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8/9/2019 Ch 11 Product2 Classif Mix 15June08 n24
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PRODUCT CONCEPTSPRODUCT CONCEPTS
Product ClassificationsProduct Classifications(Part 2 of 3)(Part 2 of 3)
Business Products used to create other productsBusiness Products used to create other products
1.1. Derived demand Derived demand carsteelglasscarsteelglass
2.2. Price elasticity Price elasticity industry vs. companyindustry vs. company
3.3. Volatility of demand Volatility of demand inventoryinventory fluctuationfluctuation
4.4. Buyer expertise Buyer expertise rationalrational -- -- emotionalemotional
Characteristics of Business Products:Characteristics of Business Products:
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ProductionProduction
BasedBased
InstallationsInstallations(Capital Projects)(Capital Projects)
Raw MaterialsRaw Materials
ProcessProcess MaterialsMaterials
Component PartsComponent Parts
AccessoryAccessoryEquipmentEquipment
MRO SuppliesMRO Suppliesmaintenance & repairmaintenance & repair
BusinessBusiness
ServicesServices
OperationsOperations
BasedBased
Business Products used to create other products
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Consumer Products Consumer Products end users.end users.
DurableDurable
goodsgoods
Non durableNon durable
goodsgoodsServicesServices
Durable & Non Durable Consumer ProductsDurable & Non Durable Consumer Products
Short Time of consumption
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The ProductThe ProductClassification SequenceClassification Sequence
CONSUMPTION BEHAVIOR
(Leads to)
PRODUCT CLASSIFICATION
Level of effort Level of reward
Convenience
Shopping
Specialty(Which leads to)
MARKETING MIX STRATEGY
Conceptual
Model
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ConsumerConsumer Product GoodsProduct Goods
ClassificationClassification (M. Copeland)(M. Copeland)
ConvenienceProducts
ShoppingProducts
Specialty
Products
Is based on Level of Effort expended
. . To satisfy information needs & buying motives
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CONVENIENCE GOODSCONVENIENCE GOODS
StaplesStaples -- goods purchased on agoods purchased on aregular basis (ex. milk, eggs)regular basis (ex. milk, eggs)
Emergency goodsEmergency goods -- purchased when thepurchased when theneed is urgent (ex. umbrella, boots)need is urgent (ex. umbrella, boots)
ImpulseImpulse purchasespurchases no conscious preno conscious preplanningplanning
MILK
Convenience goods consumers useminimal effort for frequently purchased
low cost items
* Ordering a mixed drink in a bar
* 70 % of cheese purchases
(Donut)
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CONVENIENCE. . .CONVENIENCE. . .
CONVENIENCE. . .CONVENIENCE. . .
CONVENIENCE. . .CONVENIENCE. . .
Segment Profile: Average supermarketSegment Profile: Average supermarketconsumer (a woman) spends 21 min. to shopconsumer (a woman) spends 21 min. to shop
buys 18 items (average) out of 30buys 18 items (average) out of 30--40,00040,000
browse time decreased 25% over 5yrs.browse time decreased 25% over 5yrs.
doesnt bother to check pricesdoesnt bother to check prices
(Proctor +(Proctor + Gamble,WSJGamble,WSJ/99)/99)
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Convenience ProductsConvenience Products
Marketing Strategy PrinciplesMarketing Strategy Principles
-- Intensive distributionIntensive distribution ProvideProvideconvenient locations and hours of operationconvenient locations and hours of operation
-- SelfSelf--Service/Pre sold Brand NameService/Pre sold Brand Name
-- Low MarkupLow Markup-- Substantial substitutionSubstantial substitution
TOMS
MARKET
Open
24 hrs.
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Case Example: Ice Cream RivalsCase Example: Ice Cream Rivals
UNILEVERUNILEVER 17% Mk Sh17% Mk Sh Ben & jerrysBen & jerrys
Good Humor, BreyersGood Humor, Breyers
NestleNestle (Dreyers)(Dreyers)-- 16%16% Haagen DazHaagen Daz
Drum Stick BrandsDrum Stick Brands
WSJ, June,03
Nestl's taskNestl's task Improve (intensive) distribution techniquesImprove (intensive) distribution techniques
Introduce new branded vending machines &Introduce new branded vending machines &freezers in biggas stations & convenience stores.freezers in biggas stations & convenience stores.
(aim for 100,000 non grocer outlets)(aim for 100,000 non grocer outlets) Create new novelty products & specialty items: ex.Create new novelty products & specialty items: ex.
Coffee Almond Crunch Bar at StarbucksCoffee Almond Crunch Bar at Starbucks
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Valued freezer spaceValued freezer space
Costs are up to 6x higher to keep food in theCosts are up to 6x higher to keep food in thefreezers of non grocer venders because offreezers of non grocer venders because ofelectricity and maintenance costselectricity and maintenance costs
Ice cream covers 35% of convenience freezerIce cream covers 35% of convenience freezerspace but items offer 25% higher profit marginsspace but items offer 25% higher profit marginsthan super market tubsthan super market tubs
Out of home consumption is growing 10% per yearOut of home consumption is growing 10% per year
compared to 8% in home (* 80% of ice creamcompared to 8% in home (* 80% of ice creamconsumption is in home) (8%x80% volume)consumption is in home) (8%x80% volume)
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Shopping ProductsShopping Products
Shopping goodsShopping goods -- consumers make aconsumers make aconsiderable effortconsiderable effort to evaluate to evaluate
Consumers make product comparison(s),
They seek information before purchase,
they are not impulsive
Moderate substitutions are made
Products last a considerable time
Monetary & social costs may be high
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TVs As a Shopping ProductTVs As a Shopping Product
(2007(2007 -------- 1950s)1950s)AttributeAttribute--based Pricebased Price--basedbased
PICTURE SIZE
WARRANTY
REMOTE CONTROL
LOW PRICE
Brand Name
Plasma LCD screen
Homogeneous products select on price
Heterogeneous products select on benefits
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Marketing Strategy PrinciplesMarketing Strategy Principles
-- Product DifferentiationProduct Differentiation ((Quality,design,etcQuality,design,etc.).)
