MSU LIBRARIES .—:—. RETURNING MATERIALS: Place in book drop to remove this checkout from your record. FINES will be charged if book is returned after the date stamped below. Nearly all of t on qualitative the ootinal pro: ascertain a tee historically be :uaztitativel‘: :59 Promotiona 1—16 framework Characteristic ABSTRACT A METHOD TO PREDICT PROMOTIONAL STRATEGY By David Charles Lehmkuhl Nearly all of the marketing mix models designed to date have relied on qualitative information as the base for the determination of the optimal promotional mix. The purpose of this thesis is to ascertain a technique of scoring whereby information which has historically been expressed in qualitative form may be expressed quantitatively so that it will be useful to predict the nature of the promotional mix. The framework of this thesis is based on an analysis of nine product characteristics which are common to all products and whose relation- ship in the product "bundle of goods" can be analyzed to determine the most advantageous marketing/promotional mix. This "study of goods theory" was first put forth by Leo V. Aspinwall and was further refined by Gordon E. Miracle. It was Miracle who specified the nine product characteristics and defined how they work in relationship to one another. This thesis attempts to carry this analysis a step further by assigning numerical points to each product characteristic under consideration. The total score of all nine characteristic subtotals positions the product on the continuum in relationship to other prOducts. This can then inform the marketer of the value of his product and how the product can best be promoted to the consuming public. Within each pre- determined whiz instances these seholats. Rowe use as a guide} hoe these varia‘~ Particular “0,5“ 3-35th characr The composite 5 32 order to ta. ”’5 _ f~J ““3 were acterisubbv‘ Within each product characteristic a number of variables have been determined which affect that particular characteristic. In some instances these variables had already been analyzed by earlier scholars. However, in most cases there was no earlier history to use as a guideline and it was left to the author's judgement as to how these variables interrelated with one another. Each of these variables has been assigned a range of scoring points and the analyst is to select the score which best reflects his particular product. The total of all the variable scores within the product characteristic thus yields a net score for each characteristic. The composite score of all nine characteristics then positions the product on the promotional mix continuum. In order to test the usefulness of the prOposed scoring technique ten products were selected for test purposes. Each product was taken char- acteristic—by—characteristic through the product analysis and "earned" scores according to the summation of its total points. From these earned scores each product was positioned on the promotional continuum. These product positionings were then compared to base/known data (from the Miracle model) for accuracy in estimating the promotional mix. It was found that the scores from the product analysis proposed in the thesis ranked the products in the same way in which the base/known data had ranked the products; thus indicating that the method proposed in the thesis provides accurate and useful data. Thus, the qualitative information had been effectively translated into a quantitative scoring system and did provide accurate results. The method proposed in the thesis can therefore serve as a useful tool in the marketing system. vol/K». " A METHOD TO PREDICT PROMOTIONAL STRATEGY By David Charles Lehmkuhl A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of MASTER OF ARTS Department of Advertising 1974 In addition to male were ins Fir“: I VOUld his Lint‘lerstand i: {Mimi'v H mm... of 1 acre difficUlt. ht she already Else. '1. s ACKNOWLEDGMENTS In addition to my own hard work and part-time dedication, two other people were instrumental in seeing this project through to completion. First, I would like to thank Dr. Gordon E. Miracle for his patience, his understanding, his good humor and his unending criticisms during the many, many months which this project consumed. Without the inspiration of Dr. Miracle this undertaking would have been immensely more difficult. I would also like to say thank you to a second very important person. But she already knows who she is and why I don't have to say anything else. Thank you both. David C. Lehmkuhl ii Aflfifiiflfiflihg A Com: 3 Durab C. Conve: D ASpim E Hiracj N' DERODCCI P SCOr: SCOr SQO. I LI RAIL OE SQQ U" ~E‘C‘fi‘u‘u SC: SC 11 \ F‘J‘EQCE S 3:11 ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . PART I. INTRODUCTION Chapter 1. PURPOSE AND SCOPE. . . . . . . . . . . . II. HYPOTHESIS AND METHODOLOGY . . . . . . . III. REVIEW OF THE LITERATURE . . . . . . . . A. Consumer/Industrial Goods. . . . . B. Durable/Nondurable Goods . . . . . C. Convenience, Shopping, and Specialty D. Aspinwall' s Typology . . . . . . . . E. Miracle's Typology . . . . . . . . . IV. INTRODUCTION TO SCORING TECHNIQUE. . . . PART II. PRODUCT CHARACTERISTICS V. UNIT VALUE . . . . . . . . . . . . . . . Scoring. . . . . . . . . . . . . . . VI. SIGNIFICANCE OF EACH INDIVIDUAL PURCHASE Scoring. . . . . . . . . . . . . . . VII. TIME AND EFFORT SPENT PURCHASING . . . . Scoring. . . . . . . . . . . . . . . VIII. RATE OF TECHNOLOGICAL CHANGE . . . . . . Scoring. . . . . . . . . . . . . . . IXJ TECHNICAL COMPLEXITY . . . . . . . . . Scoring. . . . . . . . . . . . . . . X. CUSTOMER'S NEED FOR SERVICE. . . . . . . Scoring. . . . . . . . . . . . . . . XI. FREQUENCY OF PURCHASE/RAPIDITY OF CONSUMPTION. Scoring. . . . . . . . . . . . . . . XII. EXTENT OF USAGE. . . . . . . . . . . . . TABLE OF CONTENTS scoring. 0 O O O O O O I O O O O O 0 ii 0\ HOmNV l7 19 23 28 33 35 39 45 49 51 55 57 61 65 71 73 Chapter Eli. TESTING XIV. SDIVARY ; me. ICES 5- Hark. 3- From. (3- Ten E Imam . . mummy. . PART III. CONCLUSION Chapter XIII. TESTING THE HYPOTHESIS . . . . XIV. SUMMARY AND CONCLUSION . . . . APPENDICES A. Marketing Mix Continuum. . B. Promotional Mix Continuum. C. Ten Product Analyses . . . FOOTNOTES 0 O O O O O O O O O O O O O BIBLIOGRAPHY. . . . . . . . . . . . . 79 83 85 86 87 117 122 PART I INTRODUCTION The purpose of titative fem g notional mix. he theoretical 9&7-"1 In this to all prod,dcts 92-1 which he s ‘4. . n..tion of the In addition. H; ‘ 7 SLmCtiOnng frangiork. I. PURPOSE AND SCOPE The purpose of this thesis is to express qualitative information in quan- titative form so that it will be useful to predict the nature of the pro— motional mix. The theoretical framework for this thesis is taken from the article by Gordon E. Miracle entitled "Product Characteristics and Marketing Strat- egy."1 In this report Miracle describes nine characteristics common to all products. He presents these product characteristics in a frame- work which he suggests is suitable to predict approximately the most appropriate marketing mix. This thesis will carry this kind of work further, concentrating on pre- diction of the promotional strategy component of the marketing mix. In addition, "A Two-Phase Interaction Process for Marketing Model Con- struction"2 by Lipson, Darling and Reynolds will provide a supplemental framework. This article begins to quantify the process of determining the optimal marketing mix by offering the Miracle Product Analysis in matrix form based on a continuum of 0-100. This will provide the basic quantitative framework. The analysis of a product will be based on the 0-100 continuum. By determining the number of points "earned" by a product the marketing manager will be able to quantitatively position his product on the continuum. Points accmulz; result of the a an independent notional strate to assign quan: the scores to o‘ 0f the appro-pril 3 Points accumulated for each product characteristic will be a direct result of the analysis for each characteristic. Each characteristic is an independent variable from the standpoint of its relationship to pro— motional strategy. Upon completion of this study it should be possible to assign quantitative scores to each product characteristic and total the scores to obtain an overall net score which will permit prediction of the appropriate promotional mix. his thesis is :e:hod which 03 thesis V111 not ability of the HypothesiSl I: test this prt detailed analyst :y-characteristt 91.: .ns thesis and Insulated by ti 36 analyzed: II. HYPOTHESIS AND METHODOLOGY FOR TESTING This thesis is a methodological thesis, ie. an attempt to suggest a method which can determine the optimum promotional mix. As such, this thesis will not test hypotheses but rather will test the predictive ability of the proposed method. Hypothesis: The proposed quantitative scoring technique predicts accurately the relationship between all of the nine product characteristics of the Miracle model and "promotional strategy." To test this predictive ability, ten products have been selected for detailed analyses. These analyses will consist of (l) a characteristic- by-characteristic evaluation of each product based on the proposals in this thesis and (2) a grouping of the products based on the categories formulated by the Miracle typology. The following ten products will be analyzed: l.- Heinz Ketchup 2. Oldsmobile Cutlass 3. Zenith Color Television 4. IBM 360 Computer 5. Polaroid Camera 6. Salem Cigarettes 7. Memorex Magnetic Tape 8. Timex watch 9. Goodrich Radial Tires 10. Hush Puppies Shoes f The predicted istic-by-chara ation (ie. the These conparis 2- the In»;- Other: 3- the DE a usef 5 The predicted Optimal promotional mix ascertained from the character- istic-by-characteristic analysis will be compared with the known inform- ation (ie. the continuum categorization based on the Miracle methodology). These comparisons will yield one of the following conclusions: 1. the method predicts accurately and therefore is a useful method. 2. the method predicts some promotional mixes accurately but not others and therefore needs some additional study. 3. the method does not predict accurately and therefore is not a useful method. "A model is a features that In other words Since models d have become a; 1950 there has the Possibilit ‘ 4 filling. " In WEI future Ev III. REVIEW OF THE LITERATURE "A model is a representation of a system, designed to incorporate those 3 features that are deemed essential for one or more specific purposes." In other words-a representation of the real world. Since models do represent the real world, it is not surprising that they have become an important tool in the marketing process. "Since about 1950 there has been a growing interest among marketing executives in the possibilities of using mathematical models as aids to decision making."4 In today's highly sophisticated marketing arena, model building is of even greater importance as marketing executives are in- terested in better models to serve as "devices for exercising control over future events affecting their firms."5 Much of the interest in marketing models has been in the area of determining the marketing mix. "The construction of models to repre- sent marketing systems and to study the relationships among various components of the 'marketing mix' promises to be of significant value to marketing management."6 In an attempt to provide meaningful models for marketing decision making, scholars have formulated and refined different concepts. lBefOre continuing with this thesis, the current state of these ear- lier marketing mix models will be analyzed for the scope, the limita- tions and the benefits of each model. H. A. Consumer, The consumer/ is. the proposed mt. classified acco to pro: The “35011 for ifiat in their 1: Emmet! this ( 10 JErome Kern‘- ieanl‘i into C is “either; it in “Sing it, industrial-go‘ he efforts t a ‘ 8 ‘akEgOrieS . n B. W A second die] seeds theorv at which A. Consumer/Industrial Goods The consumer/industrial goods categorization is the most basic of all the proposed marketing mix models. In this dichotomy products are classified according to the following criteria: 1. consumer goods: goods which can be used by individuals or households without further processing. 2. industrial goods: goods which will be used by other companies to produce other goods or other services. The reason for this distinction is that "industrial buyers differ some- what in their buying motives, habits and skills from consumer buyers."7 However, this consumer/industrial goods concept is not valid according to Jerome Kernan: "Unfortunately, products can't be partitioned cleanly into consumer or industrial goods. Intrinsically, a product is neither; its classification is a function of the buyer's intention in using it. It follows, then, that consumer-goods strategies or industrial-goods strategies are at best approximations of the market- ing efforts that tend to be appropriate for the respective goods 8 categories." B. Durable/Nondurable Goods A second dichotomy which has been proposed is the durable/nondurable goods theory. In this, goods are categorized according to the rapidity at which they are consumed. This proposal seems to have a great deal of validity since products which are consumed rapidly (nondurable) would most likely have a different marketing mix than those products 8 which last over a number of years or a number of uses. However, "as with the consumer-industrial goods scheme, the durable- nondurable dichotomy tends to break down in practice. A durable good is not ipso facto perceived by a buyer differently than a nondurable good. Accordingly a priori strategies are at best only guides to 9 propriety." C. Convenience, Shoppipg and Specialty_Goods--Copeland In 1923 Melvin T. Copeland presented his theory that a marketing mix can be constructed according to the amount of time a consumer is willing 10 to spend in buying a product. The Copeland proposition was that all products can be positioned in one of the following categories: 1. convenience_goods: goods that are usually purchased fre- quently, immediately and with a minimum of effort. 2. shopping goods: goods that are purchased only after a com- parison on the basis of suitability, quality, price or style. 