Intro to Marketing section 4 (Developing New Products, Product, Branding, and Packaging Decisions, & Services: The Intangible Product

Product

Anything that’s of value to a consumer and is offered through an exchange

(Can be products, services, places [e.g. Whistler, B.C], ideas, organizations [e.g. Canadian Blood Services], communities [e.g. Instagram], or even people [e.g. Drake]

Innovation

The way in which ideas are turned into new products and services that’ll help firms grow

Market Saturation

When the market becomes potentially saturated the longer a product’s available in the marketplace

The firm’s value may decline as a result

Changing customer needs

When Firms create and provide better value(s) by fulfilling the changing needs of their current and new customers or just keeping them from getting bored

Managing risk through diversity

When firms create a large portfolio of products that can help value grow and diversify risk all via innovation better than any single product

This can allow a firm to withstand major blows like strong competition and changing consumer preferences.

Fashion cycles

When most sales of new products for industries are dependent on fashion trends.

E.g. If a book series’s out with no new titles, there’d be no reason to buy more books from that series

Improving business relationships

New products don’t always target end customers and rather function to help relations with suppliers

e.g. Walmart asking suppliers for product data (even for unsold products)

Diffusion of innovation

How innovation (product or service) spreads through a market group over time and multiple adopter categories

Helps firms predict which types of offerings customers will buy upon their introduction

The function of diffusion of innovation

Helps marketers understand the rate consumers may adopt a new offering and allows them to spot potential markets for offerings or even predict sales

Pioneer/breakthrough

True new products new to the world that make new markets, provide massive value and wildly change competition rules

E.g. The iPod, as it changed the way people listened to music and created the accessory industry (e.g. earbuds, cases, speakers, etc)

Disruptive innovations

Simpler, less sophisticated, and cheaper new product intros compared to existing offerings

First movers

Offerings that are the 1st to create a market or product category, making them known to consumers and making a leading and early market share lead.

The 5 groups of purchasers

1. Innovators

2. Early adopters

3. Early Majority

4. Late Majority

5. Laggards

Innovators

Those who want to be the first to have a new offering; they enjoy taking risks, aren’t price sensitive and are knowledgeable.

They’re crucial to the success of any new product or service because they help the product gain market acceptance.

e.g. Someone who may camp out in front of a movie theatre to be the first to watch a movie

Early adopters

Would rather wait to buy a product after careful review and don’t like risk-taking. They enjoy novelty and are mostly seen as opinion leaders in certain product categories. Makeup 13.5% of all buyers

*Are important for bringing the other three categories to the market as they spread the word and act as opinion leaders

e.g. Someone who’ll go see a movie a week after its release after reading its reviews

Early Majority

34% of the population who don’t like taking risks and wait until kinks are worked out of products

Few new offerings can be profitable until this group buys them, hence why they’ll fail if this group doesn’t get big enough

e.g. Someone who may watch the movie as soon as it becomes available on DVD

Late majority

The last group of buyers that enters a market; makes up 34% of the population and enter when an offering reaches its full potential

e.g. Someone who may watch a movie on Cable

Laggards

16% of the population. They dislike change and tend to stick to traditional products until their discontinuation.

e.g. Someone who may watch a movie once it’s on TV

Factors affecting product diffusion

1. Relative Advantage

2. Compatibility

3. Observability

4. Complexity and Trialability

Relative advantage

A quick diffusion if a product is seen as better than substitutes

e.g. Swiffer products’ advertising showcasing their ease of use and promises to speed up cleaning

Compatibility

Various consumer features (e.g. international cultural differences) may impact the speed of a diffusion process

e.g. Having a coffee and getting customers for it is easy in Canada, but the diffusion is slower in Japan and China where tea’s the traditional drink

Observability

When products are easily seen, it makes it so their uses and benefits are easily promoted, all of which help the diffusion process

e.g. Blendec launching a YouTube campaign called “Will it blend?” to show why consumers should spend $400 on a blender

