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Expert: Leo Lingham Date: 6/19/2008 Subject: Marketing Management
Question 1) How a marketer develops and test new product concept?
2) How management does business and market analysis in new product development?
3) Why service marketing is different than product marketing?
4) Discuss the different service marketing strategies.
Answer AMRAN,
HERE IS SOME USEFUL MATERIAL.
REGARDS
LEO LINGHAM
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1) How a marketer develops and test new product concept?
2) How management does business and market analysis in new product development?
NEW PRODUCT INTRODUCTION
SEARCHING FOR OPPORTUNITY
Information that can help to shape the development of the
NEW product plan.
Information that can help to shape the development of the
product plan.
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STEP ONE
INDUSTRY MARKET RESEARCH & ANALYSIS
WHAT IS THE MARKET SIZE/ POTENTIAL FOR THIS PRODUCT
GROUP ?
SALES VOLUME AND TRENDS
By dollar volume and unit sales.
By specific product.
By geographic design.
By customer use pattern.
By manufacturer and marketer.
By buying power.
By distribution channel.
By price.
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STEP TWO
TECHNOLOGY RESEARCH
WHAT TECHNOLOGY WOULD BE REQUIRED TO MAKE THIS
PRODUCT?
BASIC TECHNOLOGY
By parts, raw materials, labor.
By process.
By patent barriers.
By purchasing.
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STEP THREE
COMPETITION RESEARCH
WHAT WOULD BE THE NATURE OF COMPETITION FOR THIS
PRODUCT?
COMPETITION
By product specifications.
By product volumes.
By market share.
By end‑user.
By trade channel.
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STEP FOUR
CONSUMER RESEARCH
WHO ARE THE REAL POTENTIAL USERS FOR THIS
PRODUCT?
CONSUMER DEFINITION
By CONSUMER use.
By geographic characteristics.
By industry.
By pricing effects.
By alternative and substitute products.
By seasonal purchase.
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STEP FIVE
OTHER AREAS OF RESEARCH
WHAT OTHER AREAS WOULD BE REQUIRED TO RESEARCHED?
OTHER FACTORS
Import regulations.
Government regulations.
Economic situations.
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OPPORTUNITY IDENTIFICATION RESEARCH
PHASE 1
The process includes:
*Define targets.
*Forecast rough volume and share.
*Perform a risk ratio analysis.
*Conduct a preliminary feasibility study using secondary data and professional expert opinion ‑ no prototypes or no trial runs.
*Assess competitive reactions, exclusivity, regulations, protections and constraints.
*Look at exceptional technical hurdles.
*Consider legal and policy issues.
CONCEPTION RESEARCH – PHASE 2
This phase translates market facts into product concepts and customer positioning communication, prior to extensive research and development. The objective is to create and to refine a variety of appropriate product concepts in the form of customer communications, which may then be screened down to a workable number of the most appealing ones that may be carried forward into the prototype modelling phase.
1 . INPUT RESEARCH
This is a backgrounding step, often required where "hands‑on" experience, technical education, patent and literature review, as well as special consultant professionals, are needed for complete understanding of the opportunity area.
2. IDEATION
Ideation is the generation of large quantities of unconstrained possibilities, utilising a variety of stimulus techniques ‑brainstorming, group discussion, etc.
3. IDEA FORMS
This is the shaping of concepts into single‑minded, clear communications. The goal is a clear communication that neither goes beyond nor falls short of a real world summary statement of each concept.
4. PRE‑SCREENING CONCEPTS
Broad‑brush selection methods are applied to eliminate or improve concepts that are difficult to target.
5. SCREENING RESEARCH
This process rates many concepts rapidly ‑ individually
and in relationship to each other.
PROTOTYPE MODELLING
PHASE 3
At this phase, preliminary concepts have survived several selection steps. Now it is necessary to bring the narrowed number of proposed new products closer to reality in the form of prototype products and prototype communications. The target customer prospect should see the concept "in the round" as closely as is timely and economically feasible. Prototype modelling accomplishes the development of such stimulus materials.
1 . DESCRIPTORS
This step involves the product category and preliminary brand name development.
2. PROTOTYPES
This covers all aspects of the product and its communications. Included are:
Product.
Package.
Brand name and description.
Communications theme development.
Prototype of communications.
Prototype testing.
DEVELOPMENT - PHASE 4
This phase of product development encompasses a number of different activities.
1 . VITRO TRIALS
In‑house double check of the prototype in the research and development.
