CIM Coursebook: Delivering Customer Value through Marketing

Ray Donnelly, Colin Linton, Colin Linton

• Publisher: Routledge
• Year: 2010
• ISBN:
  9781136442247
• Edition: 1
• Topic: Commerce
• Subtopic: Commerce Général

Butterworth-Heinemann's CIM Coursebooks have been designed to match the syllabus and learning outcomes of our new qualifications and should be useful aids in helping students understand the complexities of marketing. The discussion and practical application of theories and concepts, with relevant examples and case studies, should help readers make immediate use of their knowledge and skills gained from the qualifications.'
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CHAPTER 1 New Product Development and Positioning

DOI: 10.4324/9780080961255-2

Learning Objectives

By the end of this chapter you will be able to:

• Examine the value and contribution of effective product management
• Apply the new product development process
• Assess product positioning and how it is applied

Introduction

Chapters 1 to 4 cover the part of the syllabus which relates to the role of products, the relationship with branding and the influence of pricing (product proposition and brand management). These are key tools available to a marketer when developing a product portfolio which meets the ever-changing needs of customers, and at the same time delivers corporate profitability.

The chapters of study will enable the reader to understand a number of techniques which have been tried and tested by a range of organisations to assist with effective strategic management of the product portfolio.

The reader will be introduced to a number of processes which enables you to develop a better understanding of the product and its key elements, the reasons for managing products to maximise customer value and the tools available to achieve this. Readers will be appraised of the advantages of strategic product management but at the same time will be asked to consider the limitations and how this might be managed.

A variety of different techniques will be explored including Product Life Cycle, BCG Matrix, GE Matrix and the new product development process. They will equip the reader with a number of options in achieving effective product management and this will be set in the context of opportunities both at home and abroad. The difficulties in developing products that eventually come to market and the key stages in the process will be explored and examples provided.

The marketing mix will be introduced as a concept which aids the strategic management of the product portfolio by developing an understanding of the role of the variable elements and the inter-relationship between them.

The role of branding will also be explored in the context of its critical role in shaping and positioning products with customers. Readers will be aware of a variety of strategies which can be explored with a view to maximising the attractiveness of the product range, the appeal to the customer and organisational profitability. Branding categories will also be considered and a view of how branding can be used to differentiate products explored. The role of branding in developing global products in overseas markets will be looked at particularly in relation to the degree of adaptation required.

The pricing variable will also be considered with a view to deepening the understanding of the impact that a variety of pricing strategies can have on the product position in the market. We will explore the ways in which pricing can be used to manage the product at various stages in its lifecycle in order to maximise the appeal of the product and profitability. Readers will be appraised of the importance of setting pricing objectives as a benchmark and to guide strategic product development. The role of the customers’ view of different strategies will also be considered, particularly in terms of the perception of value for money over which pricing strategies have significant influence. The role of pricing in building market share will also be considered as a key element of the marketing mix.

By the end of Chapter 4 readers will have a greater understanding of the key variable of the marketing mix, a range of techniques available to manage product portfolios effectively and a variety of examples of how this has been achieved.

It must be remembered that the subject encompasses both the domestic and international markets and this is applicable across all the Chapters. Similarly the context of the material needs to be understood in terms of different organisations or sectors, e.g. B2B, B2C, public and the not-for-profit sectors.

What is a Product?

The terms ‘product’ and ‘services’ are used interchangeably but they do have precise definitions and implications which helps marketers be more effective in carrying out their roles.

Kotler (1999) defines a product as ‘anything that is offered to the market for attention, acquisition, use or consumption that might satisfy a need or want’. He goes on to define a service as ‘products that consist of activities, benefits, or satisfactions that are offered for sale that are essentially intangible and do not result in the ownership of anything’.

A product can be a physical good, service, idea or indeed a person. Leona Lewis, your favourite soup, or replacement parts for your car, all come within the definition of a product. In other words a product it is something which is capable of meeting customers’ needs.

It can be the case that a product has tangible and non-tangible elements i.e. a combination of both product and service. Consider the purchase of a new software product by an organisation to streamline its payroll system. The software will be tangible, but its complexity means that an engineer needs to install it and then train staff on its use.

A product can be viewed from three levels:

• The core product
• The actual product
• The augmented product

These levels are used by marketers to offer a range of benefits that will have a different meaning for each customer.

The anatomy of a product (the different levels) is shown as a series of concentric rings as illustrated in Figure 1.1.

Figure 1.1 Product levels.

When marketers think about a product, its constitution is a little more complex than might be obvious and the various levels are summarised in Table 1.1.

Table 1.1 Summary of product levels

The core product	This is the basic product i.e. what the customer is buying. Marketers must define the core product elements in terms which are meaningful to the customer.
The actual product	Is composed of several characteristics such as styling, brand, quality, and packaging.
The augmented product	Additional consumer benefits and services are added. This could include things like warranties, guarantees, finance terms, dedicated help line.

It is at the augmented level that most competition takes place. For example, having made a decision to purchase a new car and narrowed the choice of vehicles to two manufacturers, it may be the case that the decision is swayed by the three years interest free credit deal offered by one of the brands. Organisations must constantly look to differentiate their product offers from the competition.

Example

PC World will now sell you a laptop computer that comes as a basic product, or with security software added, and/or mobile broadband with a range of payment terms which in summary allow you to choose to pay (say) £400, or in fact nothing, depending on whether you select a broadband package.

Product Categories

Products can be categorised into consumer and business products. The key differentiator is the purpose for which the product is to be used. It is important for marketers to understand the different categories in order for the appropriate marketing mix to be developed. However, it is not always easy to differentiate between the two categories. For example, the owner of a company buys a laptop computer for home use. However, by clearly understanding the different purchasing intentions the marketing mix can be highly targeted.

Consumer products can be further subdivided into four categories and...