ch 11 product2 classif mix 15june08 n24

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. . .



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?

ch 11 product2 classif mix 15june08 n24

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