MARKETING YOUR PRODUCT Donald Cyr, MBA Douglas Gray, LLB Self-Counsel Press (a division of) International Self-Counsel

Press Ltd. USA Can ada

CONTENTS ACKNOWLEDGEMENTS INTRODUCTION 1 WHAT IS MARKETING? 1. MARKETING 1.1 Understandin g customer needs and desires 1.2 Selecting and developing a product 1.3 Developi ng a communication program 1.4 Getting your product to your customer 2. MARKETIN G MIX 2.1 Product 2.2 Price 2.3 Place 2.4 Promotion 3. SELLING VERSUS MARKETING 4. PRODUCT VERSUS SERVICE MARKETING 5. AVOIDING FAILURE; ENSURING SUCCESS MARKET ING PLANNING, GOAL-SETTING, AND STRATEGY 1. UNDERSTANDING THE PLANNING PROCESS 1 .1 Situation analysis: Where are we now? 1.2 Identifying problems and opportunitie s 2. FORMULATING GOALS 2.1 What are goals, anyway? 2.2 Clarifying goals 3. YOUR PERSONAL AND COMPANY GOALS 4. SETTING OBJECTIVES 4.1 Why goals are never enough 4.2 The role of objectives 4.3 What does a typical objective look like? 5. INTEG RATING GOALS AND OBJECTIVES 6. PLANNING YOUR SPECIFIC STRATEGY 6.1 Evaluating al ternatives 6.2 Designing your action plan xv xvii 1 1 1 2 2 2 2 2 2 2 2 2 3 4 6 7 7 8 8 8 9 9 10 10 10 10 11 11 12 12 2 v

3 6.3 Monitoring system THE MARKETING ENVIRONMENT 1. DEMOGRAPHICS 2. TECHNOLOGY 3. CULTURE 3.1 Baby boomers 3.2 Baby busters 3.3 Seniors 4. ECONOMY 5. POLITICS SE GMENTING YOUR MARKET AND IDENTIFYING CONSUMER BEHAVIOR 1. SEGMENTATION 2. SEGMEN TING USING DEMOGRAPHICS AND PSYCHOGRAPHICS 2.1 Benefits segmentation 2.2 Gender 2.3 Other variables 3. MARKET POSITIONING 4. UNDERSTANDING CUSTOMER BUYING BEHAV IOR 4.1 Recognition of need 4.2 Information search 4.3 Evaluating the alternativ es 4.4 Choice 4.5 Post-purchase feelings RESEARCHING YOUR MARKET 1. AREAS TO RES EARCH 1.1 Who is your market? 1.2 What products do they buy? 1.3 When do they bu y? 1.4 Who is involved in the purchase decision? 1.5 Where is your market? 1.6 W here should you sell your product? 1.7 Why does the market buy your product? 2. SECONDARY DATA 2.1 Government 2.2 Trade, professional, and business associations 12 24 24 25 26 26 27 28 28 29 30 30 31 31 34 35 35 36 36 37 37 37 38 40 40 40 40 40 40 41 41 41 41 41 41 4 5 vi MARKETING YOUR PRODUCT

2.3 College, university, and research organizations 2.4 Libraries 2.5 Marketing firms 2.6 Consultants 3. PRIMARY DATA 3.1 Sales records 3.2 Order-billing-shippi ng account 3.3 Sales representatives 3.4 Questionnaires 3.5 Group survey 3.6 Tel ephone survey 3.7 Expert opinions 3.8 Mail-order catalogue 3.9 Test market 3.10 Trade shows 3.11 Direct mail 6 DEVELOPING YOUR PRODUCT 1. WHAT BENEFITS ARE YOU OFFERING? 2. HOW DO YOU CONVEY THE BENEFITS OF A PRODUCT? 2.1 Interest value 2.2 Identity 2.3 Risk 2.4 Packaging 2.5 Branding 2.6 Customer contact 2.7 Service a vailability 3. ADDITIONAL SERVICES 4. PRODUCT LIFE CYCLE 4.1 Introduction 4.2 Gr owth 4.3 Maturity 4.4 Decline PRICING TO SELL 1. WHAT ARE YOUR PRICING GOALS? 1. 1 Maximizing your profit 41 41 41 41 42 42 42 42 43 43 43 43 43 44 44 44 45 45 45 45 46 46 46 46 46 47 47 47 48 48 49 50 53 53 53 7 CONTENTS vii

