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Innovation, product, price,place & promotionLecture 3
MBA4644Customer Focus
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1stLecture: Marketing environment iscomplex. We have various tools thathelps us structure & manage this
complexity 2nd Lecture: Product (1st P), Consumer
behaviour & Market segmentation
3rd
Lecture: Innovation, Price, Place &Promotion
Roadmap
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Marketing Inputs Product Place Promotion
Price
Purchase decision Product choice Location choice Brand choice
Psychological
inputs Culture Attitude Learning Perception
Buyer Decision Process, Cohen 1991
Putting it in context
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Marketing Mix various approaches
Product
Place
Promotion
Price
Process
Physicalevidence
People
4 Ps SIVA
Solution
Value
Access
Information
5 P / 5 C
Consumer desire
7 Ps
Cost
Convenience
Communication
Customer approach
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Core benefitor
service
Brand nameand image
Quality anddesign
Packaging
Actual product /service
Features
Capabilities
Customer servicecomponents / after sales
Augmented
product / service
Delivery
Guarantees
Installation
Warranty
Personnel
Product & Service offering
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Toothpaste
Gleem
Crest
Shampoo
Head &
Shoulders
Pantene Pro
Vidal Sasson
Bar soaps
Camay
Zest
Safeguard
(Oil of) Olay
Deodorants
Old Spice
Secret
Sure
Careful product mixing allows a company to assess its strengths andweaknesses relative to the competition and the requirements of the
marketplace
Product line & product mix
Product Mix width
Produc
tline
depth
Product lineProduct mix
Productitem
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Identify possible
positioning conceptsfor each targetsegment
Select, develop andcommunicate the
chosen positioningconcept
Identify
segmentationvariables andsegment the market
Develop profiles ofresulting segments
Evaluate
attractiveness ofeach segment
Select the targetsegment (s)
Product / Service Offering
Segmentation, Targeting &Positioning
Segment Target Position
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Benefits sought
Purchase occasion
Purchase behaviour
Usage
Lifestyle
Personality
Demographic
Geographic
What is a Base for Segmentation?A variable by which people can be divided into groups of similar
customers
Source: Jobber, D. (2004); Principles and Practice of Marketing, McGraw-Hill
Segmenting consumer markets
Consumer segmentationBehavioral Psychographic Profile
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Product/MarketMaturity
Diversity inBuyers
Preferences
SegmentAttractiveness
IndustryStructure
Opportunities forCompetitiveAdvantage
OrganisationalCapabilitiesResources
Choosing a targeting strategy
TargetingStrategy
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Learning outcomes
Explain & indentify thevarious strategiesfor innovation
To understand thecomplex nature ofthe marketing mix Price, Place &
Promotion
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What is a new product?
New products are nowwidely defined toinclude: Innovative products: truly
new products e.g.Television
Adaptive/Replacementproducts: lightdifferences fromexisting products
Imitative products:products that are newto the company: 'me-
too
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What is a new product?
Booz, Allen & Hamilton (1968) identified 6categories of new products in terms of theirnewness to the company and to the marketplace. In practice, new products emerge as
follows: New to the world :10%
New product lines : 20%
Additions to existing product lines : 26%
Improvements in/revisions to existing products :26%
Repositioning : 7%
Cost reductions : 11%
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For innovation to succeed,it must be:
Innovation strategies
Important: customersUnique: not availableSustainable: not easily copiedMarketable: company must
have capability to market theinnovation
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The relationship between
cost and product development
Idea generation
Idea screening
Concept development and testing
Market strategy development
Business analysis
Product development
Market testing
Commercialisation
NPD consists of 8 stages
New Product Development
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Product portfolio & Adoption curve
Earlyadopters
Earlymajority
Latemajority
Laggards
Innovators
2.5%
13.5%
34% 34%
16%
GrowthIntro Maturity Decline
These will change overtime
ProductPricePlacePromotion
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Customer-focused innovations
Innovation Strategies
New forms of segmentation, reaching the target market andpositioning
New techniques for creating supplier to customer continuity
New mechanisms for product or service deliveryNew ways of increasing customer valueNew ways of ensuring operational excellenceNew products & service
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Customer-focused innovations
Innovation Strategies
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External
Innovation Strategies
The acquisition route can take three forms:
The company can search for and buy othercompanies
The company can buy patents from other companies
The company can license or franchise from anothercompany to make that companys product orservice
In all three cases the company does not developnew products, but simply acquires the rights toexisting ones
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External
Innovation Strategies
What Makes 3Par Worth over $2 Billion?
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External
Innovation Strategies
FerrariWorldAbu Dhabi
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Internal
Innovation Strategies
Newproductconcept
EmployeesSales forceR&D
Overseas
CompetitorsCopyingLearning from
competitors
ConsumersDiscussion GroupsActivity analysisMarket research
techniques
SpecialistConsultantsAgencies
Creative GroupsAttribute listingSyncretics
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Pricing
Price is the most studied of the marketing mix variables Determining price has lead to marketers borrowing from
the disciplines of: Economics- demand and supply
Accounting costs
Behavioural sciences - why people buy
Price is seen in terms ofsacrifices to be made by theconsumer and revolves around: value, worth and cost
Price has also been placed in a triangular relationship:
company, competitorand costs Price is problematic to the firm because it tends to be
used both tactically and strategically to achieve thefirms goal
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Pricing is important..
