Chapter 4: product

Powerpoint: chapter 4.1

Powerpoint: chapter 4.2

Powerpoint: chapter 4.3

Powerpoint: chapter 4.4

Chapter 5: place

Powerpoint: chapter 5.1

Powerpoint: chapter 5.2

Chapter 6: price

Chapter 7: promotion

A.What is a product

B. Product categories

C. Product mix

D. Brand decisions

E. Product features

F. Product development

G. Product life cycle

4 classes:

4.1, 4.2, 4.3 and 4.4

4.1

4.2

4.3

4.4

F. Product development

Innovation

Market opportunities

Product development proces

Success or failure?

Case: Mercedes Benz

G. Product life cycle

Introduction

Growth

Maturity

Decline

F.

Innovation

Market opportunities

Product development proces

Success or failure?

Case: Mercedes Benz

Up to you

In pairs, 5’

Think of a newly developed product (innovation)

Was it created because there was a need?

An other reason?

Is it somehow a creative breakthrough?

Due to

Changes in consumer needs

New technologies

Mobile phone => wifi => smart phone

Competitive force

Samsung vs. Apple

Financial risks

Chances to fail are quite big

Even despite extended market research

Growth

Continuity (survival)

Profit

Tackle PLC

Make use of overproduction

Meet the changing needs of the consumers

Advantages innovation vs. Me-too

Early mover advantages: large brand awareness and knowledge

MP3 = iPod

Cost leadership because of large production volume

Registered innovation => production start long before competition

Eg. Senseo pads (ended in 2006)

Eg. Nestlé capsules (ended in 2012)

Nestlé lost an important court case in 2012 against a small British coffee manufacturer (Dualit)

Imitators

Advantages

No R&D costs

Steal part of the market/segmented targets

Disadvantages

Hard to conquer part of the market (‘follower’)

Sometimes only able to take part in the success by means of producing private labels

When do companies innovate?

They offer something rare/hard to find

Only to be found in a unique location

They improve the existing service/product

Locate problem => improve

They create a totally new product

Already in the USA

Practically unknown in the

East of Europe

Step 1: idea generation

Consumers

External developments

Competition

Technological developments

Internal sources (staff, sales managers)

Own research

2. Concept refinement and opportunity assessment

Evaluate the various ideas

How attractive is the potential market

How well can we manage this?

Product evaluation matrix

Various criteria, differences in rating

4. Business case

Turn idea into concrete concept

List product benefits

Define target audience

Concept testing

Make a prototype

Checklist

Check purchase intentions

Example: Google glasses, biochip

5 & 6. Market and customer research

Based on research, develop marketing strategy

USP

Price setting

Place – distribution channels

Communication goals

Budget – financial planning

LT goals for turnover and profit

Google Glass : “sometime this year, £ 1,000, stock (?)

7. Go/ No go

Full financial analysis

Estimation of costs and turnover

Estimation of break-even point

8. Product development

Concept becomes real product

Testing of the prototypes

Functional tests in the company

Consumer tests

9. Launch

Introduce the new product on the market

Good marketing!

Check out how the innovation is accepted by

Consumers

Distrbutors

Check out who they are

Innovators

Early adopters

Extremely popular

Michael Dell’s invitation:

for die-hards only

Failure?

Not a unique concept

Bad or insufficient marketing support

Inferior quality

Bad timing

Other reasons: product features, location, …

The goal:

Development of car running on hydrogen

Fast acceleration

150 km/h

Reach: 450 km

The segment:

Cheaper, 2nd family car: more compact and city-friendly

Middle class sports car for young drivers

‘Green’ car for those who want less pollution, basic transport and low fuel costs

SUV for higher segment which wants bigger car but regrets the high fuel costs

Checklist consumer panel:

Do you understand the concept of a hydrogen engine?

Do you believe in the promised achievements of the car?

What are the advantages of this car when compared to a normal car?

Which improvements can you think of?

What is the ideal price setting according to you?

Who in your family would drive your car? To what purpose?

Would you consider buying a car like this?

Result checklist

An effective, very compact electric car that runs on hydrogen.