Complexity and Trialability

Products that are simpler and are thus easy to try; will usually diffuse quicker

e.g. It’s much easier to pick up a spray cleaner for home use than it is to try a new vacuum. Thus firms find ways to help people engage in trials

The product development process

1. Idea generation

2. Concept testing

3. Product development

4. Market testing

5. Product launch

6. Evaluation of results

Idea generation

Development of viable new product ideas

Internal R&D

Many firms historically rely on R&D efforts for their products

e.g. Pfizer’s Covid Vaccine

Licensing firms

When firms buy the rights to use tech/ideas from other research-intensive firms via a licensing agreement, which can save the high costs of R&D

e.g. Apple getting 5G Tech from Qualcomm for six years via a licensing agreement

Brainstorming

When groups work together to generate ideas; no idea can be immediately accepted or rejected

Outsourcing

When companies hire external firms to help generate ideas when they have trouble moving through these steps alone

Competitor’s products

A firm may reverse engineer a product in order to understand it when said product triggers a potential opportunity.

Reverse engineering

Dis-assembling a competitor’s product to analyze and gain a better understanding of it and then releasing an improved version of said product that doesn’t infringe on any existing patents.

Customer input

Listening to both B2B and B2C Markets via closely following product usage, carrying out surveys/polls, and observing customer desires through their behaviours, as all of it is essential for successful idea generation

Lead users

Innovative product users who (according to their own ideas) modify existing products to suit their needs

Concept testing

Testing a new product idea or concept statement among a potential set of customers to get their reactions and thus predict sales values

Concept

Quick, written descriptions of an offering and it’s tech, forms, functions, etc

Product development

A process of balancing various marketing, manufacturing, and engineering methods to create products/prototypes

Prototype

The first physical form of a product or service description of a new product

Alpha testing

A firm tries to see whether a product will perform according to its design and if it fulfils its intended needs; occurs within the R&D department

e.g. Ben and Jerry’s tests all their new ice cream flavours at their Vermont Hangout using their employees

Beta testing

Potential customers are used to examine a product in a real-life setting to see the functions, performance, and possible issues/problems

Product launch

The full-on commercialization of a product

Is the most important step in the new product intro and needs large financial contributions and heavy coordination of the marketing mix

Evaluation of results

A critical analysis of the new product’s performance and making needed changes

The 3 interrelated factors used to measure a product’s success

1. Satisfaction of technical requirements (e.g. performance)

2. Customer acceptance

3. Satisfaction of financial requirements (e.g. sales and performance)

If the product doesn’t do well, there’ll be poor customer acceptance, which’ll lead to poor financial performance

The product life cycle

The stages new products move through as they get introduced, established, and discontinued

The product life cycle stages

1. Introduction

2. Growth

3. Maturity

4. Decline

Introduction

When innovators start buying the product

• Usually starts with one firm

• Other firms will enter the market when they sense the viability of these pioneering offerings

• Firms will incur initial losses from high start-up costs and low sales revenue as the product gains ground

Growth stage

When a product gets accepted, gains demand, and sees increased sales

• Product adopters, sales, product versions, and competitors grow

• Firms also try to segment the market by studying consumer preferences and introducing variants in an attempt to ride rising sales trends

Maturity stage

Sales peak, so firms try to inject new life into products via repositioning, entering new markets or introducing new additional features

• Firms will also face major competition since the product’s average price falls greatly

• The market will eventually become saturated and all potential customers will have adopted the product

e.g. Mattel’s kept Barbie alive for so long thanks in part to new digital strategies (i.e. gaming apps and YouTube Vlogs featuring the character)

Decline stage

The product gets eventually discontinued when sales dip

• Products may eventually position themselves for a niche portion of dedicated consumers

• Laggards who haven’t yet adopted the product enter at this stage

Core customer value

Basic problem-solving benefits customers seek

Actual product

The conversion of customer value(s) by marketers

Associated services/augmented product

The intangible traits of a product (e.g. warranties, support, after-sale services, etc)

e.g. Canada Goose’s lifetime warranties on their jackets

Consumer products

Offerings used by people for personal use

Specialty goods/services

Offerings that consumers show strong preferences for and will dedicate great efforts to find the best suppliers for

e.g. Medical professionals

Shopping goods/services

Offerings like fashion items furniture, appliances, where customers will spend time balancing alternatives

