Overview of Marketing Management for Technical Products

1. Overview of Marketing Management for Technical Products City University of Hong Kong Engineers in Society ( EE3014 ) • Calvin CHUI • 6 November, 2009

2. Contents Marketing Product Price Delivery Quality Q&A

3. References • Cyr, Donald G., Gary, Douglas A., “Marketing Your Product”, Self-Counsel Press, 2003, pp. 53-58, 79-83 • Jackson, Ralph W., “Sales and Sales Management”, Prentice Hall, 1996, pp. 50-65 • Kotler P., “Principles of Marketing”,Prentice Hall, 1994, pp. 6-11, 535-539 • Louis E. Boone, David L. Kurtz, “Contemporary Marketing Wired”, The Dryden Press, 1998, pp.47-49 • Tony P., “Strategic Marketing: An Introduction”New York Routledge, 2000, pp.47-48

4. Marketing • Marketing is not only a sale –“selling” and “promotion”– but in the new sense of satisfying customer needs • Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others

5. Marketing – Four Ps • Product • Price • Promotion • Placement

6. Marketing - Product & Price • Product • The product management and product marketing aspects of marketing deal with the specifications of the actual goods or service, and how it related to the end-user’s needs and wants • Price • This refers to the process of setting a price for a product, including discounts

7. Marketing - Promotion & Placement • Promotion • This includes advertising, sales promotion, publicity, and personal selling, and refers to the various methods of promoting the product, brand, or company • Placement • Placement or distribution refers to how the product gets to the customer; for example, point of sale placement or retailing

8. Case – iPhone 3G • Please apply marketing Four Ps on Apple’s iPhone 3Gs Source: www.apple.com

9. Marketing 7Ps ( 3 more) • People • Any person coming into contact with customers can have an impact on overall satisfaction • Process • This is the processes involved in providing a service and the behavior of people, which can be crucial to customer satisfaction • Physical Evidence • Unlike a product, a service cannot be experienced before it is delivered, which makes it intangible

10. Product • A successful product must benefit your customers • Identify the need of your customers • Understand your customer’s perceived needs • e.g. Sofa is not just a chairor a piece of furniture; itprovides comfort as well asreflecting personality andlifestyle Source: www.yanhodesign.com

11. Product - Product Value • Interest Value • The pleasure derived from using the product • Identity • Personality and lifestyle • Risk • Possibility and importance of a bad purchase • Packaging • Minor in the past; important in today • Protection, attraction, transportation and promotion

12. Example - Packaging • Functions of the product package • To attract target customers • To identify the product • To keep the product together

13. Example - Packaging • Functions of the product package • To provide a description of the product function • To protect the product

14. Product - Product Value • Branding • Name, symbol, or design to identify your products from those of your competitors • Helps customer identify your product • Protect your product features from imitation • Build a corporate image • Example: A BMW’s new Mini, you could get a bigger car at lower price, but that would be zero-prestige low-priced car. People will pay more for the small Mini instead. This is luxury defined, being able to pay extra for style

15. Price • Pricing is an ongoing concern • Pricing relates to industry supply and demand • Pricing relates to customer perception of the product benefits • Today’s pricing strategies need to combine hard data from an activity-based cost system with soft data from marketing

16. Price - Price Structure • Unit Cost = (Total Variable Costs + Fixed Costs) / Units Sold • Total Variable Costs = $10,000 • Fixed Costs = $10,000 • United Sold = 5,000 • then Unit Cost = $4.0 per unit • Fixed cost represents the overhead expenses that don’t change with the volume of work (e.g rent, depreciation, insurance and administrative expenses) • Variable cost represents expenses that can change based on the volume of work (e.g. material, labor, overtime pay and commission on sales)

17. Price - Price Structure • Markup • Selling Price = Unit Cost + (Unit Cost x Rate of Return) • Selling Price = $4.0 + ($4.0 x 15%) • Selling price = $4.60 • Markup = [(Unit Price – Unit Cost) / Unit Cost] x 100% • Markup = [(4.6 – 4.0) / 4.0] x 100% • then Markup = 15%

18. Price - Price Structure • Margin • Selling Price = Unit Cost / (1 – Desired Return on Sales) • Selling Price = $4.0 / (1 – 13%) • Selling Price = $4.6 • Margin = [(Unit Price – Unit Cost) / Price] x 100% • Margin = [($4.6 – 4.0) / $4.6] x 100 • then Margin = 13%

