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Overview of Marketing Management for Technical Products

City University of Hong Kong

Engineers in Society ( EE3014 )

Calvin CHUI6 November, 2009

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Contents

–Marketing–Product–Price–Delivery–Quality–Q&A

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References

• Cyr, Donald G., Gary, Douglas A., “Marketing Your Product”, Self-Counsel Press, 2003, pp. 53-58, 79-83

• Jackson, Ralph W., “Sales and Sales Management”, Prentice Hall, 1996, pp. 50-65

• Kotler P., “Principles of Marketing”, Prentice Hall, 1994, pp. 6-11, 535-539

• Louis E. Boone, David L. Kurtz, “Contemporary Marketing Wired”, The Dryden Press, 1998, pp.47-49

• Tony P., “Strategic Marketing: An Introduction” New York Routledge, 2000, pp.47-48

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Marketing

• Marketing is not only a sale – “selling” and “promotion” – but in the new sense of satisfying customer needs

• Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others

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Marketing – Four Ps

•Product

•Price

•Promotion

•Placement

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Marketing - Product & Price

• Product– The product management and product

marketing aspects of marketing deal with the specifications of the actual goods or service, and how it related to the end-user’s needs and wants

• Price– This refers to the process of setting a

price for a product, including discounts

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Marketing - Promotion & Placement

• Promotion– This includes advertising, sales

promotion, publicity, and personal selling, and refers to the various methods of promoting the product, brand, or company

• Placement– Placement or distribution refers to how

the product gets to the customer; for example, point of sale placement or retailing

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Case – iPhone 3G

• Please apply marketing Four Ps on Apple’s iPhone 3Gs

Source: www.apple.com

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Marketing 7Ps ( 3 more)

• People– Any person coming into contact with customers

can have an impact on overall satisfaction

• Process– This is the processes involved in providing a

service and the behavior of people, which can be crucial to customer satisfaction

• Physical Evidence– Unlike a product, a service cannot be

experienced before it is delivered, which makes it intangible

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Product

• A successful product must benefit your customers– Identify the need of your customers– Understand your customer’s perceived

needs• e.g. Sofa is not just a chair

or a piece of furniture; itprovides comfort as well asreflecting personality andlifestyle

Source: www.yanhodesign.com

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Product - Product Value

• Interest Value– The pleasure derived from using the

product• Identity

– Personality and lifestyle• Risk

– Possibility and importance of a bad purchase

• Packaging– Minor in the past; important in today– Protection, attraction, transportation

and promotion

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Example - Packaging

• Functions of the product package– To attract target

customers

– To identify the product

– To keep the product together

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Example - Packaging

• Functions of the product package– To provide a

description of the product function

– To protect the product

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Product - Product Value

• Branding– Name, symbol, or design to identify

your products from those of your competitors

• Helps customer identify your product• Protect your product features from imitation• Build a corporate image

• Example: A BMW’s new Mini, you could get a bigger car at lower price, but that would be zero-prestige low-priced car. People will pay more for the small Mini instead. This is luxury defined, being able to pay extra for style

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Price

• Pricing is an ongoing concern• Pricing relates to industry supply

and demand• Pricing relates to customer

perception of the product benefits• Today’s pricing strategies need to

combine hard data from an activity-based cost system with soft data from marketing

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Price - Price Structure

• Unit Cost = (Total Variable Costs + Fixed Costs) / Units Sold– Total Variable Costs = $10,000– Fixed Costs = $10,000– United Sold = 5,000– then Unit Cost = $4.0 per unit

• Fixed cost represents the overhead expenses that don’t change with the volume of work (e.g rent, depreciation, insurance and administrative expenses)

• Variable cost represents expenses that can change based on the volume of work (e.g. material, labor, overtime pay and commission on sales)

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Price - Price Structure

• Markup– Selling Price = Unit Cost + (Unit Cost x

Rate of Return)• Selling Price = $4.0 + ($4.0 x 15%)• Selling price = $4.60

– Markup = [(Unit Price – Unit Cost) / Unit Cost] x 100%

• Markup = [(4.6 – 4.0) / 4.0] x 100%• then Markup = 15%

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Price - Price Structure

• Margin– Selling Price = Unit Cost / (1 – Desired

Return on Sales)• Selling Price = $4.0 / (1 – 13%)• Selling Price = $4.6

– Margin = [(Unit Price – Unit Cost) / Price] x 100%

• Margin = [($4.6 – 4.0) / $4.6] x 100• then Margin = 13%

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Price - Pricing Strategy

• Profit Maximization– Setting a price level to attain the

highest possible current profit

• Market Share– Pay attention to your competition and

set your price to obtain market share– Of course this would happen when

competitive products are similar and where the market is price sensitive

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Price - Pricing Strategy

• Obtain ROI (Return on Investment)– Establish a price that will provide a

certain percentage return on investment

– Such as 10 percent ROI after tax

• Price Skimming– Setting a high price to maximize early

cash recovery before catering to moreprice sensitive segment of themarket

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Delivery

• Bring your product to your target customer or market

• Make your product available at a time and place that is convenient to your target customer