Only means of income for thecompany
Determines image of product
Major determinant of householdexpenditure and resources
In times of inflation, plays anadjusting role
In some markets, may play the roleof segmentation variable
Plays a part in dissatisfactionexpressed by consumers
May be used as a differentiatingvariable
Influences new product adoption
Pricing SituationsNew product pricing
Life cycle pricing
Positioning strategy change
Countering competitive threats
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Positioning Strategy
Targetmarket andobjectives
Productstrategy
Value-Chainstrategy
Pricing
strategy
Promotionstrategy
Line or mix of
products yieldingrevenue
Intensive versus
select distributionchannels
How price fits into Positioningstrategy
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Controllable and uncontrollable factors
Factors influencing pricing
Price vs Valueadded
Marketingobjectives
Nature of
product
Organizationalobjectives
Companyresources
Channels ofdistribution
Costs
Product /Industrylifecycle
Demand &price elasticity
Legal ®ulatory
Market
structure
Market type
Marketdevelopment
Competitors
Environmental
pressures
Customers &consumers
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Functional
Quality
Operational
Personal
Financial
PriceAssessm
ent
Factors influencing customers priceperception
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PriceStrategies
Cost-plus pricing Going-rate pricing
Break-even andtarget-profit pricing
What-the-market-will-bear pricing
Customerdriven pricing Psychological
pricing
Market penetration /skimming objectivesPrice
discrimination
Methods of Pricing
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Methods of Pricing
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Economy
position Value position
Excellent value
strategy. Under-priced?
Poor valueposition Over-
priced?
Medium valueposition
Value positionUnder-priced?
Poor valuestrategy Over-
priced?
Poor valueposition
Unsupportedprice premium
Premiumpositioning
Product Quality
High
High
Medium
Low
Pr
ice
Price Quality Matrix
Price setting strategies
MediumLow
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Product Quality
High
High
Medium
Low
Pr
ice
Price Quality Matrix
Price setting strategies
MediumLow
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Price competition
Price is the key tool
Low cost producers most effective
Must be flexible
Price wars
Non price competition
Differences must be easily perceived
Builds loyalty
Emphasise everything but the price
Price vs. Non Price Competition: considerations
Price setting strategies
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DiscountingTrade discounts
Quantity discounts
Cash discountsSeasonal discounts
One off quantity discounts
PricingFree on Board (FOB)
Geographical pricing
Transfer pricingPrice discrimination
Tendering
B2B Pricing
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Where the customer will expect to see
and purchase the product
Place
Direct
Customer
Indirect Indirect
Retailer Wholesaler
Retailer
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Where the customer will expect to see
and purchase the product
Three main strategies:
Intensive distributionSelective distribution
Exclusive distribution
Use ofintermediaries
Place
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Store retailing:Discount stores
Grocery Supermarkets /Superstores /
Hypermarket Retail Parks/ Outlet village
Speciality shops
Department stores Cashand carry wholesalers
Convenience stores
Franchise outlets
Non - Store retailing(direct marketing):
In-home retailing
Telemarketing
Automatic vending
Mail order
Internet
Place
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Agents Agents
Buyers
B2B Place
Supplier Supplier Supplier Supplier
Specialistdistributors
Specialistdistributors
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Functions of an intermediary:
Research: to facilitate the exchange processPromotion: to target segmentsMatching and Sorting of goodsNegotiation: price and other conditionsPhysical Handling of products
Financing: payment for goods to manufacturersRisk-Taking: translating customers' requirements
Exchanges that are performed include:
Physical Flow: actual movements of goodsTitle Flow: exchange of ownershipPayment Flow: from customers to manufacturersInformation FlowPromotion Flow: both to consumers and manufacturers
Therefore, theoverall role
performed by anintermediary iscrucial to the
success orfailure of a newproduct
Place
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Advertising
Sales Promotion
Direct Marketing
Public relations (PR) - Publicity
Personal Selling
A company has the following promotional tools open to it:
The choice of promotional tools are influenced by: resource availability and
cost of the promotionaltools; market size/concentration; customer information
needs; product characteristics; push versus pullstrategies
Internet Promotion
Promotion / Promotional Mix
ThePromotionalMix
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Push & Pull Promotion
Producer Retailer Customer
Producer
Tradepromotions &
advertising
Retailer Customer
Push
Advertising &sales promotions
Pull
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Budgets
Tactics:Securing leadsFollowing up
Techniques:
Sales-forcePublic RelationsPress advertisingTrade pressDirect marketingDirectories
Brochures, salesliteratureExhibitions / trade
shows / demonstrations
Promotion / Promotional Mix B2B