3. specialtnggods: goods that are of such uniqueness that a consumer insists upon and will take considerable effort and time to purchase.11 The value of the Copeland trichotomy "lies in its ability to prescribe (in broad strokes because it does yield some anomalies) the distribu- tion and promotional strategies--and implicitly the pricing strategy-- appropriate to each of the three types of goods."12 Convenience goods, for instance, are heavily advertised, available in numerous outlets, and competitively priced. Shopping goods, meanwhile, usually entail 9 more personal selling, a more selective distribution program and priced according to quality. Specialty goods are more restrictive in promotion, price and distribution. D. Aspinwall's Typology Much of the problem.with the preceeding marketing mix models is their inability to consider enough product characteristics. A marketing mix is not determined accurately by considering only how often a product must be replaced (durable/nondurable goods theory) or by considering only how much time and effort a consumer will put forth before buying a product (Copeland's theory). Instead, the optimal marketing mix can only be determined accurately by considering many factors operating in the marketing arena. In 1958 Leo V. Aspinwall began this process with his "Characteristics of Goods and Parallel Systems Theories."l3 In this report Aspinwall states that there are five product character- istics which should be considered by the marketer. The five are: 1. replacement rate: the rate at which a good is purchased and consumed by users in order to provide the satisfaction 3 con- sumer expects from the product. 2. Aggoss margin: the money sum which is the difference between the laid-in cost and the final realized sales price. 3. adjustment: services applied to goods in order to meet the exact needs of the consumer. 4. _§ime of consumption: the measured time of consumption during which the good gives up the utility desired. 5. searchipggtime: the measure of average time and distance from ther Based on these colors to def i: The idea : ilar to e. three lar- a manner _ choice of the idea c ative val; The following d Replacement Rat Gross Hargiu die of Consuz Search Time A 1' .snmall furt 80 t‘ flat any Pr dependant upor 5’" .r 4%, aQCOId if n. , plgeon‘hOled' part1Cular prc the optimal (in 10 14 the retail store. Based on these five product characteristics, Aspinwall used a system of colors to define his categories of goods. The idea that goods with similar characteristics are sim- ilar to each other lends itself to the establishment of three large classes of goods that can be named in such a manner as to convey the idea of an array of goods. The choice of color names may be inept in some respects, but the idea of an array of goods, based upon the sum of rel- ative values of characteristics of goods, is important. The following chart represents Aspinwall's color concept: Red Orange Yellow Eggdg Goods Goods Replacement Rate High Medium Low Gross Margin Low Medium High Adjustment Low Medium High Time of Consumption Low Medium High Search Time Low Medium High ASpinwall further suggested that a system of scoring could be devised so that any product could be rated on a scale from zero to one hundred dependent upon the weight assigned to each product characteristic. Thus, according to Aspinwall, products fall on a continuum rather than "pigeoneholed" into two or three restrictive categories. Where the particular product under consideration falls on the continuum determines the optimal distribution and promotion policies. 11 E. Miracle's Typology In 1965 Gordon E. Miracle extended Aspinwall's characteristics of goods theory.16 Instead of five characteristics common and key to every product (as proposed by Aspinwall) Miracle specified nine product char- acteristics. Instead of three product categories (red, yellow and orange) Miracle theorized five product groups. And, rather than offering direction only in the areas of distribution and promotion, Miracle also included product and pricing policies. The following nine product characteristics were designated in the Miracle theory: 1. Unit value 2. Significance of each individual purchase to the consumer 3. Time and effort spent purchasing by the consumer 4. Rate of technological change (including fashion changes) 5. Technical complexity 6. Consumer need for service (before, during or after the sale) 7. Frequency of purchase 8. Rapidity of consumption 9. Extent of usage (number and variety of consumers and variety of ways in which the product provides utility)17 Through an analysis of these nine characteristics it is possible to categorize a product into one of five groups. The following chart shows the variation in product characteristics for each group: 12 Product GROUP NUMBER Characteristics (see list) I II III IV V 1 Very Low LOW’ Med-Hi High Very High 2 Very Low Low Med High Very High 3 Very Low Low Med High Very High 4 Very Low Low Med High Very High 5 Very Low Low Med-Hi High Very High 6 Very Low Low Med High Very High 7 Very High Med-Hi Low Low Very Low 8 Very High Med-Hi Low LOW“ Very Low 9 Very High High ‘Med-Hi Low-Med Very Low For each of the five groups there is a recommended policy for product, distribution, promotion and pricing. At the one extreme-Group I- the following marketing mix is recommended by the Miracle model: 1. Little effort on product development. 3. Heavy advertising. Intensive distribution. 4. Little effort to control pricing. At the other extreme, products which fall into Group V would have the following marketing mix: Custom built. Sold directly from manufacturer to user. Sold primarily by salesmen. Individually negotiated price. IV. INTRODUCTION TO SCORING TECHNIQUE The models discussed in the previous section provide a basic founda— tion to the use of models in determining the marketing mix. However, both Miracle and Aspinwall have commented as to the limitations of these models. Miracle: "It is, of course, an artificiality to classify products by groups; and it would be more accurate to place products on a continuum, or within a spectrum ranging from one extreme to another."18 Aspinwall: "Finally, if precise weights or values could be assigned to each characteristic, their combination would determine the unique position of a product on the marketing scale."19 "The problem of weights or values being assigned to these individual characteristics has been one of the real difficulties in giving the theory a mathe— matical setting. So far that objective has not been fully achieved. We have been obliged to deal with relative values which might be considered as an intermediary stage in the theory's development."20 This, then, leads to the precise purpose of this thesis. That is, to establish a method of scoring whereby information that has histori- cally been expressed in a qualitative form can be translated into quantitative form. As previously indicated, the basis for this thesis is taken from the 13 nodal described the analysis to range, a contin amber of point able to quantita Seven of the mi: “1119; Signific ate of technol SEE-lice; and ex and Hill eaCh b or Purchase and 14 model described by Gordon E. Miracle. However, rather than restricting the analysis to only five groups and a subjective high~mediumrlow range, a continuum of 0-100 will be proposed. By determining the number of points "earned" by a product, the marketing manager will be able to quantitatively position his product on the continuum. Seven of the nine product characteristics defined by Miracle (unit value; significance of each purchase; time and effort spent purchasing; rate of technological change; technical complexity; customer need for service; and extent of usage) will be considered as equally important and will each be assigned a scoring range of 0-12 points. Frequency of purchase and rapidity of consumption usually have a strong inter- relationship. As such, they will be considered as a combination and assigned a net scoring range of 0-16 points. (Note: it is dif- ficult to ascertain how much more important these two characteristics, in combination, are compared to the other seven factors. For purposes of this thesis it will be considered as one-third more important.) This then provides the 0-100 scoring scale. Because the product characteristics have been assigned an equal weighting (with the exception of frequency of purchase/rapidity of consumption) it does not necessarily follow that all of the char- acteristics are of equal weight. And, because one characteristic was assigned a one-third greater weight, it does not necessarily mean that it is always of greater importance. Instead, the "earned" scores are relative scores and can be weighted for each individual product. T For example, f tics may be of product charac 1'3e weighting . promotional mi. Height does he characteristic 15 For example, for a certain product some of the product characteris- tics may be of little or no importance. Meanwhile, some of the other product characteristics may be of considerably greater importance. The weighting of these factors can drastically alter the optimal promotional mix. (This weighting is possible as long as the total weight does not exceed eight--ie. one weighting point for each product characteristic.) The following example should demonstrate this: Earned Total Wgtd Estate. w_eia_ht images mam 192.1. Unit Value 8 1.0 8.0 2.0 16.0 Significance 6 1.0 6.0 .5 3.0 Time Spent 5 1.0 5.0 .5 2.5 Tech. Change 10 1.0 10.0 2.0 20.0 Complexity 8 1.0 8.0 2.0 16.0 Service 4 1.0 4.0 0.0 0.0 Freq. Pur./Rapidity 3 1.0 3.0 .8 2.4 Usage 4 1_.__0_ _4_9_ __._2 __§_ TOTAL 8.0 48.0 8.0 60.7 As this example indicates, the weighted total points far exceeds the unweighted. It is therefore the responsibility of the marketing exec- utive to determine which of the product characteristics are of greatest importance to his product and to assign weights accordingly. After the product has been analyzed a total score for the entire evalu- ation will be obtained. This total score then positions the product on the 0-100 continuum and allows the marketer to rank his product against other products. PART II PRODUCT CHARACTERISTICS [hit value is sis. In many actually the p' All? good is said t. 01' 0f the mural an expressed THUS, pri WhiCh eme Mending on t -.. . 1Mmatron an V. UNIT VALUE Unit value is the first element to be considered in the product analy- sis. In many instances it is the primary element since unit value is actually the price of a product. Any good that has the capacity to satisfy a human want is said to possess utility. The power of such utility or of the good possessing it to command other goods in normal and regular exchange is its value. Such value, expressed in monetary terms, is the price of the good. Thus, price is the money value of a COETOdity or service which emerges in a market transaction. Depending on the price of an item, a person will require more of less information and service at the point of sale. A candy bar, for in- stance, is inexpensive and when purchasing a candy bar one rarely questions a sales person as to advantages, disadvantages or operation. The consumer has sufficient prior knowledge from advertising, experi- ence or other sources so that he is willing to make the purchase without further information. And if the purchase decision is faulty the consumer has only invested 10¢ in the product. However, when the price of a good is greater and an outlay of more money is at stake the consumer will take more time to shop to make certain he is obtaining sufficient information to make the proper selection. For example, when purchasing a color television the potential buyer will discuss with the sales person advantages and dis- advantages of each model; will demand a demonstration; will consult his acquaintances; and will probably refer to a guide, such as Consumer Reports, for expert guidance. In other words, the prior knowledge 17 which the cus sake an innec The need for price goes hi men it is ac price of a pr 35 the means able how unit However, Pric advertising a there is a ce 18 which the customer possesses is normally not sufficient for him to make an.immediate decision. The need for personal contact at the point of sale increases as the price goes higher-say in the case of an automobile or a house. Thus, when it is accepted that there is a direct relationship between the price of a product and the amount of information required (as well as the means by which such information is obtained) it is understand- able how unit value can affect the optimal promotional mix. However, price is not the only factor which will affect the level of advertising and personal selling. Within each competitive market there is a certain price range which the majority of consumers are willing to pay. "Since consumers are often unaware of the exact prices for many products it may be that in many instances there is a range of acceptable prices. So long as the price of a product falls within the acceptable zone, price may not be a criterion."22 Thus, the positioning of the product on the price continuum scale within each industry is the second consideration. Those products which are above or below an industry "range of acceptable prices" would most likely have a different promotional mix than the average product in the industry. This situation can be exemplified by the automotive market. In this industry there is a certain price which the average consumer is willing to pay for transportation. This is what accounts for the massive sales figures for "The Big Three"-Chevrolet, Ford and Plymouth--and the steadily increasing interest in economy cars. Other automobile .. .. .Lfl aodels which c conditioning , fewer people .3 ‘u'nen the price industry, the: of the produc: range Vill prq “fling than u an "acceptablg 19 models which offer more conveniences such as power windows, air conditioning, bigger engine, etc. cost the consumer more money and fewer people are willing to pay for these added comforts. When the price of an item exceeds what is considered normal for the industry, there is less of a potential market. Hence, the seller of the