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Most organizations sell more than one product. They may offer a portfolio of products. Construct a matrix of an organization’s product portfolio that reflects its width (variety) and depth (assortment). Imagine you are the organization’s Chief Marketing Officer. How would you defend the decision to offer so many options to meet buyer needs? Though goods and services are both types of products, they present different marketing challenges. Using a service with which you are familiar, identify how unique characteristics of services in general are manifested for your service. Develop recommendations for marketing the service that can overcome the marketing challenges related to these service characteristics. There are several strategic options organizations can follow when introducing new products. Estimate the relative risk and return associated with the level of innovation reflected in a new product launch. Though organizations sometimes base pricing decisions on the cost of materials, another option is to base price on perceived customer value. Choose a product and estimate the perceived value of that product as a function of customer benefits and customer costs. Compare your estimate to the actual price charged for the product. What modifications to the price would you recommend? Imagine an organization has asked you to create its pricing strategy. You decide to base your proposed price recommendations on possible pricing objectives. Using the same product, you chose in Question 4, examine how price decisions should be adapted for the pricing objective. the_marketing_program_chapter_6.pdf helpful_hints_and_tips_fpr_unit_4_complete_section.docx Unformatted Attachment Preview The Marketing Program CHAPTER 6 C A L INTRODUCTION V With a clearly defined target market in hand, the organization turns its attention E toward developing a marketing program that will fulfill the target’s needs and wants R , we are referring to the better than the competition. When we say marketing program strategic combination of the four basic marketing mixTelements: product, price, distribution, and promotion. Although each element is vitally important to the success of the marketing strategy, the product usually receives, the most attention because it is most responsible for fulfilling the customers’ needs and wants. However, since customers’ needs and wants are multifaceted, we prefer to think of the outcome of T the marketing program as a complete “offering” that consists of an array of physical (tangible), service (intangible), and symbolic (perceptual) E attributes designed to satisfy customers’ needs and wants. In other words, the best marketing strategy is likely R to be one that combines the product, price, distribution, and promotion elements in a R way that maximizes the tangible, intangible, and perceptual attributes of the complete offering. E Good marketing strategy considers all four elements of the marketing program N We have noted throughout and the offering rather than emphasizing a single element. this text how most firms today compete in rather mature C markets characterized by commoditization. In these cases, the core product (the element that satisfies the E differentiating the offering basic customer need) typically becomes incapable of from those of the competition. Consequently, most organizations work to enhance the service and symbolic elements of their offerings by changing price, distribution, or promotion in order to stand out from the crowd.1As described in Beyond the Pages 6.1, this makes marketing strategy even more challenging for the firm. It also 8 requires that the marketing program be considered holistically rather than sequentially. This means that products must be designed with5an eye toward how they will be priced, distributed, and promoted. It does a company 9 no good to develop a standout product that is not price competitive, difficult to ship or store, and hard to conT vey in promotional messages. All four elements of the marketing program must be S developed simultaneously. In this chapter, we examine the four elements of the marketing program in more detail. Issues such as product design, affordability, distribution convenience, and product awareness are major considerations in developing an effective marketing program. Problems in any one area can create obstacles that customers may be unwilling to overlook as they search for the best offering that will fulfill their needs. 153 9781337669078, Marketing Strategy: Text and Cases, Seventh Edition, O.C. Ferrell - © Cengage Learning. All Rights Reserved. No distribution allowed without express authorization. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-240 154 Chapter 6 • The Marketing Program BEYOND THE PAGES 6.1 Can Physical Books Save Barnes & Noble?1 Like many companies in the Internet economy, Barnes & Noble is at a crossroads. The largest U.S. bookstore chain made retailing history when it opened the first category–killer bookstore in the late 1980s. At that time, the store was five times the size of a typical bookstore. Customers flocked to the spacious and comfortable stores that offered a comprehensive inventory of books, music, and DVDs. Most of the stores also included a café where customers could have coffee, a snack, and enjoy a good book. Barnes & Noble had successfully converted the small, mall-based bookstore to a true destination for book-loving customers. But that was in the 1980s and 1990s. As the Internet economy took off in the late 1990s and into the 2000s, Barnes & Noble was forced to move online. At the launch of Barnesandnoble. com in 1997, the company offered a staggering 1 million titles for immediate delivery, plus access to a nationwide network offering over 30 million listings from out-of-print, rare, and used book dealers. This move came at roughly the same time as the launch of an unusual online bookstore called Amazon.com. Amazon offered a limited selection and was a pure Internet-based company, so few people gave the company any chance of succeeding. Plus, Amazon was losing money. At the time, Barnes & Noble wasn’t worried about Amazon because their book superstore concept was a huge success. And, everyone knew that book lovers preferred to browse in the store, sit in comfortable chairs, and enjoy a coffee. Didn’t they? Fast-forward to today and we all know that Amazon has been remarkably successful. So much so that other book retailers, namely Borders and Waldenbooks, have since closed. We also know that Amazon sells more e-books than physical books. E-readers such as Amazon’s Kindle and Barnes & Noble’s Nook (plus a variety of tablets like the iPad and Kindle Fire) are wildly popular among a variety of target customers, old and young. In addition, other competitors have entered the market. Apple, for example, offers e-books through its iBooks app on the iPad and iPhone. Google now offers free access to millions of public domain books. The rapid changes in the book retailing market have forced Barnes & Noble to adapt, and these changes now threaten the future of the oncedominant book retailer. What can Barnes & Noble do to remain relevant and viable in this market? To answer that question, we need to look at the company’s current marketing program: • C A L V E R T , • T E R R E • N C E 1 8 5 9 T S• Products. Barnes & Noble competes in a highly commoditized product market. Books, whether offered in print or as ebooks, are the same no matter where they are purchased. Barnes & Noble does have an advantage in the textbook market, but the differences between its selection and the selection at Amazon are disappearing fast. Amazon, on the other hand, offers a very broad selection of products ranging from electronics to beauty supplies. Barnes & Noble offers a much narrower variety of books, music, movies, and some toys. Both companies’ e-readers are competitively matched in terms of features and benefits. Pricing. Given the commoditized nature of the market, price would be one logical place to compete against Amazon and other competitors. However, there is very little price differentiation in the book market. This is especially true with respect to ebooks, where prices are roughly the same across multiple competitors. Distribution. Barnes & Noble has invested a lot of resources into its distribution system. However, Amazon is also no slouch at supply chain management. One area where Barnes & Noble has a distinct advantage is on college campuses. The company operates over 717 college bookstores serving over 4 million students and 250,000 faculty in all 50 states. The company’s physical footprint also includes roughly 650 traditional Barnes & Noble stores that draw millions of customers annually. These stores are still destinations for true book lovers, something that Amazon cannot copy. Promotion. It is very hard to build a competitive advantage based on promotion alone, and neither Barnes & Noble nor Amazon stand out per se. Both have strong brands and positioning. Both also offer membership programs. However, Amazon’s program—Amazon 9781337669078, Marketing Strategy: Text and Cases, Seventh Edition, O.C. Ferrell - © Cengage Learning. All Rights Reserved. No distribution allowed without express authorization. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-240 Chapter 6 • The Marketing Program Prime—beats Barnes & Noble by a wide margin. For a $99 per year fee, Prime members get free two-day shipping on millions of products, free instant streaming of thousands of movies and television programs, and the ability to borrow one Kindle e-book each month. By contrast, Barnes & Noble’s members get free shipping and small discounts on books and Nook e-readers. It is clear that carving out a strong competitive advantage is difficult for any book retailer. Barnes & Noble has an edge in college campus distribution and a loyal customer following. Amazon, however, has an edge in terms of the total digital ecosystem and a loyal following of priceconscious customers. In some ways the two companies compete using different paradigms. Although the company continues to lose ground in the digital book market to Amazon, Barnes & Noble’s saving grace is likely to be its retail footprint, especially on college campuses. In the college market, Follett leads the way with 940 campus stores (to 717 for Barnes & Noble). However, since 53 percent of colleges and universities still operate their own stores, the market growth potential in the college market is very large. Barnes & Noble is partnering with these universities to create academic superstores that are much larger than a traditional Barnes & Noble store. These