1. Review MKT 102
HHU Spring 2015

3. Levels of Product and Services
What Is a Product?
Levels of Product and Services
Note to Instructor
Core benefits represent what the buyer is really buying.
Actual product represents the design, brand name, and packaging that delivers the core benefit to the customer.
Augmented product represents additional services or benefits of the actual product.
It is a good idea for the students to bring in some products so the class can discuss the levels of product and services. Products including Gatorade, toothpaste, facial moisturizer or cosmetics work well in this discussion. You can often find augmented product features on the product’s Web sites including games, features and support.

4. Supply Chains and the Value Delivery Network
03/03/11
Supply Chain Partners
Upstream partners include raw material suppliers, components, parts, information, finances, and expertise to create a product or service
Downstream partners include the marketing channels or distribution channels that look toward the customer 4

5. Product and Service Classifications
What Is a Product?
Product and Service Classifications
Consumer products are products and services for personal consumption
Classified by how consumers buy them
Convenience products
Shopping products
Specialty products
Unsought products

6. Nature and Characteristics of a Service
Services Marketing
Nature and Characteristics of a Service
Note to Instructor
Intangibility refers to the fact that services cannot be seen, tasted, felt, heard, or smelled before they are purchased.
Inseparability refers to the fact that services cannot be separated from their providers.
Variability refers to the fact that service quality depends on who provides the services as well as when, where, and how they are provided.
Perishability refers to the fact that services cannot be stored for later sale or use.

7. Product and Service Decisions
Individual Product and Service Decisions
Brand is the name, term, sign, or design—or a combination of these—that identifies the maker or seller of a product or service Brand equity is the differential effect that the brand name has on customer response to the product and its marketing
Note to Instructor
Discussion Questions
What brands do you tend to purchase consistently? Why?
This discussion should lead to the consumer benefits of brands including quality and consistency. It is interesting to now ask students what the benefits might be for the seller of having a strong brand. This will include segmentation, positioning, and the ability to communicate product features

8. Product and Service Decisions
Product Line Decisions
Product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges

9. Product and Service Decisions
Product Line Decisions
Product line length is the number of items in the product line
Line stretching
Line filling
Note to Instructor
Product line stretching is when a company lengthens its product line beyond its current range.
Downward product line stretching is used by companies at the upper end of the market to plug a market hole or respond to a competitor’s attack.
Upward product line stretching is by companies at the lower end of the market to add prestige to their current products.
Combination line stretching is used by companies in the middle range of the market to achieve both goals of upward and downward line stretching.
Product line filling occurs when companies add more items within the present range of the line.

10. Product Life-Cycle Strategies
Note to Instructor
Discussion Question
Name a product at each stage of the PLC.
This concept is very new to students. See if they can identify products or product categories that are in each stage of the model. Introduction might include online movie viewing software, growth might include MP3 players, maturity might include bottled water, and decline could include soda (actually in a decline) or videotape players.

11. Product Life-Cycle Strategies
Product development
Sales are zero and investment costs mount
Introduction
Slow sales growth and profits are nonexistent
Growth
Rapid market acceptance and increasing profits.
Maturity
Slowdown in sales growth and profits level off or decline
Decline
Sales fall off and profits drop

12. Product Life-Cycle Strategies
Maturity Stage Modifying Strategies
Market modifying
Product modifying
Marketing mix modifying
Note to Instructor
This link is for 1000 Uses of Glad Web site. It is described below, and in the book, as a way to modify the product.
In modifying the market, the company tries to increase the consumption of the current product. It may look for new users and new market segments. The manager may also look for ways to increase usage among present customers. The company might also try modifying the product—changing characteristics such as quality, features, style, or packaging to attract new users and to inspire more usage. It can improve the product’s styling and attractiveness. It might improve the product’s quality and performance—its durability, reliability, speed, taste.

13. New-Product Development Process
Major Stages in New-Product Development

14. New-Product Development Process
Idea Generation
Idea generation is the systematic search for new-product ideas
Sources of new-product ideas
Internal
External
Note to Instructor
Discussion Question
In groups of four come up with one ideas for a new products.
It might be helpful if you assign each group a category including kitchen products, office supplies, laptop accessories, dessert products, bathroom accessories, children’s toys, baby products, etc. Students will realize this is very difficult.

15. New-Product Development Process
Idea Screening
Identify good ideas and drop poor ideas
R-W-W Screening Framework:
Is it real?
Can we win?
Is it worth doing?

