CS173 : products and markets the importance of products and markets in a company’s strategy



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CS173 : PRODUCTS AND MARKETS


  1. THE IMPORTANCE OF PRODUCTS AND MARKETS IN A COMPANY’S STRATEGY

A good fit between its products and markets is essential for the continuing survival and success of any company.


A poor fit means loss of sales to the competition and dissatisfied customers

Over time, the quality of the fit will vary under the impact of changing competition, consumer wants, technology,…….




  1. WHAT IS A PRODUCT?



A product is anything which is offered for sale, so it might be a physical good (e.g. a desk or a motor car) or a service (e.g. hairdressing or a seat on a train). See examples on pages 6/7
Note:



A Good



A Service

Tangible: it can be touched and seen and owned



Intangible: impossible to touch, see and own


Generally produced and consumed at different times, with storage in between



Produced and consumed at the same time and so cannot be stored





Customer participation in the delivery of a service is essential



Implications e.g. for training?



One product is differentiated from another by:





  • Function: does it clean your floor, make you feel good when you drink it, or keep you warm in cold weather

  • Design: how effectively does it carry out its function?

  • Price

  • Brand image

  • Quality

  • Availability

  • After sales service (if appropriate)




  1. WHAT IS A MARKET?



Traditionally, a meeting together of people for the purchase and sale of goods and services, but of course now:


  • Physical meeting is unnecessary: communication can take place by other means, such as telephone, fax, ‘advertise and respond’, and the internet

  • There must be suppliers and potential buyers

  • When there is more than one supplier, we have competition







  1. WAYS OF DEFINING MARKETS



  • By product, e.g. soap, bread, shirts, cars



  • By function performed, e.g floor coverings



  • By customer group, e.g. office consumables (pencils, pens, envelopes, paper clips,…..)




Market Share: a measure of an organisation’s success in winning and retaining customers in a competitive market.

It is measured either by volume:


(Units sold by the company in a given period)/(Total number of units sold into that market during that period) x 100%
or by value:
(Value of sales by the company into that market in a given period)/(total sales into that market in the same period) x 100%


  1. MARKET SEGMENTATION



Markets are rarely homogeneous. Within markets there are groups of customers with requirements that are similar. These ‘submarkets’ are known as market segments.
Thus a manufacturer of face soap will recognise, for instance, that:



  • Adults

  • Babies

  • Fashion conscious teenagers

  • Coal miners

  • Eczema sufferers



will each want soaps with different properties. That manufacturer can then consider the make-up of the product, the price, packaging, promotion, likely sales, …. And then decide which of these segments offers opportunities for his business.

Segmentation is thus a powerful competitive tool.


  1. PRODUCT POSITIONING


Product positioning is the way that a product is perceived in the marketplace in comparison with other products. Thus in an alcoholic drinks market, two important characteristics of the products in that market might be alcoholic strength (weak or strong) and taste (sweet or bitter).
The diagram shows the preferences of different groups of customers, and their perceptions of existing products in the market. Such a diagram can be a useful tool for:



  • Identifying any unsatisfied or poorly satisfied gaps in the market

  • Judging whether a company’s product is perceived as the company wishes, and whether price, promotion, packaging and distribution are all consistently pointing in the same direction





  1. KOTLER’S FIVE LEVELS OF PRODUCT BENEFIT




  • Core benefit
    e.g. in a car - provides transport



  • Basic benefit
    e.g. the seats, the controls and legally required safety aspects



  • Expected benefit
    e.g a radio, a comprehensive warranty and certain levels of performance



  • Augmented benefit

Goes beyond the customer's expectations to provide something extra, e.g. air conditioning



  • Potential benefit
    All that the car might be expected to include, e.g. a renewable energy source.



In mature markets, competition is normally at the augmented product level and the basic product is taken for granted



  1. THE PRODUCT LIFE CYCLE



The Five Stages:





  • Introduction
    considerable uncertainty, despite the careful planning
    - balancing production against demand
    - competitor reactions
    - rapid learning opportunity



  • Growth
    - (Support or kill decision)
    - Smoother production
    - More targeted marketing
    - Competing products launched?



  • Maturity
    - Product or service now widely accepted
    - Competitive battles likely
    - More targeted marketing



  • Saturation
    - Consumer basic needs satisfied (e.g. refrigerators)
    – now a replacement market
    - Widespread competition
    - possible price wars
    - Attention turning to new or improved products




  • Decline
    - As new and better products introduced
    - Possible changes in fashion
    - Possible changes in technology
    - affecting demand or production methods
    - Possible regulatory changes
    - affecting demand, safety, packaging,….



Extending the Maturity Stage: possible means:





  • Patents



  • Establishing the brand and brand loyalty



  • Regular advertising to maintain customer awareness



  • Uncertainty of changing to other products



  • Cost to the customer of changing to other products



  • Changing the product, the price and the promotion to maintain a better match with customer needs than competing products



  1. DEVELOPING PRODUCTS & SERVICES TO SATISFY CUSTOMER WANTS




Basic Development Options : The Ansoff Matrix Tool





Products


Existing

New

Markets

Existing



Current Business


Product Development

New



Market Development


Diversification

___________________________________________


PRODUCT & MARKET EXAMPLES


Products




Clothes




Books

Watches

Squash racket


Cars


Computers


Furniture


Newspapers


Food


CDs, DVDs


Boats






Services




Haircut




Holiday

TV programme

Fitness advice


Lecture


Restaurant meal



Telephone service





Train or bus journey



Medical advice


Car maintenance







Product Market Fit Changing Over Time



  • The Model T Ford



  • Recorded music: 78 rpm; 33.3; tapes; CDs; DVDs; ….



  • Package Holidays (France,……………….Muscat)



  • Clothes – fashion



  • Radio, TV programmes


Products


In Decline



Mature But Continuing

Audio tapes?



Persil (1919)


Men’s Suits?



Coca Cola


Meat (eating)?



Johnny Walker whisky


Dairy Products?



Bryant & May matches


Cuff links?



Esso Petrol



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