Products, Markets and Advertising

Product Differentiation

The importance of non-price competition

product

differentiation product development advertising and marketing

Features of a product
technical

standards quality standards design standards service characteristics mix of attributes in different brands

Product Differentiation

Vertical and horizontal product differentiation

vertical

product differentiation
of quality
of price

importance
importance

horizontal

product differentiation
of specific features

importance

market

segmentation
specific parts of the market markets

targeting niche

Marketing the Product

Product / market strategy

alternative a

approaches

growth vector matrix

penetration development

market

product market

development

diversification

Growth vector components

Product
Present New

A
Present

B
Product development

Market penetration

Market C
New

Market Diversification development

Marketing the Product

The marketing mix

product pricing place

considerations

considerations

considerations

promotion

considerations

Considerations when marketing a product

Product considerations
Product line Product services Brand Package Basic price

Promotion considerations

Public relations

Pricing considerations

Special promotions Personal promotions

Target market segment

Price alterations Credit terms

Adverts Channel Storage networks facilities

Transport and handling Inventory Shipping terms facilities control

Place considerations

Advertising

Background
advertising

and the state of the economy

Total UK advertising expenditure

At current prices (bn) 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 6.57 7.61 8.64 8.93 8.53 8.86 9.14 10.14 11.03 12.08 13.34 14.42 15.41 16.99 16.54 16.73 At constant (1995) prices (bn) 9.61 10.62 11.18 10.55 9.53 9.54 9.68 10.48 11.03 11.79 12.63 13.19 13.89 14.87 14.22 14.16 As a percentage of Gross value Household added expenditure 1.56 1.63 1.68 1.60 1.48 1.45 1.42 1.49 1.53 1.58 1.64 1.68 1.71 1.79 1.67 1.60 2.61 2.68 2.77 2.64 2.37 2.33 2.27 2.40 2.49 2.55 2.65 2.69 2.71 2.81 2.61 2.52

Advertising

Background
advertising

and the state of the economy distribution of advertising between media

UK total Advertising Expenditure (% of total)

1938 1948 1958 1968 1978 1988 1998 2002

National newspapers Regional newspapers Consumer magazines Business and professional Directories

25.4 27.1 15.3 11.9 0.0

13.9 31.6 12.7 16.5 0.0

18.9 24.1 13.3 1 0.0 1.2

19.7 24.1 9.9 9.1 1.6

15.8 25.8 8.5 10.1 2.7

14.4 20.3 6.3 9.5 4.8

12.7 16.6 4.9 8.4 5.4

11.5 17.1 4.7 6.5 5.9

Press production costs

Total press Television Direct mail Outdoor and transport Radio Cinema Internet Total

5.1
84.7 0.0 0.0 8.5 3.4 3.4 0.0 100.0

7.6
82.3 0.0 0.0 13.9 0.0 3.8 0.0 100.0

5.2
72.7 19.3 0.0 6.0 0.4 1.6 0.0 100.0

4.6
69.0 25.6 0.0 4.0 0.2 1.2 0.0 100.0

5.1
68.0 25.8 0.0 3.6 1.9 0.7 0.0 100.0

4.7
59.7 27.9 7.0 3.2 1.8 0.4 0.0 100.0

4.3
52.2 28.0 11.6 4.3 3.2 0.7 0.1 100.0

3.8
49.6 25.8 14.2 4.8 3.3 1.1 1.2 100.0

Source: Advertising Statistics Yearbook 2003 (NTC Publications Ltd).

Advertising

Background
advertising

and the state of the economy distribution of advertising between media advertising expenditure by product sector

UK advertising expenditure by product sector

(% of total advertising expenditure)

1986 Retail Industrial Financial Government Services 13.8 8.7 10.2 3.3 8.5

1990 12.4 7.4 10.5 3.2 10.8

1994 16.4 7.8 10.2 2.2 10.4

1998 18.9 8.9 8.3 2.3 11.1

2002 13.8 12.8 10.6 2.8 11.4

Durables Consumables Total

20.5 35.0 100.0

19.6 36.1 100.0

19.4 33.5 100.0

21.4 29.4 100.0

24.1 24.6 100.0

Source: Advertising Statistics Yearbook 2003 (NTC Publications Ltd).

Advertising

Background
advertising

and the state of the economy distribution of advertising between media advertising expenditure by product sector

The intensity of advertising

Advertising

Background
advertising

and the state of the economy distribution of advertising between media advertising expenditure by product sector

The intensity of advertising

the

advertising / sales ratio

Advertising/sales ratio: 2002

(ranked by advertising/sales ratio)
Product category Advertising / sales ratio (%) 29.38 20.17 12.15 10.90 8.48 8.24 7.99 6.73 5.12 4.99 4.27 3.92 Product category Advertising / sales ratio (%) 2.63 2.32 2.59 1.77 1.73 1.47 1.41 0.30 0.07 0.11 0.02 0.02

Denture fixatives Shampoos Lawn fertilisers Indigestion remedies Vitamins and minerals Potato crisps Female fragrances Toothpaste Margarine Male fragrances Instant coffee Cameras

Ground coffee Butter Chocolate Bottled water Alcopops Tea Contents insurance Buses Cigarettes Fruit (total) Petrol and diesel Flour

Advertising

Background
advertising

and the state of the economy distribution of advertising between media advertising expenditure by product sector

The intensity of advertising

the

advertising / sales ratio causes of differences in advertising intensity between the different sectors of the economy

Advertising

Background
advertising

and the state of the economy distribution of advertising between media advertising expenditure by product sector

The intensity of advertising

the

advertising / sales ratio causes of differences in advertising intensity between the different sectors of the economy
differences

in market structure

Advertising

Background
advertising

and the state of the economy distribution of advertising between media advertising expenditure by product sector

The intensity of advertising

the

advertising / sales ratio causes of differences in advertising intensity between the different sectors of the economy
differences

in market structure differences in product characteristics

Advertising

Aims of advertising
shifting making

the demand curve the demand curve less elastic

Effect of advertising on the demand curve

P

P1

D1

Q1

Effect of advertising on the demand curve

P

P1

D2

D1

Q1

Q2

Effect of advertising on the demand curve

P

P2 P1

D2

D1

Q1

Q3

Q2

Advertising

Aims of advertising
shifting making

the demand curve the demand curve less elastic

Effects of advertising

Advertising

Aims of advertising
shifting making

the demand curve the demand curve less elastic

Effects of advertising
advertising

and the long run

Advertising and the long run

Sales (weekly)

s2
Direct effect on sales

Habit sales

s3 Sales
Advertising campaign

Sales
Long-term effect

s1

t1

t2

t3

t4

t5

Time

Advertising

Aims of advertising
shifting making

the demand curve the demand curve less elastic

Effects of advertising
advertising advertising

and the long run and company growth

Advertising, profit margins and company growth

Advertising expenditure relative to competitors

Product image and company reputation

Relative quality of offering

Relative price

(Relative) customer value Real market growth Market share Profit margins

Growth

Advertising

Assessing the effects of advertising

benefits
to to

of advertising

firms consumers

costs
to to

of advertising

firms consumers and society generally