, with personalized game cards and the distribution of games through Chapters and Indigo book stores © Copyright 2008 Pearson Education Canada 10-4

5. Product Anything that can be offered to a market to satisfy a want or need, including goods, services, experiences, events, persons, places, properties, organizations, information, and ideas © Copyright 2008 Pearson Education Canada 10-5

6. Figure 10.1 Components of the Product Offering Attractiveness of the market offering Value-based prices Product features and quality Services mix and quality © Copyright 2008 Pearson Education Canada 10-6

7. Figure 10.2 Five Product Levels © Copyright 2008 Pearson Education Canada 10-7

8. Product Classification Schemes Durability and tangibility Industrial goods Consumer goods © Copyright 2008 Pearson Education Canada 10-8

9. Durability and Tangibility Nondurable goods Services Durable goods © Copyright 2008 Pearson Education Canada 10-9

10. Consumer Goods Classification Convenience Unsought Shopping Specialty © Copyright 2008 Pearson Education Canada 10-10

11. Industrial Goods Classification Materials and parts Supplies/ business services Capital items © Copyright 2008 Pearson Education Canada 10-11

12. Product Systems and Mixes Product system Product mix Product assortment Depth Length Width Consistency © Copyright 2008 Pearson Education Canada 10-12

13. Product Line Analysis Evaluate sales and profits associated with each item in product line Evaluate line positioning relative to competition Decide whether to build, maintain, harvest, or divest © Copyright 2008 Pearson Education Canada 10-13

14. Line Stretching Down-market stretch Up-market stretch Two-way stretch © Copyright 2008 Pearson Education Canada 10-14

15. Line Filling © Copyright 2008 Pearson Education Canada 10-15

16. Packaging: The 5 th P All the activities of designing and producing a product’s container © Copyright 2008 Pearson Education Canada 10-16

17. Packaging and Levels of Material Primary Shipping Secondary © Copyright 2008 Pearson Education Canada 10-17

18. Packaging has been influenced by… Self-service Consumer affluence Company/brand image Innovation opportunity © Copyright 2008 Pearson Education Canada 10-18

19. Functions of Labels Identify Grade Describe Promote © Copyright 2008 Pearson Education Canada 10-19

20. New Product Development What is a “new” product? New-to-the-world products New product lines Additions to existing product lines Improvements and revisions of existing products Repositioned products Cost-reduction products © Copyright 2008 Pearson Education Canada 10-20

21. New Product Success and Failure New product failure is rampant 80% of new Canadian consumer products 90% of new European consumer products Reasons for failure include ignoring unfavourable market research, overestimating market size, marketing mix decision errors, and stronger than anticipated competitive actions © Copyright 2008 Pearson Education Canada 10-21

22. Attributes of Successful New Products Offer a strong relative advantage Reflect better understanding of customer needs and beat the competition to market Exhibit higher performance-to-cost ratios and higher contribution margins Are launched with larger budgets Have stronger top management support © Copyright 2008 Pearson Education Canada 10-22

23. Figure 10.3 New Product Development Decision Process © Copyright 2008 Pearson Education Canada 10-23

24. Step 1: Idea Generation Procter & Gamble’s consumer advisors assist in the new product development process © Copyright 2008 Pearson Education Canada 10-24

25. Step 2: Idea Screening Does the product meet a need and offer superior value? Will it deliver sales volume, sales growth, and profit? What is the likelihood of success? Does the company have the necessary resources to pursue concept? © Copyright 2008 Pearson Education Canada 10-25

26. Step 3: Concept Development and Testing Figure 10.4 Product and Brand Positioning © Copyright 2008 Pearson Education Canada 10-26

27. Concept Testing Rapid prototyping Virtual reality Options for presenting concepts to consumers © Copyright 2008 Pearson Education Canada 10-27

28. Step 4: Marketing Strategy Development Description of target market size, structure, and behaviour Planned product positioning Goals (sales, market share, and profit) © Copyright 2008 Pearson Education Canada 10-28

29. Step 5: Business Analysis Sales, cost, and profit projections Break-even analysis Risk analysis Optimistic Pessimistic Most likely © Copyright 2008 Pearson Education Canada 10-29

30. Step 6: Product Development Can the idea be translated into a technically and commercially feasible product? Prototype development Functional and customer tests Alpha testing Beta testing © Copyright 2008 Pearson Education Canada 10-30

31. Step 7: Methods of Market Testing Sales-wave research Controlled test marketing Test marketing Simulated test marketing © Copyright 2008 Pearson Education Canada 10-31

32. Step 8: Commercialization First entry Parallel entry Late entry © Copyright 2008 Pearson Education Canada 10-32

33. The Consumer Adoption Process Adoption Stages in the Adoption Process Trial Evaluation Interest Awareness © Copyright 2008 Pearson Education Canada 10-33

34. Factors Influencing Adoption Process Communicability Divisibility Compatibility Complexity Relative advantage © Copyright 2008 Pearson Education Canada 10-34

35. Figure 10.5 Adopter Categorization © Copyright 2008 Pearson Education Canada 10-35

36. Marketing Through the Product Life Cycle Products have a limited life Product sales pass through distinct stages Profits rise and fall at different stages Products require different marketing, financial, manufacturing, purchasing, and human resource strategies © Copyright 2008 Pearson Education Canada 10-36

37. Figure 10.6 Product Life Cycle © Copyright 2008 Pearson Education Canada 10-37

38. Stages of the Product Life Cycle PLC Stages Introduction Growth Maturity Decline Low sales High costs per customer Negative profits Innovator customers Few competitors © Copyright 2008 Pearson Education Canada 10-38

39. PLC Objectives and Strategies PLC Stages Introduction Growth Maturity Decline Objective: to create awareness and trial Offer a basic product Price at cost-plus Selective distribution Awareness–dealers and early adopters Induce trial via heavy sales promotion © Copyright 2008 Pearson Education Canada 10-39

40. Stages of the Product Life Cycle PLC Stages Introduction Growth Maturity Decline Rising sales Average costs Rising profits Early adopters, customers Growing competition © Copyright 2008 Pearson Education Canada 10-40

41. PLC Objectives and Strategies PLC Stages Introduction Growth Maturity Decline Objective: maximize market share Offer service, product extensions, warranty Price to penetrate Intensive distribution Awareness and interest–mass market Reduce promotions due to heavy demand © Copyright 2008 Pearson Education Canada 10-41

42. Stages of the Product Life Cycle PLC Stages Introduction Growth Maturity Decline Peak sales Low costs High profits Middle majority customers Stable/declining competition © Copyright 2008 Pearson Education Canada 10-42

43. PLC Objectives and Strategies PLC Stages Introduction Growth Maturity Decline Objective: maximize profit while defending market share Diversify brands/items Price to match/beat competition Intensive distribution Stress brand differences Increase promotions to encourage switching © Copyright 2008 Pearson Education Canada 10-43

44. Stages of the Product Life Cycle PLC Stages Introduction Growth Maturity Decline Declining sales Low costs Declining profits Laggard customers Declining competition © Copyright 2008 Pearson Education Canada 10-44

45. PLC Objectives and Strategies PLC Stages Introduction Growth Maturity Decline Objective: reduce costs and milk the brand Phase out Cut prices Selective distribution Reduce promotions to minimal levels © Copyright 2008 Pearson Education Canada 10-45

46. Product in Decline © Copyright 2008 Pearson Education Canada 10-46

47. For Discussion Is there a new product that you are interested in but haven’t adopted yet? Which characteristics that explain the rate of adoption explain why you haven’t yet purchased the product? © Copyright 2008 Pearson Education Canada 10-47