product which sells for more than the "acceptable " price range will probably need a promotional mix with slightly more personal selling than would a product which sells at or below what is considered an "acceptable" price range. SCORING Two independent variables affect the concept of unit value. They are (1) price and (2) relationship of price to competing products. In order to ascertain a total score for unit value it is necessary to assign scores to the variables which affect unit value. When these scores are combined an overall score for unit value can be determined. (1) Price The price that a consumer must pay for an item is the major factor in this consideration. As indicated, the more a product costs a consumer the greater the risk of buying and the more personal selling will be required at the point of purchase. In order to give price a total consideration a seven point scale will be used. This will provide a wide scope which can include a large range of prices. But rather than stating the price in dollars and cents it shall be expressed as a per cent of the median per capita national inco: (i.e., applic in income lev: The following Po? 0 Li" 20 national income. In this way the proposed model will be universal (i.e., applicable in any nation) and will be operable despite changes in income levels, severe inflation or depression. The following scoring scale will be used: Points Percent of Median Per Capita Income 0 Below .10% l .10% - .49% 2 .50% - .99% 3 1.00% - 1.99% 4 2.00% - 9.99% 5 10.00% - 24.99% 6 25.00% and over (2) Relationship of Price to Competing Products If a product costs more than the normal perceived price, a mass mark- eting campaign is usually not plausible. As the cost becomes more un- aligned with the normal price the more unplausible a mass campaign (i.e., advertising) becomes. The following scoring scale will reflect this aspect of the analysis: Points 1 50% or more PEAEELthe "accepted" price 2 49.9% below to 49.9% above "accepted price 3 50% or more apgyg_the "accepted" price When these two factors are considered in combination, the total scope 0f Unit value can be considered. For example, assume that the median per capita int he considered This is 62 of the scoring sc- isszme further vatch is $100. is three times to this portio Elli these W0 | consideration. of Points aCCu by IElationShj is fOIIOVS.‘ 21 per capita income in the United States is $5,000. The product to be considered is a man's wrist watch which costs $300 to the consumer. This is 6% of the per capita income. This converts to 4 points on the scoring scale (2.00% - 9.99% = 4 points). Assume further that the generally accepted price of a man's wrist watch is $100. The watch under consideration in this product analysis is three times the normal price. Therefore, 3 points are assigned to this portion of the unit value scoring. But these two factors must be combined in order to provide an overall consideration. This can be accomplished by relating the total number of points accumulated by multiplying price points (in this case, 4) by relationship points (in this case, 3) and converting the points as follows: L?“ 11113, in the e late a toral 0 the to tal "Uni 22 Raw Score Points Assigned 0 0 1 1 2 2 3 3 4 4 5 5 6 6 8 7 9 8 10 9 12 10 15 ll 18 12 Thus, in the example used above, the man's wrist watch would accumu- late a total of 12 points (4 x 3 = 12). Converting this raw score on the above chart means that the man's watch is assigned 10 points for the total "Unit Value" analysis. \‘I. Sli w E‘ehster's det l. "I“ nce blgnlilca ' l Purchase .' L'JPOItance of the datemina iaportant a ‘ and, Convers ad'sercising refers to d: diffeteflt p C“Skelly Will influ. Starch for class, the Two iaq to aging a i C VI. SIGNIFICANCE OF EACH INDIVIDUAL PURCHASE Webster's defines significant as "important, momentous." Therefore, "significance of purchase" can also be considered as "importance of purchase." Importance of each individual purchase is a contributing factor in the determination of the promotional mix. In most cases the more important a purchase is, the more important personal selling becomes and, conversely, the less important a purchase the more important advertising is to the promotional mix. "Importance of purchase refers to differential degrees of ego-involvement in or commitment to different product classes. It is therefore an entity which must be carefully examined in inter-product studies. Importance of purchase will influence the size of the evoked set and the magnitude of the search for information. For example, the more important the product class, the larger is the evoked set."23 Two factors are pertinent in analyzing significance of purchase-- (1) the importance of the need and (2) the perceived risk of purch- asing a particular product. A separate discussion of each of these factors shows their relevance. 23 (l) Imp Seeds can be categories de Taese categor bra esteem These b. in a he Prepote 0f itse ities o nized, V61]. 56 in turr the ce: needs At the loge hpor taflQ e 24 (1) Importance of the Need Needs can be stratified, according to A.H. Maslow, into five basic categories depending on the importance of the need to the consumer. These categories are, in order of importance: physiological, safety, love, esteem and self-actualization. These basic goals are related to each other, being arranged in a heirarchy of prepotency. This means that the most prepotent goal will monopolize consciousness and will tend of itself to organize the recruitment of the various capac- ities of the organism. The less prepotent needs are mini- mized, even forgotten or denied. But when a need is fairly well satisfied, the next prepotent ("higher") need emerges, in turn to dominate the conscious life and to serve as the center of organization of behavior, since gratified needs are not active motivators. At the lowest level on the heirarchy of prepotency, but of utmost importance when they are thwarted, are man's physiological needs. These needs, basically, are the needs required to sustain life. Such items as food, rest, exercise and shelter can be included at this level. "Undoubtedly these physiological needs are the most pre-potent of all needs. What this means specifically is, that in the human being who is missing everything in life in an extreme fashion, it is most likely that the major motivation would be the physiological needs rather than any others. A person who is lacking food, safety, love, and esteem would most probably hunger for food more strongly than for 25 anything else." When the physiological needs of an individual are reasonably gratified other (and "higher") needs dominate. This higher level in the hier- archy of prepotency is the need for safety; ie. protection against danger. "Other broader aspects of the attempt to seek safety and stability in : familiar ratht the unknown." individuals . If both ' well grail and belo: scribed o person s; friends, hlinger f. namely, great if. me fourth 1E All People 1 25 stability in the world are seen in the very common preference for familiar rather than unfamiliar things, or for the known rather than "26 the unknown. Thus, safety needs can be strong motivators to individuals. If both the physiological and the safety needs are fairly well gratified, then there will emerge the love and affection and belongingness needs, and the whole cycle already de- scribed will repeat itself with this new center. NOW'the person will feel keenly, as never before, the absence of friends, or a sweetheart, or a wife, or children. He will hunger for affectionate relations with people in general, namely, for a place in his group, and he will strive with great intensity to achieve this goal.27 The fourth level on the hierarchy of needs is the esteem needs. "All people in our society (with a few pathological exceptions) have a need or desire for a stable, firmly based, (usually) high evaluation of themselves, for self-respect, or self-esteem, and for the esteem "28 of others. Esteem needs, according to Maslow, include the desire for reputation, prestige, recognition, attention and importance. Finally, at the pinnacle of the hierarchy of needs, and the need which is least often satiated, is the need for self actualization. This refers to "the desire for self-fulfillment, namely, to the tendency for one to become actualized in what he is potentially. This tendency might be phrased as the desire to become more and more what one is, to become everything that one is capable of becoming."29 There seems to be a relationship between the level of need on the hierarchy (as proposed by Maslow) and the type of promotion which should be accorded the greatest amount of emphasis by the marketer. As one ascends the hierarchy chain moving from physiological needs to 26 self-actualization needs the need for advertising seems to decrease while the need for personal selling seems to increase. The reason for this occurance is probably due to the consumer being almost constantly aware of the gratification of physiological and safety needs and, therefore, possessing sufficient prior knowledge to make a purchase decision with little shopping. Conversely, at the higher extremes of needs (esteem and self-actualization) one is not often exposed to the gratification of these needs and therefore lacks adequate prior know- ledge. The consumer is more likely to spend additional time and effort to secure this knowledge before making his purchase decision. This view is supported by Albert Wesley Frey: In general the opportunity for profitable primary advertising appears stronger when the wants to be satisfied by the pro- duct are not trivial. A product that deals with a basic or strong consumer need may lend itself better to primary advertising than does a product designed to satisfy a trivial or a secondary need. While one may dispute the wording of Frey's proposal or the need for judgement (re. the word "trivia1") his basic premise does seem sound and is applicable in this situation. (2) Perceived Risk The second factor influencing the significance of a purchase is the perceived risk of purchasing a product. Consumer behavior involves risk in the sense that any action of a consumer will produce consequences which he cannot anticipate with anything approximating certainty, a3? some of which at least are likely to be unpleasant. Risk is a factor to be considered in the significance of each purchase because it adds "he perceptior possible consel can be thought Eros simple me not live up t: element could mates will I: order to . seeks inform Each 9. ariahay ceived the de People Ratio: wiLl . and r is the Iii DE placed 27 because it adds a dimension not covered by Maslow's hierarchy of needs. "The perception of risk in a purchase situation is a function of the possible consequences and the uncertainty involved. Consequences can be thought of as the costs if a given event occurs, and may range from simple monetary loss and disappointment if a new food item does not live up to expectations, to food poisoning. The uncertainty element could be phrased in terms of probabilities that given conse- quences will occur,"32 In order to reduce the risk of a purchase decision, the consumer seeks information. Each purchase decision path will strike him [the consumer] as having some risk attached. The amount of risk per- ceived by a consumer depends on the amount a5 stake and the degree of subjective certainty that he will do well. People try to reduce the perceived risk by seeking infor- mation. The final selection of a path by the consumer will reflect his balancing of expected rewards, costs, and risks.33 As the risk involved in a purchase is greater, the more emphasis will be placed on personal selling. As the perceived risk declines, advertising will become more and more important to the promotional mix. In toto, the more important or more momentous a purchasing decision is, the more important personal selling becomes to the promotional mix. At the far extreme of "insignificance" is an established food item which adequate information is known; e.g., Heinz Ketchup. At the opposite extreme, a product whose purchase is "very significant" to the consumer would be a newly introduced automobile which requires a large investment and may meet with family or peer group disdain. In order to a: two variables analyses are ‘. (l) Imp. As previously ant advertisi; necessary fee: HSually fequir 3“ the other h 0f needs (a ne 5“ would Gena It should be n individuals. 28 SCORING In order to ascertain a total score for significance of purchase, the two variables discussed above must be scored separately. When these analyses are combined a net overall score can be determined. (1) Importance of the Need .As previously mentioned, the more important the need the more import- ant advertising becomes to the promotional mix. At one extreme necessary food items require no personal selling because the consumer usually requires no additional information at the point of purchase. 