2. PILOT PRODUCTION
This involves a small‑scale replication of mass production. It helps to debug the system and devise productions controls, systems and equipment design. it is basic to determining on‑stream cost estimates.
3. SCALING UP (COMMERCIALISATI ON)
Manufacturing resources.
Marketing factors.
Distribution.
Service.
Financial.
Legal.
MARKETING - PHASE 5
The marketing plan should include the following elements:
Prototype introduction.
Test simulation.
Sales and distribution.
Creative strategy.
Media programme.
Trade promotion.
PR plans.
Start‑up plan.
Test marketing.
Assessment plan.
Expansion plan.
Finance and production requirements.
TEST MARKETING ‑PHASE 6
Evaluation of:
Awareness, attitude, usage.
Distribution.
Sales.
MAJOR INTRODUCTION
PHASE 7
Finally comes the moment of truth ‑ the major introduction.
Expanding the sales territory.
Close monitoring of performance vs. plan.
Evaluating opportunities.
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3) Why service marketing is different than product marketing?
4) Discuss the different service marketing strategies.
Service quality is not one-dimensional; it encompasses numerous factors that are important to customer satisfaction. Satisfaction basically is related to expectations and perceived delivery on these dimensions and as shown by the equation given below.
The quality of service delivery results in customer satisfaction & their retention as it reinforces the perception that the value of the service received is grater than the price paid for it.
Quality is defined as the ability of the service provider to satisfy customer needs. Customer perception , service quality & profitability are interdependent variable.
Even in the case of products, quality is difficult to define because it is highly dependent upon customer perception. The task is made more complicated in the case of service because of the intengible nature of service & the variation in services offered to different customers.
There are several reasons why customers must be given quality service. Most important of them are
1. Industry has become so competitive that customers now have variety of alternatives. If the customers are lost, it can be extremely difficult to win back the individual.
2. Most customers do not complain when they experience problems, these customers simply opt out & take their business elsewhere.
What is CUSTOMER Satisfaction?
CUSTOMER Satisfaction = function of {CUSTOMER -Expectation and Perceived delivery}
A person is said to be dissatisfied when the perceived delivery is lower than expectation; he/she is satisfied when they match; delighted when the delivery exceeds expectation and astonished when the delivery far exceeds expectation. The following equations explain these relationships.
Perceived Delivery < Expectation --> Dissatisfaction
Perceived Delivery = Expectation --> Satisfaction
Perceived Delivery > Expectation --> Delight
Perceived Delivery >> Expectation --> Astonishment
Dimensions of Service Quality:
There are various aspects that a customer expects from different services.
1. Reliability: This refers to the ability of the company to perform the promised service dependably and accurately. Reliability is probably the single most important dimension of quality. Customers expect that companies will do what they say and they will do when they say they will do it.
2. Tangibles: This refers to the appearance of the physical facilities, equipment, personnel, and communication materials. As services are intangible, the tangibles give an impression to the customers about the quality of service they can expect from a firm. A bank in a shabby building will make the customer wonder whether their money will be safe in such a bank.
3. Responsiveness: This refers to the willingness of the employees to help customers and provide prompt service. When you go to a bank the minimum that you expect is that the employees would attend to you rather than chit-chat amongst themselves.
4. Assurance: This factor is linked to several minor factors such as competence, courtesy, credibility and security. Competence depends on the service provider's possession of the required skills and knowledge to perform the service. The politeness, respect, consideration, and friendliness of the service providers can be bundled into the term courtesy. Credibility refers to the perceived trustworthiness, believability, and honesty of the service provider. Security refers to the fact that the service should be free from danger, risk, and doubt. In sum, the assurance factor refers to the knowledge and courtesy of employees and their ability to inspire trust and confidence.
5. Empathy: Empathy refers to the caring, individualized attention the firm provides to its customers. It includes access, communication and understanding. Access refers to the approachability and ease with which the customer can contact the firm. Communication refers to keeping the customer informed in the language they can understand and listening to them. Understanding has to do with the efforts made by the service provider to know customers and their needs.
The Service Quality Gaps:
Gaps between perceived & expected levels of service quality delivery result in the failure of the service provider.
These are the 5 gaps.
-The First gap does not know what customers expect. rea
-The second gap is between what the customer expects and what the management understands as the customers' expectation from the company.
-The third gap is with reference to the management's understanding of the customer expectations and the service quality standards set by the management.
-The fourth gap is between the quality specifications and actual service delivery.
-The fifth gap is between what is communicated to customers and what is actually delivered.