Fun to drive, for 4 passengers

Practical and reliable means of transport with hardly any pollution

Can reach up to 150 km/h

And doesn’t need to be charged (as compared to cars with an electric battery system)

Ideal price all-inclusive is 25,000 euro

Development of marketing strategy

Target market is jong, highly educated, with an income above average-high

Couples or small families

Looking for a practical and environment-friendly way of transport

Image to be created:

fuel-efficient,

nicer to drive,

less polluting

has less limits when compared to hybrid or electric cars

Develop strategy:

1st year: sell 100,000 cars, loss: max. 15 mio. Euro

2nd year: sell 120,000 cars, profit: 25 mio. Euro

Three colours

Airco is optional

Price setting: 20,000 Euro

15 % margin for dealers

Advertising budget: 20 mio. Euro

Half for regional advertising

Half for national advertising

Focus on: fuel-efficiency and driving pleasure

Strategy LT:

3% of total car market

Car quality needs to be high as of day 1

Constant improvements

Price will be increased in year 2 and 3 if possible (competition)

Total advertising budget: increase of 10% every year

Up to you

Brainstorm about a new product for one of the following sectors

Health, wellness or lifestyle

Fun (event, culture, leisure time)

Retrospective (bring back something from the past)

Check the feasability

Depict the target audience

Describe your new product

G.

Every product goes through the PLC

Duration depends on type of product

Technological product: 1 year

Others: can last for more than 100 years…

Every phase asks for a different marketingapproach

Every phase: different turnover

Turnover:

Growing slowly

Facilitate adoption

Restraints:

Insufficient manufacturing capacity

Technical problems

Market is fluid, predictions are difficult

Examples: Dixan Megaperls, Omo, Renault Cactus, augmented reality

Augmented

reality

Costs

Costs > return

R&D

High manufacturing costs

Low sales volume

High advertising costs

No profit yet; financial loss only

Examples: 3D television, holographic projection

Competition:

Hardly any

Marketing objectives

In case of new product category: explain

Create brand awareness

Stimulate trial

Work on distribution network

Product management

Hardly any variation/choice

Mostly 1 type only

Competitors will follow soon if they smell success

Price setting:

Price skimming

Penetration pricing

Normal price setting

Communication strategy:

Depends on budget and size of organization

Introduction new product category

Make sure brand name becomes well-known (brand awareness)

Not just a pen, but a legacy: Montblanc

Sales promotions

Distribution strategy:

You get a chance to be introduced?

Strict conditions

Negotiate

Fight for shelf space

Turnover grows

Evolution of costs:

Manufacturing costs decrease

Economy of scale: more production => lower costs

Learning by doing

Profit grows

Competition grows too (me-too players)

Marketing objectives

Create brand preference

Potential buyers need to become real buyers

Extend distribution network

Make sure the growth phase lasts as long as possible

Create new types of your product

Fill the gaps in the market

Distribution:

New channels – places for distribution

Smaller shops will wait for your product to be truly successful

Price setting:

price skimming

Slow decrease: new customers

Penetration pricing

Reach normal sales volume after initial boost

Communication/advertising:

Focus on strong brand

(Value-) expressive advertising

Focus on product benefits

Sales promotions

Eg. Lego for girls (2013)

Largest part of products are (stuck) in this phase

Market stability

No considerable growth

Turnover:

First slow growth

Followed by plateau

Maximum level of penetration

All possible buyers have been reached

Competition

A lot of competition

Price battle

Margins are smaller

Profit is made because of large sales volume

Marketing objectives

Defend market share

Create brand loyalty

Product management = PLC-stretching

Look for new consumers

Look for new moments of use

Steal consumers from competitors

Increase user frequency

Stimulate replacement

Improve design/style

Improve functionality

Improve quality

Up to you: look for examples

Look for new consumers

Look for new moments of use

Steal consumers from competitors

Increase user frequency

Stimulate replacement

Improve design/style

Improve functionality

Improve quality

Product management

Sometimes: stop product line

No more parts, accessories, service, repair

Eg. Windows 98 after XP launch, Minidisc player

Turnover decreases, due to

Technological evolution

Increasing competition

Changing life styles

Once in decline, now again trendy

Very sudden and brisk death

Photo cameras

Slow death

Video recorders

Decline to marginal level

Survive in the margin