0n the other hand, a product which is higher on Maslow's hierarchy of needs (a new stereo unit) would not require as much advertising but would demand more personal selling. It should be noted that not every product means the same to all individuals. For example consider seat belts for automobiles. For one group of consumers this product may be perceived as a safety need as it represents protection against danger and reduces the pos- sibility of death. But a second group might consider seat belts a love need. This would be the case if the seat belts were installed to gain acceptance or love from one's family and/or peer group. To a third group seat belts might represent a self-actualization need if it helps a man better realize his role as a father and a family protectorate. The level of need will therefore depend on how the manufacturer decides to position his particular product. The seat belt manufacturer can 29 position his product in the way in which he believes is most benefi- cial to his sales. Depending upon the positioning of the product, the promotional mix may vary widely. When the product has been positioned in the market place the manu- facturer can assign scoring points as follows: Points Type of Need 1 Physiological Need 2 Safety Need 3 Love & Belonging Need 4 Esteem Need 5 Self-Actualization Need (2) Perceived Risk "It might be hypothesized, for example, that the more important the purchase is and the less experienced the person is in making such purchases (higher perceived risk), the more likely is information seeking. This may take the form of using marketer-controlled informa- tion sources (advertising and personal selling) and/or using non- marketer-controlled information sources (fellow consumers, and such 'objective' sources as Consumer Reports)."34 However as the perceived risk becomes greater it seems reasonable that the emphasis of the promotional mix should be placed on personal selling. Perceived risk can be divided into two forms-~functional risk and psychosocial risk. HmHnL—amHm—nw-jmm (n HamD-fin and p5 Sloth]. Edda rd ’KJ (D In Dr; H {3 DEC 30 Functional risk is closely related to product performance, and psychosocial risk is closely related to whether the product will enhance one's sense of well-being or self- concept (Cox, 1967). Cunningham, for example, found headache remedies to be higher in perceived functional risk than fabric softeners or dry spaghetti (1967, p. 87). Robertson (1966) found that a new telephone product was low in perceived functional risk but fairly high in per- ceived psychosocial risk. There was little concern about the telephone not working (functional risk), but a good amount of expressed concern about what other people would think about the product (psychosocial risk). Some products, such as clothing, are by their very nature high in psych- osocial risk; other products, such as drugs, are high in functional risk. Automobiles are perhaps an appropriate example of a product often perceivgg as both high in functional and psychosocial risks. Since functional and psychosocial risks are not necessarily mutually exclusive, in the scoring of this segment both types of risk must be considered separately. Therefore, a range of 0-2 will be accorded to both types of risk. The following scoring chart will be employed: Functional Risk Perceived Risk Payphosocial Risk 0 No Risk 0 l Light-Moderate 1 2 Moderate-Heavy 2 In the case of an automobile, which is heavy in both functional risk and psychosocial risk, the total score would be 4 (2 + 2 = 4). A new clothing item would probably register pg functional risk (0 points) and a heavy psychosocial risk (2 points) for a composite score of 2 points (0 + 2 = 2). In order to consider significance of purchase as a total entity it is necessary to combine the scores accumulated in these two separate HI‘ in l 3 _. I.“ I.‘~“ h'. ~fl» Mn. N...» 31 analyses. This can be accomplished by multiplying the two scores together. For example, using the man's wrist watch introduced in the preceding section the following scoring analyses may be performed: (1) Esteem Need = 4 Points (2) Perceived Risk Functional Risk: Moderately Heavy 2 Points Psychosocial Risk: Light—Moderate 1 Point Total Perceived Risk = 3 Points Total Significance of Purchase to Consumer = 12 Points (4 x 3 = 12) At this stage the accumulated points must be translated into a score which can be factored into the overall analysis. The following conversion chart will be used: Raw Score Points Assigped 0 0 1 l 2 2 3 3 4 4 5 5 6,8 6 9 7 10 8 12 9 15 10 16 11 20 12 .ne 3 CJZTEI Te: ps the as 19 poi 32 The man's wrist watch which accumulated a raw score of 12 points, converts to 9 points on the above scale. Ten points were earned by this product in the "Unit Value" section. The new subtotal after analyzing two product characteristics is now 19 points. VII. TIME AND EFFORT SPENT PURCHASING BY CONSUMER The third product characteristic to be considered in this analysis is "time and energy spent purchasing by the consumer." This factor is an important consideration in the formulation of the promotional mix due to its high correlation with the amount of emphasis placed on ad- vertising and on personal selling. Products for which a person is willing to expend very little time and effort purchasing must rely heavily on advertising to presell the product to the consumer. On the other hand, those products which a consumer will take considerable time and effort purchasing, do not require as much preselling but do call for an increased effort in personal selling. Hence, consumer buying habits strongly affect the determination of the promotional mix. "Typically, consumers will buy at the nearest store unless advantages of product quality, product selection, price or service lead them to go further."36 Products which offer no distinct advantage in quality, price, etc. (e.g. light bulbs) will usually be purchased at the most convenient store with a minimum of shopping time being consumed. How- ever, those products which offer a variety of quality, price, service and selection (e.g. automobiles) usually demand a great amount of shopping on the part of the consumer. The consumer must, therefore determine a balance between the amount of time and energy they are willing to expend shopping and the probable increase in satisfaction they expect to receive from the goods in question.37 33 34 Some products (because of their very nature) require a greater amount of shopping than others. Automobiles, computers and a home require considerably more shopping time and effort than does a pack of ciga- rettes or a pair of shoe strings. This theory was originally conceived by Melvin T. Copeland in his classification of consumer goods according to shopping, convenience and specialty goods. A later refinement by Richard H. Holton provides the definition which will be used in this thesis: Convenience goods are those goods for which the probable gain from making price and quality comparisons among alternative sellers is thought to be small relative to the consumer's appraisal of the searching costs in terms of time, money and effort. Shopping goods, then, are those goods for which the probable gain from making price and quality comparisons among alternative sellers is thought to be larger relative to the consumer's ap- praisal of the searching costs in terms of time, money and effort.38 These definitions explain why consumers are willing to spend additional time and effort shopping for certain goods, but are not willing to for others. While Holton's evaluation of consumer goods is quite useful, it should be noted that he does not provide a definition for the category of specialty goods -- i.e. "those consumer goods on which a significant group of buyers are habitually willing to make a special purchasing effort."39 Holton's theory on specialty goods was as follows: 35 Therefore, it would seem that the specialty-good classification overlaps both the other groups and cannot be distinguished either from the shopping goods or from convenience goods.40 In other words, "a convenience good may or may not be a specialty good; and a shopping good may or may not be a specialty good."41 For the purposes of this thesis the Holton theory that "the convenience goods-shopping goods distinction is measured in one dimension, the specialty-goods characteristics in another,"42 will be accepted. SCORING The scoring in this section of the analysis will entail a two-fold process. First, determination of whether the product is a convenience good or a shopping good. Second, determination of whether or not the product is a specialty good. The analysis of whether a particular product is a convenience good or a shopping good is not a simple dichotomy. Instead, "the goods which might be bought can be crudely arrayed from convenience goods at one end of the spectrum to shopping goods at the other; a neat two-fold classification is not possible. The amount of comparison shopping increases steadily as one moves from shoe strings to neckties to suits to dining room furniture."43 In this thesis the scoring continuum will range from 1—5 with con- venience type products worth 1 point and shopping goods worth 5 points. Points will be assigned to the product according to the amount of gain (in lower price, increased quality, etc.) which can be made by shopping. 36 Points ‘§g_Gain to be Made from Shopping (Light Bulb) 1 Slight Gain to be Made from Shopping (Record Album) 2 Moderate Gain to be Made from Shopping (Man's Suit) 3 Fairly Heavy Gain to be Made from Shopping (Automobile 4 tires) Very Heavy Gain to be Made from Shopping (Automobile) 5 Step two in this analysis considers whether or not the product is a specialty good. The following excerpt from Holton's analysis should be useful in determining this: It would seem helpful not to define specialty goods from the viewpoint of the individual consumer, but rather to say that specialty goods are those (convenience or shop- ping) goods which, because of the nature of the distri- bution costs—-are sold only through a restricted number of outlets. Then, whether or not an item is a specialty item depends in part on whether the manufacturer wishes it to be a specialty item.44 This phase of the analysis will also be placed on a continuum depending upon the degree to which the number of outlets is restricted by the manufacturer. At one end of the continuum are those products (shopping or convenience) whose number of outlets is unrestricted. At the high extreme are those products (shopping or convenience) whose number of outlets is heavily restricted. This continuum will have a 1-4 scoring range. 37 Points Distribution §g£_Limited ‘ 1 Distribution Slightly Limited 2 Distribution Moderately Limited 3 Distribution Heavily Limited 4 To determine the gross score for "time and effort spent purchasing," the product analyst should multiply the "gain from shopping" by the "distribution limitation" point count. For example, if there is a "slight gain to be made by the customer by shopping" (2 points) and the distribution is "moderately limited" (3 points) the product would accumulate a gross total of 6 points (2 x 3 = 6). The gross points accumulated within the step must next be converted to points which can be added to the overall product analysis. The scoring system.selected for this section is as follows: 38 Raw Score Points Assigned 1 O 2 1 3 2 4 3 5 4 6 5 8 6 9 7 10 8 12 9 15 10 16 ll 20 12 The 6 points accumulated in the example above would therefore translate to 5 points in the overall analysis. Once more, using the example of the man's wrist watch, the analysis of this phase of the product evaluation would be as follows: The probable gain from shopping for a high priced wrist watch would probably be fairly heavy and, therefore, worth 4 points. Distribution of the product might be moderately limited and worth 3 points. This amounts to a gross score of 12 points (4 x 3 = 12). This 12 points translates to an overall point assignment of 9 points. Adding these 9 points to the already accumulated 19 points, yields a subtotal after three steps of 28 points. VIII. RATE OF TECHNOLOGICAL CHANGE "The effect of technological change is to render old products less attractive and less salable."45 As new and improved products become available in the marketplace net sales and share of market figures begin to be altered. Technological change can also have an effect upon the promotional mix of a product. The more often a product changes or is improved the more important personal selling becomes to the promotional mix. This is because the consumer does not usually have sufficient information on the new product and must, therefore, seek out information at the point of and time of purchase. Conversely, those products which rarely change and are fairly standardized for several years will allocate more emphasis to advertising and less to personal selling. Technological change is defined as follows: Technology is society's pool of knowledge regarding the industrial arts. It consists of knowledge used by industry regarding the principles of physical and social phenomena (such as the properties of fluids and the laws of motion), knowledge regarding the application of these principles to production (such as the application of genetic theory to the breeding of new plants), and knowledge regarding the day-to-day operations of production (such as the rules- of-thumb of the craftsman). Technological changg is the advance of technology, such advance often taking the form of new methods of producing existing products, new designs which enable the production of products with im- portant new characteristics, and neg techniques of organ— ization, marketing and management.4 39 40 In other words, technological change is an advance in knowledge and is 22£_the result of this knowledge. For an example consider transistors. When the concept of the transistor was initially con- ceived and the realization was made that these minute durable items could replace the bulky and fragile vacuum tubes in radios, tel- evisions and computers; this was a technological change. However, when the transistor was actually used in a radio in place of a vacuum tube, this was a change in technique. Hence, technological change is the change in knowledge and not the actual change itself. It is also important to distinguish between the diffusion of infor- mation and technological change. A new piece of knowledge is considered a technological change when it is first discovered. However, when the knowledge is passed from one person to another it is no longer considered a technological change.47 Also, a distinction between scientific advance and technological change should be made. The main difference between the two terms is that technological change quite often occurs as a result of inventions that did not require any scientific breakthrough for its creation. And even when technological change has been connected to a scientific breakthrough, they have not followed these breakthroughs in any simple and direct way; often taking several decades before making the change. However, without these earlier breakthroughs many of the technological changes of today would not have been possible.48 Finally, one last term worthy of definition is technolggical innovation. This is quite similar to change in technique in that it is the ap- plication to a particular product of a technological change. Stated 41 another way, "An invention, when