It is possible to measure the gaps and take corrective actions to fill them to the extent possible. The most difficult gap to fill is the one between customer expectations and the perceived service delivery. The expectation of the customers keeps rising with every good experience. When a customer visits the service organization, he/she expects a better service than what was experienced in the last encounter.
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The service marketing challenges are
-to generate re-sales
-to create a waiting list
-to create a positive word of mouth advertising
as a lot of new business is generated from satisfied customers.
WHICH MEANS THAT THERE IS NO/LITTLE GAP BETWEEN
SERVICE EXPECTATIONS AND SERVICE DELIVERY.
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HOW DO YOU MATCH SERVICE EXPECTATION WITH DELIVERIES
IN PRODUCT MARKETING , WE RELY ON 4 P's
-product attributes/benefits
-pricing strategy
-place [ right / easy place to buy]
-promotions [ selected weighted mix]
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IN CASE OF THE SERVICE, THE PRODUCT IS
-intangible, the greater the intangibility the more complex
the promise.
-perishable /heterogeneous, the production and consumption are often simulaneous.
IN SERVICE MARKETING, WE RELY ON 7 P's
-product service [ features/benefits]
-place [ flexibility]
-price [ flexi]
-promotions [ selected weighted mix]
-people [ ability,competent, right attitude ]
-physical evidence
-process
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IN SERVICE BUSINESS,
-SERVICE MARKETING PROMOTES AND
SERVICE MANAGEMENT GENERATES RESULTS, through
*service delivery
*service quality
*customer satisfaction/ relation management
-service recovery
-service management audit.
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SERVICE MANAGEMENT PROVIDES SATISFACTORY SERVICE
-by designing the customer oriented business process
-cost effective service
-continuous improvements through research/development
-improving people's abilities/competences.
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SERVICE MARKETING MEETS SERVICE MANAGEMENT
-by managing customer behavior
-by conducting customer research
-by managing customer expectations
-by reverse-engineering the product/service portfolio.
-by determining what service the market needs/ we can offer.
-what do we need to do to fill the gap.
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THE INTEGRITY OF PRODUCT-SERVICE DELIVERY
when the service marketing is intergrated with service management
that is ,what you promise [either explicitly or implicitily] and
what you deliver
IN THIS CASE , ''INTEGRATED'' = ''INTEGRITY''
There is no gap
WHICH MEANS CUSTOMER SATISFACTION,
WHICH IT TURN MEANS = SUCCESSFUL SERVICE MARKETING.
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4) Discuss the different service marketing strategies.
There are a number of broad strategic options, including
‑market penetration strategies,
‑new market development strategies,
‑new service development strategies and
‑diversification strategies,
depending on whether an organisation has decided to enter new markets or to develop new services, or both.
MARKET PENETRATION
Market Penetration is the least risky and most conservative strategy, as it avoids new service development and entering new markets. If market penetration strategies are sufficient to close a long‑term profit gap, then they should be pursued.
The following table shows some examples of market penetration strategies.
MARKET PENETRATION STRATEGIES
1.INCREASING PRESENT CLIENTS' RATE OF USAGE
(A)INCREASING THE UNIT OF PURCHASE
for example: special price for a full‑service package,
cross‑selling of
services to existing clients
(B)INCREASING THE RATE OF SERVICE OBSOLESCENCE
for example: service life reduced.
(C)FINDING OTHER SERVICE USES
for example: offering CAD equipment on a fee‑for‑time
basis to competitors.
(D)PRICE INCENTIVE FOR INCREASED USE
for example: reduced fees for clients with high turnover.
ATTRACTING COMPETITORS' CUSTOMERS
(A)SHARPER DIFFERENTIATION
clearer differentiation from competitors by stressing attributes that competitors do not have (or are not known for).
(B)INCREASING PROMOTIONAL EFFORT
more advertising, promotion, public relations, etc.
(C)DECREASING FEES
note that this strategy should only be used as a last resort
because of its impact on profitability
3.CONCENTRATING RESOURCES ON MOST
PROFITABLE CLIENT SEGMENTS
(A)AIMING ADVERTISING, PROMOTION,
PERSONAL SELLING AT MOST
PROFITABLE SEGMENTS
choosing media and designing message to reach and
appeal to target segments, selective direct mailing,
selective sales calls, etc.
(B]CONCENTRATING ON DISTRIBUTION
CHANNELS REACHING MOST PROFITABLE
SEGMENTS
deciding on branch location, choice of agents, etc. to
reach target segment; selective use of distribution
channels; etc.