1.2 Getting your share of the market 1.3 Obtaining a return on your investment 2 . ATTAINING YOUR PRICING GOALS 2.1 Cost-plus pricing 2.2 Target market share 2.3 Price skimming 2.4 Penetration pricing 2.5 Prestige pricing 3. DEMAND-ORIENTED PRICING 3.1 Price elasticity 3.2 Prices and profits 4. SETTING A PRICE 8 ADVERTI SING 1. ADVERTISING CAMPAIGN 1.1 Target market 1.2 Market research 1.3 Advertisi ng objectives 1.4 Message development 1.5 Message potency 2. MEDIA SELECTION 2.1 Newspapers 2.2 Magazines 2.3 Radio 2.4 Television 2.5 Direct mail 2.6 Media mix 3. TIMING 4. MESSAGE EXECUTION 4.1 Headline 4.2 Copy 4.3 Layout 5. ADVERTISING BUDGET 5.1 Task method 5.2 Mechanical method 6. SALES PROMOTIONS 54 54 54 54 56 56 56 56 56 57 57 58 62 62 62 63 63 63 63 64 64 65 65 66 66 66 67 67 67 67 68 68 68 68 69 viii MARKETING YOUR PRODUCT

7. LEGAL DOS AND DONTS WHEN ADVERTISING 9 PUBLIC RELATIONS 1. PUBLICITY 2. DOS AN D DONTS 3. DIFFERENCES BETWEEN PUBLICITY AND ADVERTISING 10 DISTRIBUTION: GETTING THE PRODUCT TO YOUR CUSTOMER 1. METHODS OF DISTRIBUTION 1.1 Producer to custome r 1.2 Producer to retailer to customer 1.3 Producer to wholesaler to retailer to customer 1.4 Producer to agent to wholesaler to retailer to customer 2. DISTRIB UTION CONSIDERATIONS 2.1 The customer 2.2 Product characteristics 2.3 The go-bet ween 2.4 Producer characteristics 2.5 Warehousing 2.6 Inventory control 2.7 Pack aging 2.8 Material handling 2.9 Order processing 2.10 Transportation 11 RETAILIN G YOUR PRODUCT 1. RETAIL CLASSIFICATIONS 1.1 Convenience stores 1.2 Large depart ment stores 1.3 Specialty stores 1.4 Discount retailers 1.5 Nonstore retailer 2. CONSUMER MOTIVES 3. TYPES OF SHOPPERS 3.1 Inactive shoppers 3.2 Active shoppers 3.3 Service shoppers 3.4 Traditional shoppers 69 71 71 72 75 79 79 79 80 81 81 82 82 82 82 82 83 83 83 83 83 83 86 86 86 86 87 87 87 87 88 88 88 88 88 CONTENTS ix

3.5 Dedicated fringe shoppers 3.6 Price shoppers 3.7 Transitional shoppers 4. CH OOSING A LOCATION 4.1 Choosing an area 4.2 Choosing a specific site 12 MARKETING ON THE INTERNET 1. WHO WILL YOUR CUSTOMERS ON THE INTERNET BE? 2. SERVICES INTE RNET CUSTOMERS EXPECT 3. WHAT PRODUCTS CAN BE SOLD ON THE INTERNET? 4. ADVANTAGE S OF THE INTERNET 5. IS THE INTERNET RIGHT FOR YOUR BUSINESS? 6. CUSTOMER CONCER NS ABOUT THE INTERNET 7. POOR ADVERTISING ON THE INTERNET 8. WEB SITE PITFALLS T O AVOID 9. KEY TIPS TO DEVELOPING YOUR WEB MARKETING 10. CREATING A GREAT WEB SI TE 10.1 Present a professional corporate image 10.2 Establish the product benefi ts early 10.3 Anticipate customer questions 10.4 Create a dynamic message 10.5 C reating a domain name 10.6 How to design an effective Web site 10.7 Gathering cu stomer information from the Internet 11. LEGAL ISSUES 12. CONCLUSION 13 THE COMP ETITIVE EDGE 1. TYPE OF COMPETITION 1.1 Monopoly (one firm) 1.2 Oligopoly (few f irms, same product) 1.3 Differentiated oligopoly (few firms, similar product) 1. 4 Monopolistic competition (many firms, different products) 1.5 Pure competition (many firms, similar products) 2. GAINING THE COMPETITIVE EDGE 2.1 Operational efficiency 88 88 88 88 88 89 91 91 92 93 93 94 95 95 96 97 98 98 98 98 98 99 99 100 102 102 103 103 104 104 104 104 104 104 105 x MARKETING YOUR PRODUCT

