BMGT 411: Week 7

Kotler Chapter 10, 11, 12Wood Chapters 4, 7

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BMGT 411: Chapter 10

Marketing Through the Life Cycle

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Ford Fiesta Blogger Test Drive Page 143

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Chapter Questions

• What are the characteristics of products and how do marketers classify products?

• How can companies differentiate products?

• How can a company build and manage its product mix and product lines?

• How can companies use packaging, labeling, warranties, and guarantees as marketing tools?

• What strategies are appropriate for new product development and through the product life cycle?

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What is a Product?

• A product is anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.

• Examples: Starbuck’s 3rd Place. The place between someone’s work and home. Starbuck’s coffee is a product, but the Starbuck’s experience is a product as well, and include comfortable cafe’s, free wifi, and service that is beyond typical fast food and beverage.

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Figure 10.1 Five Product Levels Page 144

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Five Product Level Example: Kohl’s

• Core Benefit: Clothes

• Basic Product: Clothing and home goods in a variety of styles and sizes

• Augmented Product: Clothing and home goods, with weekly and seasonal specials, customers will get excited about savings

• Potential Product: Any future updates Kohl’s would do in the future to exceed customer expectations (More online offerings, same day shipping, etc)

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Product Classification Schemes Page 145

Durability

Tangibility

Use

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Product Classifications

Nondurable goods: tangible goods consumed in one or a few uses. Large availability, smaller markups, induce trial and build preference

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Product Classifications

Durable goods: tangible goods like appliances that survive many uses, higher margins, more service required, and also require more seller guarantees

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Product Classifications

Services: intangible, inseparable, variable products that require more quality control, credibility, and adaptability

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Consumer Goods Classifications• Convenience Goods: Purchased frequently,, and with minimal effort (often self service)

• Ex: Soft Drinks

• Shopping Goods: Consumers compare on the basis of suitability, price, and style

• Ex. Appliance

• Speciality Good: Unique characteristics or brand identification for which enough buyers make a special purchasing effort

• Ex. Cars

• Unsought Goods: Needs, that the customer does not normally think about buying

• Ex. Smoke detectors, first aid kits

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Industrial Goods Classification

• Materials and parts: Go into the final finished product

• Ex. Wheat delivered to make cereal

• Capital items: Equipment to make final product

• Ex. Oven to roast cereal

• Supplies/business services: Short term items that help making the final product, like office supplies and consulting fees

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Product Differentiation

• Product form

• Features

• Customization

• Performance

• Conformance

• Durability

• Reliability

• Repairability

• Style

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Product Differentiation

Form: Products size, shape, or physical structure

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Product Differentiation

Features: Supplement the products basic function, often deployed to users in regular cycles, to increase upgrades and excitement in the product

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Product Differentiation

Customization: A company meets each customers requirements on a mass basis, by individually designing products, services, or programs.

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Product Differentiation

Style: The look and feel of a product to a buyer. Often a key item in creating demand for a product. Style often depends on target market being sought.

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Service Differentiation

• Ordering ease

• Delivery

• Installation

• Customer training

• Customer consulting

• Maintenance and repair

• Returns

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Zappos.com

• Differentiation is based on service:

• Ease of ordering

• Customer service

• Ease of returns

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Product-Mix Pricing

• Product-line pricing: Varying prices in a line of products: Ex. Soda

• Optional-feature pricing: Price of product plus options: Ex. Cars

• Captive-product pricing: Introduction products and the price of ancillary or captive products: Ex. Razors, Low intro price, and high price of blades

• Two-part pricing: Fixed fee plus variable pricing: Ex. Cell Phone + Data Plans

• By-product pricing: Price of by products in the production of the main product: Ex. Meats

• Product-bundling pricing: Price for a bundle of products or service: Ex. Comcast Triple Play

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Ingredient Branding

Creating brand equity for the materials or components inside of a finished product, to increase demand and create higher margins based on perceived quality

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• Packaging, sometimes called the 5th P, is all the activities of designing and producing the container for a product

• Sometimes, packaging is just as important as the product itself

• Packaging is the customers first experience with the product

• It must identify the brand, convey descriptions and persuasive information, facilitate product transportation, and aid in product consumption

• Can you think of any iconic brand packaging?

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Altoids Packaging

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Mio Packaging

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Tropicana Packaging

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New Product Development Process

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Ways to Find Great New Ideas

• Run informal sessions with customers

• Allow time off for technical people to putter on pet projects

• Make customer brainstorming a part of plant tours

• Survey your customers

• Undertake “fly on the wall” research to customers

• Social Media Crowd sourcing: Gathering popular ideas directly from customers

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Concept Testing

Concept Testing: Who will use this product? What benefit will it provide? When will they use it?

• Need level

• Perceived value

• Purchase intention

• User targets, purchase occasions, purchasing frequency

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Prototype Testing

• Alpha testing: Testing within the firm

• Beta testing: Testing with a group of customers

• Market testing: Testing in a few markets to gauge customer acceptance, sales forecasts, identify any logistic issues

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True Runner (Dick’s Sporting Goods) Concept: Shady Side

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True Runner (Dick’s Sporting Goods) Cranberry Township, PA

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What is Adoption?

Adoption is an individual’s decision to become a regular user of a product.

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Stages in Adoption Process

Awareness

Interest

Evaluation

Trial

Adoption

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Figure 10.4 Adopter Categorization on the Basis of Relative time of Adoption Technology is speeding up the

life cycles

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Figure 10.4 Adopter Categorization on the Basis of Relative time of Adoption Technology is speeding up the

life cycles

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Product Life Cycle Marketing

• Introduction and Innovator Stage: High marketing costs and low profit, due to getting awareness out to customers and driving trial

• Growth: Improve quality, reduce cost, add features to maximize profitability. Can become a market leader in this stage, increasing profitability in the maturity stage

• Maturity: Longest section of life cycle. This is where targeted marketing takes over from broad based marketing to increase users at a reduced marketing cost.

