MNM3036 PROD MAN.
Andrew Pretorius <>
TOPIC 2
PRODUCT MANAGEMENT
Study Unit 3
Consumer Product – sg20 X10/10 3+12
-Convience
-Shopping
-Speciality
Customer service-sg19 X10/10 (12)X10/07(12+6)
-Intangible
-Perishability
-Variability
-Inseperability
Product Study Unit 4
Single product
Product features 4.1/p25
Product quality 4.2.2/p26
Product style and design 4.1.3/p27
Packaging 4.2/p28
Labeling 4.3/p29
Product support services. 4.4/p30
4.1.2Product qualityX6/11 (8+4mrks)
Dimensions NB
4.3 Labelling
Carries information about the product itself or the seller. Might be part of the packaging or a tag attached directly to the product.
Trademark- appears on the product items or their packaging
Grading- Quality of the product is represented by a letter, number or word
Informative- Provide written & visual objective information on the products ingredients
4.2 PackagingX6/11(8+4mrks)/X10/09 (15)
Acts as a means of communicating product info as well as serving as a functional purpose- protection.
Family or individual- used for the purpose of similarity with regard to main features
Special- different type of package that gives the product a certain type of image.
Reusable- Designed to be used over and over again
Multiple –Used for packaging more than one related product in a single container
Kaleidoscope- Alternating certain details in the packaging creating a demad for the packaging and not necessarily the product.
Multiple product decisions: Study Unit 5
The product mix 5.6/p39
The product portfolio. 5.7/p40
Product line decisions are not important for this year. ??
Product mix
Refers to the complete set of product lines and items that a company offers for sale to buyers. A company’s product mix can be described as having a certain breadth, depth and consistency.
Breadth- number of product lines the company carries
Depth- Number of versions offered of each product in the line.
Consistency- How closely related the various product lines are in the end use
Product Portfolio
Collection of items that are balanced as a group. Decisions on product portfolios are mainly concerned with relationships, harmony and synergy between the different product lines.
Problem Child- inject big sums of cash to keep up with growing market and to retain market share X10/09 (7)
Star- Fundamental to an org growth and existence. Produce a lot of cash but can equally consume a lot of cash.
Cash Cow- Cash generators for an organization
Dog- Might generate some cash, tend to be unprofitable and generally incur losses
Four Strategies sg42X10/09 (3)
-Build
-Hold
-Harvest
-Divest
The product life cycle: Study Unit 6
describe the different kinds of product life cycle. 6.3/p50
the characteristics of each phase of the product life cycle and the marketing strategies applicable to that phase. 6.6.2/
Characteristics of each phase of product life cycle
Introductory- slow sales; customer resistance; high marketing costs; few distribution channels; few competitors; low profit; price determined by nature of prod; high marketing costs.X10/10(4+10) +X06/09(3+12)
Eight characteristics of intro phase..+ Price and comm.. introduce prod to market in intro phase
Growth- Strong growth in sales, increase in number of competitors; product improvement; rapid increase in profits
Maturity- Leveling off of sales growth; increased level of competition; increased marketing costs to maintain position; declining profitsX10/09 Characteristics and marketing strats of mature phase (3+12)
X06/08 Marketing mix (8)
Decline- Rapid & permanent decline in sales; decline in market size; declining profits; decrease in competitors
Marketing strategies of product life cycle
Introductory- Product decisions(minor modifications); distribution decisions(middlemen?); price & marketing communicating decisions(rapid & low skimming, rapid & slow penetration)X10/10 4 different ways in which price and marketing communication (promo) can be combined to introduce the product(brand) to the market, (10marks)
Growth- Product (producing sufficient quantities); distribution (expand availability); price (reduce price as a result of comp)X10/07 (10)
Maturity- retain existing strategy; retain current product; change all instruments; introduce product differentiation; extend product range; modify marketing instruments
Decline- Continue with existing strategy; revise marketing strategy; withdraw products from all markets
New product development: Study Unit 7
The role of marketing management in new product development products. 7.4/
the management of ideas 7.3/59
the strategies for new product development 7.5/61X10/10 (12)new
-Planned Obsolescence
-Physical Obsolescence
-Psychological obsolescence
-Product standardisation
More attention to the stages that require large marketing input such as 7.6/62
idea generation X06/09 (8)
idea screening
concept testing
test marketing
commercialization X10/10 (7) X06/09 (7)
The consumer adoption process 7.7/65
7.4 Role of marketing management in new product development
-Product decisions have a substantial influence on the financial management
of an organisation in terms of investment and distribution of capital to the
new product development process.
-Product decisions directly affect the human resources of an organisation, in
that if a new product has to be developed, this may lead to new personnel
being recruited or the establishment of a new-product department and venture
teams requiring additional staff members.