2.2 Customer service 2.3 Product leadership 3. CHOOSING A COMPETITIVE EDGE 4. AS SESSING YOUR COMPETITION 14 MANAGEMENT IN A COMPETITIVE WORLD 1. WHAT HAPPENED I N THE PAST 2. WHAT CHANGED 3. THE IMPORTANCE OF FRAME OF MIND 4. MANAGEMENT STYL E 5. HOW DOES IT WORK? 6. MANAGEMENT PROCESS 6.1 Flexibility 6.2 Management fads 7. ADAPTIVE MANAGEMENT 8. MANAGING DUALITY 15 SELLING AS A MARKETING TECHNIQUE 1. ORGANIZATION 1.1 Office location 1.2 Reception 1.3 Layout and decor 1.4 Dress code 2. WHO SHOULD YOU HIRE TO SELL? 3. PERSUASION 4. MAKING CONTACT 5. HOW TO SELL EFFECTIVELY 5.1 Pre-approach 5.2 Appraisal 5.3 Presentation 5.4 Objections 5.5 Closing 5.6 Follow-up 6. HOW TO MAKE THE SALES JOB EASIER 16 IMPLEMENTING TH E MARKETING PLAN 1. CONTROLLING IMPLEMENTATION 2. SETTING A SCHEDULE 105 106 107 107 112 112 113 113 113 114 114 114 114 114 117 120 120 121 121 121 121 121 121 122 122 122 122 122 123 123 123 123 126 126 126 CONTENTS xi

3. STAYING ON SCHEDULE 4. DIFFERENT RESULTS THAN EXPECTED? BECOME AN MD 4.1 The diagnostic process 4.2 Getting well again 5. COMMON PITFALLS TO AVOID WHEN MARKE TING 6. SYSTEMATIC MARKETING DIAGNOSIS 17 INTERNATIONAL MARKETING 1. GOING INTER NATIONAL 2. ASSESSING YOUR GLOBAL MARKET 2.1 Political environment 2.2 Economic considerations 2.3 Cultural differences 3. MARKET RESEARCH 4. STRATEGIES FOR INT ERNATIONAL MARKETING 5. PRODUCT 5.1 Same product 5.2 Product adaption 6. PROMOTI ON 7. PRICE 7.1 Cost factors 7.2 Marketing factors 7.3 Economic factors 8. DISTR IBUTION 8.1 Exporting 8.2 Indirect export 8.3 Direct exporting 8.4 Licensing 8.5 Franchising 8.6 Manufacturing 8.7 Joint ventures 9. GLOBAL MANAGEMENT 9.1 Pitfa lls 9.2 Looking through a window, not a mirror 18 LEGAL CONSIDERATIONS 1. PRODUC T LIABILITY 127 127 127 128 128 129 132 133 133 133 134 134 135 136 136 136 136 137 138 138 138 138 139 139 139 140 140 140 141 141 141 142 142 143 143 xii MARKETING YOUR PRODUCT

2. 3. 4. 5. 1.1 Contract liability 1.2 Tort liability 1.3 Strict liability PRODUCT LIABILITY INSURANCE 2.1 Product liability coverage 2.2 Completed operations liability cov erage 2.3 Claims made versus occurrence coverage 2.4 Declarations 2.5 Exclusions 2.6 Insuring agreements 2.7 Definitions 2.8 Limits of liability 2.9 Deductibles 2.10 Conditions SPECIAL INSURANCE 3.1 Product mixing 3.2 Product withdrawal 3.3 Product damage 3.4 Product failure 3.5 Product extortion 3.6 Professional liabi lity DOING BUSINESS WITHOUT INSURANCE LOSS PREVENTION 143 144 145 145 145 145 145 145 146 147 147 147 147 147 148 148 148 148 148 148 148 149 149 151 159 169 175 179 181 APPENDIXES 1 Researching your market 2 Advertising 3 The marketing plan GLOSSARY BIBLIOGRAPHY BONUS CD-ROM CONTENTS xiii

