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This lecture reviews some of the fundamental principles of product marketing, and then examines several current issues facing marketers and consumers alike. "Real-world" examples are utilized whenever possible, along with links to their websites. Finally, a mini-case is provided to illustrate "The Cola Wars," and the intense product marketing undertaken by Coca Cola and Pepsi.
What is a product? Marketers sell "products." They are their very lifeblood. Products can take many varied shapes and forms, and may number into the hundreds of thousands. Consumers buy "products." They are our very lifeblood. Who among us can say they did not purchase and/or consume a product today? We will buy and consume hundreds of thousands of products in our lifetime. Products are traditionally thought of as tangible items, but this definition is misleading, as well as limiting. Actually, for our discussion, "product" must be much broader in scope, and encompass the following (which can be viewed as a continuum):
For example, think about what "product" is being "sold" by the following providers:
Levels of Products There are two "levels" that every product has. They are:
Of course, one delivers you there in much more style than the other. That difference is called the augmented product, and includes things such as image and prestige, as well as customer support and elements of service (e.g., delivery, wrapping, installation, etc.). In other words, the augmented product takes the core product and "jazzes it up" by adding elements of prestige, style, and services that set it apart from the other branded products. Take an inventory of five products you own, and seek to determine both the core and augmented products. Then, ask yourself why you bought these products. Was it because of the core, or was it because of the augmentation? Let's take a look at some other examples of core and augmented products:
Each of these items sells much more than just the core. Some sell image; others sell high quality; others sell service. In all cases, though, there are lower-cost alternatives available for consumers. Still, consumers are known to bypass those options, and instead buy the heavily augmented product. The issue of core vs. augmented products is further enhanced by a look at the dichotomy of functionality vs. hedonism. Functionality refers to the product's ability to simply get the job done, whereas hedonism refers to pleasure being the top goal in life. By overlaying the functionality/hedonism framework atop the core/augmented framework, it becomes apparent that core products are basically striving for functionality, whereas the augmented product seeks to appeal to our hedonistic ways. But where does the Marketer fit into all of this? The marketer's job is to try to wrap the core product in such a way that it becomes augmented, and thereby appeals to our hedonistic desires. Of course, this may not work very well with mundane products such as dish soap or dog food, but with very personal, high-involvement products, it becomes paramount. A car is an extension of our personality; as such, the car we drive is a reflection of us and who we are. Clothes are an expression of the inner you; you are what you wear. Thus, clothing companies appeal to the "inner you," selling items with certain logos and monograms that set us apart from our peers. Utility The above discussion leads naturally to an examination of the ethics surrounding such Marketing activity. It does not take much Marketing to sell function; it does, however, take great amounts of clever Marketing to sell "form." Thus, is it wrong for Marketers to appeal to our base instincts, our desire to be different, expressive, unique? Furthermore, is it wrong for Marketers to charge a premium for this privilege? In other words, of the $50,000 it might cost to purchase a mid-level Mercedes, how much of that is for added quality, versus how much is for the product name and prestige? This is one topic that we will discuss in our Bulletin Board. Have Marketers over-stepped their bounds by stressing the augmented product and appealing to hedonism, or, do these hedonistic products serve a need in society? Think this one through carefully! Categories/Types of Products There are numerous "categories" of products on the market. These category names are usually applied with regard to new product introductions. In other words, a product is labeled when it is introduced, and once labeled, always labeled. The following are the different types of
product categories that exist, along with examples:
An innovation is a new product that essentially an entirely new type of product entirely, such as the compact disc player. It presented a totally different format for the playback of recorded music, and was not at all compatible with previous formats. In time, innovations may well cause previously existing types of products to die an agonizing death, like long-playing records. Other examples: wireless phones will eventually supplant wired phones; microwave ovens made the kitchen stove less important; television nearly killed radio. It should be noted that true innovations only occur in the Introductory stage of the Product Life Cycle. A "me-too" product occurs whenever someone introduces an item that is much like that of an innovator, but it was introduced mostly so that the manufacturer can say that they, too, have the item. These generally occur during the late Introduction stage of the PLC, as well as throughout the Growth stage. There is still much money to be made from the category at this point, so imitators often respond fast and furiously. Planet Hollywood is a good example of a me-too, because it sought to coat-tail on the success of Hard Rock Cafe. The theme restaurant "industry" has since attracted many other me-toos, including Rain Forest Cafe. A line extension occurs when a new product is issued that is essentially a new variant on an established brand. Diet Coke, introduced in 1982, is a line extension of the flagship Coke brand. Any time a new flavor is introduced, it is a line extension. Line extensions are utilized because they are generally much cheaper to introduce than a product