- Product decisions influence information management in the organisation
because the organisation might have to establish a research and development
(R&D) department to work closely with the marketing department whose
members are exposed to new ideas on developing new product from
customers and competitors.
- The purchasing department in an organisation is affected in a special way
by product development and other product decisions. This means the
purchasing department will need to adjust its buying pattern as soon as the
new-product idea is approved and a physical product has to be manufactured.
-The marketing department in the organisation can also effectively use
information on the product mix that the organisation manufactures and
markets. In this case, new-product development information will be
communicated and disseminated to existing as well as new markets of the
organisation. This helps the organisation to keep its consumers up to date
with new developments within the firm, which can lead to trust and loyalty.
New product development process
Idea generation
Customers- logical place to start looking for ideas
- Identify needs through surveys, questionnaires etc
Competitors- Org keep an idea on research done by competitors
- Industrial espionage is rife
Employees- Suggestion boxes help generate new ideas
Top management- catalyst in new product development
- drive new product development
- provide leadership role
Idea screening
Once ideas have been generated the next step is to filter out the ideas that don’t fit the organizations goals
Concept testing
Takes place when the idea has been approved internally then externally with potential customers and the market
Core Ideas- short, general statements explaining what the product can do. Aim is to
Test if the idea is accepted by the potential customer.
Positioning statement- Focus on main & secondary benefits and also outline aspects
Of the products marketing mix. Aim is to try asses the full
Concept that customer may find in the marketplace.
7.6.4 Business Analysis X06/08
Product Development
Test Marketing
Takes place when new products are available in a limited geographic area for a specified time and sales costs are measured. This is done to establish if the consumer will in actual fact purchase the product.
Advantages- Real test in real enviroment
-offers last chance for fine tuning
-gives an opportunity to vary the marketing mix variables
-provides a forecast of future sales
CommercializationX10/10 (7) X06/08
At this point the product is ready for launching. Org faced with two alternatives:
1. Immidiate national launch or 2. Rolling launch
Consumer adoption process
Stages of new product acceptance
Awareness-interest-evaluation-trial-adoption
Factors that influence the adoption process
-differences in peoples readiness to accept a new product
-personal influence on the adoption of new products
-the effect of an innovations characteristics on its rate of adoption
Brand management: Study Unit 8
the meaning of branding.8.1/70
Benefits of branding 8.2/72
Branding decisions 8.3/73X6/11 Brand name: (13)
Brand equity 8.4/78X10/09 Perceived quality and loyalty (10)X10/07 Perceived quality/loyalty/association (18)
Brand positioning and image 8.5/80
Meaning of branding
A brand is a name, term, design, symbol or any other feature that identifies a product as unique from competitors. The brand as a whole is trademarked.
Advantages of branding
Consumer- easier product identification
-Communicated features and benefits
-helps product evaluation
-reduces risk in purchasing
-creates interest for product
Manufacturer- Helps create loyalty
-creates differential advantage
-allows premium pricing
-facilitates product diversification
Types of brands
Manafacturer/ retailer- designated, owned and used by the manufacturer or producer
Generic- Do not indicate the manufacturer or the retailer, only indicates type of brand
Family/ individual- assigned to an entire line or mix of product items
Positioning methods
Attribute- org positions itself with one or more outstanding attributes
Benefit- emphasizes the unique benefits that the org or product offering offers its customers
Use/application- Position itself in terms of product use or application possibility
User - Position products with users in mind
Competitor- Some products are best positioned against competitive offerings
Product category- positions itself in a category not traditionally associated with it, thereby expanding its business opportunities.
Quality/ price- Org can claim that its product is of exceptional quality or the lowest price
Brand equity
78X10/09 Perceived quality and loyalty (10)X10/07 Perceived quality/loyalty/association (18)X06/08(18)
Brand awareness- more consumers that are aware of the brands existence, the more valuable it is.
Percieved quality- high quality brand is generally worth more than one that is precieved as being of a low quality
Brand loyalty- Loyal customers return to a brand again and again in spite of difficulties obtaining that brand.
Brand association- When consumers associate a brand with the intended qualities such as quality, reliability, value for money or availability. The value for that brand is increased.
Management of ideas in new product development
Product managers: Many organisations appoint a product manager that
will oversee all the activities that have to do with new product development in
theentire organisation.
New-product managers: This position is an extension of a product manager,
the only difference is that the new product manager is specifically focused
on developing new products and has to report to the product manager.
New-product managers' responsibilities are limited to thinking about product
modifications or line extensions within their product market or category.