TABLES 1 1 2 3 4 5 Segmentation SAMPLES Average product life cycle News release Advertising versus publicity Leaders versus managers: Approaches to strategy Wor king groups versus teams: How they function within a company WORKSHEETS 1 2 3 As sessing the competition Forecasting demand from research results Advertising 108 158 164 47 73 74 115 116 32 xiv MARKETING YOUR PRODUCT

CHAPTER 1 WHAT IS MARKETING? 1. MARKETING Remember when Made in Japan implied an inexpensive, poor-quality product? Today, m any Japanese products are recognized as highquality industry leaders. This chang e in perception is due to effective marketing. Many people consider marketing si mply as pricing gimmicks, advertising, and hard-sell. On the contrary, marketing is an essential management function needed to create a demand for your product. The core concept of marketing is the exchange of value between two parties: the buyer and the seller. This means that in your marketing planning, your primary functions are to (a) understand the needs and desires of present and potential c ustomers, (b) select and develop products that would best satisfy those customer s within the limits of your resources, (c) develop a program to tell your customers about the benefits of your product, and (d) ensure that your products get to your customer. 1.1 Understanding custo mer needs and desires We all tend to assume that others needs are the same as our own. Understanding your customers means finding out what they really want, and recognizing that their needs and desires may be very different from your own. Ma rket research can reduce the uncertainty and risk of deciding what products you should present. Marketing does not try to impose a product that is not required or wanted. Effective marketing is user-oriented, not seller-oriented. 1

1.2 Selecting and developing a product A marketing-oriented business does not at tempt to be all things to all people. Once you have identified the needs and cha racteristics of several markets, decide which one to serve on the basis of profi t potential, market size, and your companys goals and available resources. Each m arket will be different, so you have to design different product benefits to mee t each market requirement. 1.3 Developing a communication program Once you devel op appropriate products for your different markets, you must decide how to commu nicate the benefits of each product. You might use promotion, advertising, perso nal selling, public relations, and media selection. All these marketing tools ar e explored in this book. 1.4 Getting your product to your customer Getting your product to your customer means offering your product at the right place, at the right time, and at the right price. It means making it easy for your customer to find and buy your product. 2.1 Product A product is designed to satisfy consumer needs. Product strategy in cludes decisions about its uses, quality, features, brand name, style, packaging , guarantees, design, and options. Decisions about changes in the product charac teristics are needed as the product goes through its life cycle (see Chapter 6). 2.2 Price Besides being the amount you charge customers for your product, price involves management policies on discounts, allowances, credit terms, payment pe riods, transit payments, etc. 2.3 Place Placing your product means providing it at the right place at the right time. Distribution strategies involve decisions on such things as store location and territories, inventory levels, shelf locati on, type of shipments. 2.4 Promotion Promotion is informing and persuading your target market of the value of your product. The major promotional tools are adve rtising, personal selling, publicity, and sales promotion. Which media you use i s also an important part of promotion. 2. MARKETING MIX Four variables make up the marketing mix: product, price, place, and promotion. You as a business person can control, vary, and use these variables to influence your customers. These variables are interrelated and form the total package tha t will determine the degree of your marketing success. Following is a brief desc ription of the four variables; each is discussed in detail in later chapters. 3. SELLING VERSUS MARKETING Despite rhetoric of catering to customer needs and solving problems, sales-orien ted organizations have traditionally consisted of talkative salespeople trying t o foist their products on customers. Dont you make that mistake! 2 MARKETING YOUR PRODUCT