with an entirely unique name, mostly because the advertisimg component will be less. Consumers already know the flagship brand name, so there is little to educate consumers about. Line extensions generally occur during the Maturity stage of the PLC, as well as in early Decline, often when ideas and creativity begin to wane. Marketers looking for a quick fix often use line extensions to pump a little life into an established brand. Flanker brands are often used by major consumer goods manufacturers, like Procter and Gamble. It is not uncommon for them to have three or more different branded products in a given category (e.g., toilet tissue, soap, shampoo, etc.), with each being aimed at a specific market segment. Rather than use one brand name (and variations thereof), they opt to develop unique brand identities for each target segment. This type of behavior is common of the Maturity stage of the PLC, and is more typical only of the largest producers. Finally, new and improved products are used late in the Maturity stage of the PLC. They are weak attempts to put a little life into product sales. Some manufacturers perennially issue a "new and improved" version of their product, reaching the point of being predictable. A better flavor, a new ingredient, a new package shape, etc., are all examples of this phenomenon. These are the three most over-used words in Marketing. The "problem" with modern Marketing is that many of the new products issued tend to be either line extensions of new and improved, with very few true innovations making it to market. Thus, in mature industries, it is not uncommon for trade shows to become almost boring, because there is little new, aside from a new flavor here and there, or new bells and whistles. But this "problem" is almost caused by consumers and middlemen alike. They both expect companies to issue "new" items each year, even if it's just the 38th flavor variant, because if they don't introduce something, we must conclude that the manufacturer is asleep at the wheel and doing nothing. Also, it is assumed (and probably rightly so) that consumers thrive on variety, and the 38th flavor is introduced so that consumers will have something new to sink their teeth into, even if this Marketing effort took only a few days to come up with. The result of this? The vast majority of new products (roughly 70-percent) introduced each year are line extensions. The remaining 30-percent is distributed across the other types, with true innovations sometimes scoring zero-percent, depending on the industry. Is there a solution? It is doubtful. Some have argued that science, too, is dead, and that no new discoveries will be made. Of course, this is not true. Science is not dead, and neither will Marketers curl up on the sofa and quit innovating. But while there will certainly be more true innovations, they will be infrequent, and instead there will continue to be many more line extensions. After all, it is much cheaper to introduce a new flavor than it is to sink millions into R&D. The following section will explore some current issues of importance in product marketing. Be prepared to discuss these in the Chat Room. New Product Proliferation If it seems like there are more and more new products each year, you are not mistaken in your observation. In the grocery industry alone, there are over 12,000 new items introduced each year (and, as I found out in my dissertation research, most were line extensions). If this doesn't boggle your mind, consider that the "average" modern supermarket stocks only 25,000-30,000 items. Thus, it is theoretically possible for a store to rotate products in and out of the store so that once every two years, every product will have come and gone. Of course, this will never happen, because many brands have been around for years, and will continue to be. Tide detergent isn't going to be de-listed just because someone else brings out a different detergent. Nor are Campbell's Soups going to be booted, or Coca Cola dropped. In other words, new product proliferation is a serious problem, because very few new products have the formula to be able to make it in the long run. The deck is stacked, so to speak, almost certainly guaranteeing a lot of refusals with supermarket buying committees. So why do Marketers continue to introduce so many new products? There are a number of reasons:
Another interesting aspect of this problem is that many Marketers utilize a very short payback period, reflecting their general unwillingness to be patient. Whereas Marketers once automatically gave a "probationary" period of 2-3 years for a new product, this has more recently been shortened to 6-12 months in many cases. Thus, a product has to "make it" very quickly, or else its manufacturer will scuttle the mission. Points to ponder:
It has been noted in the Marketing literature that about 80-percent of new products fail within two years of introduction. The pressing question is: WHY??? With this knowledge in hand, it is even more perplexing to consider that Marketers continue to trot out so many new items each year, in open defiance of reality. Is the potential payoff so huge that Marketers are willing to throw caution (and millions of dollars) to the wind? A short list of possible reasons why products fail would include the following:
It doesn't matter. The allure of profits can obscure the vision of any Marketer. One has only to walk the aisles of a trade show (you will likely be able to do this during your career at some time) to see the array of new products, many of which are doomed from the onset. As a veteran trade show attendee (in sporting goods), I have seen many companies and products appear and disappear with alarming speed. Points to ponder:
The last 100 years has witnessed an incredible surge in technical productivity and change, as well as basic knowledge. Most of the world's knowledge has been discovered within the past two generations (40 years). We are confronted with an evolving array of high-tech products that simultaneously impresses us with its gadgetry and sheer power, yet scares us because of its life-changing implications and high costs. Consider the following: in the past 15 years, our homes have been enhanced by many new high-tech products, such as microwave ovens, CD players, answering machines, fax machines, PCs, satellite TV, DVD players, MP3 players, and more. Many of these products replaced "old fashioned" analog products, while others simply offered a new level of convenience never before enjoyed. So what's the problem, you ask? Well, consumers and retailers alike have found there to be hidden costs attached to these high-tech products. For example, consumers find that the "old" way of doing things is now obsolete, and they often have no choice but to upgrade to a new system. Furthermore, some products (PCs, for example) change so quickly that they are actually obsolete before they are even sold! This causes consumers to be apprehensive about making purchases, for fear that they will have thrown their money away on an outdated item. Retailers, too, fear this rapid change, because they are less willing to take risks with inventory. Today's state-of-the-art 2GHZ computer with 50gb hard-drive and 56k modem (hey, what's a modem if you've gone wireless?) will be tomorrow's paperweight. Points to ponder:
Perhaps one of the best battles between two product manufacturers is that of Coca Cola and Pepsi. This Marketing battle has been fought on television screens, billboards, and in newspaper ads for decades, with the fighting only getting more intense as time goes by. Coca Cola was introduced in 1886, with Pepsi following in 1898. Both were initially regional products, but both expanded nationally early this century. Traditionally, Coke has been a southern beverage, while Pepsi has been favored in the north. It was not until the early 1960s that the battle began to intensify, with the two players initially assuming very different strategies. First, Pepsi introduced Diet Pepsi, in response to the successful Diet Rite introduced by the much smaller Royal Crown Company. Coke sat back and watched for a while, and then introduced Tab to compete in the same market. Shortly thereafter, Pepsi went shopping, and purchased the rights to make Mountain Dew. It was initially positioned as a "southern" beverage, and capitalized on the "hillbilly" craze popular at the time (recall the popular TV show The Beverly Hillbillies). Coke sat back and watched, and eventually introduced a similar product called Mello Yellow in the early 1970s. During this time, the 7-Up Company was making inroads with their "Uncola" campaign. This citrus beverage was beginning to capture people's taste buds. Initially, Coke did nothing, but eventually introduced Sprite, essentially a me-too product. In the early 1970s, Dr. Pepper (another independent firm) began making great strides. What did Coke do? It responded with Mr. Pibb, yet another me-too. In the mid-1970s, Pepsi launched their Pepsi Challenge campaign, with TV ads that showed people picking Pepsi over Coke by large margins. Coke had somehow managed to hang on to a large market share to this point, but the Pepsi Challenge began to find cracks in the knight's armor. Although Pepsi never could get the restaurant market cornered like Coke had done, it began passing Coke in supermarket sales. The Pepsi Challenge was indeed beginning to turn the tide. Up to this point, Coke had been a follower, had never line extended, and was not risk-taker in the least. It preferred the easy life at the top of the heap. But that was about to change. The 1980s brought with it the "Decaf Wars," which saw every national soft drink firm hurry to introduce decaffeinated sodas. Except Coke, that is. In July 1982, Coca Cola introduced Diet Coke, which had caffeine, and was slated to run side-by-side with Tab as another diet cola entry. What happened? Analysts were scratching their heads. Pepsi was wondering what was going on, as were 7-Up and Dr. Pepper. This action was unheralded (it was Coke's first line extension), and totally unexpected. Actually, this was only the beginning of a new Marketing mindset at Coke. Whereas Coke was once the sleeping giant, it was now becoming more willing to embark on more risky ventures. Maybe the Pepsi Challenge caused Coke to wake up and smell the coffee, so to speak. A line of decaffeinated colas quickly followed, as did Cherry Coke. Coca Cola was obviously in love with line extending. But then came 1985, and the ill-fated New Coke fiasco. To the dismay of many, the puzlement of all, and the amusement of Pepsi, Coke removed its best-selling product, and replaced it with...a Pepsi taste-alike!! Could this be? Pepsi executives were in hysterics as Coke fumbled through the horrible first two months of New Coke, and laughed even more uncontrollably when Coke announced in early July that it would bring back the "old" Coke as Coke Classic. As far as Pepsi was concerned, they had brought the venerable giant to its knees. As the 1990s unfolded, Coke still maintained a slim lead over Pepsi, but Pepsi was making significant strides in the youth market, most notably with their repositioned Mountain Dew. Now the "extreme" beverage of choice, Mountain Dew had shed its hillbilly image, and was now the "cool" drink for far-our sports fanatics. While Coke had begun to change somewhat in the 1980s, it still was not known as a leader. But that began to change. In 1994 it introduced OK, a cherry-flavored cola with an attitude. Target market: teenagers. Product packaging reflected this attitude, with catchy graphics and slogans. Unfortunately, the product bombed, and it was discontinued in 1996. Most recently, Coke has made another attempt to grab the youth market, this time with Surge, a citrus-based soda introduced last winter. So far, it has made good progress, and has been hyped intensively. Still, Mountain Dew has not been removed from its throne, and one has to wonder how long Coke will give Surge before it makes a final decision. Pepsi, in the mean time, introduced Josta in the late 1990s, a new cola that is enhanced with guarana (a South American fruit that has caffeine in it). It is a cherry-flavored cola, and is also aimed at the youth market. It did well in test markets, but it ultimately. Coke did not make any response to this challenge, to their credit. Points to Ponder:
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