chapter 2 human resource planning & strategy · · 2012-11-102012-11-10 · planning,...
TRANSCRIPT
Introduction A product is the central focus of the marketing mix as this
is what is delivered to the Consumer.
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Introduction (Cont…) A frozen ready-prepared meal consists of ingredients, but
customer satisfaction is convenience. To an industrial
buyer, the main feature might be speed of delivery or
technical support. For marketers, the product is a want-
satisfying item; to consumers, it is a satisfaction.
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Consumer Goods Consumer goods are finished products that are sold to
the ultimate user and these are sub-categorised as
shown under.
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Consumer Goods (cont…) Convenience Goods
These are relatively inexpensive items, typically part of a weekly
shop, whose purchase requires little effort.
Convenience goods can be divided into staple and impulse
purchases. Staple goods are consumed on a daily basis (e.g. milk
and meat) where opportunities for differentiation are less.
As the term implies, there is no preplanning of impulse goods.
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Consumer Goods (cont…) Shopping Goods
These include major durable or semi-durable items that are more expensive
than convenience goods. Purchase is less frequent and is characterised by pre-
planning, information search and price comparisons.
White goods, furniture, DIY equipment and lawnmowers are homogeneous
because they are virtual necessities, and are not very differentiated in price,
prestige or image.
Heterogeneous goods are stylised and non-standard. Here, price is less
important than image, and behavioural factors are important in the decision
process.
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Consumer Goods (cont…) Specialty Goods
In this type of goods once a purchase choice has been made,
there is a reluctance to accept a substitute.
The market is small, but prices and profits are relatively high.
Consumers pay for prestige as well as the product.
E.g. some customers decide on a particular model of car or
designer label for clothes or jewellery long before the purchase is
even considered.
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Consumer Goods (cont…) Unsought Goods
An unsought goods is one that a consumer does not know about—or knows
about but does not normally think of buying. New products, such as new
frozen-food concepts or new smartphones, are unsought until consumers learn
about them through word-of-mouth influence or advertising. In addition, the
need for unsought goods may not seem urgent to the consumer, and purchase
is often deferred. This is frequently the case with life insurance, preventive car
maintenance, and cemetery plots. Because of this, unsought goods require
significant marketing efforts, and some of the more sophisticated selling
techniques have been developed
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Industrial Goods (cont…) Installation
These are expensive items like plant and machinery required for
production. A company might make a mistake when choosing
office equipment or building maintenance services which may be
costly, but is unlikely to be a serious threat to the company’s
future. However, if production machinery is purchased that is
then found to be unsuitable, this could affect production
processes.
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Industrial Goods (cont…) Accessories
Accessories are also capital items, but usually less
expensive, being depreciated in company accounts
over fewer years. Accessories include secondary plant
and machinery, warehousing equipment and office
equipment and furniture.
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Industrial Goods (cont…) Raw Materials
Raw materials account for much of the time and work
of a purchasing department. A direct relationship
exists between raw material quality and the quality of a
company’s finished product, so quality, reliability of
supply, service and price are important.
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Industrial Goods (cont…) Components parts and materials
Criteria are similar to raw materials, including
replacement and maintenance items for production
machinery. e.g. oils, chemicals, adhesives and
packaging materials.
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Industrial Goods (cont…) Supplies
These are the ‘convenience goods’ of industrial supply,
and include items like stationery, cleaning materials
and goods required for maintenance and repairs. The
purchasing process is more routine. Most supplies are
homogeneous and price is likely to be a major factor in
a purchasing decision.
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Industrial Goods (cont…) Industrial Service
The use of external suppliers of industrial services,
especially in the public sector, has risen over recent years.
Many organizations find it better to employ outside
agencies with the expertise they offer, to carry out certain
tasks, rather than employing ‘in-house’ personnel.
Cleaning, catering, maintenance and transport are
examples.
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New Product Development New product development forms part of product strategy
as well as being an element of overall marketing strategy.
New products are central to a company’s continued
survival, but their development is a risky undertaking.
In FMCG markets new products appear regularly.
Confectionery firms, for example, launch new products,
many of which disappear shortly after launch.
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Stages of New Product Development
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Idea generation
The attitude of management and the atmosphere in which new ideas
are encouraged and created is of prime importance. Ideas come from
many sources, e.g. marketing research, research & development and
production. Salespersons are well placed for providing customer
feedback and reporting on competitive products as part of information
collection for market intelligence. Brainstorming sessions can be
conducted to focus on new-product development issues.
Stages of New Product Development
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Screening
Management reduces the collection of ideas to manageable
numbers by identifying the most viable to go to the next stage.
Typical questions include:
Is there a real consumer need?
Does the company have resources and technical ability to
manufacture and market the new product idea?
Is the potential market large enough to generate enough profits?
Stages of New Product Development
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Concept testing
Here, a small number of key decision makers within
the company, and possibly potential customers, are
presented with the product idea in a simple format
that includes drawings, models and a written
description. This is to establish their feelings about the
product’s potential in the market place.
Stages of New Product Development
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Business Analysis
This stage concerns more detailed financial, rather
than practical, concerns. The company estimates
demand, costs and profitability that take account of
marketing costs as well as costs of raw materials and
production.
Stages of New Product Development
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Product Development
The company now develops a prototype to establish its
potential in physical terms, and turns to the market
place to obtain feedback. The prototype should
correspond as closely as possible to the production
model to obtain accurate customer reactions. At this
stage it is possible to modify the product.
Stages of New Product Development
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Test Marketing
Test marketing is an experiment conducted in a field laboratory (the test
market) comprising of actual stores and real-life buying situations, without the
buyers knowing they are participating in an evaluation exercise. It simulates
the eventual market-mix to ascertain consumer reaction. Depending on the
quality and quantity of sales data required for the final decision, test marketing
may last from few weeks to several. Test marketing is more suitable for fast
moving packaged goods than for consumer durable.