16. New-Product Development Process
Concept Development and Testing
Product idea is an idea for a possible product that the company can see itself offering to the market Product concept is a detailed version of the idea stated in meaningful consumer terms Product image is the way consumers perceive an actual or potential product

17. New-Product Development Process
Marketing Strategy Development
Marketing strategy development refers to the initial marketing strategy for introducing the product to the market
Marketing strategy statement includes:
Description of the target market
Value proposition
Sales and profit goals

18. New-Product Development Process
Marketing Strategy Development
Business analysis involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives

19. New-Product Development Process
Marketing Strategy Development
Product development involves the creation and testing of one or more physical versions by the R&D or engineering departments
Requires an increase in investment
Note to Instructor
Many companies use their employees for product testing. Students might have worked at various consumer packaged goods companies, perhaps Quaker Oats, where they had to test cereal every day at lunch.
The text gives the example:
At Gillette, almost everyone gets involved in new-product testing. Every working day at Gillette, 200 volunteers from various departments come to work unshaven, troop to the second floor of the company’s gritty South Boston plant, and enter small booths with a sink and mirror. There they take instructions from technicians on the other side of a small window as to which razor, shaving cream, or aftershave to use. The volunteers evaluate razors for sharpness of blade, smoothness of glide, and ease of handling. In a nearby shower room, women perform the same ritual on their legs, underarms, and what the company delicately refers to as the “bikini area.” “We bleed so you’ll get a good shave at home,” says one Gillette employee.

20. New-Product Development Process
Marketing Strategy Development
Test marketing is the stage at which the product and marketing program are introduced into more realistic marketing settings Provides the marketer with experience in testing the product and entire marketing program before full introduction
Note to Instructor
Here is a list of the top 10 test markets
1. ALBANY—SCHENECTADY—TROY, NY
2. ROCHESTER, NY
3. GREENSBORO—WINSTON—SALEM—-HIGH POINT, NC
4. BIRMINGHAM, AL
5. SYRACUSE, NY
6. CHARLOTTE—GASTONIA—ROCK HILL, NC/SC
7. NASHVILLE, TN
8. EUGENE—SPRINGFIELD, OR
9. WICHITA, KS
10. RICHMOND—PETERSBURG, VA
Source: Acxiom Corp., June 2004

21. New-Product Development Process
Marketing Strategy Development
Commercialization is the introduction
of the new product
When to launch
Where to launch
Planned market
rollout

22. New-Product Pricing Strategies
Market-skimming pricing
Market- penetration pricing

23. New-Product Pricing Strategies
Market-skimming pricing is a strategy with high initial prices to “skim” revenue layers from the market
Product quality and image must support the price
Buyers must want the product at the price
Costs of producing the product in small volume should not cancel the advantage of higher prices
Competitors should not be able to enter the market easily

24. New-Product Pricing Strategies
Market-penetration pricing sets a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share
Price sensitive market
Inverse relationship of production and distribution cost to sales growth
Low prices must keep competition out of the market
Note to Instructor
The text gives an excellent example of IKEA in China:
When IKEA first opened stores in China in 2002, people crowded to take advantage of the freebies—air conditioning, clean toilets, and even decorating ideas.
Chinese consumers are famously frugal. When it came time to actually buy, they shopped instead at local stores just down the street that offered knockoffs of IKEA’s designs at a fraction of the price.
So IKEA slashed its prices in China to the lowest in the world.
The penetration pricing strategy worked. IKEA now captures a 43 percent market share of China’s fast-growing home wares market.

25. Channel Behavior and Organization
03/03/11
Channel Behavior and Organization
Channel Behavior
Marketing channel consists of firms that have partnered for their common good with each member playing a specialized role
Channel conflict refers to disagreement over goals, roles, and rewards by channel members
Horizontal conflict
Vertical conflict
Note to Instructor
Horizontal conflict is conflict among members at the same channel level whereas vertical conflict is conflict between different levels of the same channel. 25

26. Channel Behavior and Organization Conventional Distributions Systems
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Channel Behavior and Organization
Conventional Distributions Systems
Conventional distribution systems consist of one or more independent producers, wholesalers, and retailers. Each seeks to maximize its own profits, and there is little control over the other members and no formal means for assigning roles and resolving conflict. 26

27. Channel Behavior and Organization Vertical Marketing Systems
03/03/11
Channel Behavior and Organization
Vertical Marketing Systems
Vertical marketing systems (VMSs) provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system and consist of:
Corporate marketing systems
Contractual marketing systems
Administered marketing systems 27