applied for the first time is an innovation."49 Hence, a technological innovation is a technological change applied for the first time. Two factors have the greatest effect on technological change. They are supply and demand. Demand will be considered first. Demand is an important determinant of the rate of technological change because a technological change may be converted into a reduction in costs for a product or into an.improved performance by a product. "An expansion of demand for a good can be reflected in increased demand for advances which reduce the cost of existing products, for advances which permit higher performance or both."50 "A growing demand for a particular product or of a particular industry is usually reflected in an increase in output (usually sales). An expansion of industry output clearly provides stimulus to both cost reducing and 51 "The larger the overall market, the quality improving advances." greater the potential profit a firm can make from an improvement in efficiency which permits it both to cut costs and to shade prices, and the larger the absolute expansion in sales to be expected from any product improvement."52 A technological change can aid an industry, not only through reducing the cost of an existing product or by increasing the usefulness of the product, but also by being converted into a reduction in the cost of productions-ie. in the machinery or the process itself. The relative prices or costs of different factors used by an industry determine the savings it achieves by various kinds of new machines or materials. An increase in the 42 price of a factor increases the profitability of techno- logical advances which reduge the requirements for that factor relative to others.5 To summarize the effects which demand has on the rate of technological change it can be said that "efforts to advance technology will tend to be drawn toward reducing costs and increasing product performance in industries and classes of products where demand is rising and toward saving on factors whose relative cost is rising."54 The second factor affecting the rate of technological change is supply. Supply factors can either permit or restrict certain kinds of technological changes or advances. Supply seems like the obvious second factor affecting technological change for the demand for a particular good or service will never be achieved unless there is supply. But, in order to supply the demand, the industry must first have the capability. The capability to achieve technological advances in a particular field depends on three factors: first, the knowledge needed to invent in that field; second, the stock of materials and components with which these people can work; and third, the stock of knowledge that they can apply.55 Changes in these three variables tend to restrict or permit the kinds and quantities of technological changes and advances. However these three variables are not independent variables for they depend on three rather broad factors. These three factors are (1) in- dustry size and growth; (2) advances in science and education; and (3) the development of a scientific base under the technology of an 56 industry. In summary, industry size and growth, advances in science and education and the development of a scientific base all influence 43 the independent variables or the factors which affect the capability of any industry to make technological changes and advances. This ca- pability, in turn, then determines the quality and the rate of tech- nological change. What has been shown here is that "the output of technological advances is sensitive to the same economic factors that influence the output of more pedestrian products and services--ie. supply and demand."57 Although supply and demand are the two major factors affecting the rate of technological change, a third important factor should be considered. This factor is competition. "Technological change is a key element in the competitive struggle among firms. The extent and quality of a firm's research and development program can make it an industry 58 leader or head it for bankruptcy." Competition is not a separate entity but is, instead, a branch of both supply and demand. For the competitor, through new innovations and through effective promotion, can affect both the supply and demand for a product and, thereby, slice into or even eliminate another firm's share of the market. Technological change can be broken into four major categories depending on the time and cost (and probability) of commercial adoption.59 These four major categories are routine improvements, major advances, tech- nical breakthroughs and "blue sky" projects. 1. Routine improvements are the most common type of tech- nological innovation. These are rather minor engineering 44 changes in which the technical knowledge for design, implementation, and application are known and predict- able. No research or scientific advance is needed and the degree of improvement is only a small percent over current capability. 2. Major advances are substantial changes in which the direction and needs are within the scape of the industry, but have not previously been performed. Necessary technology is identifiable and achievable. Very little new scientific knowledge is required but some engineer- ing development will be needed. The resulting improve- ment of a product from a major advance will yield a rather large percentage improvement. 3. Technical breakthroughs involve radical change or improvement that requires new scientific knowledge and much basic research. The technological answers seem to be feasible, but are, for the most part, unconformed or unknown. Substantial improvement in the product is promised. 4. "Blue-sky" projects are technological proposals in which the means of accomplishment and the end result are largely unknown. Substantial new scientific knowledge and engineering knowledge are required. Much basic and applied research is also needed. Predictability is low as these projects will provide a multiple of im— provements 68d many of the present devices may be eliminated. This now adds an additional consideration to the process of determining the optimal promotional mix. Not only must the rate of technological change be examined but the type of technological change must also be considered. It seems reasonable that a minor routine improvement would affect the marketing and promotional mixes differently than a major breakthrough; just as a technological change every two months would most likely affect the mixes differently than a change occuring every five years. 45 SCORING "Also, when the rate of technological change is low, few varieties tend to be offered; manufacturers are able to develop a product that remains 61 It would suitable to consumers for an extended period of time." then follow that with very minor changes in an industry, fewer varieties would be offered and a manufacturer would be better able to develop a product that remains suitable to consumers for an extended period of time. Therefore, the ultimate in a low score in technological change would be a product that has very few changes and, when changes do occur, are of a very minor nature. Since all four types of changes can occur in any one given product (for example, an automobile has annual minor changes with an occasional major advance and/or technical breakthrough) all four aspects must be considered for each product. Hence, the rate of technological change must be analyzed for all four types of technological change--routine improvements; major advances; technical breakthroughs and "blue-sky" projects. The rate of technological change will be scored on a 0-3 scale with "never" representing the lowest point and "often" representing the high extreme. Rate of Technological Change Points Never 0 Seldom (less than once every ten years) 1 Occasionally (every 1-5 years) 2 Often (at least once a year) 3 46 By determining the rate of change for each type of technological change and adding the four-point factors together, a total score for this particular analysis may be obtained. For example, consider a computer. Type of Tech. Changg Rate of Tech. Change Points Routine Improvements Often 3 Major Advances Often 3 Technical Breakthroughs Occasionally 2 Blue-Sky Projects Occasionally __2_ Total Points 10 The total raw score for technological change (in the above example, 10 points) will be incorporated into the complete evaluation of product characteristics by the following scoring chart: 47 Raw Score Points Assigned O O l l 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 ll 11 12 12 This chart indicates that the 10 points accumulated in the analysis of technological change translates to 10 points in the overall analysis. Continuing the example of the man's wrist watch (which has been carried through the first three factors), the following scoring will probably occur: Type of Tech. Changg Rate of Tech. Change Points Routine Improvements Occasionally 2 Major Advances Seldom 1 Technical Breakthroughs Seldom l "Blue-Sky" Projects Never 0 Total Points 4 48 The total "technological change" score of 4 translates to 4 points in the overall product analysis. This 4 points, when added to the already accumulated subtotal of 28 points yields a new total, after four product characteristics, of 32 points. IX. TECHNICAL COMPLEXITY Technical complexity is the fifth factor which this product analysis will consider. It seems that a product which is technically complex (e.g., an automobile) would require a promotional mix quite different than a product which is not complex (e.g., a yo-yo). The main reason for this difference in promotional mixes is due to the inherent limitations of advertising. Limited time, limited space, one- way communication and often low attentiveness usually make mass adver- tising of technically complex products impractical. However, "personal selling is typically more effective than advertising in producing 'conviction,‘ especially if the product is costly and/or technically complex."62 Face-to—face confrontation, two-way communication and virtually unlimited time permits the salesman to go into great depth concerning the product and allows him to "discuss the specific problems they [the clients] face, and show how the product or service is adaptable to each particular situation."63 In other words, "The ad cannot go into much detail; the salesman can."64 Thus a highly complex product is most receptive to personal selling. Various characteristics possessed by a product determine whether or not the good can be categorized as technically complex. After exhausting all available sources, it must be concluded that there is no research which will describe these factors. It is therefore necessary in this thesis to formulate criteria for judging the factors which determine 49 50 whether or not a product can be considered as technically complex. For the purposes of this thesis, the following two characteristics will be considered as the variables affecting technical complexity: 1. number of interrelated parts. 2. stage in product life cycle. (1) Interrelated Parts webster's defines complex as: "consisting of two or more related parts."65 Extending this, it can be concluded that the greater the number of in- terrelated (or component) parts possessed, the more technically complex a product must be. For example: an automobile has numerous interre- lated parts-—a steering system, a cooling system, a transmission linkage, etc. A wooden lead pencil, on the other hand, has no interrelated parts. Hence, because the automobile requires the proper interaction of all of its related parts in order to produce a successful product, the automobile is more complex than the pencil. (2) Stage in Product Life Cycle The reason why this factor is included in the analysis, is that as a product progresses in the product life cycle (ie. has been on the market longer) it becomes better understood by the masses. And, while a pro- duct's characteristics do not necessarily change, people's understanding of the product does, thus making the product seem less complex to the consumer o This concept can be exemplified by quadrasonic sound in record players. Quadrasonic sound is an advancement over stereophonic sound in that it 51 breaks the music into four parts rather than the two in stereo. When quadrasonic was first introduced it was unknown and therefore a high level of personal selling was necessary. However, as the product moved out of the introduction phase and into the growth stage, word-of-mouth, magazine reports, etc. allowed people to begin to understand the product and how it operates. Hence, the quadrasonic product itself did not change technically, but the understanding of the public did change. was The above analysis shows that two factors--interrelated parts and stage in the product life cycle--determine the technical complexity of a pro- duct. In order to establish an overall score for technical complexity, a scoring scale must be devised for each of the two determining factors. (1) Interrelated Parts Number of interrelated parts which a product contains is the primary consideration in this analysis. Since this can range from none (in a product like a shoe string) to very many (in a product like a computer), a 1-2 scoring scale is therefore not satisfactory. Instead, a scoring range must be employed which can take into account these differences. In this thesis, a 1-4 scoring range will be used. Those products with no or very few related parts will be placed at the low end of the scoring scale. Those products with many related parts will appear at the high end. 52 Points 1 No Interrelated Parts (Shoe String) 2 Very Few Interrelated Parts (2—3) (Safety Razor) 3 Several Interrelated Parts (4-5) (Watch) 4 Many Interrelated Parts (over 5) (Automobile) (2) Stage in Product Life Cycle The second factor to be considered in this scoring is the stage in the product life cycle. Basically the product life cycle can be divided into five stages--introduction, growth, maturity, saturation and decline. Kotler defines these stages as follows: Introduction. The product is put on the market; awareness and acceptance are minimal. Growth. The product