superstores include larger cafes, more clothing, and C often stores-within-a-store such as Clinique or Apple. A The college store side of Barnes & Noble is so that the company plans to spin it off L successful into a separate business in late 2015. V E PRODUCT STRATEGY R Of all the strategic decisions to be made in the marketing T plan, the design, development, branding, and positioning of the product are perhaps the most critical. At the heart of every organization lies one or more products ,that define what the organiza- tion does and why it exists. As we stated in Chapter 1, the term “product” refers to something that buyers can acquire via exchange to satisfy a need or a want. This is a very broad definition that allows us to classify manyTdifferent things as products: food, entertainment, information, people, places, ideas, E etc. An organization’s product offering is typically composed of many different elements—usually some combination of tangible goods, services, ideas, image, or R even people. As we consider product decisions here, it is important to remember that R product offerings in and of themselves have little value to customers. Rather, an offering’s real value comes E from its ability to deliver benefits that enhance a customer’s situation or solve a customer’s problems. For example, customers don’t buyN pest control; they buy a bugfree environment. Lexus customers don’t buy a car; they buy luxury, status, comfort, C and social appeal. Students who frequent a local nightclub are not thirsty; they want E to fulfill their need for social interaction. Likewise, companies do not need computers; they need to store, retrieve, distribute, network, and analyze data and information. Marketers who keep their sights set on developing product offerings that truly meet the needs of the target market are more likely to1be successful. 8 5 Strategic Issues in the Product Portfolio Products fall into two general categories. Products used 9 for personal use and enjoyment are called consumer products, while those purchased for resale, to make other proT ducts, or for use in a firm’s operations are called business products. Exhibit 6.1 illustrates examples of each type of product category.SAlthough the distinction may seem simplistic, it is important in a strategic sense because the type of product in question can influence its pricing, distribution, or promotion. For example, marketing strategy for consumer convenience products must maximize availability and ease of purchase—both important distribution considerations. The strategy associated with consumer shopping products often focuses more on differentiation through image and symbolic attributes—both important branding and promotion issues. Marketing strategies for raw materials are especially challenging because these products are 9781337669078, Marketing Strategy: Text and Cases, Seventh Edition, O.C. Ferrell - © Cengage Learning. All Rights Reserved. No distribution allowed without express authorization. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-240 155 156 Chapter 6 • The Marketing Program EXHIBIT 6.1 Types of Consumer and Business Products. Consumer Products Type of Product Convenience Products Inexpensive, routinely purchased products that consumers spend little time and effort in acquiring. Shopping Products Products that consumers will spend time and effort to obtain. Consumers shop different options to compare prices, features, and service. Specialty Products Unique, one-of-a-kind products that consumers will spend considerable time, effort, and money to acquire. Business Products C Unsought Products A Products that consumers are unaware of or a product that consumers do not L consider purchasing until a need arises. V Raw Materials E of a finished product. They are Basic natural materials that become part purchased in very large quantities based R on specifications or grades. T Component Parts Finished items that become part of a ,larger finished product. They are purchased based on specifications or industry standards. Process Materials T Finished products that become unidentifiable upon their inclusion in the E finished product. Maintenance, Repair, and OperatingRProducts Products that are used in business processes or operations but do not become part of the finished product. R E Accessory Equipment Products that help facilitate productionN or operations but do not become part of the finished product. C E Installations Major purchases, typically of a physical nature, that are based on customized solutions including installation/construction, training, financing, 1 maintenance, and repair. Business Services 8 Intangible products that support business operations. These purchases often 5 occur as a part of outsourcing decisions. Examples Soft drinks Candy and gum Gasoline Dry cleaning Appliances Furniture Clothing Vacations Sports memorabilia Antiques Plastic surgery Luxury items True innovations Repair services Emergency medicine Insurance Iron ore Chemicals Agricultural products Wood pulp Spark plugs Computer chips Pane glass Hard drives Food additives Wood sealants Paint colorings Office supplies Janitorial services Building security Bathroom supplies Tools Office equipment Computers Furniture Enterprise software Buildings Heat and air systems Legal services Accounting services Consulting Research services 9 T (Mason, OH: Cengage Learning, 2010), pp. 285–289. SOURCE: This material is adapted from William M. Pride and O.C. Ferrell, Marketing S commodities by definition. Here, conformance to exacting product specifications and low acquisition costs are the keys to effective strategy. Many business products are also characterized by derived demand, where the demand for the product is derived from, or dependent upon, the demand for other business or consumer products. For example, the demand for business products such as glass, steel, rubber, chrome, leather, and carpeting is dependent upon the demand for automobiles. 