Chapter 2 Human Resource Planning & Strategy · · 2012-11-102012-11-10 · planning, information...

Ibrahim Sameer

1

Introduction A product is the central focus of the marketing mix as this

is what is delivered to the Consumer.

2

Introduction (Cont…) A frozen ready-prepared meal consists of ingredients, but

customer satisfaction is convenience. To an industrial

buyer, the main feature might be speed of delivery or

technical support. For marketers, the product is a want-

satisfying item; to consumers, it is a satisfaction.

3

Product Classification There are two types of product / goods

Consumer Goods

Industrial Goods

4

Consumer Goods Consumer goods are finished products that are sold to

the ultimate user and these are sub-categorised as

shown under.

5

Consumer Goods (cont…) Convenience Goods

These are relatively inexpensive items, typically part of a weekly

shop, whose purchase requires little effort.

Convenience goods can be divided into staple and impulse

purchases. Staple goods are consumed on a daily basis (e.g. milk

and meat) where opportunities for differentiation are less.

As the term implies, there is no preplanning of impulse goods.

6

Consumer Goods (cont…) Shopping Goods

These include major durable or semi-durable items that are more expensive

than convenience goods. Purchase is less frequent and is characterised by pre-

planning, information search and price comparisons.

White goods, furniture, DIY equipment and lawnmowers are homogeneous

because they are virtual necessities, and are not very differentiated in price,

prestige or image.

Heterogeneous goods are stylised and non-standard. Here, price is less

important than image, and behavioural factors are important in the decision

process.

7

Consumer Goods (cont…) Specialty Goods

In this type of goods once a purchase choice has been made,

there is a reluctance to accept a substitute.

The market is small, but prices and profits are relatively high.

Consumers pay for prestige as well as the product.

E.g. some customers decide on a particular model of car or

designer label for clothes or jewellery long before the purchase is

even considered.

8

Consumer Goods (cont…) Unsought Goods

An unsought goods is one that a consumer does not know about—or knows

about but does not normally think of buying. New products, such as new

frozen-food concepts or new smartphones, are unsought until consumers learn

about them through word-of-mouth influence or advertising. In addition, the

need for unsought goods may not seem urgent to the consumer, and purchase

is often deferred. This is frequently the case with life insurance, preventive car

maintenance, and cemetery plots. Because of this, unsought goods require

significant marketing efforts, and some of the more sophisticated selling

techniques have been developed

9

Industrial Goods

Goods and services required by industry are shown

under:

10

Industrial Goods (cont…) Installation

These are expensive items like plant and machinery required for

production. A company might make a mistake when choosing

office equipment or building maintenance services which may be

costly, but is unlikely to be a serious threat to the company’s

future. However, if production machinery is purchased that is

then found to be unsuitable, this could affect production

processes.

11

Industrial Goods (cont…) Accessories

Accessories are also capital items, but usually less

expensive, being depreciated in company accounts

over fewer years. Accessories include secondary plant

and machinery, warehousing equipment and office

equipment and furniture.

12

Industrial Goods (cont…) Raw Materials

Raw materials account for much of the time and work

of a purchasing department. A direct relationship

exists between raw material quality and the quality of a

company’s finished product, so quality, reliability of

supply, service and price are important.

13

Industrial Goods (cont…) Components parts and materials

Criteria are similar to raw materials, including

replacement and maintenance items for production

machinery. e.g. oils, chemicals, adhesives and

packaging materials.

14

Industrial Goods (cont…) Supplies

These are the ‘convenience goods’ of industrial supply,

and include items like stationery, cleaning materials

and goods required for maintenance and repairs. The

purchasing process is more routine. Most supplies are

homogeneous and price is likely to be a major factor in

a purchasing decision.

15

Industrial Goods (cont…) Industrial Service

The use of external suppliers of industrial services,

especially in the public sector, has risen over recent years.

Many organizations find it better to employ outside

agencies with the expertise they offer, to carry out certain

tasks, rather than employing ‘in-house’ personnel.

Cleaning, catering, maintenance and transport are

examples.

16

New Product Development New product development forms part of product strategy

as well as being an element of overall marketing strategy.

New products are central to a company’s continued

survival, but their development is a risky undertaking.

In FMCG markets new products appear regularly.

Confectionery firms, for example, launch new products,

many of which disappear shortly after launch.

17

Stages of New Product Development

18


19

Idea generation

The attitude of management and the atmosphere in which new ideas

are encouraged and created is of prime importance. Ideas come from

many sources, e.g. marketing research, research & development and

production. Salespersons are well placed for providing customer

feedback and reporting on competitive products as part of information

collection for market intelligence. Brainstorming sessions can be

conducted to focus on new-product development issues.


20

Screening

Management reduces the collection of ideas to manageable

numbers by identifying the most viable to go to the next stage.

Typical questions include:

Is there a real consumer need?

Does the company have resources and technical ability to

manufacture and market the new product idea?

Is the potential market large enough to generate enough profits?


21

Concept testing

Here, a small number of key decision makers within

the company, and possibly potential customers, are

presented with the product idea in a simple format

that includes drawings, models and a written

description. This is to establish their feelings about the

product’s potential in the market place.


22

Business Analysis

This stage concerns more detailed financial, rather

than practical, concerns. The company estimates

demand, costs and profitability that take account of

marketing costs as well as costs of raw materials and

production.


23

Product Development

The company now develops a prototype to establish its

potential in physical terms, and turns to the market

place to obtain feedback. The prototype should

correspond as closely as possible to the production

model to obtain accurate customer reactions. At this

stage it is possible to modify the product.


