Chapter

Chapter 10
10

Innovation &
Marketing
Innovation
InnovationManagement
Management(WBB
(WBB10202)
10202)

Lesson
Lesson Outlines
Outlines

1. Product
2. Price
3. Place
4. Promotion

22

Chapter
Chapter 10
10

PRODUCT

Innovation
InnovationManagement
Management(WBB
(WBB10202)
10202)

Product

Product
Everything, both favorable and
unfavorable, that a person
receives in an exchange

Good
Good
Service
Service

24

What Is a Product?

Product is the
heart of
Marketing Mix

Price

Product

Promotion

Place (Distribution)
25

Product Classifications

Business
Business
Product
Product

A
A product
product used
used to
to manufacture
manufacture other
other
goods
goods or
or services,
services, to
to facilitate
facilitate an
an
organizations
organizations operations,
operations, or
or to
to resell
resell to
to
other
other consumers.
consumers.

Consumer
Consumer
Product
Product

Product
Product bought
bought to
to satisfy
satisfy an
an
individuals
individuals personal
personal wants
wants

26

Types of Consumer Products

PRODUCTS
PRODUCTS

Consumer
Consumer
Products
Products

Convenience
Convenience
Products
Products

Shopping
Shopping
Products
Products

Business
Business
Products
Products

Specialty
Specialty
Products
Products

Unsought
Unsought
Products
Products

27

Types of Consumer Products

Convenience
Product

A relatively inexpensive item that merits

little shopping effort.

Shopping
Product

A product that requires comparison

shopping, because it is usually more
expensive and found in fewer stores.

Specialty
Product

A particular item that consumers search

extensively for and are reluctant to accept
substitutes.

Unsought
Product

A product unknown to the potential buyer

or a known product that the buyer does
not actively seek.
28

New Product

New Product
A product new to the world, the
market, the producer, the seller, or
some combination of these.

29

Why New Products Fail

No discernible benefits
Poor match between features and customer
desires
Overestimation of market size
Incorrect positioning
Price too high or too low
Inadequate distribution
Poor promotion
Inferior product

210

Success Factors
Factors
Factors in
inSuccessful
Successful
New
New Products
Products
Match
Matchbetween
betweenproduct
productand
andmarket
market needs
needs
Different
Differentfrom
from substitute
substituteproducts
products
Benefit
Benefitto
tolarge
largenumber
numberof
of people
people

211

Diffusion

Diffusion
The process by which the
adoption of an innovation
spreads.

212

Categories of Adopters
Innovators
Innovators
Early
Early Adopters
Adopters
Early
Early Majority
Majority
Late
Late Majority
Majority
Laggards
Laggards
5

213

Percentage of Adopters

Categories of Adopters

Early
Innovators Adopters
2.5%
13.5%

Early
Majority
34%

Late
Majority
34%

Laggards
16%

Time
5

214

Product Characteristics and the Rate of

Adoption
Complexity
Complexity
Compatibility
Compatibility
Relative
Relative Advantage
Advantage
Observability
Observability
Trialability
Trialability
5

215

Product Life Cycle

Product Life Cycle

A concept that provides a way to
trace the stages of a products
acceptance, from its introduction
(birth) to its decline (death).

216

Product Life Cycle

Growth
Stage

Maturity
Stage

Decline
Stage

Sales

Dollars

Introductory
Stage

Profits
0

Time
217

Introductory Stage
High failure rates
Little competition
Frequent product modification
Limited distribution
High advertising and production costs
Negative profits
Promotion focuses on awareness and
information
Intensive personal selling to channels
218

Growth Stage
Increasing rate of sales
Entrance of competitors
Market consolidation
Initial healthy profits
Aggressive advertising of the differences
between brands
Wider distribution
Prices normally fall

219

Maturity Stage
Sales increase at a decreasing rate
Saturated markets
Annual models appear
Lengthened product lines
Service and repair assume important roles
Heavy promotions to dealers and consumers
Marginal competitors drop out
Prices and profits fall
Niche marketers emerge
220

Decline Stage
Long-run drop in sales
Large inventories of unsold items
Elimination of all nonessential marketing
expenses
Organized abandonment

221

Marketing Strategies for PLC

INTRODUCTION

Product
Strategy

Limited models
Frequent
changes

GROWTH
More models
Frequent
changes.

MATURITY

Large number
Eliminate
of models.
unprofitable
models

Distribution
Strategy

Limited
Expanded
Wholesale/
dealers. Longretail distributors term relations

Extensive.
Margins drop.
Shelf space

Promotion
Strategy

Awareness.
Aggressive ads.
Stimulate
Stimulate
demand.Sampling
demand

Advertise.
Promote
heavily

Pricing
Strategy

High to recoup
development
costs

Fall as result of
competition &
efficient production.

DECLINE

Prices fall
(usually).

Phase out
unprofitable
outlets
Phase out
promotion
Prices
stabilize at
low level.

