Development and Management of Market

Offerings

Marketing
3. Semester HA – Fall 2023

Jochen Reiner
jochenreiner@[Link]
F i b i g e r s t r æ d e 11 , O f f i c e 3 2
Agenda for today (Part 1)

Marketing strategies and product life cycle

Implications of market evolutions for
marketing strategies
The characteristics of market products and
how marketers classify products
How companies differentiate products and
manage their product mix and product lines
How companies use packaging, labeling,
warranties and guarantees as marketing
tools
Mar k et Of f er

Product: anything that can be offered to a market for

attention, acquisition, use or consumption that might
satisfy a want or need.
Service: any activity or benfit that one party can offer
to another that is essentially intangible and does not
result in the ownership of anything Market Offer

Between pure tangible goods and pure services, there

are many combinations. Due to rapid emergence of
digitalisation, more and more products are the
combinations of goods and services.
T h e Ti m e D i m e n s i o n o f M a r k e t O f f e r s

A company’s market offer strategy must change as the market offering, market, competitors
change over time – i.e., the product life cycle.

A life cycle asserts four things:

Products (market offerings) have a limited life
Sales pass through distinct stages
Profit rise and fall at these distinct stages
Market offers require different resources in each of these stages
The Stages of the Product Life-Cycle (PLC)

A PLC covers five distinct stages that follow the course that a product’s sales and profits take
over its lifetime:
[Product development begins when the company finds and develops a new-product idea.]

Introduction is a period of slow sales growth as the product is introduced in the marketplace.

Growth is a period of rapid market acceptance and increasing profits

Maturity is a phase of slowdown in sales growth – the product has now achieved acceptance by
most potential buyers.

Decline is the last stage when sales fall off and profits drop
Product Life-Cycle

Source: Kotler et al. p 440

Product Life-Cycle Strategies

Introduction stage is when the new product is first launched.

Takes time
Slow sales growth
Little or no profit
High distribution and promotion expense

 Pioneer advantage if being first in the market is possible

Product Life-Cycle Strategies

Growth stage is when the new product satisfies the market.

Improve quality and add new features

New models (different sizes, colors, etc.)
New market segments
Increase distribution / new channels
Shift focus of advertising (from awareness to preference)
Lower prices
Product Life-Cycle Strategies

Maturity stage is a long-lasting stage of a product that has gained consumer acceptance.
Slowdown in sales
Many suppliers
Substitute products
Overcapacity leads to competition
Increased promotion and R&D to support sales and profits.

Marketers consider modifying strategies at the maturity stage

Market modifying
Product modifying
Marketing mix modifying
Product Life-Cycle Strategies

Decline stage is when sales decline or level off for an extended time, creating a
weak product.
Maintain the product without change in the hope that competitors leave the industry
Reposition or reformulate the product in hopes of moving back into the growth stage
Harvest the product that means reducing various costs and hoping that sales hold up
Drop the product by selling it to another firm or simply liquidate it at salvage value
Product Life-Cycle - Overview

Kotler et al. 448

Product Life Cycle - Critique

Shape of life cycle looks often more like a ‘shark fin’

Shape is “very flexible” and bell shape is an abstracted generalization. Often hard to guess,
where a product is in the cycle
There is no “natural law” that determines life cycle.
Some products show continuous growth
Self fulfilling result of marketing strategies

No interdependence to market
Market Evolution

Markets evolve through four stages

Emergence
Growth
Maturity
Decline
Market Evolution - Emergence

Emergence  latent market with diffuse preferences

Single-niche strategy: Design a new market offering to meet the preferences of one of the corners of
the market
Multiple-niche strategy: Launch two or more market offerings simultaneously to capture two or more
parts of the market
Mass-market strategy: Design the new market offering for the middle of the market
Market Evolution – Growth

If the new market offer sells well, there is a high likelihood of competitors entering the market
What strategy does the competitors use?
Against which competitive behavior can a firm shield itself?
Market Evolution - Maturity

After all segments are covered and served

Market fragmentation (market splits into smaller segments) is observed, often followed by
Profits go down
Market consolidation (e.g., due to new customer -perceived values attribute(s))
Products become more similar
Market Evolution - Decline

Eventually, demand for current portfolio will begin to decrease

Society’s needs shift
Technology replacement
Levels of product

Core benefit
Benefit or product /
services that
consumers expect.
Actual Product
Quality
Brand name
Styling
Features
Packaging
Augmented
Delivery and credit
Warranty
After sale service
Installation

Source: Kotler and Armstrong., Principles of Marketing, Fourteenth Edition, 14e © Pearson Prentice Hall 2012
What is customer actually buying?

When designing products, marketers must first define

the core, problem-solving benefits or services that
consumers seek
Next, product planners must turn the core benefit into
an actual product with service features, design, an
adequate quality level, a brand name and an
appealing package
Finally, an augmented product must be built around
the core benefit and actual product by offering
additional consumer services and benefits:
warranties, instructions, support services, auxiliary
services such as apps, and a nice shopping
atmosphere
W h a t Va l u e C o n s u m e r s
Buy?