Convenience goods/services

Offerings where the consumer isn’t willing to devote effort to deduce/evaluate before the purchase

e.g. Frequently bought commodity items

Unsought products/services

Offerings that customers don’t think about buying, seek out, or even know about

Product mix

The complete set of all products a firm offers

Product lines

A part of the product mix that’s a group of associated items (e.g. items consumers think of as part of a group of like products or products used together

e.g. Canada’s Goose’s main focus is jackets, but has product lines consisting of snow pants, hats, and gloves

Increase breadth

When firms add new product lines to catch new/growing markets, grow sales, and compete in venues/product areas

e.g Starbucks’ VIA Ready brew which changed the way people thought about instant coffee

Decrease breadth

The removal of an entire product line to cater to changing market conditions or fulfil internal strategic priorities

e.g. S.C. Johnson selling off their skin-care products to Johnson & Johnson but still staying strong in the home cleaning industry

Increase depth

Adding new products to a line to meet changing customer preferences

e.g. Häagen-Dazs adding new ice cream to appeal to their variety-seeking customers to grow the product line’s depth

Decrease Depth

Deleting product categories when needed to re-adjust resources, eliminate unprofitable items, etc

Branding

A way for firms to make their products stand out from competitors

Firms live or die based on it as consumers can’t buy something if they don’t know it exists even if the brand name’s familiar

The value of branding

1. Brands facilitating purchasing

2. Brands establish loyalty

3. Brands protect from competition and price competition

4. Brands reduce marketing costs

5. Brands are assets

6. Brands impact market value

Brands facilitating purchasing

Brands signify a quality level and have familiar traits/brands that help consumers make quick decisions

e.g. Pepsi drinkers can easily find the familiar logo and will most likely buy it

Brands establish loyalty

Consumers will learn to trust certain products with prolonged time and usage.

e.g consumers will always know band-aid bandages will always perform the same way and my become so loyal to the point where they won’t touch other brands.

Brands protect from competition and price competition

Strong brands are established in the market and have loyal consumer bases thus, neither competitive pressures nor retail-level competition pose threats

e.g. consumers wilfully pay a premium for Canada Goose jackets for their best-of-breed status

Brands reduce marketing costs

Well-known brands can spend less on marketing costs as the brand(s) essentially sell themselves

e.g. The Nike Swoosh or the Apple Logo

Brands are assets

Brands can be legally protected via trademarks and copyright, and thus create a form of ownership for a firm

e.g. McDonald’s trademark infringement suits over the “Mc” Prefix

How may brands impact market value

Well-known brands can have a direct impact on the bottom-line; when brands lose value, other assets are threatened

Brand Equity

The set of assets and liabilities connected to a brand that give or take from the value provided by an offering

Brand image

Something that must be maintained to keep up a positive image

e.g. A LuLulemon yoga pants recall can negatively impact brand equity without corrective action

Brand awareness

A measurement of how much consumers know the brand and what it stands for. Is created via repeated exposure of various brand elements in the communication to consumers

Perceived value

The relationship between an offering’s benefits and costs

Brand association

The reflection of mental links that consumers make between a brand and the key traits like its slogan, logo, etc.

e.g A firm may associate their brands with positive emotions like fun, friendship, parties, etc

Brand personality

A set of human traits linked with a brand that has symbolic or self-expressive meanings for customers

Brand loyalty

When a customer buys a product over and over again; an important source of value for firms. Brand loyal customers don’t switch to competitors when given the choice

Labels and Labelling

A communication tool which provides info that consumers need for purchase and consumption decisions

They identify the product and are thus usable for promotion

Labels and Labelling (con’t)

Many elements of labels are required by laws and regulations (e.g. serving size, weight, ingredients, etc), but some are within the manufacture’s control