28. Channel Behavior and Organization Vertical Marketing Systems
03/03/11
Vertical Marketing Systems
Corporate vertical marketing system integrates successive stages of production and distribution under single ownership
Note to Instructor
The text gives Zara as an example:
Zara has control over almost every aspect of the supply chain, from design and production to its own worldwide distribution network.
Zara makes 40 percent of its own fabrics and produces more than half of its own clothes, rather than relying on a hodgepodge of slow-moving suppliers.
New designs feed into Zara manufacturing centers, which ship finished products directly to 1,161 Zara stores in 68 countries, saving time, eliminating the need for warehouses, and keeping inventories low.
Effective vertical integration makes Zara faster, more flexible, and more efficient than international competitors such as Gap, Benetton, and H&M. 28

29. Channel Behavior and Organization Vertical Marketing Systems
03/03/11
Channel Behavior and Organization
Vertical Marketing Systems
Contractual vertical marketing system consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone. The most common form is the franchise organization. 29

30. Channel Behavior and Organization Vertical Marketing Systems
03/03/11
Channel Behavior and Organization
Vertical Marketing Systems
Franchise organization links several stages in the production distribution process
Manufacturer-sponsored retailer franchise system
Manufacturer-sponsored wholesaler franchise system
Service firm-sponsored retailer franchise system
Note to Instructor
Every year entrepreneur.com lists the top franchises. This link brings you to their Web site. The top 10 Franchises for 2008 are, in order:
7-Eleven Inc.
Subway
Dunkin' Donuts
Pizza Hut
McDonald's
Sonic Drive In Restaurants
KFC Corp.
InterContinental Hotels Group
Domino's Pizza LLC
RE/MAX Int'l. Inc. 30

31. Channel Behavior and Organization Vertical Marketing Systems
03/03/11
Channel Behavior and Organization
Vertical Marketing Systems
Administered vertical marketing system has a few dominant channel members without common ownership. Leadership comes from size and power. 31

32. Channel Design Decisions Identifying Major Alternatives
03/03/11
Channel Design Decisions
Identifying Major Alternatives
Note to Instructor
In any channel producers and intermediaries need to agree on price policies, conditions of sale, territorial rights, and services provided by each party. 32

33. Public Policy and Distribution Decisions
03/03/11
Public Policy and Distribution Decisions
Exclusive distribution is when the seller allows only certain outlets to carry its products
Exclusive dealing is when the seller requires that the sellers not handle competitor’s products
Exclusive territorial agreements are where producer or seller limit territory
Tying agreements are agreements where the dealer must take most or all of the line
Note to Instructor
Producers of a strong brand sometimes sell it to dealers only if the dealers will take some or all of the rest of the line. This is called full-line forcing. Such tying agreements are not necessarily illegal, but they do violate the Clayton Act if they tend to lessen competition substantially. The practice may prevent consumers from freely choosing among competing suppliers of these other brands. 33

34. The Promotion Mix Major Promotion Tools Note to Instructor
Discussion Question
Which of these do you think is most effective?
They will realize that different tools are better for different targets, products, stages in the product life cycle, and goals of the marketer.

35. The Promotion Mix
Major Promotion Tools
Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor
Broadcast
Print
Internet
Outdoor

36. The Promotion Mix
Major Promotion Tools
Sales promotion is the short-term incentives to encourage the purchase or sale of a product or service
Discounts
Coupons
Displays
Demonstrations
Note to Instructor
Discussion Question
What sales promotions have you seen in the last two months?
They will often mention similar coupon books, fast food contests, and demonstrations in stores.

37. The Promotion Mix
Major Promotion Tools
Public relations involves building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events
Press releases
Sponsorships
Special events
Web pages
Note to Instructor
This link is to McDonald’s Web page for press releases. Before clicking you might ask the students what kind of information McDonald’s might issue press releases about. You can then see the press releases which talk about finances, marketing strategies, and organizational issues.

38. The Promotion Mix
Major Promotion Tools
Personal selling is the personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships
Sales presentations
Trade shows
Incentive programs

39. The Promotion Mix
Major Promotion Tools
Direct marketing involves making direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships—through the use of direct mail, telephone, direct-response television, , and the Internet to communicate directly with specific consumers
Catalog
Telemarketing
Kiosks
Note to Instructor
This Web link is to boston.com—a regional news Web site. This site usually has extensive banner advertising and sponsorships. A good question to ask students is “Why is this considered direct marketing.” Tell them that it is targeted, expects an immediate response, and is measurable.