B207A Big ideas in organizations

1. B207ABig ideas in organizations Shaping Business Opportunities I

2. Block 1 Session 6: Formulating an offering- the marketing mix- product and place

3. Block 1- Reading 6 The marketing mix- Place

4. The marketing mix- 4Ps • Historically the marketing mix is known as the ‘4Ps. • Product • Place • Promotion [distribution] • Price Reading 6: Formulating an offering- the marketing mix- Product

5. The marketing mix- 7Ps • However, as ‘people’ element is now recognized as important for all offerings, not just services • 5Ps are commonly considered for product offerings as well as the 7Ps for services. Reading 6: Formulating an offering- the marketing mix- Product

6. The marketing mix • The elements of the marketing mix constitute the offer made to customers • All of the elements play a role in meeting consumer needs • While marketers use & vary elements of the marketing mix to tailor the offer to customers • In practice, elements cannot be frequently & rapidly changed because it takes time &/or be expensive. • So careful research, analysis & planning are important for an optimal mix • Close monitoring of an organization's environment is also required to ensure necessary changes can be anticipated. Reading 6: Formulating an offering- the marketing mix- Product

7. Product • The term ‘product’ describes services, ideas & physical goods. • Many offerings include a combination of goods & services. • In the marketing mix, product includes: • Specifying a product’s development requirements. • Packaging design • Branding • After-care service and support Reading 6: Formulating an offering- the marketing mix- Product

8. Three levels of product benefits Reading 6: Formulating an offering- the marketing mix- Product

9. Types of products There are four main types of product: • Convenience: frequently purchased, low investment and involvement (milk, tissues) • Shopping: less frequently purchased, selected on price, quality and style (furniture, computers) • Specialty: special purchase, expensive, strong brand preferences (luxury items) • little knowledge (e.g. new invention) or little interest (Insurance) Reading 6: Formulating an offering- the marketing mix- Product

10. Product • Innovations in products is expensive & risky as it is incremental in nature • Mainly at ‘actual product’ level rather than at the core product level. • Ex. new packaging, new features, new styling & new quality • Freezers & washing machines, which were invariably white, are now available in different colors, such as black and stainless steel Reading 6: Formulating an offering- the marketing mix- Product

11. New product developmentFive-step basic new products process(Crawford & Di Benedetto, 2014) • Phase 1: Opportunity identification and selection • Phase 2: Concept generation • Phase 3: Concept/project evaluation • Phase 4: Development (includes both technical & marketing tasks) • Phase 5: Launch Five-step basic new products process(Crawford & Di Benedetto, 2014) Reading 6: Formulating an offering- the marketing mix- Product

12. New product developmentNew product development model by Crawford (1991) • Extended list of steps for developing new products • New product planning – reviewing current product performance & identifying threats & new product opportunities. • Idea generation – generating product ideas in line with organizational objectives. • Idea screening – assessing how well product ideas match organizational objectives & resources. • Concept testing – testing the new product concept on a small sample of potential buyers to assess their reactions to it. • Market/business analysis – evaluating the new product’s potential sales, costs & profits for the organization. Reading 6: Formulating an offering- the marketing mix- Product

13. New product developmentNew product development model by Crawford (1991) • Product development – determining if the new product can be produced both technically and cost-effectively. • Test marketing – introducing the new product in limited geographic areas or a representative marketing channel to determine the reactions of potential buyers (sample launching of the entire marketing mix). • Commercialisation– refining & settling plans for full- scale production & marketing. • Not all companies go through all of these stages or go through them in a systematic process Reading 6: Formulating an offering- the marketing mix- Product

14. Product planning in detail • Step 1 – new product planning: This step involves analysis of • The micro and macro environment • Competitive positions of the organization & Competitors • Differential advantage and marketing information SWOT analysis can be a useful tool in the product planning process Reading 6: Formulating an offering- the marketing mix- Product

15. Product planning in detail • Step 2 – ideas generation: Ideas may come from one or more of the following: • Research laboratories with teams dedicated to developing new product ideas & prototypes. • Periodic reviews of products and product portfolios. • Open calls for product suggestions internally or externally – external invitation to submit ideas for innovations. • Serendipitous (unexpected) suggestions from staff members, suppliers, distributors or customer feedback • Competitors or other organizations (innovations that can be copied often are, sometimes even when protected by patents or trademarks) • Collaboration – for example, Walkers and Heinz teamed up to launch a range of limited-edition sandwich-flavored crisps Reading 6: Formulating an offering- the marketing mix- Product