New-product committees: Many organisations assign the responsibility of
developing and approving new product proposals to a high-level management
committee. The people serving on these committees could meet on a regular
basis to do some brainstorming and screening of new product ideas, assist
in managing the introduction of new products and any other function that
will help the organisation to make optimal use of its resources in the
development of new products ideas.
New-product departments: Many large organisations use the new-
product department to manage the product development process. This
department is headed by a manager who has links with the individuals who
are serving at the top level of management in the organisation. The major responsibilities of this department include recommending new-product
objectives, planning and screening new-product ideas, providing assistance
in the development of new-product specification, implementing test marketing
and the commercialisation of new products.
New-product venture teams: In the managing of new-product development
many organisations can opt to appoint a venture team. To facilitate
understanding of the concept of a venture team the following definition will
be used:“A venture team is a group of individuals brought together from
various operating departments and charged with developing a specific
product, service or business”.
TOPIC 3
PRICING DECISIONS
Pricing: Study Unit 9
No questions will be asked on Study Unit 9.
No calculations will be asked, but if you want to illustrate a point by means of a calculation, you are welcome to do that.
One must know the whole process of pricing that entails the following:
The formulation of pricing objectives. Study Unit 10
10.3/98
The selection of an estimated price level. Study Unit 11
Cost-based pricing 11.1/106
Profit-based pricing 11.2/108X6/11 (12mrks)+X06/09(10)X10/07(7)
Demand-based pricing 11.3/109
New product pricing 11.4/111
Competition-oriented methods 11.5/112
11. Cost-based pricingX10/07 (15) X06/08(15)
Cost plus pricing- Standard mark up pricing which entails adding a fixed percentage to the cost of al items in a specific product class.
Cost-plus-percentage-of-cost-pricing- Mark up is set on a desired percentage of cost
Price determination according to cost plus fixed-free pricing-Org adds a standard fee to the costs
Price determination according to experience curve- based on learning & scale effect, unit costs of products & services declines as a company gains experience at producing and selling it’s products
Price determination according to the break even analysis- Based on break even analysis which aims to determine at which sales level the firm would cover it’s cost
10. Profit-based pricingX6/11 (12mrks)+X06/09(10)X10/07(7)
Price determination according to target profits- Simplest profit-based method if variable & fixed cost & units sold can be accurately estimated.
Price determination according to target return on sales- Total costs & units sold can be accurately estimated and together with an acceptable target-return-on-sales percentage
Price determination according to ROI- Uses target-return-percentage & total capital invested in order to calculate the target return price per unit
11.3 Demand- based pricingX10/09 Consumer-orientedpricing techniques (15)
Value based pricing- Organisation attempts to determine what value different market segments attach to a specific product
Demand backward pricing- Marketer has to make adjustments to the other elements of the marketing mix
Prestige pricing- Based on the principle that better quality products usually cost more to manufacture and therefore have to be more highly paid
Odd-even pricing- Are set for products at psychological levels where consumers distinguish between acceptable and higher prices
Price lining- Used if research shows that different market segments for a specific type of product buy within a specific price range or price band.
Traditional pricing- When tradition, a standardized channel of distribution or other competitive factors dictate the price.
Bundle prices- Combining several related products and selling them together at one price.
11.4 New Product pricing X10/07 (7)
-Higher/lower than market
-Lower=penetration stategy
-Higher=Skimming strategy
Competition orientated methods
Customary pricing- Happens when tradition, a standardized cannel of distribution or other competitive factors dictate the price
Loss-leader pricing-Point is to attract people to the store to buy other products
Sealed bid pricing- Tenders
Tactical pricing decisions Study Unit 12
The granting of different types of discounts 12.1/118X6/2011 (13mrks)X06/09 (10)
The handling of geographical price differences. 12.2/120 X6/2011 (9+3mrks)
X10/09 (10)
X06/09 (13)
The handling of price changes in the competitive market environment, such as initiating price changes and reactions to price changes. 12.3/122
The use of segmented pricing to offer flexible pricing decisions for different segments and situations. 12.4/127
How to take psychological factors into account in tactical price decisions. 12.5/129X10/10 Describe meaning of psychological pricing (6) X06/10
Discounts118X6/2011 (13mrks)X06/09 (10) X06/08(6+6) x06/10
Trade or functional discounts (inter alia)nb8 factors
Quantity discounts
Cash discounts
Seasonal discounts
Geographic pricingX6/2011 (9+3mrks)X10/09 (10)X06/09 (13)
Free-on-rail
Freight-absorption
Uniform regional
Base-point
Managing price changes
Initiating price cuts
Initiating price increases
Buyer reactions to price changes
Competitors reactions to price changes
Responding to competitors price changes
Segmented pricingx1010 Four forms of segmented pricing (11)X06/08
Customer-segment pricing
Product- form pricing
Location pricing
Time pricing