Manufacturer brands

Brands owned and operated by the manufacturer who develops merch with a focus on quality and investment in brand image

(e.g. Nike, Mountain Dew, Marriott)

Private-label brands

Brands developed, marketed, and only available from a certain retailer may be used to develop distinct identities and/or to save on branding/marketing costs. Most common in supermarkets, drugstores, and discount stores

e.g. President’s Choice, No Name, Great Value

Generic products

Products sold with no brand names; usually in commodity markets.

e.g. When hardware stores sell nuts, screws, and bolts; or when consumers can buy salt, meat, and veggies in grocery stores

Drawbacks of generic products

Consumers may question the origin and quality of these products

Family Brands

A firm uses its corporate name to brand similar products and lines

e.g. Kellogg’s incorporates into the brand names for their cereals (e.g. Kellogg’s Froot Loops, Kellogg’s Frosted Flakes

Individual brands

The usage of individual brand names for each of a firm’s products; they allow for a company to compete in one category and if one brand goes through issues, other brands won’t be impacted via negative association

When picking names, firms should consider:

1. A descriptive name that suggests the associated benefits (e.g. Sunkist evokes images of oranges ripening in the sun)

2. The pronunciation, recognition, and ability to remember (e.g. Tide, Crest, Kodak)

3. The ability to legally protect via trademarking

4. The ease of translating into other languages

Brand extension

The use of the same brand name for new products being brought to the same markets, new markets, or global expansions.

e.g. Roots (an athletic clothing brand) expanding to leather bags, yoga wear, and even baby clothes

The advantages of brand extensions

1. If a brand name is well-established, firms can spend less time developing brand awareness and associations for new products

2. Perceptions will carry over to new products if a brand’s known for high quality

3. Synergy will exist between two products if brand extension’s used for complementary products (e.g. Consumers will tend to buy Frito-Lay dips with Frito-Lay chips)

Brand dilution

When a brand extension unintentionally impacts customer views about the characteristics the brand’s thought to uphold

e.g. Zippo, a lighter brand, introducing a perfume for women

To prevent the negative consequences of brand extensions, firms must

1. Carefully evaluate the fit between the product class of the core brand extension

2. Evaluate customer views of the brand and look for similar traits of the extension

3. Try not to expand the brand name to too many products to avoid brand dilutions

4. Whether the extension will be distanced from the core brand

Cobranding

The practice of pushing two or more brands on the same package/promotion; may fail if there are financial or interest issues

e.g. Airlines cobranding with credit card companies such as the CIBC Aeroplan Visa Card

Brand licensing

An agreement between firms where one firm lets another firm use its name and branding symbols for a price; is also a form of attracting visibility and can build brand equity and revenue

e.g. Porche licensing their name to Grundig Radios for use on watches, luggage sets, and tennis gear

Unique characteristics affecting service

1. Intangible

2. Inseparable

3. Inconsistent

4. Inventory

Intangible

A trait of a service; can’t be touched or tasted

Inseparable

Service and product is consumed and produced at the same time. It’s rare for services to be tested and they can’t be returned

e.g. Haircuts where the customers present and active in the service

Inconsistency

The varying of quality as it’s provided by humans

e.g. A barber may give poor cuts in the morning as a result of a party the night before, but may offer a better cut than the apprentice barber

Inventory

Listening to customers

Customers can get very upset service about service failures regardless of their severity, and firms must listen to them carefully to fix it

When firms and customers work together, they can achieve a better result than working alone

Listening carefully to customers and providing a fair solution

Compensating a customer a fair amount for a perceived service loss.

e.g. Providing a travel voucher as compensation for an overbooked flight, or providing accommodations like meals or hotel stays

Resolving problems quickly

Firms must act on complaints in addition to listening to them

The longer it takes to solve a problem, the more upset the customer will get

Firms must have clear policies, good training, and empowered employees

90% of customers will do business with a firm again if their complaints are solved quickly, compared to 56% - 70% if complaints are just solved