24

Test Marketing

Test marketing is an experiment conducted in a field laboratory (the test

market) comprising of actual stores and real-life buying situations, without the

buyers knowing they are participating in an evaluation exercise. It simulates

the eventual market-mix to ascertain consumer reaction. Depending on the

quality and quantity of sales data required for the final decision, test marketing

may last from few weeks to several. Test marketing is more suitable for fast

moving packaged goods than for consumer durable.


25

Commercialization

This is the final stage after various ideas have been

filtered. A final proposition has been selected that is

acceptable to the marketplace. Test marketing has

permitted the company to make any final adjustments

to the chosen marketing strategy, and the product can

now be ‘commercialized’.

Product Life Cycle

26

The product life cycle (PLC) is central to marketing strategy. It is

based on the suggestion that a new product enters a life cycle

once it is launched. The product is conceived prior to

development and has a ‘birth’ and a ‘death’ described as

introduction and decline. The intervening period is

characterised by growth, maturity and saturation. By mapping a

product’s course through the market, it is possible to design

strategies appropriate to relevant stage in the product’s life.

Product Life Cycle (cont…)

27


28

Development

Naturally, during this phase no sales are made. As time

progresses, development costs accrue as can be seen

on the lower negative cash-flow curve.


29

Introduction

The aim is to create awareness that often involves a

disproportionate level of marketing expenditure

relative to sales revenue. This is seen as an investment

in the product’s future. Promotion creates this

awareness along with the sales function whose task is

to communicate product benefits.


30

Introduction (cont…)

Introductory pricing strategy will depend on the

degree of product distinctiveness. A firm may wish to

achieve high sales in a short space of time, in which

case ‘penetration pricing’ might be appropriate, or

slowly establish a niche in the market in which case it

might use ‘skimming’.


31

Growth

The characteristics of growth are:

1. More competitors and less product distinctiveness.

2. More profitable returns.

3. Steeply rising sales.

4. Company or product acquisition by larger competitors.


32

Growth (cont…)

Promotional expenditure is still high because it is the

best time to gain market share in preparation for

market dominance during the maturity stage.

Promotional effort moves from creating product

awareness to specific brand promotion.


33

Maturity

The major characteristics of the maturity stage are:

1. Sales continue to grow, but at a much decreased rate.

2. Attempts are made to differentiate and re-differentiate

products.

3. Prices fall in battles to retain market share along with falling

profits.

4. Marginal manufacturers leaving the market when faced with

severe competition and reduced margins.


34

Maturity (cont…)

Exponential market growth has ceased, and

marketing’s task is to retain market share with

promotion reinforcing brand loyalty. Further growth is

at the expense of competitors so there is a need for

sustained promotional activity, even if only to retain

existing customers.


35

Saturation

This is really the second part of the maturity phase,

but has its own characteristics. It is when the peak of

maturity has been passed, when price wars are

common and lower priced producers have entered the

market. They have mastered the manufacturing

technology, often in low labor-cost countries.


36

Decline

Characteristics of decline are:

1. Sales falling continually.

2. Further intensification of price cutting.

3. Producers deciding to abandon the market.

Problems in Product Life Cycle

37

Forecasting

Not all products follow the traditional product life cycle as

outlined above. The shape can be altered by external

environmental factors, such as a recession, competitor or

marketing activity, e.g. an organization can introduce new

benefits or features to try to extend the life cycle for its products.

Therefore the product life cycle has limited use as a forecasting

tool as it is not able to identify when a product will move to the

next stage.

Problems in Product Life Cycle (cont…)

38

Identifying the stage

It is often hard for an organization even to identify which

stage the product is in, for example for some products the

market size is unknown, particularly for new technologies,

therefore it is difficult for marketing managers to know if

the product is in the maturity stage or if it is just the sales

of that product which are stabilizing compared to

competitors and in fact the market is still growing.

Problems in Product Life Cycle (cont…)

39

Historic

Information and statistics on sales revenue and market

size is often historic, e.g. what has been spent and

therefore any attempt to ‘plot’ these on a product life

cycle means that the information is historic and does

not identify what is happening at the current time or

what will happen in the future.

Past Paper Review December 2008 / Q4 (b) (c)

(b) Draw a diagram of a typical product life cycle with each

stage clearly labelled and give a brief explanation of each

stage. (10 marks)

(c) Explain three problems of using the product life cycle as

a tool to make marketing decisions. (6 marks)

40

Past Paper Review (cont…) Answer (b)

41


Introduction

Following the development of a product, the introduction stage is

where an organization launches the product to the market. This is a

very expensive stage which will involve expenditure on

communications activities such as advertising and sale promotion to

make consumers aware of the product and persuade them to try. This

expenditure needs to be incurred in advance of any revenue being

produced.

42


Growth

This is the stage where the product is adopted by the

market and the organization starts to experience increased

sales revenue. Often at this stage competitors will enter the

market fighting for market share. It is often in this stage

that costs are reduced by achieving greater economies of

scale in production and marketing expenditure. 43


Maturity

This is the stage where the market is no longer growing and sales of

the product are stable. During this stage if an organization wishes

to achieve more growth with the product they will need to look for

alternative markets such as international markets or different

market segments. At this stage an organization will need to

continue to develop customer loyalty to ensure its market share

remains constant.

44


Decline

This is where the market for a product is in decline perhaps

due to an external environmental change, an example

would be the introduction of a new technology such as the

DVD which replaced videos. Organizations during this

stage need to decide whether to withdraw their products or

look for alternative markets or product uses.

45

Past Paper Review (cont…) Answer (c)

Refer slide 37-39

46

Q & A

47

Chapter 2 Human Resource Planning & Strategy · · 2012-11-102012-11-10 · planning, information...

Documents

Transcript of Chapter 2 Human Resource Planning & Strategy · · 2012-11-102012-11-10 · planning, information...