Dr. S. Borna
MBA 671
LECTURE OUTLINE
1. Underlying concepts
of product differentiation
and positioning
2. Is product differentiation
a special case of positioning?
3. How to position a product offering?
Product Differentiation:
According to R. Smith:
Product differentiation is
concerned with the bending of
demand to the will of supply.
According to Chamberlin:
A general class of product is
differentiated if any significant
basis exists for distinguishing
the goods (or services) of one seller
from those of another. Such a basis
may be real or fancied, so long as it
is of any importance whatever to
buyers, and leads to a preference
for one variety of product over
another.
Perceptual/cognitive responses
of consumers are necessary
but not sufficient.
Sufficiency criterion is met only
when consumers’ preference/affective
responses are incorporated in
the definition of differentiation.
Product positioning
According to Schiffman and
Kanuk: positioning is an attempt
to develop a special image for
(a) product in the consumer’s
mind.
According to Aaker and
Shansby:
The term position differs from the
older term ‘image’ in that it
implies a frame of reference, the
reference point usually being the
competition.
We may concluded that:
Perception is the common
underlying concept of both
product differentiation and
positioning.
What is perception?
Perception is the process by
which an individual selects,
organizes and interprets stimuli
into a meaningful and coherent
picture of the world.
(weltanschauung)
According to Bruner:
Perception involves an
act of categorization.
Whatever is perceived, is
placed in and achieves its
meaning from a class of
precepts with which it is
grouped.
If perception involves an act
of categorization and the
common underlying concept
of both product differentiation
and positioning is consumer
perception, then the inevitable
conclusion is that the end
result of any differentiation and
positioning is categorization..
Conclusion
This conclusion raises a
critical question:
Under what conditions can
we label a categorization as
positioning or differentiation?
Marketers try to establish
either:
1. Product categorization
and product uniqueness
2. Product categorization and
product affinity
Price
Products are positioned
but not differentiated
p1
p
2
Products are
positioned and
differentiated
s1
s2
Sweetness
It is evident from the
previous graph that
product differentiation
is a special case of
product positioning.
How to position a product?
1. Identify “product” attributes
that consumers perceive to
to be important.
How? aided techniques
Unaided techniques
Product
Features
Performance
Conformance
Durability
Reliability
Style
Design
Services
Ordering ease
Delivery
Installation
Customer training
etc.
Personnel
Competence
courtesy
Reliability
Credibility
Physical Attractiveness
Etc.
Channels
Coverage
Expertise
Performance
Prepare a Perceptual Map
Plot consumers’ perception
of each “important”
Product attribute on the
perceptual map.
A Descriptive Perceptual Map
?
A Prescriptive Perceptual Map
Competing
brands
Ideal
Brand
Co. Brand
Avoid:
Over positioning
Confused Positioning
Product means different
things to different people
What strategies to follow?
Product Life Cycle
Concept of Product Life Cycle
An attempt to recognize distinct
stages in the sales history of
a product. Based on the notion
that like living organisms,
products have distinct stages
in their life cycle.
Plotting Product Life Cycle
In plotting the product life cycle
curve special attention should be
paid to the following points:
1. Price
2. Population
3. Income affect
4. Product hierarchy
5. Market hierarchy
Note 1:
Product class (cars,
news papers)
Product form (compact cars
Evening papers)
Brand (Chevrolet, Muncie Star)
A Typical PLC!
Unit
Sales
Introduction
Time
Maturity
Growth
Decline
Types of Product Life
Cycle Patterns
U
T
Cycle-recycle
Cycle-half cycle
Increasing sales
V. Decreasing sales
High plateau
VII. Low plateau
U= Unit sales T= time
Stable maturity
Innovative maturity
Note 2
Styles, fashions and fads
also have life cycles.
Note 3
The International Product
Life cycle.
Sales & profits ($)
Sales & Profit Life Cycles
Product
Intro
Decisions
Introduction
Product
Modification
Decisions
Growth
Maturity
Time
Product
Elimination
Decisions
Decline
Rationale For Product Life Cycle
The rationale behind product life
cycle is the diffusion of
$
innovation theory
Time
time
Marketing Objectives
Introduction: Create product
awareness and trial
Growth: Maximize market share
Maturity: Maximize profit while
defending market share
Decline: Reduce expenditure
and milk the brand
Marketing Strategies During the
P.L.C.
Product
Introduction
Promotion
Price
Place
Growth
Maturity
Decline
4 P’s
4 P’s
4 P’s
Introduction Stage
Sales are slow because:
buyer’s resistance to change,
availability of product, price,
etc.
profits are usually low or
negative (heavy promotion,
high margins for retailers etc.)
Marketing Strategies in the
Introduction Stage
Product Offer a basic product
Price
Skimming or penetration
strategies
Distribution
Build selective
distribution
Advertising
Build product
awareness among
early adopters
and dealers
Sales Promotion
Use heavy promotion
to entice consumers to try
the new product. samples,
coupons etc.
Marketing Strategies in the
Growth Stage
Product
Offer product
extensions, new product
features etc.
Markets
enter new Mkt. segments
Price
Price to penetrate
market
Distribution
Build more
intensive
distribution
Advertising
Build awareness
and interest in
the mass market
Marketing Strategies in the
Maturity Stage
Note: Most products are in the maturity
stage of life cycle
Product
Diversify brands
and models
Price
Price to match or
beat competitors
Distribution
Advertising
Build more
intensive
distribution
Stress brand
differences
and benefits
Market Modification
(strategies in mkt. maturity stage)
Volume = (Number of brand users)
X (usage rate)
No. of user can be increased by:
Converting nonusers
Entering new markets
Winning competitors’ customers
Usage rate can be increased by:
a) more frequent use;
b) more usage per occasion; and
c) new and more varied uses
Marketing mix modifications
(strategies in mkt. maturity stage)
Price: How to reduce price in order
to stimulate demand?
Distribution: Is the channels of
distribution optimum? If not how
to modify it?
Promotion Mix: How to modify it?
Marketing Strategies During
Decline Stage
Identification of weak products:
Increase the firm’s investment
to dominate the market or
strengthen its competitive position
• Maintaining the firm’s
investment level until the
uncertainties are resolved.
• Decrease the firm’s investment
selectively (dropping
unprofitable segments etc.)
• Harvesting
• Divesting
PROBLEMS ASSOCIATED
WITH PLC
1. Is there evidence for the
existence of the classical bellshaped PLC?
Evidence is strong but other
shapes do exist.
Forecasting PLC Stage
Some success has been
claimed for methods designed
to forecast the transition form
one PLC stage to another.
Problems do exist.
PROBLEMS ASSOCIATED WITH
PLC
1. Duration of stages
2. PLC as a dependable Variable
3. Determinants of the curve
Is P.L.C. a Useful Concept?
As a predictive or forecasting
tool
* In a general sense yes
*but it has not proven useful
for specific forecasting on
a time basis
Review
Identify Differentiating Attributes
 Choosing & Communicating Effective
Positioning
 Marketing Strategies Along the Product
Life Cycle
 Marketing Strategy & Market Evolution