-- Selective DistributionSelective Distribution-- Brand Name FocusBrand Name Focus
-- Moderate MarkupModerate Markup
-- Somewhat Knowledgeable sales forceSomewhat Knowledgeable sales force
Homogeneous shoppinggoods have numerousHomogeneous shoppinggoods have numeroussubstitutes which are similar in quality and featuressubstitutes which are similar in quality and featuresbut they are different in price.but they are different in price. PrinciplePrinciple: you need: you needto find a way to make your good stand out andto find a way to make your good stand out andmake people want it (productmake people want it (product differentiaiondifferentiaion))
Shopping Good Principles
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Specialty ProductsSpecialty Products
infrequently (seldom) purchasedinfrequently (seldom) purchased
relatively expensiverelatively expensive
little or no substitutionlittle or no substitution
High involvement, well informed consumersHigh involvement, well informed consumers
High visibility to othersHigh visibility to others
SpecialtygoodsSpecialtygoods -- consumers make aconsumers make asignificant effortsignificant effort to acquire the desired brand.to acquire the desired brand.
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Specialty ProductsSpecialty Products
MarketingStrategyPrinciplesMarketingStrategyPrinciples
-- HaveHave a knowledgeable sales force (pros)a knowledgeable sales force (pros)
-- ExclusiveExclusive DistributionDistribution-- High Markup/exceptional serviceHigh Markup/exceptional service
-- Be Innovative/cutting edgeBe Innovative/cutting edge
-- Maintain a differential advantageMaintain a differential advantage
Tony M. drove a Ford explorer to a Mercedes showroom.
Where are the sales people? (2003)
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Consumer BehaviorConsumer BehaviorProduct ClassificationProduct Classification
Market StrategyMarket Strategy
Intensive DistributionIntensive Distribution (convenience)(convenience)
Selective DistributionSelective Distribution (shopping)(shopping)
Exclusive DistributionExclusive Distribution (specialty)(specialty)
Product
CategoryMarket Coverage
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WIDENING GULF THEORYWIDENING GULF THEORY
-- Consumer behavior is so complex thatConsumer behavior is so complex thatmarketers do not understand whatmarketers do not understand whatconsumers wantconsumers want
-- Conclusion: Product classifications overlapConclusion: Product classifications overlap& have limited influence on strategy& have limited influence on strategy
CAUSES:CAUSES:
-- Rapid technological changesRapid technological changes-- Fierce CompetitionFierce Competition
-- Changing consumer valuesChanging consumer values
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What Do You Think?What Do You Think? Do you think the consumer productDo you think the consumer product
classification sequence has an impactclassification sequence has an impact
on marketing strategy?on marketing strategy?
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LAMPSLAMPSTableTable
CeilingCeiling
TrackTrack
DeskDesk
Product Line - a group ofa group of
closely related productsclosely related products
Product MixProduct Mix -- the totalthe total
group of products offeredgroup of products offeredconsistencyconsistency: relatedness: relatednessof itemsof items
Product mix
Product line
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CONCEPTUALIZATION OFCONCEPTUALIZATION OF
PRODUCT MIXPRODUCT MIXWIDTH
D
E
P
TH
# of lines = 4
# of items = 12
Awide product mix facilitates one stop shopping
Home
Depot,
Lowes
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PRODUCT MIX EXAMPLEPRODUCT MIX EXAMPLE
HAIR
CARE
SALTY
SNACKS
DENTAL
CARE
SOFT
DRINKS
Shampoo
Conditioner
Hair Spray
Brush
Chips
Nuts
Crackers
Tooth Brush
Tooth Paste
Dental Floss
Cola
Ginger Ale
Root Beer
Width (# of product lines)
Complimentary products peanut butter & jelly
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THETHE GILLETTEGILLETTE PRODUCT MIXPRODUCT MIX
Selected Product ItemsSelected Product Items Product LinesProduct Lines Product MixProduct Mix
(% of Total 1985(% of Total 1985
Sales by line)Sales by line)
33
*Atra Razor & Cartridges
*Trac II Razor & Blades
*Disposable Razors
BLADES &
RAZORS
TOILETRIES &
COSMETICS31
*Foamy Shaving Cream
*Adorn Hair Spray
*Silkience Shampoo
*Right Guard Deodorant
*Toni Hair Preparation
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Product Portfolio ConceptProduct Portfolio Concept
. . The sales revenue (cash flow) for the. . The sales revenue (cash flow) for thecomplete mix of products is emphasized rathercomplete mix of products is emphasized ratherthan (isolated) problems of individual productsthan (isolated) problems of individual products
. . Focus on the interrelatedness among products. . Focus on the interrelatedness among products
Issue: CannibalismIssue: Cannibalism
AA smallsmall percentage of the organizations productspercentage of the organizations productscontribute to acontribute to a largelarge % of profits.(80/20 rule)% of profits.(80/20 rule)
Principles:Principles: Protect best sellersProtect best sellers
Delete marginal productsDelete marginal products
Reallocate marketing supportReallocate marketing support
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Any questions?Any questions?
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