• Make it easy for your customer to buy

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Delivery - Methods

• Producer -> Customer– The simplest and most direct

marketing channel– From producer to customer

• Open markets – fish markets, meat and fresh produce markets and flea markets

• Door-to-door• Trade shows• Street vending• Product inserts• Internet

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Delivery - Methods

• Producer -> Retailer -> Customer– Department stores– Manufacturer’s sales representative

• Independent salesperson who distributes products to retailers

• Producer -> Wholesaler -> Retailer -> Customer– Small producers sell to wholesalers who then sell to

small retailers– This approach allows indirect contact between

thousands of producers and retailers

• Producer -> Agent -> Wholesaler -> Retailer -> Customer– Agent’s main function is to bring buyers and sellers

together

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Delivery – Distribution Consideration

• Customer– Number of customers

• When we have a large number of customers, we may need a go-between (or middleman) to serve them

– Purchasing patterns• If customers buy on a frequent basis, a greater

number of go-betweens is required. E.g. drinks and sundries

– Geographic dispersion• Producers may set up their own sales outlets in

densely populated areas, but use go-betweens in less concentrated areas

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Delivery – Distribution Consideration

• Product Characteristics– Perish-ability

• Perishable products suitable for direct or short distribution route to the end user

• E.g. fresh produce and fashionable goods

– Product Value• Products of high value or custom-made products are

generally sold directly to the customer

– Convenience Goods• Products such as staples, impulse goods, and

emergency supplies require a go-between to give the product maximum exposure

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Quality

• Today’s customers have high expectations and they are managing their consumption more carefully

• The customer defines quality, not the manufacturer. If you know what your customers want and what influences them, you’ve got the competitive edge

• Customer demand more than just a fair price; they are seeking added value. Value is the customer’s perception of the balance between the quality of goods or services that a firm provides and their price.

– Example: Lexus and Infiniti are in vogue because they emphasize quality and value

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Quality

• Quality consists of the capacity to satisfy wants(Edwards C.D., “The Meaning of Quality”, Quality Progress, Oct. 1968)

• Quality is the degree to which a specific product conforms to a design or specification(Gilmore H.L., “Product Conformance Cost” Quality Progress, June 1974)

• Quality is the degree of excellence at an acceptable price and the control of variability at an acceptable cost(Broh R.A., “Managing Quality for Higher Profits”, McGraw Hill 1982)

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Quality

• Product Quality– Performance

• How well a product performs the task it was designed to do?

– Durability• How long the product will last?

– Features• What special features does the product have which makes

it superior to competitive offering?

– Reliability• Can one expect the same kind of quality every time that

the product is used?

– Fit and finish• Does the product look and feel like a quality product?

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Quality

• Service Quality– Tangibles

• Do the physical facilities, equipment and appearance of personnel associated with the service promote confidence in the quality of the service?

– Reliability• Is there evidence of an ability to perform the promised

service properly the first time?

– Competence• Do the personnel possess knowledge and skill and have

they an ability to convey trust and confidence?

– Communication• Are customers kept informed about the service offered in

the language they can understand? Do the providers of the service listen to what the customers have to say?

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Quality – Customer Satisfaction

• Quality is usually referred to several critical dimensions that can be identified and measured, such as number of defects, durability and reliability

• Quality also includes the intangible components of customer satisfaction, the ability of a good or service to meet or exceed buyer needs and expectations

• “Quality is what your customer says it is – not what you say it is. To find out about your quality, ask your customer.” (Feigenbaum A.V., Quality Management Consultant)

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Quality – Customer Satisfaction

• Kano’s model of customer satisfaction

unspoken

expressed

expected

basic

performance

excitement

Customer Satisfaction

Actual Product Performance

Disappointed

Notunhappy

Immediatehappiness

Delight

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Quality – Customer Satisfaction

• Kano’s model explains that for some customer attributes, customer satisfaction is dramatically increased with only a small improvement in performance, while for other customer attributes, customer satisfaction is increased only a small amount even when the product performance is greatly improved

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Q&A

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Thank You !