begins to make rapid sales gains be- cause of the cumulative effects of introductory promotion, distribution, and word-of-mouth influence. Maturity. Sales growth continues but at a declining rate because of the diminishing number of potential customers who remain unaware of the product or who have taken no action. Saturation. Sales reach and remain on a plateau marked by the level of replacement demand. Decline. Sales begin to diminish absolutely as the pro- duct is gradually edged out by better products or sub- stitutes.66 Scoring for this factor will be in inverted order; that is, the decline stage being assigned a low point value (high advertising) and introduction being assigned a high point value (low advertising). The following scoring scale will be used: 53 Points 1 Decline 2 Saturation 3 Maturity 4 Growth 5 Introduction To calculate the overall score for "technical complexity" the score obtained for each factor should be multiplied together. For example, a product with a few interrelated parts (2 points) and is in the growth stage (4 points), would tally a total of 8 points for technical complexity. This gross score must be converted into an overall score for the entire product analysis. As in the other product characteristics, this will be based on the following 0—12 scale: 54 Raw Score Points Assigned l O 2 l 3 2 4 3 5 4 6 5 8 6 9 7 10 8 12 9 15 10 16 ll 20 12 In the example above, the 8 points accumulated by the hypothetical pro— duct would convert to 6 points in the overall evaluation. Considering the man's wrist watch again (which has been used throughout), the following scoring process would probably be used: Interrelated Parts (Several) 3 points Stage in Life Cycle (Maturity) 3 points The gross score for the man's wrist watch is, therefore, 9 points (3 x 3 - 9). This will convert to 7 points in the overall analysis. Thus, adding these 7 points to the subtotal of 32 accumulated to this point yields a new subtotal of 39 points. X. CUSTOMER'S NEED FOR SERVICE Factor number six in the product evaluation process is the "customer's need for service." This is an important aspect for most manufacturers because "customer service is one of the keys to survival and profit."67 "Materials, workmanship, manufacturing techniques, and design are unim- portant if the user of a product fails to obtain satisfaction from its possession. Service helps to keep merchandise 'sold'. It [service] builds goOdwill and helps to promote repeat sales. . . . Some products have no utility for the buyer without accompanying service. Without the service there would be nosale."68 Since customer service is such an important concept a concise definition of the term should be established. In this evaluation service will be defined as follows: "Service on the part of the manufacturer refers solely to those activities that are carried on in an attempt to see that the product gives satisfactory performance to its users."69 Thus, any activity which makes the product more exactly what the customer wants can be categorized as a service. This point can be exemplified by a pane of window glass. In this instance three services are required of the glass retailer before the product has any value to the customer. After taking the order he [the glass retailer] must first, cut the glass to the proper size; second, deliver the glass to the customer via a specially equipped truck; and third, properly install the glass in the window. These three services do not make the pane of glass, itself, 55 56 any better, but they do make certain that the product is yielding satisfactory performance for its users. Customer service can be an important ingredient in the determination of the optimal promotional mix. The more service required by a product the more individualized the product becomes. Therefore, a manufacturer of an individualized product (i.e., one that requires a great deal of service) can not enjoy the economies of scale nor is he likely desirous to reach a very broad audience. In other words, if a great deal of service is necessary it would probably be found that the manufacturer is investing the bulk of his promotional dollars in personal selling. Conversely, a product demanding very little manufacturer/retailer service would undoubtedly be geared to a much broader audience and would, therefore, concentrate heavily in advertising. Service can take four different forms in the channel of distribution. These four principal forms are: 1. Education: how to use and maintain it 2. Installation 3. Inspection 4. Repair or Replacement7O Some products require all four of these services while others require none or very few. In order to determine the best promotional mix, all four types of services should be analyzed with regard to each particular product. In most cases a product requiring all four types of services would call for a different promotional mix than a product which needs 57 only one or two service types. Service takes time. And, not all services require the same amount of time. Therefore, in the evaluation of a product and in determining the optimal promotional mix, the amount of time to service the product must also be considered. A product which can be serviced in a matter of minutes would most likely have different marketing and distribution policies than one which takes a great deal of time to service. SCORING This analysis of customer's need for service has indicated that there are basically two dependent variables which affect the positioning of service in the determination of the optimal promotional mix--types of service required and length of time to provide the service. Length of time to service a product varies according to technical com- plexity, stage in life cycle, etc. The amount of time required for servicing is an important factor and should, therefore, be assigned a score according to the amount of service required. For the purposes of this thesis, time will be broken into four categories ranging from "no service required" to "extensive service required." The rating scale will be as follows: Amount of Service Required Points None 0 Slight (less than 1 hour) 1 Moderate (1 hour — 1 day) 2 Extensive (More than 1 day) 3 58 As previously stated, services may appear in any or all of four forms—- education, installation, inspection, and repair or replacement. Each type of customer service may require different amounts of time depending on the product being examined. Therefore, in order to best evaluate the service aspect of a product, the extent of service required for all four types of services must be analyzed and scored. Each type of service should be weighed equally thus making the scores for each a simple addition process. For example let us consider the service aspect with regard to an electric can opener and a washing machine: Electric Can Opener Type of Service Extent of Service Points Education None 0 Installation None 0 Inspection None 0 Repair or Replacement Slight _l;_ Total 1 washinggMachine Type Of Service Extent of Service Points Education Slight 1 Installation Moderate 2 Inspection None 0 Repair or Replacement Moderate 2 Total 5 59 This total must now be incorporated into the entire analysis of the product. This can be done by relating the total number of points accumulated in this step to the following chart: Raw Score Points Assigned . O O 1 l 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 ll 11 12 12 In the above examples of the electric can Opener and the washing machine, 1 and 5 points, respectively, would be added to the analyses of these two products. Now consider the man's wrist watch which has been evaluated throughout this thesis. 6O Type of Service Extent of Service Points Education None 0 Installation None 0 Inspection Slight 1 Repair and Replacement Extensive _;1_ Total 4 Converting this on the above chart the 4 points raw score is worth 4 points in the overall analysis. This 4 points is then added to the subtotal of 39 already accumulated to give a new subtotal of 43 points. XI. FREQUENCY OF PURCHASE/RAPIDITY OF CONSUMPTION The more quickly a good is consumed the more frequently it will be repurchased. A pack of cigarettes, which is usually consumed in less than one day, would most likely be repurchased more frequently than a refrigerator which is not consumed for many years. Since there is such a close relationship between frequency of purchase and rapidity of consumption these two factors will be considered in combination rather than individually as proposed by Miracle.71 Both factors--frequency of purchase and rapidity of consumption-are af- fected by sundry things occurring in the consumer environment. However, rapidity of consumption is one of the criteria which affects the fre- quency of purchase. Therefore, before frequency of purchase can be analyzed, rapidity of consumption must first be considered. Rapidity of Consumption According to Aspinwall, rapidity of consumption is "the measured time of consumption during which the good gives up the utility desired."72 The rate at which the good gives up the utility desired is most likely a major determinant of the overall sales promotion strategy. A product which is consumed quickly would require a great deal of advertising because those in the audience are potential consumers much more often and should, therefore, have more exposure to promotion. 61 62 Conversely, a product which is consumed at a much slower rate would not require the high volume of advertising but would require information when ready to buy. These two extremes can be exemplified by the pack of cigarettes and the refrigerator cited earlier. Because a pack of cigarettes is consumed rapidly (often in less than one day) the cigarette manufacturer must keep a constant promotion since the consumer is a buyer nearly every day. Thus, the marketing mix includes much advertising and little or no personal selling to the consumer. A refrigerator, however, which is purchased perhaps every five or ten years, does not need constant promotion but most certainly requires a well-trained sales force when the consumer begins his search for a new refrigerator. Hence, the marketing mix includes relatively little advertising and much personal selling. There seems to be two factors which affect the rate of consumption of any product--(l) the durability of a product and (2) the extent of consumption. (1) Durability "Durable goods are durable in the sense that they are not 'used up' in a single act of consumption. An automobile, for example, '1asts' a reasonably long time. Nondurable goods, on the other hand, are used up relatively quickly."73 Thus, those products which are consumed relatively quickly (nondurable products) "are likely to be made avail- able in many locations, command a small margin, and develop strong brand loyalty. Durable products, on the other hand, are likely to be shop- ping or specialty goods, need more personal selling, command a higher Inargin, and require more seller guarantees."74 63 (2) Extent of Consumption Regardless of the durability built into a product it is not always employed for the full number of years for which it was designed. It is often sold or discarded before it has been fully consumed. For example, an automobile is rarely kept for the full term of its existence. Even though it is designed to last many years, the car is often dis- posed of in a few years. Hence, here is a highly durable product being consumed in a relatively short time. But the product is only consumed partly as in most cases it can be resold as a used car. Consumer behavior studies support this idea. Surveys revealed, as expected, that very few people reported at any time that their refrigerator was in bad condition. The majority said without qualification that their refriger- ator was in good condition, and most others that it was in fair or quite satisfactory condition. This was true both of those who in the following eighteen months replaced their refrigerator with a new one and of those who kept their old one. Among those who made a replacement purchase, close to one-half had owned a relatively new refrigerator (less than ten years old), of which the owner had said prior to the purchase period that it was in good condition.75 Similar findings were obtained for television sets, stoves and auto- ‘mobiles.76 The importance of this consideration is that when a product is not completely consumed, the consumer has the time and the flexibility to shop, compare prices and even postpone his final decision. Thus, a product which is fully consumed would require a greater emphasis on advertising in its promotional mix while a product which is only partly consumed would probably need more personal selling. 