Chapter 11 Positioning and Differentiating the Market Offering Through the Product Life Cycle

Kotler on Marketing Watch the product life cycle; but more important, watch the market life cycle.

Chapter Objectives In this chapter, we focus on the following questions: How can the firm choose and communicate an effective positioning in the market? What are the major differentiating attributes available to firms? What marketing strategies are appropriate at each stage of the product life cycle? What marketing strategies are appropriate at each stage of the market’s evolution?

Developing and Communicating a Positioning Strategy Value proposition

Table 11.1: Examples of Value Propositions Demand States and Marketing Tasks Company and Product Target Customers Benefits Price Value Proposition Perdue (chicken) Quality-conscious consumers of chicken Tenderness 10% premium More tender golden chicken at a moderate premium price Volvo (station wagon) Safety-conscious “upscale” families Durability and safety 20% premium The safest, most durable wagon in which your family can ride Domino’s (pizza) Convenience-minded pizza lovers Delivery speed and good quality 15% premium A good hot pizza, delivered to your door within 30 minutes of ordering, at a moderate price

Developing and Communicating a Positioning Strategy Positioning According to Ries and Trout Strengthen own current position Grab an unoccupied position De-position Re-position Product ladders Positioning According to Treacy and Wiersema Value disciplines Product leader Operationally excellent firm Customer intimate firm

Developing and Communicating a Positioning Strategy Treacy and Wiersema propose that a business should follow four rules for success Become best at one of the three value disciplines. Achieve an adequate performance level in the other two disciplines. Keep improving one’s superior position in the chosen discipline so as not to lose out to a competitor. Keep becoming more adequate in the other two disciplines, because competitors keep raising customers’ expectations.

Developing and Communicating a Positioning Strategy Positioning: How many ideas to promote? Unique selling proposition Four major positioning errors Underpositioning Overpositioning Confused positioning Doubtful positioning

Discussion Question Can you think of any companies that market the same product or service offering to multiple segments using different strategies? Are the different segments being offered different value propositions?

Figure 11.1: Perceptual Map

Developing and Communicating a Positioning Strategy Theme park’s positioning possibilities: Attribute positioning Benefit positioning Use or application positioning User positioning Competitor positioning Product category positioning Quality or price positioning Which Positioning to Promote?

Table 11.2: Method for Competitive-Advantage Selection (1) (2) (3) (4) (5) Competitive Advantage Company Standing Competitor Standing Importance of Improving Standing (H-M-L)* Affordability and Speed (H-M-L) Technology 8 L Cost 6 H M Quality Service 4 3 H=high, M=medium, L=low See text for complete table

Adding Further Differentiation Differentiation criteria: Important Distinctive Superior Preemptive Affordable Profitable

Adding Further Differentiation Exceed customer expectations with a three-step process Defining the customer value model Building the customer value hierarchy Basic Expected Desired Unanticipated Deciding on the customer value package

Figure 11.2: The BCG Competitive Advantage Matrix Differentiation Tools Figure 11.2: The BCG Competitive Advantage Matrix

Table 11.3: Differentiation Variables Product Services Personnel Channel Image Form Ordering ease Competence Coverage Symbols Features Delivery Courtesy Expertise Media Performance Installation Credibility Atmosphere Conformance Customer training Reliability Events Durability Customer consulting Responsiven-ess See text for complete table

Differentiation Tools Product Differentiation Form Features

Table 11.4: Measuring Customer Effectiveness Value Company Cost Customer Value Customer Value/Customer Cost Feature (a) (b) (c=b/a) Rear-window defrosting $100 $200 2 Cruise control 600 1 Automatic transmission 800 2,400 3

Differentiation Tools Performance Quality Conformance Quality Durability Reliability Reparability Style Design: The Integrating Force Services Differentiation Ordering Ease

Differentiation Tools Delivery Quick response system Installation Customer Training Customer Consulting Maintenance and Repair HP’s online support page

Discussion Question Many e-commerce ventures fail because of distribution problems in the so-called “last mile” (the local distribution portion of shipping of online purchases). Can a marketing plan help offset some of these potential pitfalls?

Differentiation Tools Miscellaneous Services Personnel Differentiation Competence Courtesy Creditability Reliability Responsiveness Communication

Differentiation Tools Channel Differentiation Image Differentiation Identity Image Symbols, Colors, Slogans, Special Attributes Physical plant Events and Sponsorship Using Multiple Image-Building Techniques

Discussion Question Which differentiation tool would be most useful for a dot.com startup? Why?

Product Life-Cycle Marketing Strategies To say that a product has a life cycle asserts four things Products have a limited life. Product sales pass through distance stages, each posing different challenges, opportunities, and problems to the seller. Profits rise and fall at different stages of the product life cycle. Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life-cycle stage.

Figure 11.4: Cost Product Life-Cycle Patterns Product Life-Cycle Marketing Strategies Figure 11.4: Cost Product Life-Cycle Patterns

Figure 11.5: Style, Fashion, and Fad Life Cycles Product Life-Cycle Marketing Strategies Figure 11.5: Style, Fashion, and Fad Life Cycles

Product Life-Cycle Marketing Strategies Marketing Strategies: Introduction Stage The Pioneer Advantage Inventor Product pioneer Market pioneer Figure 11.6: Long-Range Product Market Expansion Strategy (P = Product; M = Market)

Product Life-Cycle Marketing Strategies Marketing Strategies: Growth Stage Improve product quality and add new product features and improved styling Add new models and flanker products Enter new market segments Increase distribution coverage and enter new distribution channels Shift from product-awareness advertising to product-preference advertising Lower prices to attract next layer of price-sensitive buyers

Product Life-Cycle Marketing Strategies Marketing Strategies: Maturity Stage Market Modification Expand number of brand users by: Converting nonusers Entering new market segments Winning competitors’ customers Convince current users to increase usage by: Using the product on more occasions Using more of the product on each occasion Using the product in new ways

Product Life-Cycle Marketing Strategies Product modification Quality improvement Feature improvement Marketing-Mix Modification Prices Distribution Advertising Sales promotion Personal selling Services

Product Life-Cycle Marketing Strategies Marketing Strategies: Decline Stage Increase firm’s investment (to dominate the market and strengthen its competitive position) Maintain the firm’s investment level until the uncertainties about the industry are resolved. Decrease the firm’s investment level selectively by dropping unprofitable customer groups, while simultaneously strengthening the firm’s investment in lucrative niches Harvesting (“milking”) the firm’s investment to recover cash quickly Divesting the business quickly by disposing of its assets as advantageously as possible.

Product Life-Cycle Marketing Strategies Product Life-Cycle Concept: Critique Market evolution

See text for complete table Table 11.5: Summary of Product Life-Cycle Characteristics, Objectives, and Strategies Introduction Growth Maturity Characteristics Sales Low sales Rapidly rising sales Peak sales Costs High cost per customer Average cost per customer Low cost per customer Profits Negative Rising profits High profits Customers Few Growing Number Stable number beginning to decline See text for complete table

Market Evolution Growth Maturity Diffused-preference market options A single-niche strategy A multiple-niche strategy A mass-market strategy Growth Market-growth stage options Single-niche strategy Mass-market strategy Multiple-niche strategy Maturity

Market Evolution Dynamics of Attribute Competition Decline An Example: The Paper-Towel Market Dynamics of Attribute Competition Customer expectations are progressive Approaches to discover new attributes: Customer-survey processes Intuitive processes Dialectical processes Needs-hierarchy process