Rational Value
Efficiency
Complementarity
Novelty
Lock-in
Non-Rational Value
Hedonic (Pleasure)
Emotional
Stress/Distress Reduction
Ty p e s o f P r o d u c t s
Type of Products

Market offering classification

Durable goods  longer use lifetime (e.g.,
Consumer Industrial
Products Products

refrigerator)
Convenience:
[Link] parts
Frequent purchase,

Non-durable goods or Fast-Moving Consumer

[Link] items
low price;
[Link] and service
Toothpaste

Goods (FMCG) (e.g., chocolate)

Impulse:
Staple:
Kellogg

Service  intangible offer (e.g., hairdresser)

Colgate Toothpaste
Cornflakes

Shopping:
Less frequent purchase,
much shopping effort,
higher price;
cloth, furniture

Specialty:
Strong brand preference,
Hedonic /
Utilitarian
high price;
luxury goods

Unsought:
Little product awareness;
life insurance
Differentiation

(Product) Differentiation can be achieved by using various means:

Form (e.g., size, shape)
Features (attributes and benefits)
Customization
Performance quality
Conformance quality (i.e., meeting promised specifications)
Durability
Reliability (e.g., Miele for washing machines)
Repairability
Style
Design
Service
Product / Market Offering Hierarchy

Item

Product type

Product line

Product class

Product family

Need family
Product Line

Product line: A group of products that are closely related because they function in a similar
manner, are sold to the same customer groups, are marketed through the same types of
outlets or fall within given price ranges, e.g., Revlon & Square produces several lines of
cosmetics.
Product mix

Product mix is the set of all product lines and items that a particular seller offers.

The Width: how many different product lines

The Length: the number of items the company carries.

The Depth: the number of versions offered of each product in the line.

The Consistency: how closely related the various lines are

Product Line Length

Product lines tend to lengthen over time. Line Stretching:

Down-Market Stretch

Up-Market Stretch

Two-Way Stretch

Line Filling
Packaging - The Fifth P?

Packaging, sometimes called the fifth P, is all the activities of designing and producing the
container for a product.

Packaging Objectives:
• Identify the brand
• Convey descriptive and persuasive information
• Facilitate product transportation and protection
• Assist at-home storage
• Aid product consumption
Factors Contributing to the Emphasis on Packaging

Self-service

Consumer affluence

Company/brand image

Innovation opportunity

Source: Kotler and Keller., Marketing Management, Thirteenth Edition, 13e © Pearson Prentice Hall 2009
Agenda for today (Part 2)

Challenges in developing new

offerings
Structures and processes used to
develop new market offerings
Main stages in developing new market
offerings
Manage the process of developing
new market offerings
Diffusion and consumer adoption
New Product Development

Product Development / Innovation  Make or buy?

Organic growth  develop new products (within company)
Acquisition
Buy other company
Buy patents
Buy license
New Product Development

The development of original products (Touch Screen Mobile Phone)

Product improvements (hearing aid)

Product modifications (Pepsi Cola Coffee)

New brands through the firm’s own R&D efforts (Carlsberg NORDIC)

Rana and Sørensen, 2018

Market Offering Failure
 New Product Development Process

Marketing Business
Strategy Analysis

Concept Product
Development Development
and Testing

Idea Test
Screening Marketing

Idea Commercialization
Generation
Organizing new Products

Stage Gate System

New-Product Development Process

Idea Generation
• New idea generation is the systematic search for new product
ideas.
• To create a large number of ideas
• Sources of new-product ideas
– Internal sources refer to the company’s own formal research and
development, management and staff, and intrapreneurial programs.
– External sources refer to sources outside the company such as
customers, competitors, distributors, suppliers, and outside design
firms.
New-Product Development Process

Idea Screening
• Idea screening refers to reviewing new-product ideas in order to drop poor ones as soon
as possible.
Concept Development and Testing
• Product idea is an idea for a possible product that the company can see itself offering to
the market.
• Product concept is a detailed version of the idea stated in meaningful consumer terms.
• Product image is the way consumers perceive an actual or potential product.
• Concept testing refers to testing new-product concepts with groups of target consumers.
To find out how attractive each concept is to customers and choose the best one.
New-Product Development Process

Marketing Strategy Development

Marketing strategy development refers to the initial marketing strategy for introducing the
product to the market.
Marketing strategy statement
Part 1:
Description of the target market segment
The planning product positioning; sales, market share, and profit goals
Part 2:
Price distribution and budget
Part 3:
marketing mix strategy
Long-term sales, profit goals, and product life cycle
New-Product Development Process

Business Analysis
involves a review of the sales, costs, and profit projections to find out whether they satisfy
the company’s objectives.

Product Development
involves the creation and testing of one or more physical versions by the R&D or
engineering departments.
New-Product Development Process

Market Testing
is the stage at which the product and marketing program are introduced into more realistic
marketing settings
provides the marketer with experience in testing the product and entire marketing program
before full introduction
When firms test market: New product with large investment; Uncertainty about product or
marketing program
When firms may not test market: Simple line extension; Copy of competitor product; Low
costs; Management confidence
involves the creation and testing of one or more physical versions by the R&D or
engineering departments.
New-Product Development Process

Standard test markets

Small representative markets where the firm conducts a full marketing campaign
Uses store audits, consumer and distributor surveys, and other measures to gauge
product performance
Results are used to
Forecast national sales and profits
Discover product problems
Fine-tune the marketing program
New-Product Development Process

Controlled test markets

Panels of stores that have agreed to carry new products for a fee
Less expensive than standard test markets
Faster than standard test markets
Competitors gain access to the new product

Simulated test markets

Events where the firm will create a shopping environment and note how many
consumers buy the new product and competing products
Provides measure of trial and the effectiveness of promotion
Researchers can interview consumers
New-Product Development Process

Commercialization is the introduction of the new product into the market

When to launch
Where to launch
Planned market rollout (the widespread public introduction of a new product )
Consumer adoption process

Adoption is the individual’s decision to become a regular user of the product

Stages Adopter Groups

Awareness
Interest
Evaluation
Trial
Adoption
Development and Management of Market
Offerings

Marketing
3. Semester HA – Fall 2023

Jochen Reiner
jochenreiner@[Link]
F i b i g e r s t r æ d e 11 , O f f i c e 3 2