64 Frequengy of Purchase The rate at which a product is consumed is a major factor pertaining to the frequency of purchase. In most cases goods which are durable are purchased far less frequently than nondurable goods simply because they are consumed much more slowly. Therefore, it seems reasonable to assume that in many instances rate of consumption and frequency of purchase have a direct correlation (deodorant, gasoline, etc.). How- ever this is not always true. Consumers do not always repurchase a good once it has been used up. Candy bars, restaurant dinners, books, etc. are not usually repurchased immediately after they have been consumed. Instead, there is usually’ some span of time between consumption and repurchase. Thus, even though a product may be consumed rapidly it is not always purchased at as rapid a rate. Similarly, some products are repurchased before the existing product is fully consumed. Such may be the case when more than one of the product under consideration can be used during the same period of time. Most articles of apparel would fall into this classification. Therefore, in addition to rapidity of consumption, the second factor affecting frequency of purchase is "replacement rate." Aspinwall defines replacement rate as: "The rate at which a good is purchased and consumed by users in order to provide the satisfaction a consumer expects from the product. . . . It asks [for example] how often the consmmer buys shoes--once each month, once each six months, 65 _or once each year? It does not ask whether or not the shoes have been consumed, but only how often the market must be ready to make shoes available for consumers."77 This is an important consideration in the determination of a promotional mix for it determines the rapidity at which a product must be repurchased. Those products which have a high replacement rate (e.g., once every day) require a heavy emphasis on advertising since the consumer is in the market place so often. A product with a low replacement rate requires a high level of personal selling. SCORING Frequency of purchase is affected by two factors--rapidity of consump- tion and replacement. In order to ascertain an overall score for frequency of purchase, it is necessary to first determine scores for these two factors. Rapidity of Consumption One of the factors affecting rapidity of consumption is the durability of a product-~i.e., the length of time a good will last. This is not a clear yes-or—no concept. Instead there is a continuum of durability ranging from those products which are used up in one act of consumption to those products which will endure many uses and provide many years of service. The following definitions will provide the basis for this scoring system: 66 Durable Goods. Generally, any producers' or consumers' goods whose continuous serviceability is likely to exceed three years. (Such as machinery, trucks,7gassenger cars, homes, furni- ture, refrigerators, etc.). Nondurable Goods. Producers' and consumers' goods whose serviceability is generally limited to a period of less than three years. This category includes "perishable" and "semi- durable" goods. Semidurable Goods. Goods ordinarily employed in their ultimate use frag six months to three years (clothing, tires, shoes, etc.). For purposes of this thesis alterations in the above definitions will be made in order to create a more meaningful continuum. In this thesis durability will be scored on a 1—5 continuum with those products which are highly nondurable at the low end of the scale and those products which are highly durable at the high end of the scale. The rating scale will be as follows: Points Perishable--consumed within 2 weeks (fresh veg- etables, cigarettes) l Nondurable--consumed in 2 weeks to 6 months (light bulbs, deodorant) 2 Semidurable--consumed in 6 months to 1 year (auto insurance, fashionable clothing) 3 Durable--consumed in 1 year to 3 years (tires, shoes) 4 Egghly Durable-takes over 3 years to consume (furniture, refrigerators) 5 But the product is not always fully consumed. For various reasons a 67 product is repurchased before it has completely worn out. In order to factor this consideration into the total evaluation the following scoring scale will be employed: Points Fully Consumed l Partly Consumed 2 In order to determine the score for rapidity of consumption the analyst need only multiply the two figures which have been determined to this point. For example, in the case of a product which is semidurable (3 points) and is only partly consumed (2 points) the subtotal thus far is 6 points (3 x 2 = 6). The raw subtotal determined for "Rapidity of Consumption" will now be converted to value points as follows: Raw Score . Value Points 1 l 2 2 3 3 4 4 5 5 6 6 8 7 10 8 68 Frequency of Pugchase To calculate the total score for "Frequency of Purchase" the value points determined in the above analysis must be multiplied by the score assigned to replacement rate. Replacement rate in this thesis will be in relationship to the rapidity of consumption. Three scoring factors will be used. Points Criteria 1 Repurchased before old product is consumed 2 Repurchased ghgn old product is consumed 3 Repurchased irregularly gigs; old product is consumed By multiplying the rapidity of consumption value points achieved earlier by the points earned in the replacement rate section, the product analyst can determine the total points earned for frequency of purchase. For example, if the product example used above (with a value point total of 6 points) is the type of product which is repurchased E222 the old product is consumed, 2 points will be assigned. The total score for this product, therefore, will be 12 points (6 x 2 = 12). The raw scores which are achieved in this analysis must now be con- 'verted into a score to be incorporated in the overall consideration. frhis can be accomplished by converting the total number of points accumulated, to the following 0-16 continuum: 69 Raw Score Points Assigned l O 2 1 3 2 4 3 5 4 6 5 7 6 8 7 9 8 10 9 12 10 14 ll 15 12 16 13 18 14 21 15 24 16 The example cited above, which accumulated a total of 12 points, would convert to a net score of 10 points. Now consider the man's wrist watch which has been analyzed throughout this thesis. Its point accumulation would probably be as follows: 7O Highly Durable ‘ 5 points Fully Consumed 1 point Subtotal = 5 points Converts to 5 points (value points) Repurchased when old product is consumed = 2 points Total score = 10 points Converts to 9 points Thus, 9 points are added to the former subtotal of 43 to arrive at a new subtotal for the man's wrist watch of 52 points. XII. EXTENT OF USAGE The final factor to be considered in this product analysis is "extent of usage"--ie. the number and variety of consumers and the variety of 81 ways in which the product provides utility. Products which have many different and a variety of users (mass appeal) will usually incorporate a promotional mix heavily laden with mass communication-advertising--and very little personal contact. When masses of consumers must be reached cheaply, advertising is a very integral part of the promotional mix.82 At the other extreme, those products which have a very few users and appeal to a very select audi— ence, will usually have a promotional mix consisting of a large amount of personal selling and very little advertising. Three factors affect the extent of usage: (1) number of consumers; (2) variety of consumers and (3) variety of ways in which the product provides utility.83 All three of these factors are generally related to the market segmentation/product differentiation which a manufacturer desires. An individual study of each of these three factors should demonstrate this relationship. (1) Variety of Consumers In effect, the variety of users of a particular product is a direct result of the degree of market segmentation desired. "Market segmen- tation . . . involves breaking the total heterogeneous market for a 71 72 type of product into a nmmber of homogeneous segments. A separate product, or brand, is developed for each segment and is promoted to appeal specifically to the needs of that segment rather than the generalized needs of the entire market."84 In instances where the market is not segmented and the needs of all consumers are satiated by one product and the same promotion; advertising becomes more important than personal selling. This is due to the universality of the product which allows it to be promoted on a mass basis. Conversely, as the market becomes more and more segmented and new and different products are needed to satisfy the demands of the market place, personal selling becomes more important in the promo- tional mix. Once again, this is due to the fact that the products have become more individualized and the promotional campaign must reflect this individualization. (2) Number of Users Advertising will usually dominate the promotional mix when there is a large number of potential users to be reached. In fact, the larger the number of potential users the greater the value of advertising. This is due to the high costs involved for personal selling which. severely limits the use of personal contact promotion on a large scale. Advertising, however, offers cost economies due to the mass reach which it can provide. Thus, not only is variety of users important in the development of a promotional strategy, but the actual number of individuals in the target market is an.important consideration. The more total users the promo- tional mix must reach, the more advertising will be used. And, the 73 fewer total users to be reached, the more personal selling will be used. (3) Variety of Uses "In actuality, the diversity of individual wants and desires with respect to almost all consumer goods creates a basic need for differentation."85 The number of ways in which a product can provide utility is, therefore, directly related to product differentation. "Product differentation in the form of minor physical differences or advertising, for example, is frequently used in established markets to distinguish one product from another. In effect, this strategy consists of using one basic product and attempting to convince the customer in the market that the product meets their needs better than any of the other available products."86 The more ways in which a product can provide utility, the more important personal selling is to the promotional mix. For those products which have a single use (a candy bar) a mass general campaign can be used. However, for products with a variety of uses (a computer) a mass adver- tising campaign is usually not plausible. Instead, a more individual- ized campaign must be created by each of the uses. SCORING Scoring for "extent of usage" will be based on a three-factor analysis. The factors to be considered are: (l) variety of users; (2) number of users and (3) variety of uses. 74 (1) Variety of Users As was indicated in the above analysis, the variety of users is dependent upon the degree of segmentation desired by the manufacturer. If the product offered no segmentation whatsoever it would attract a great variety of users and could be promoted in a general and all encompassing manner--ie. advertising. If, however, the product is highly segmented appealing to a very select group of individuals, a more specific campaign must be constructed. Thus, a greater emphasis being placed on personal selling. Three different strategies are available. The firm may put out only one product and try to draw in all buyers with one marketing program. This can be called undifferentiated marketing. Or it may design separate products and/or marketing programs for each segment. This can be called differentiated marketing. Finally, it may concentrate all its efforts in one or a few lucrative segments of the market. This can be called concentrated marketing. In scoring for the variety of consumers, a 1-3 scale will be used depending on the segmentation strategy used by the manufacturers-- undifferentiated, differentiated or concentrated. Since undiffer- entiated segmentation would require the greatest advertising promo- tion, it should be placed at the low end of the scale. The following scoring scale will be used: Points Strategy 1 Undifferentiated 2 Differentiated 3 Concentrated 75 (2) Number of Users Regardless of which segmentation strategy is selected, the sheer number of individuals who are in the target universe is also an important consideration. If the entire universe of pe0p1e to be reached is 100 a considerably different promotional strategy will probably be used than if the universe is 10 million. It should be noted that simply because a manufacturer selects an undifferentiated segmentation program does not mean the universe is all people. For example, eye liner is, at best, a product designed for only one-half of the adult population. Similarly, Pampers (paper diapers) attempt to reach only mothers with small children. Hence, while the segmentation policy is undifferentiated, the actual number of people in the universe is considerably less than the total popu- lation. This factor will be combined in the scoring system by a scale of 1-4. Since the amount of advertising used is directly related to the number of individuals to be reached, the greater numbers will be assigned the lower scores. Points Percent of Population 1 50% - 100% of total population 2 25% - 49.9% of total population 3 10% - 24.9% of total population 4 Under 10% of total population 76 (3) Variety of Uses If a product can be used in only one way the manufacturer can concen- trate on selling that particular usage and thus increasing the value of advertising. Conversely, if a manufacturer must tailor a different product for each use of the product, an advertising campaign is usually not practical and personal selling will dominate the promotional mix. This aspect of the "extent of usage" will be integrated into the scoring scheme via a 1-3 scoring scale. Again, since the fewer number of ways in which a product can be used the more important is advertising, the lower usages will receive the lowest score. Points Number of Uses 1 One use (candy bar) 2 Two uses (watch--tell time/ aesthetic jewelry) 3 More than two uses (computer) At this point the scoring of the three factors must be combined to provide one overall score for this eighth product characteristic analysis. This will be accomplished by multiplying the score earned from "vari- ety of users" by "number of users" by "variety of uses." This pro— vides a net raw score. For example, a product that is undifferentiated (1 point); whose target audience is 20% of the total population (3 points); has three uses (3 points) would achieve a net raw score of 9 points (1 x 3 x 3 = 9). This raw score will now be converted to the regular scoring scale by 77 the following chart: Raw Score Points Assigned l 0 2 l 3 2 4 3 6 4 8 5 9 6 12 7 l6 8 l8 9 24 10 27 ll 36 12 In the example cited above, the raw score of 9 points would convert to 6 points in the overall scoring of the product. Once again returning to the example of the man's wrist watch which has been used throughout the thesis, the following scoring would probably be used: Variety of Users: Undifferentiated 1 point Number of Users: Men, $15,000+ Income = 20% 3 points Variety of Uses: Two (time/aesthetic jewelry) 2 points In the case of the man's wrist watch, a raw score of 6 points is earned. 