(C)INCREASING FEES, REDUCING TURNOVER BUT INCREASING CONTRIBUTION MARGIN prestige service; total client service at high price, etc.
4.REDUCING NUMBER OF LOST CLIENTS
(A)IMPROVING COMMUNICATION WITH
PRESENT CLIENTS
make it easy for them to complain, survey
clients regularly to assess satisfaction/dissatisfaction,
develop a personal relationship between key clients and partners or senior staff, etc.
(B)PROMOTION AIMING AT EXISTING CLIENTS use direct ‑mail promotions aiming at existing clients, invite clients to special seminars, presentations, etc.
(C)UNDERSTAND REASONS FOR LOSING CLIENTS
follow‑up clients who have changed to a competitor
NEW MARKET DEVELOPMENT
New market development may involve expansion in terms of additional geographical markets, for example, regional, national or international expansion, or attracting other market segments. The latter may be achieved by developing service versions to appeal to other segments, entering other channels of distribution, advertising in other media, or developing new uses for the service.
Some of the options to consider in a market development stragegy are:
MARKET DEVELOPMENT STRATEGIES
1 .NEW GEOGRAPHICAL MARKETS
(A)REGIONAL EXPANSION
(B)NATIONAL EXPANSION
(C)INTERNATIONAL EXPANSION
for example, appointing agents, opening branch offices, joint ventures in new markets, etc.
2.ATTRACTING OTHER MARKET SEGMENTS
Whilst the geographic market stays the same, efforts could concentrate on attracting other market segments, e.g. other industry segments, client size categories, etc.
(A)OTHER DISTRIBUTION CHANNELS for example, franchise system of tax agents.
(B)ADVERTISING IN OTHER MEDIA
for example, changing media to reach different
age/socioeconomic groups; complement direct mail with
advertising in‑ business journals or finance pages of newspapers, etc.
(C)ACQUISITION OR MERGER
for example, consider the acquisition of a merger with a
competitor to broaden your client base.
(D)REPOSITIONING
for example, change the image of your firm or the services
provided by your firm to appeal to other market segments.
3.ATTRACTING NON‑USERS
(A)INDUCING TRIAL USE
for example, small fee for first time use of service, or a
non‑obligation, initial discussion, free introductory
seminars.
(B)PRICING UP OR DOWN
for example, lowering fee to attract price‑sensitive buyers,
increasing fee to attract prestige segments.
(C)FINDING OTHER SERVICE USES
for example, consulting firms may draw on their consulting
experience to write and market training manuals.
(D)CONCENTRATING ON OPINION LEADERS concentrate on opinion leaders or influencers who can promote your services to potential clients.
NEW SERVICE DEVELOPMENT
SERVICE DEVELOPMENT STRATEGIES
1.DEVELOPING NEW SERVICE FEATURES
(A)UPGRADING
introduce a similar service with more features than the existing service to induce clients to 'step‑up' (for example, additional trend analyses or medical tests).
(B)QUALITY VARIATIONS
offer services from a stripped‑down basic version up to a
luxury version to attract different market segments.
(C)INCREASING CONVENIENCE
where possible, increase the clients' convenience in using
the service (for example, reducing the client's time
involvement, waiting times, travel time to attend
meetings).
2.DEVELOPING SERVICE'PACKAGES'
(A)LINKING EXISTING SERVICES
group existing services into packages aiming at specific segments (for example, a 'rejuvenation package' offered by a private hospital, a 'retirement package' offered by an accounting firm).
(B)PACKAGE EXISTING WITH NON‑TRADITIONAL SERVICES
combine existing services with non‑traditional services
(for example, a British private hospital specialising in
cosmetic surgery includes an exciting holiday package
for the patient's spouse in the total service package).
DEVELOPING NEW SERVICE DELIVERY OPTIONS
(A)NEW TECHNOLOGIES
new technologies may offer a means of delivering
services differently (for example, through terminals).
(B)DIFFERENT CHANNELS
franchising an agent network, utlising existing channels
in other, related industries (for example, to sell share
broking services through post offices).
DIVERSIFICATION
The fourth growth strategy is diversification. In this context, diversification means entering new markets with new services.
There are several risks involved in the strategic option of diversification. These include:
Entering an area where skills and technologies are involved which are not in use in the diversifying organisation. The diversifying organisation may be too optimistic and thus easily beaten by competitors in the new field.
Spreading resources too thinly, with the result that penetration suffers.
Unforeseen increase in the complexity of managing the business, and subsequent overloading of the senior staff and information systems.
The most important consideration is that diversification should build on an existing strength.
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