16. Product planning in detail • Step 3 – idea screening: • Idea screening involves selecting the most promising ideas for further development using at set of criteria proposed by Day (2007). • Time consuming when open competitions for external ideas submission Reading 6: Formulating an offering- the marketing mix- Product

17. Product planning in detail • Step 4 – Concept testing: • To test a more detailed idea as a product concept with target consumers to test their reactions to it. • The product concept might be described in words &/or images & sometimes using physical representations, with target consumers’ feedback sought to a set of questions. • Concept testing allows product ideas to be refined before expensive further development is pursued for promising products. Reading 6: Formulating an offering- the marketing mix- Product

18. Product planning in detail • Step 5 – market/business analysis Business analysis involves evaluating the sales, costs & profit estimates against the organization's objectives & determining the contribution and attractiveness of the product concept. Reading 6: Formulating an offering- the marketing mix- Product

19. Product planning in detail • Step 5 – market/business analysis Business analysis involves evaluating the sales, costs & profit estimates against the organization's objectives & determining the contribution and attractiveness of the product concept. Reading 6: Formulating an offering- the marketing mix- Product

20. Product planning in detail • Step 5 – market/business analysis Business analysis involves evaluating the sales, costs & profit estimates against the organization's objectives & determining the contribution and attractiveness of the product concept. Reading 6: Formulating an offering- the marketing mix- Product

21. Product planning in detail • Step 6 – Product development Product development entails translating the product concept into an actual prototype of the product. • Step 7- test marketing Test marketing includes testing not only a prototype product with a sub-set of target consumers but also the full marketing mix. Reading 6: Formulating an offering- the marketing mix- Product

22. Product planning in detail • Step 8 commercialization • Commercialization: a full-scale launch of a new product, having evaluated the feedback from the test marketing & incorporated any required amendments to the marketing mix. • The timing of a new product’s launch needs to be set carefully. (considering other products in the org, competing launches, etc.) Reading 6: Formulating an offering- the marketing mix- Product

23. Block 1- Reading 7 The marketing mix- Place

24. The marketing mix- Place (Distribution channels) Marketers need to collaborate effectively with the operations management function to ensure that sufficient quantities, appropriate outlets and acceptable delivery costs are provided. Reading 7: Formulating an offering- the marketing mix- Place

25. Distribution channels Some channel members may also perform other functions including: • Information – channel members can be a vital source of information about other stakeholders & forces in the marketing environment, which can help an organization with its strategic planning . • Promotion – communicating promotions for a product . • Contact – some channel members will be in contact with potential buyers or consumers & can influence their purchase decisions . • Matching – some channel members may influence aspects of the product to enable it to match customers needs more closely • Negotiation – agreeing price or terms to facilitate exchanges . • Financing – providing funding for channel distribution . • Risk taking – taking on some of the risks involved in channel distribution Reading 7: Formulating an offering- the marketing mix- Place

26. Distribution channels • The length of the chain and the type of actors in it vary. • Some chains are getting shorter, with providers dealing directly with buyers, such as in the travel industry. • Other chains are getting longer and more complicated, such as in clothing manufacturing. • Service distribution is more likely to be direct Reading 7: Formulating an offering- the marketing mix- Place

27. Traditional Distribution Channel Traditional model (Figure1) • Under the traditional model, each channel member was independent & pursued their individual goals & could conflict as well as cooperate with other channel members. • Channel conflict if not resolved could potentially damage channel relationships & compromise the effectiveness of the whole distribution channel. Reading 7: Formulating an offering- the marketing mix- Place

28. Vertical marketing system (VMS) • Channel members act as a unified system under the leadership of one channel member on the basis of one of the following: • owning the other channel members – corporate VMS . • having contractual arrangements with them – contractual VMS . • exerting control over them through superior size or power – administered VMS Reading 7: Formulating an offering- the marketing mix- Place

29. Vertical marketing system (VMS) Example: Apple • It manufactures chips and sensors for its products • Has a laboratory in Taiwan for developing screen technologies • Has bought a manufacturing facility in North San Jose, providing the company with flexibility and control over manufacturing. • Apple sells its products through physical & online stores, as well as selected retailers, controlling distribution & sales to end consumers. • Apple provides its own iOS operating system and iTunes software. Reading 7: Formulating an offering- the marketing mix- Place

30. Vertical marketing system(VMS)- Examples • Franchises are a common example of contractual VMS including: • Restaurants (McDonald's, Burger King) • Hotels (Best Western) • Car rentals (Avis and Hertz) • Car dealerships (Ford and Honda). • Ex. of administered VMS include major supermarkets, who exert considerable power over smaller suppliers, and large retailers and large retailers such as Walmart. Reading 7: Formulating an offering- the marketing mix- Place