9781337669078, Marketing Strategy: Text and Cases, Seventh Edition, O.C. Ferrell - © Cengage Learning. All Rights Reserved. No distribution allowed without express authorization. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-240 Chapter 6 • The Marketing Program It is very rare for a company to sell only one product. Most firms sell a variety of products to fulfill a variety of different needs. In general terms, the products sold by a firm can be described with respect to product lines and product mixes. A product line consists of a group of closely related product items. As shown in Exhibit 6.2, Procter & Gamble sells a number of famous brands in its Fabric and Home Care line, including Tide, Dawn, and Cascade. Most companies sell a variety of different product lines. The different product lines at General Motors carry well-known brand names like Corvette, Chevrolet, Cadillac, and Buick. Likewise, FedEx offers a number of logistics and supply chain services in its family of brands, such as FedEx Express, FedEx Ground, and FedEx Freight. A firm’s product mix or portfolio is the total group of products offered by the company. For example, Procter & Gamble’s entire product portfolio consists of Beauty, Hair, and Personal Care products; Baby, Feminine, and Family Care products; and Health and Grooming products in addition to the products in its Fabric and Home Care line. C Decisions regarding product lines and product mixes are important strategic considerations for most firms. One of these important A decisions is the number of product lines to offer, referred to as the width or variety of the product mix. By offerL ing a wide variety of product lines, the firm can diversify its risk across a portfolio of V to capitalize on the strength product offerings. Also, a wide product mix can be used and reputation of the firm. Sony, for example, enjoysEthis advantage as it uses its name to stake out a strong position in electronics, music, and movies. The second important decision involves the depth of each productRline. Sometimes called assortment, product line depth is an important marketing tool. T Firms can attract a wide range of customers and market segments by offering a deep assortment of products , in a specific line. Each brand or product in the assortment can be used to fulfill different customer needs. For example, Hilton, Inc. offers 12 different lodging brands—including Hilton, Hilton Garden Inn, Hampton Inn, Conrad, and Embassy T market. Suites—that cater to different segments of the hospitality Although offering a large portfolio of products can E make the coordination of marketing activities more challenging and expensive, it also creates a number of R important benefits: • R Economies of Scale. Offering many different product lines can create economies of scale in production, bulk buying, and promotion.EMany firms advertise using an umbrella theme for all products in the line. Nike’s “Just Do It” and Maxwell N House’s “Good to the Last Drop” are examples of this. The single theme covering C the entire product line saves considerably on promotional expenses. EXHIBIT 6.2 Product Mix Depth (Assortment) E Procter & Gamble’s Portfolio of Fabric and Home Care Products. Dish Washing Ariel Dawn Cascade Product Mix Width (Variety) 1 Household Laundry and Cleaners Fabric Care 8 Batteries Mr. Clean Duracell* Tide 5 Swiffer Cheer 9 Bounce Gain T Downy S Dreft Era Febreze Bold Ace Paper Products Charmin *At the time of publication, P&G planned to sell Duracell to Berkshire Hathaway for $4.7 billion. SOURCE: From the Procter & Gamble website (http://www.pg.com/en_US/brands/global_fabric_home_care/index.shtml), accessed March 29, 2015. 9781337669078, Marketing Strategy: Text and Cases, Seventh Edition, O.C. Ferrell - © Cengage Learning. All Rights Reserved. No distribution allowed without express authorization. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-240 157 158 Chapter 6 • The Marketing Program • • • • Package Uniformity. When all packages in a product line have the same look and feel, customers can locate the firm’s products more quickly. It also becomes easier for the firm to coordinate and integrate promotion and distribution. For example, Duracell batteries all have the same copper look with black and copper packaging. Standardization. Product lines often use the same component parts. For example, GM often shares components across its Buick, GM, and Chevrolet product lines. This greatly reduces GM’s manufacturing and inventory handling costs. Sales and Distribution Efficiency. When a firm offers many different product lines, sales personnel can offer a full range of choices and options to customers ... Purchase answer to see full attachment