222

Chapter
Chapter 10
10

PRICE

Innovation
InnovationManagement
Management(WBB
(WBB10202)
10202)

What Is Price?

Price
Price is that which is given up in an
exchange to acquire a good or
service.

224

The Importance of Price to Marketing

Managers

Revenue
Revenue

The
The price
price charged
charged to
to customers
customers
multiplied
multiplied by
by the
the
number
number of
of units
units sold.
sold.

Profit
Profit

Revenue
Revenue minus
minus expenses
expenses

225

Pricing Objectives

Profit-Oriented
Profit-Oriented Pricing
Pricing Objectives
Objectives

Sales-Oriented
Sales-Oriented Pricing
Pricing Objectives
Objectives

Status
Status Quo
Quo Pricing
Pricing Objectives
Objectives

226

Profit-Oriented Pricing Objectives

Profit-Oriented
Profit-Oriented Pricing
Pricing Objectives
Objectives

Profit
Profit
Maximization
Maximization

Satisfactory
Satisfactory
Profits
Profits

Target
Target
Return
Return on
on
Investment
Investment

227

Sales-Oriented Pricing Objectives

Sales-Oriented
Sales-Oriented Pricing
Pricing Objectives
Objectives

Market
Market
Share
Share

Sales
Sales
Maximization
Maximization

228

Status Quo Pricing Objectives

Status
Status Quo
Quo Pricing
Pricing Objectives
Objectives

Maintain
Maintain
existing
existing
prices
prices

Meet
Meet
competitions
competitions
prices
prices

229

Chapter
Chapter 10
10

PLACE

Innovation
InnovationManagement
Management(WBB
(WBB10202)
10202)

Marketing Channels

Marketing
Marketing
Channel
Channel

A
A set
set of
of interdependent
interdependent organizations
organizations
that
that ease
ease the
the transfer
transfer of
of ownership
ownership as
as
products
products move
move from
from producer
producer to
to
business
business user
user or
or consumer.
consumer.

Supply
Supply
Chain
Chain

The
The connected
connected chain
chain of
of all
all the
the business
business
entities,
entities, both
both internal
internal and
and external
external to
to
the
the company,
company, that
that perform
perform or
or support
support
the
the logistics
logistics function.
function.

231

A company's supply chain

232

Marketing Channel Functions

Specialization
Specializationand
anddivision
division of
of labor
labor

Overcoming
Overcoming discrepancies
discrepancies

Providing
Providingcontact
contact efficiency
efficiency

233

Specialization and Division of Labor

Provides efficiency and cost savings
Attains economies of scale
Aids producers who lack resources to
market directly
Builds good relationships with customers

234

Overcoming Discrepancies
Discrepancy
Discrepancy
of
of
Quantity
Quantity

The
The difference
difference between
between the
the amount
amount of
of
product
product produced
produced and
and the
the amount
amount an
an
end
end user
user wants
wants to
to buy.
buy.

Discrepancy
Discrepancy
of
of
Assortment
Assortment

The
The lack
lack of
of all
all the
the items
items aa
customer
customer needs
needs to
to receive
receive full
full
satisfaction
satisfaction from
from aa product
product or
or products.
products.

Temporal
Temporal
Discrepancy
Discrepancy

A
A situation
situation that
that occurs
occurs when
when aa product
product is
is
produced
produced but
but aa customer
customer is
is not
not ready
ready to
to
buy
buy it.
it.

Spatial
Spatial
Discrepancy
Discrepancy

The
The difference
difference between
between the
the
location
location of
of aa producer
producer and
and the
the location
location of
of
widely
widely scattered
scattered markets.
markets.
235

Contact Efficiency

236

Channel Intermediaries

Retailer
Retailer

A
A channel
channel intermediary
intermediary that
that
sells
sells mainly
mainly to
to customers.
customers.

Merchant
Merchant
Wholesaler
Wholesaler

An
An institution
institution that
that buys
buys goods
goods
from
from manufacturers,
manufacturers, takes
takes title
title
to
to goods,
goods, stores
stores them,
them,
and
and resells
resells and
and ships
ships them.
them.

Agents
Agents and
and
Brokers
Brokers

Wholesaling
Wholesaling intermediaries
intermediaries who
who
facilitate
facilitate the
the sale
sale of
of aa product
product by
by
representing
representing channel
channel member.
member.
237

Channel Intermediaries

Retailers
Retailers

Take
TakeTitle
Titleto
toGoods
Goods

Merchant
Merchant
Wholesalers
Wholesalers

Take
TakeTitle
Titleto
toGoods
Goods

Agents
Agents
and
and
Brokers
Brokers

Do
DoNOT
NOTTake
TakeTitle
Titleto
toGoods
Goods

238

Channel Functions Performed by

Intermediaries
1. Transactional functions : contacting and
communicating with prospective buyers to
make them aware of existing products and
explain their features, advantages, and
benefits.
2. Logistics include transporting, storing, sorting
out, accumulating, allocating, and assorting
products from point of origin to point of
consumption.
3. Facilitating functions include research and
financing.
239

Direct Channel

Direct Channel
A distribution channel in which
producers sell directly to
consumers.