• Decline: Choice to let the brand die, or innovate to create a new product or service based on new needs, technology, etc. Declining products should not be invested in unless it is to be relaunched

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Wigle Whiskey

• What is the product of Wigle Whiskey?

• Is is a good? Or an experience?

• What stage of the life cycle is Wigle in?

• Who should it target at this stage to grow?

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BMGT 411: Chapter 11

Designing and Managing Services

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Chapter Questions?

• How do we define and classify services and how do they differ from goods?

• What are the new services realities?

• How can we improve service quality?

• How can goods marketers improve customer support services?

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What is a Service?A service is any act of performance that one party can offer another that is essentially intangible and does not result in the ownership of anything; its production may or may not be tied to a physical product.

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Services are Everywhere

• Think of some companies that provide a service

• What do they provide?

• How is success measured?

• Where is the service delivered?

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Categories of Service Mix

• Pure tangible good: A tangible good with no accompanying service provided

• Ex: Toothpaste

• Good with accompanying services: A good that is accompanied by one or more service

• Ex. smartphone (good) with data plan (service)

• Hybrid: An offering with equal parts goods and services

• Ex. Restaurant or Grocery Store

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Categories of Service Mix

• Major Service with Accompanying minor Goods or Service: A major service with additional services or goods

• Ex. Airline Service with Drink Service during flight

• Pure Service: Primarily an intangible service being provided, with no goods included

• Ex. Dentists, Childcare, etc

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Figure 11.1 Continuum of Evaluation for Different Types of Products

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Qualities of Goods and Services

• Search Qualities: The buyer can usually evaluate even before purchases and compare

• Ex. Clothing, Food, etc

• Experience Qualities: Characteristics the buyer can evaluate after it is purchased

• Ex. Haircut, Vacations

• Credence Qualities: The buyer can find it hard to evaluate even after consumption

• Ex. Auto Repair, Dental Work, Medical

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Distinctive Characteristics of Services

Intangibility

Inseparability

Variability

Perishability

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Intangibility

• Services cannot be seen, tasted, felt, heard, or smelled

• Service firms try to demonstrate their service by physical evidence

• Ex. Colleges will publish employment statistics, etc to make the intangible seem tangible

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Inseparability

• Services are usually produced and consumed simultaneously vs goods produced elsewhere

• Provider/Client interaction is a special feature of service marketing

• More training may be involved to make customer service outstanding since it is so visible

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Variability

• Services are highly variable because the quality depends on who provides them

• Good hiring and training (Starbucks)

• Standardize service performance (Zappos)

• Monitor customer satisfaction (Most retailers)

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Perishability

• Services cannot be stored, so perishability can be a problem when demand fluctuates

• Off- Peak Pricing (Sonic Happy Hour)

• Cultivating non-peak demand (McDonald’s Breakfast)

• Offering complimentary services as alternatives (ATM Banking Vs. Tellers)

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New Service Realities

• Customer Empowerment: Social Media has enabled customers to broadcast a bad experience to a very wide audience

• Most companies have their customer service departments monitoring social media for negative feedback, and responding almost instantly

• Led by @comcastcares and @frankelliason

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Figure 11.2 Root Causes of Customer Failure

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• Redesign processes and redefine customer roles to simplify service encounters

• Incorporate the right technology to aid employees and customers

• Create high-performance customers by enhancing their role clarity, motivation, and ability

• Encourage customer citizenship where customers help customers

Solutions to Customer Failures

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Best Practices in Service Companies

• Strategic Concept: Customer service is behind everything the company does

• Top-Management Commitment: Management commitment to putting service performance along with financial performance as a quality metric

• High Standards: Setting very high quality standards to avoid the most customer disruptions

• Ex. a 98% errors rate with an electrical supplier would result in no electricity for 8 days

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Best Practices in Service Companies

• Self-Service (Better Options) Technologies: Providing customers with different levels of comfort to use technology to increase service (Airline self check in, grocery store self-checkout, ATMs, Online Banking)

• Profit Tiers: Customizing service levels based on profitability of the customers

• Ex. AMEX Black Card, Lincoln Concierge

• Monitoring Systems

• Satisfying Customer Complaints

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Figure 11.3: Service Quality Model

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• Gap between consumer expectation and management expectation

• The customer may want something entirely different than what is being delivered

• Gap between management perception and service quality specification

• Ex: Being very clear on specifications, speed in minutes, etc

• Gap between service quality specifications and service delivery

• Often a result of poor training

Managing Customer Expectations

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• Gap between service delivery and external communications

• Ex. Toys R Us Foursquare Check in Discount

• Gap between perceived service and expected service

• Occurs when the customer misperceives the service quality

Managing Customer Expectations

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Determinants of Service Quality

1.Reliability

2.Responsiveness

3.Assurance

4.Empathy

5.Tangibles

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Chapter 7: Marketing Plan Handbook

• What pricing strategy would you recommend for Wigle?

• Is they way you are positioning the product affect the pricing strategy?

• Is the stage of the lifecycle affect your pricing recommendation?

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BMGT 411: Preparing for Week 8

• Test #2

• Chapters 5-11 Kotler

• Wood Material will not be covered in test #2

• Project Check in - You should be pretty far along

• Read Kotler Chapters 12, Wood Chapter 7

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