19. Price - Pricing Strategy • Profit Maximization • Setting a price level to attain the highest possible current profit • Market Share • Pay attention to your competition and set your price to obtain market share • Of course this would happen when competitive products are similar and where the market is price sensitive

20. Price - Pricing Strategy • Obtain ROI (Return on Investment) • Establish a price that will provide a certain percentage return on investment • Such as 10 percent ROI after tax • Price Skimming • Setting a high price to maximize early cash recovery before catering to moreprice sensitive segment of themarket

21. Delivery • Bring your product to your target customer or market • Make your product available at a time and place that is convenient to your target customer • Make it easy for your customer to buy

22. Delivery - Methods • Producer -> Customer • The simplest and most direct marketing channel • From producer to customer • Open markets – fish markets, meat and fresh produce markets and flea markets • Door-to-door • Trade shows • Street vending • Product inserts • Internet

23. Delivery - Methods • Producer -> Retailer -> Customer • Department stores • Manufacturer’s sales representative • Independent salesperson who distributes products to retailers • Producer -> Wholesaler -> Retailer -> Customer • Small producers sell to wholesalers who then sell to small retailers • This approach allows indirect contact between thousands of producers and retailers • Producer -> Agent -> Wholesaler -> Retailer -> Customer • Agent’s main function is to bring buyers and sellers together

24. Delivery – Distribution Consideration • Customer • Number of customers • When we have a large number of customers, we may need a go-between (or middleman) to serve them • Purchasing patterns • If customers buy on a frequent basis, a greater number of go-betweens is required. E.g. drinks and sundries • Geographic dispersion • Producers may set up their own sales outlets in densely populated areas, but use go-betweens in less concentrated areas

25. Delivery – Distribution Consideration • Product Characteristics • Perish-ability • Perishable products suitable for direct or short distribution route to the end user • E.g. fresh produce and fashionable goods • Product Value • Products of high value or custom-made products are generally sold directly to the customer • Convenience Goods • Products such as staples, impulse goods, and emergency supplies require a go-between to give the product maximum exposure

26. Quality • Today’s customers have high expectations and they are managing their consumption more carefully • The customer defines quality, not the manufacturer. If you know what your customers want and what influences them, you’ve got the competitive edge • Customer demand more than just a fair price; they are seeking added value. Value is the customer’s perception of the balance between the quality of goods or services that a firm provides and their price. • Example: Lexus and Infiniti are in vogue because they emphasize quality and value

27. Quality • Quality consists of the capacity to satisfy wants(Edwards C.D., “The Meaning of Quality”, Quality Progress, Oct. 1968) • Quality is the degree to which a specific product conforms to a design or specification(Gilmore H.L., “Product Conformance Cost”Quality Progress, June 1974) • Quality is the degree of excellence at an acceptable price and the control of variability at an acceptable cost(Broh R.A., “Managing Quality for Higher Profits”, McGraw Hill 1982)

28. Quality • Product Quality • Performance • How well a product performs the task it was designed to do? • Durability • How long the product will last? • Features • What special features does the product have which makes it superior to competitive offering? • Reliability • Can one expect the same kind of quality every time that the product is used? • Fit and finish • Does the product look and feel like a quality product?

29. Quality • Service Quality • Tangibles • Do the physical facilities, equipment and appearance of personnel associated with the service promote confidence in the quality of the service? • Reliability • Is there evidence of an ability to perform the promised service properly the first time? • Competence • Do the personnel possess knowledge and skill and have they an ability to convey trust and confidence? • Communication • Are customers kept informed about the service offered in the language they can understand? Do the providers of the service listen to what the customers have to say?

30. Quality – Customer Satisfaction • Quality is usually referred to several critical dimensions that can be identified and measured, such as number of defects, durability and reliability • Quality also includes the intangible components of customer satisfaction, the ability of a good or service to meet or exceed buyer needs and expectations • “Quality is what your customer says it is – not what you say it is. To find out about your quality, ask your customer.”(Feigenbaum A.V., Quality Management Consultant)

31. Quality – Customer Satisfaction • Kano’s model of customer satisfaction Customer Satisfaction Delight excitement performance Immediatehappiness unspoken Actual ProductPerformance Notunhappy basic expressed expected Disappointed

32. Quality – Customer Satisfaction • Kano’s model explains that for some customer attributes, customer satisfaction is dramatically increased with only a small improvement in performance, while for other customer attributes, customer satisfaction is increased only a small amount even when the product performance is greatly improved

33. Q&A

34. Thank You !