The marketing-oriented organization seeks to make a profit by serving the needs of customers and solving their problems. The marketing concept is concerned with the fair exchange of value between the consumer and the organization. Marketing is different from sales in that you first determine the customers needs and then design a product or service to satisfy those needs. Marketing is really about l istening to your customer. In a sales-oriented organization, salespeople listen with the intent to reply; in marketing, you listen with the intent to understand . Inventing a product without first checking if it is needed is similar to havin g your optometrist give you his personal eyeglass prescription without first exa mining your own eyes. In a market-oriented organization your first priority is t o find out if a product is needed before offering it. In a marketing-oriented or ganization, the sales managers responsibilities relate mainly to the following: ( a) Determining sales objectives (b) Establishing a sales force size and structur e (c) Formulating sales implementation programs (d) Recruiting, training, and su pervising the sales force (e) Formulating a motivating compensation package (f) Setting budget and sales expenses (g) Developing sales forecasts (h) Establishin g ties between the different functional groups (i) Evaluating sales representati ves A sales representative has many responsibilities ranging from simply taking orde rs to building goodwill, trade selling, prospecting, and negotiating contracts. Personal characteristics that are required include empathy, patience, persuasive ability, and persistence. The stereotypical image of a sales representative is of an extroverted, joke-telling socialite trying to foist his product on you. Bu t the best salespeople take the time to listen to a clients needs and provide sol utions to fit those needs. 4. PRODUCT VERSUS SERVICE MARKETING Although product marketing has much in common with service marketing, the strate gy is not the same. Services are performed and consumed while products are manuf actured and possessed. The following service sector attributes are different fro m those of the product industry: (a) Services are intangible, which makes it dif ficult for the consumer to inspect the services before purchase. Services cannot be displayed, physically demonstrated, or illustrated in the same manner as a p roduct. For example, unlike products such as books or cameras, legal services ca nnot be seen, felt, tasted, smelled, or touched before they are bought. Because consumers can see few physical attributes prior to the purchase, they may feel t here is a greater risk associated with the selection of a service. (b) Services are simultaneously consumed and produced. The person rendering the service requi res the consumer to be present throughout the service delivery. For example, med ical examinations, beauty WHAT IS MARKETING? 3

salons, and travel tours all take place with both the customer and agent present . This characteristic limits the scale of a service operation to the number of q ualified personnel available. Regardless of the size of the office, a dentist ca n treat only so many patients per hour. (c) The quality of a service is affected by the clients own input. A psychiatrist, doctor, or psychologist requires the p atients cooperation. A management consultants advice depends on the clients honest disclosure of information in order for the recommendations to be appropriate and effective. (d) Services cannot be inventoried because most are performed by peo ple. Empty seats in an airplane or unused electric power represents lost busines s and cannot be stored for the next day. (e) Services are not standardized; the quality of service varies depending on where and when it is performed. For examp le, different sales representatives in a travel agency have varying levels of ex perience. Depending on the expertise of the sales representative you use, you ma y or may not be advised of the most economical travel package. In the product in dustry, however, machines ensure standardization. In a service organization, the quality and consistency of service is highly dependent on the person giving the service. failures can be attributed to poor marketing. In order of priority, the most com mon reasons for product failure are the following: (a) Misunderstanding the mark et: Failure to properly analyze market needs and habits leads to a poor understa nding of the benefits your customer was looking for. You must be careful not to assume that what you want to offer is what your customer wants. (b) Product qual ity: The quality, value, and performance of your product may not meet your custo mers expectations or may be inferior to the competition. (c) Lack of marketing ef fort: Failure to provide the required training, support, and follow-up for an ef fective marketing effort erodes the commitment and team effort critical to the s uccess of any business. (d) Poor planning: Failure to set realistic goals, objec tives, and tasks often leads to higher costs than anticipated, which in turn res ults in a higher price. Higher prices often mean lower sales volumes. It is comm on to over-estimate the revenue and underestimate the cost of bringing a product to market. (e) Competition: The competitions quick reaction to copy and improve on your product or overcrowd the market could force you out of business. (f) Fai lure to adapt: Not revising goals, maintaining inflexible attitudes, arrogance o r overconfidence, and unanticipated obstacles can lead to failure. Adaptability and ongoing reassessment of your goals is practical and realistic. 5. AVOIDING FAILURE; ENSURING SUCCESS Statistics vary, but the majority of new products fail. Studies indicate that 75 percent of product 4 MARKETING YOUR PRODUCT

(g) Lack of technical competence: Not assessing your strengths and weaknesses, o r marketing a product you are unfamiliar with or do not have technical competenc e or production expertise in, can lead to failure. This book provides many pract ical tips and information that will contribute to the success of your business. As you read this book, keep in mind the four main reasons why a product succeeds : (a) Use of an effective marketing approach: Answering the basic marketing ques tions and acting on that information is essential to the success of your product . Stay in touch with your customers; find out what they really need and want and where you stand in the market. (b) Have a unique product: Most successful products are either superior to and/o r different from those of the competition. Successful businesses care about prod uct quality and the services they provide. (c) Technical competence: Have techni cal competence in the production or distribution of your product. Gain knowledge and experience in the industry and a hands-on understanding of what is happening. Provide meaningful rewards to employees for good work. (d) Competitive pricing: Are your prices competitive compared to similar products? Do you offer added va lue? Do you have sufficient margins to cover your costs and give incentive to yo ur distributors? WHAT IS MARKETING? 5