Stages of New Product Development
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Commercialization
This is the final stage after various ideas have been
filtered. A final proposition has been selected that is
acceptable to the marketplace. Test marketing has
permitted the company to make any final adjustments
to the chosen marketing strategy, and the product can
now be ‘commercialized’.
Product Life Cycle
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The product life cycle (PLC) is central to marketing strategy. It is
based on the suggestion that a new product enters a life cycle
once it is launched. The product is conceived prior to
development and has a ‘birth’ and a ‘death’ described as
introduction and decline. The intervening period is
characterised by growth, maturity and saturation. By mapping a
product’s course through the market, it is possible to design
strategies appropriate to relevant stage in the product’s life.
Product Life Cycle (cont…)
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Development
Naturally, during this phase no sales are made. As time
progresses, development costs accrue as can be seen
on the lower negative cash-flow curve.
Product Life Cycle (cont…)
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Introduction
The aim is to create awareness that often involves a
disproportionate level of marketing expenditure
relative to sales revenue. This is seen as an investment
in the product’s future. Promotion creates this
awareness along with the sales function whose task is
to communicate product benefits.
Product Life Cycle (cont…)
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Introduction (cont…)
Introductory pricing strategy will depend on the
degree of product distinctiveness. A firm may wish to
achieve high sales in a short space of time, in which
case ‘penetration pricing’ might be appropriate, or
slowly establish a niche in the market in which case it
might use ‘skimming’.
Product Life Cycle (cont…)
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Growth
The characteristics of growth are:
1. More competitors and less product distinctiveness.
2. More profitable returns.
3. Steeply rising sales.
4. Company or product acquisition by larger competitors.
Product Life Cycle (cont…)
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Growth (cont…)
Promotional expenditure is still high because it is the
best time to gain market share in preparation for
market dominance during the maturity stage.
Promotional effort moves from creating product
awareness to specific brand promotion.
Product Life Cycle (cont…)
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Maturity
The major characteristics of the maturity stage are:
1. Sales continue to grow, but at a much decreased rate.
2. Attempts are made to differentiate and re-differentiate
products.
3. Prices fall in battles to retain market share along with falling
profits.
4. Marginal manufacturers leaving the market when faced with
severe competition and reduced margins.
Product Life Cycle (cont…)
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Maturity (cont…)
Exponential market growth has ceased, and
marketing’s task is to retain market share with
promotion reinforcing brand loyalty. Further growth is
at the expense of competitors so there is a need for
sustained promotional activity, even if only to retain
existing customers.
Product Life Cycle (cont…)
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Saturation
This is really the second part of the maturity phase,
but has its own characteristics. It is when the peak of
maturity has been passed, when price wars are
common and lower priced producers have entered the
market. They have mastered the manufacturing
technology, often in low labor-cost countries.
Product Life Cycle (cont…)
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Decline
Characteristics of decline are:
1. Sales falling continually.
2. Further intensification of price cutting.
3. Producers deciding to abandon the market.
Problems in Product Life Cycle
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Forecasting
Not all products follow the traditional product life cycle as
outlined above. The shape can be altered by external
environmental factors, such as a recession, competitor or
marketing activity, e.g. an organization can introduce new
benefits or features to try to extend the life cycle for its products.
Therefore the product life cycle has limited use as a forecasting
tool as it is not able to identify when a product will move to the
next stage.
Problems in Product Life Cycle (cont…)
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Identifying the stage
It is often hard for an organization even to identify which
stage the product is in, for example for some products the
market size is unknown, particularly for new technologies,
therefore it is difficult for marketing managers to know if
the product is in the maturity stage or if it is just the sales
of that product which are stabilizing compared to
competitors and in fact the market is still growing.
Problems in Product Life Cycle (cont…)
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Historic
Information and statistics on sales revenue and market
size is often historic, e.g. what has been spent and
therefore any attempt to ‘plot’ these on a product life
cycle means that the information is historic and does
not identify what is happening at the current time or
what will happen in the future.
Past Paper Review December 2008 / Q4 (b) (c)
(b) Draw a diagram of a typical product life cycle with each
stage clearly labelled and give a brief explanation of each
stage. (10 marks)
(c) Explain three problems of using the product life cycle as
a tool to make marketing decisions. (6 marks)
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Past Paper Review (cont…) Answer (b)
Introduction
Following the development of a product, the introduction stage is
where an organization launches the product to the market. This is a
very expensive stage which will involve expenditure on
communications activities such as advertising and sale promotion to
make consumers aware of the product and persuade them to try. This
expenditure needs to be incurred in advance of any revenue being
produced.
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Past Paper Review (cont…) Answer (b)
Growth
This is the stage where the product is adopted by the
market and the organization starts to experience increased
sales revenue. Often at this stage competitors will enter the
market fighting for market share. It is often in this stage
that costs are reduced by achieving greater economies of
scale in production and marketing expenditure. 43
Past Paper Review (cont…) Answer (b)
Maturity
This is the stage where the market is no longer growing and sales of
the product are stable. During this stage if an organization wishes
to achieve more growth with the product they will need to look for
alternative markets such as international markets or different
market segments. At this stage an organization will need to
continue to develop customer loyalty to ensure its market share
remains constant.
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Past Paper Review (cont…) Answer (b)
Decline
This is where the market for a product is in decline perhaps
due to an external environmental change, an example
would be the introduction of a new technology such as the
DVD which replaced videos. Organizations during this
stage need to decide whether to withdraw their products or
look for alternative markets or product uses.
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