240

Channels for Consumer Products

Direct
Channel

Retailer
Channel

Wholesaler
Channel

Agent/Broker
Channel

Producer

Producer

Producer

Producer
Agents or
Brokers

Consumers

Wholesalers

Wholesalers

Retailers

Retailers

Retailers

Consumers

Consumers

Consumers
241

Channels for Business Products

Direct
Channel

Direct
Channel

Producer

Producer

Industrial Agent/Broker Agent/Broker

Distributor
Channel
Industrial
Channel

Producer

Producer

Producer

Agents or
Brokers

Agents or
Brokers
Industrial
Distributor

Industrial
Distributor
Industrial
User

Govt.
Buyer

Industrial
User

Industrial
User

Industrial
User
242

Levels of Distribution Intensity

Intensive
Intensive

A
Aform
form of
of distribution
distribution aimed
aimed at
at
having
having aa product
product available
available
in
in every
every outlet
outlet

Selective
Selective

A
Aform
form of
of distribution
distribution achieved
achieved
by
by screening
screening dealers
dealers to
to eliminate
eliminate
all
all but
but aa few
few in
in any
any single
single area
area

Exclusive
Exclusive

A
Aform
form of
of distribution
distribution that
that
established
established one
one or
or aa few
few
dealers
dealers within
within aa given
given area.
area.
243

Levels of Distribution Intensity

Intensity
Intensity Level
Level

Objective
Objective

Number
Number of
of
Intermediaries
Intermediaries

Intensive
Intensive

Achieve
Achievemass
massmarket
market
selling.
selling.
Convenience
Convenience goods.
goods.

Many
Many

Selective
Selective

Exclusive
Exclusive

Work
Workwith
withselected
selected
intermediaries.
intermediaries.
Shopping
Shoppingand
andsome
some
specialty
specialtygoods.
goods.
Work
Workwith
with single
single
intermediary.
intermediary.Specialty
Specialty
goods
goods and
andindustrial
industrial
equipment.
equipment.

Several
Several

One
One

244

Chapter
Chapter 10
10

PROMOTION

Innovation
InnovationManagement
Management(WBB
(WBB10202)
10202)

Promotion

Promotion
Communication by marketers that
informs, persuades, and reminds potential
buyers of a product in order to influence
an opinion or elicit a response.

246

Promotional Strategy
Promotional Strategy
A plan for the optimal use of the
elements of promotion:

Advertising
Public Relations
Sales Promotion
Personal Selling

Competitive
Advantage
247

Promotional Mix
Promotional Mix
Combination of promotion tools used
to reach the target market and fulfill
the organizations overall goals.
Advertising
Public Relations
Sales Promotion
Personal Selling

248

Promotional Mix
Advertising
Advertising

Public
PublicRelations
Relations

Sales
SalesPromotion
Promotion

Personal
PersonalSelling
Selling
249

Advertising

Advertising
Impersonal, one-way
mass communication about a product or
organization that is paid for by a
marketer.

250

Advertising Media

Traditional
Traditional
Advertising
Advertising Media
Media

Television
Radio
Newspapers
Magazines
Books
Direct mail
Billboards
Transit cards

Electronic
Electronic
Advertising
Advertising Media
Media

Internet
Electronic mail
Interactive video

251

Public Relations

Public Relations
The marketing function that
evaluates public attitudes, identifies areas
within the organization that the public may
be interested in, and executes a program
of action to earn public understanding and
acceptance.

252

Functions of Public Relations

Evaluates
Evaluates public
public
attitudes
attitudes

Identifies
Identifies areas
areas
of
of public
public interest
interest

Executes
Executes
programs
programs to
to
win
win public
public

253

Publicity

Publicity
Public information about a
company, good, or service
appearing in the mass media as a
news item.

254

Sales Promotion

Sales Promotion
Marketing activities--other than personal
selling, advertising, and public relations-that stimulate consumer buying and
dealer effectiveness.

255

Sales Promotion
Free
Free samples
samples
Contests
Contests
Premiums
Premiums
Trade
Trade Shows
Shows
Vacation
Vacation Giveaways
Giveaways

End
End
Consumers
Consumers
Company
Company
Employees
Employees

Trade
Trade Customers
Customers

Coupons
Coupons
256

Trade Sales Promotion

Trade
Trade allowances
allowances
Push
Push money
money
Training
Training
Free
Free merchandise
merchandise
In-store
In-store demonstrations
demonstrations
Business
Business meetings,
meetings, conventions
conventions && trade
trade shows
shows
257

Personal Selling

Personal Selling
Planned presentation to one or more
prospective buyers for the purpose of
making a sale.

258

Personal Selling

Traditional
Traditional
Selling
Selling

Relationship
Relationship
Selling
Selling

259

Thank you

260