78 This will translate to 4 points in the scoring scale conversion chart and total 56 points for the overall score of this product. PART III CONCLUSIONS XIII. TESTING THE HYPOTHESIS In order to test the validity of the technique set forth in this thesis two product analyses will be undertaken. The first will be a study based on the very high-highdmedium-lOvaery low continuum set forth in the Miracle typology. This will serve as the base or the "known" to which the second analysis will be compared. The second analysis will be a characteristic-by-characteristic con- sideration of the thesis proposals. For each product a total point count will be obtained. Based on this point tally the product will then be positioned on the promotional mix continuum and compared to the base results obtained in the analysis described above. To compare these analyses and to see if the thesis proposal is valid, the model presented by Lipson, Darling and Reynolds will serve as the conversion chart. Appendix A shows the technique used by Lipson, Darling and Reynolds which includes the recommendation for the entire marketing mix. Appendix B shows an enlargement of only the promotional mix section of the entire marketing mix. Analysis #1 based upon the Miracle technique will position the product into one of the five major categories which Miracle set forth in his "Product Characteristics and Marketing Strategy" report. This will serve as the "known" or base position of the product. In review, the five categories are as follows: 79 Product Group I II III IV 80 Sold almost entirely by advertising/ Personal selling of practically no importance Sold primarily by advertising] Personal selling of limited importance Advertising of average importance/ Personal selling of average importance Advertising of limited importance/ Sold primarily by personal selling Advertising of practically no importance/ Sold almost entirely by personal selling In order for the technique proposed in this thesis to be valid, the total points accumulated in the characteristic-by-characteristic analysis must place the product within the same product group as that obtained through the Miracle product analysis. Conversely, if the point tally does not fall within the Miracle "range of points" the hypothesis is invalid. Following is the author's analysis of the ten products to be con- sidered in this thesis based on the Miracle model. 81 PRODUCT CHARACTERISTICS 1 2 3 4 5 6 7 8 9 Group # Heinz Ketchup VL VL VL VL VL VL VH VH VH I Olds Cutlass H H H H VH H L L L IV Zenith Color TV ::< a: z :3 :z :z r* r* 3 III IBM Computer VH VH VH VH VH VH VL VL VL V Polaroid Camera L M L M L L L L L 111 Salem Cigarettes VL VL VL VL VL VL VH VH VH I Memorex Tapes VL L L L L L M M H II Timex Watch L L L L L L M M M II Goodrich Tires M M M M M M L L L 111 Hush Puppies L L L VL VL L M M M II Product Characteristics Scoring_Exp1anation 1. Unit value VL = Very Low 2. Significance of each individual purchase L = Low 3. Time and effort spent purchasing M = Medium 4. Rate of technological change H - High 5. Technical complexity VH = Very High 6. Consumer need for service 7. Frequency of purchase 8. Rapidity of consumption 9. Extent of usage 82 These groupings now establish the base for comparison. In Appendix C is a detailed characteristic-by—characteristic analysis of each of. the ten products based on the model set forth in this thesis. Using the conversion chart of Lipson, Darling and Reynolds (as shown in Appendix B), "earned" points can be converted to Product Groups. For example, (referring to Appendix B) the 2 points "earned" for Heinz Ketchup would place the product into Product Group I. Similarly, for the Oldsmobile Cutlass, finding 77 "Total Points Accumulated" on the x-axis, places the product in Product Group Category IV. Below is a summary of the "Total Points Accumulated" for the ten pro- ducts under consideration, and a comparison of product group positioning based on the Lehmkuhl model and on the Miracle model: Group Number Points Product Accumulated Lehmkuhl Model Miracle Model Heinz Ketchup 2 I I Oldsmobile Cutlass 77 IV IV Zenith Color TV 56 III III IBM 360 Computer 90 V V Polaroid Camera 43 III III Salem Cigarettes 1 I I Memorex Tapes 26 II II ‘Timex Wrist Watch 35 II II Goodrich Radial Tires 43 III III Hush Puppies Shoes 22 II II XIV. SUMMARY AND CONCLUSION The purpose of this thesis was to develop a quantitative technique which would be useful in predicting the nature of the promotional mix. In the preceeding chapters a technique of assigning points to each of nine product charateristics was presented which, when totaled, would determine the value of advertising and the value of personal selling to the promotional mix. To test the value of the proposed technique, ten products were analyzed for comparison by the Miracle typology and the method set forth in the thesis. In all ten of the cases studied the two techniques gave identical results . It can therefore be concluded that the hypothesis set forth in this thesis is valid: i.e., the scoring method proposed in the thesis £15523 predict accurately the relationship between all of the nine charac- teristics of the Miracle model and "promotional strategy." Thus, the method predicts accurately the promotional mix and therefore is a useful method . Because original research was not undertaken in this study, no further conclusions other than general groupings of categories along the pro- motional mix continuum can be drawn. And, although the total point accumulations may approximate the distribution of personal selling, it should not be considered as an actual estimate of this promotional mix. 83 84 However, this thesis has hopefully laid the groundwork for future original research in this area. With additional information, actual research findings and a more extensive scoring system, (the scoring scale in this thesis was often limited to a four or five point scale) actual promotional distribution breakouts may be obtainable. APPENDICIES APPENDIX A MARKETING MIX CONTINUUM Seiected Dimensions of the Product Component Branding. \ Branding \ Branding ,' Branding 1’ Branding OM M II"! and Packauint \ and Packaging 1 and Packaging ’1 and Packaging \ of Extreme or Maior i oi Moderate l oi- Limited I of Very tittIe / E, importance Importance t‘ Importance I Importance ,’ Immrtance 3% Practically ‘\\ Limited 1‘ ”09"“. " Seve rai I” Extensive 9. a 3:, . No Product \ Ampunt oi \' Number oi ' Product ’1 "DMD" 0' 9" g. g SONIC“ \\ PVOGUC‘ ‘ PrOdUCt I “nice. I PYOUUCt 5 g 9 3 ° 2 g ‘ \ Services “‘ Services 1' I, “MC“ 3 gé' :3 g E; \\ v. [I " [7 9g 35 . O E" 2 2:; One. or \\ Um?“ i Moderate Several I 033333 f. 32 2 "~ 3.75 = ”Wait? \ "I'm" °' "3&2? "We! / "8""? 3 3—5 I’J \ ~ q s‘ 8 _ Varieties \\ gag; Services Varieties II for Every 2, a. ’1’ \~\ £é£8\ \ ’ s." :5 O ’1’ -a an a i 5 ‘ ‘I 3 5 f x’] -'5 .- Q a s a 3 v 9.9 a k a 8 3 o :- r / a .. 533’ b E 190 ' - , / 5g: 3 3 £2 3 3: ‘\ H x” 39%: 35% '3 g t 32 2 . ‘ | / " 35 - a 5 ' 3 - 23:3 3 :8 so ./ 33 gig-’- -" ‘a' 8 153;; i 35:. 2 " o a ,. n -- _ "' C ’ ~~1 .- 2 :3 g .. . 60 I O O O r E _ .0 . E C . . < I O I '3' -e- w -. 3 3:55 .235 3:5 : 2-§~§ figs. 3512':- s - _- - a U'. C. fl 0 . é 335:: 5; £4 9 3?: 93?. 3&2 .. .. 3 .5 3- s: l .. 5-. 33., - o E t ",a 40 I L- a g "“1"—" g ' §~~~~~~ b“ 9. g / I rigs-E I 5 ~~~~J ""‘~ g ~ p‘ I - '9 'N c. a £35 3% g l 35:: a g 7““ .. .- . -- —e 2 .. - '33 a / 2° l s $8 " g - g 8 02 g —-:l a ’l A “ a»? 3 8 " a 3‘9 '- _E. I/ l ‘s n a 3 8 o 9 a Eggé ,4”. (:35 0 f ;‘\# fig: E ’I - ”a? ‘ t 3 a i \ a g 1’ 2" o 0.5 a 5-33 \ a x’ 3555 ,7 i " é‘ : xi aa ' 2 Moderate Some . i . Exclusive “ E 3 - / .5 , £5 / intensive / 'Y :MOW Selective ' $1.533“: , Franchising 2 3‘ \~“ 3 g I: 8 Distribu- , 0'3”” ’ Franchise Distribu- \\ or Direct 2 g - s‘ o 5" tion I 5 i 0‘ Distribution tion \ we to g...- - _ a 3 ‘...§ 5 "0" I \ Customers 0 Q 5' =§a §°"’ x i ‘ " 5 g: 8 3" Extremal ' M i ' ‘ Q ' .. 2: y I , oderata Y \ Eatremeiy Q 63-2 SE 3 ion. , ,’ - Von! tons i ' tone 0, fig'fif' Short \ 3,9 .. gas Distribution I Distribution ' Distributlon ‘ ' “ °" \ Distribution 53 3 0 Channels ’ CNN." ' CMMOIS C'W'M" ‘ \ Channels =3 3: . I’ ' 1' i ' 33 . V I . . . g . ‘ ,. . I , . . a . . / Warehousine and 1’ Warehousing and" r Warehousing and ‘t Vlarehousiu and Warehousing and invention of ,’ inventory " Inventory | Inventory of \ Inventory of Great Importance / Very Important , Moderate Importance ', Some Importance \\ Limited Importance 1 ' ’ t - \ Selected Dimensions oi the Distribution Component SOURCE: Harry A. Lipson and John R. Darling, Introduction to Marketing: An Administrative Approach (New York: John Wiley and Sons, Inc., 1971). 85 PRODUCT GROUP CATEGORY APPENDIX B APROMOTIONAL MIX CONTINUUM IV III II 10 20 30 4O 50 60 70 80 90 100 TOTAL POINTS ACCUMULATED 86 II. III. IV. VI. VII. VIII. IX. APPENDIX C TEN PRODUCT ANALYSES Heinz Ketchup Oldsmobile Cutlass Zenith Color Television IBM Computer Polaroid "Swinger" Salem Cigarettes Memorex Magnetic Tapes Timex Wrist Watch Goodrich Radial Tires Hush Puppies Men's Shoes PRODUCT I: HEINZ KETCHUP UNIT VALUE a. Price 49¢ b. Relationship Even Raw Score (a x b) = 0 Points Assigned: SIGNIFICANCE OF PURCHASE a. Importance Love & Belonging b. Risk -Functional None —Psychosocial None Total Risk Raw Score (a x b) = 0 Points Assigned: TIME AND EFFORT SPENT PURCHASING a. Potential Gain None b. Distribution Not Limited Raw Score (a x b) = 1 Points Assigned: RATE OF TECHNOLOGICAL CHANGE a. Routine Improvements Never b. Major Advances Never c. Technical Breakthroughs Never d. Blue-Sky Projects Never Raw Score (a + b + c + d) = 0 Points Assigned: 87 Scoring Points 0000 HEINZ KETCHUP (cont.) 5. TECHNICAL COMPLEXITY a. Interrelated parts b. Life Cycle Raw Score (a x b) = 2 NEED FOR SERVICE a. Education b. Installation c. Inspection d. Repair 88 Raw Score (a + b + c + d) = O FREQUENCY OF PURCHASE/ RAPIDITY OF CONSUMPTION a. Type Good b. Consumption Rapidity of Consumption (a x b) -Va1ue Points: c. Replacement Rate Raw Score (VP x c) = 2 EXTENT OF USAGE a. Variety of Users b. Number of Users c. Variety of Uses Raw Score (a x b x c) = 1 None Saturation Points Assigned: None None None None Points Assigned: Nondurable Fully 2 Before Points Assigned: Undifferentiated 50% - 100% One Points Assigned: Scoring Points 0000 i\Ji--I N raidia 89 HEINZ KETCHUP (cont.) 1. Unit Value 2. Significance of Purchase 3. Time and Effort Spent Purchasing 4. Rate of Technological Change 5. Technical Complexity 6. Need for Service 7. Frequency of Purchase/Rapidity of Consumption 8. Extent of Usage TOTAL POINTS Points 0 0 PRODUCT I I: OLDSMOBILE CUTLAS S Scoring Points 1. UNIT VALUE a. Price $4,000 6 b. Relationship Even 2 Raw Score (a x b) = 12 Points Assigned: 10 2. SIGNIFICANCE OF PURCHASE a. Importance Esteem Need 4 b. Risk -Functiona1 2 -Psychosocial 2 Total Risk 4 Raw Score (a x b) = 16 Points Assigned: ll 3. TIME AND EFFORT SPENT PURCHASING a. Potential Gain Very Heavy 5 b. Distribution Heavily Limited 4 Raw Score (a x b) = 20 Points Assigned: 12 4. RATE OF TECHNOLOGICAL CHANGE a. Routine Improvements Often 3 b. Major Advances Occasionally 2 c. Technical Breakthroughs Occasionally 2 d. Blue-Sky Projects Seldom 1 Raw Score (a + b + c + d) = 8 Points Assigned: 8 90 91 OLDSMOBILE CUTLASS (cont.) Scoring Points 5. TECHNICAL COMPLEXITY a. Interrelated Parts Many 4 b. Life Cycle Maturity 3 Raw Score (a x b) = 12 Points Assigned: 9 6. NEED FOR SERVICE a. Education Slight 1 b. Installation Slight 1 c. Inspection Moderate 2 d. Repair Extensive 3 Raw Score (a + b + c + d) = 7 Points Assigned: 7 7. FREQUENCY OF PURCHASE/ RAPIDITY 0F CONSUMPTION a. Type Good Highly Durable 5 b. Consumption Partly 2 Rapidity of Consumption (a x b) = 10 -Va1ue Points: 8 c. Replacement Rate When 2 Raw Score (VP x c) = 16 Points Assigned: 13 8. EXTENT OF USAGE a. Variety of Users Differentiated 2 b. Number of Users 10% - 25% 3 c. Variety of Uses Two Uses 2 Raw Score (a x b x c) = 12 Points Assigned: 7 92 OLDSMOBILE CUTLASS (cont.) 1. Unit Value 2. Significance of Purchase 3. Time and Effort Spent Purchasing 4. Rate of Technological Change 5. Technical Complexity 6. Need for Service 7. Frequency of Purchase/Rapidity of Consumption 8. Extent of Usage TOTAL POINTS Points 10 ll 12 PRODUCT III: ZENITH COLOR TELEVISION UNIT VALUE a. Price b. Relationship Raw Score (a x b) = 8 SIGNIFICANCE OF PURCHASE a. Importance b. Risk -Functional -Psychosocia1 Total Risk Raw Score (a x b) = 12 $400 Even Points Assigned: Esteem Need 2 1 Points Assigned: TIME AND EFFORT SPENT PURCHASING a. Potential Gain b. Distribution Raw Score (a x b) = 9 RATE OF TECHNOLOGICAL CHANGE a. Routine Improvements b. Major Advances c. Technical Breakthroughs d. Blue-Sky Projects Raw Score (a + b + c + d) = 5 93 Moderate Moderately Limited Points Assigged: Often Seldom Seldom Never Points Assigned: Scoring Points NP WU) CHI-‘00 I‘ll... ‘iI l‘J - ZENITH COLOR TELEVISION (cont.) 5. TECHNICAL COMPLEXITY a. b. Raw Score (a x b) = 16 Interrelated Parts Life Cycle NEED FOR SERVICE a. b. c. d. Education Installation Inspection Repair 94 Raw Score (a + b + c + d) = 7 FREQUENCY OF PURCHASE/ RAPIDITY OF CONSUMPTION a. b. Rapidity of Consumption (a x b) C. Raw Score (VP x c) = 8 Type Good Consumption -Va1ue Points: Replacement Rate EXTENT OF USAGE a. b. c. Raw Score (a x b x c) = 4 Variety of Users Number of Users Variety of Uses 8 Many Growth Points Assigned: Slight Moderate Slight Extensive Points Assigned: Highly Durable Partly 10 Before Points Assigned: Differentiated 25% - 50% One Points Assigned: Scoring Points 11 UJPJNJP‘ NU! i-‘NN 95 ZENTIH COLOR TELEVISION (cont.) 1. Unit Value 2. Significance of Purchase 3. Time and Effort Spent Purchasing 4. Rate of Technological Change 5. Technical Complexity 6. Need for Service 7. Frequency of Purchase/Rapidity of Consumption 8. Extent of Usage TOTAL POINTS Points PRODUCT IV: IBM COMPUTER UNIT VALUE a. Price $100,000+ b. Relationship Even Raw Score (a x b) = 12 Points Assigned: SIGNIFICANCE OF PURCHASE a. Importance Self-actualization b. Risk -Functiona1 2 -Psychosocial 1 Total Risk Raw Score (a x b) = 15 Points Assigned: TIME AND EFFORT SPENT PURCHASING a. Potential Gain Very Heavy b. Distribution Heavily Limited Raw Score (a x b) = 20 Points Assigned: RATE OF TECHNOLOGICAL CHANGE a. Routine Improvements Often b. Major Advances Often c. Technical Breakthroughs Occasionally d. Blue-Sky Projects Occasionally Raw Score (a + b + c + d) = 10 Points Assigned: 96 Scoring Points NO‘ 10 10 km 12 NNWW 10 4 it. 97 IBM COMPUTER (cont.) Scoring Points 5. TECHNICAL COMPLEXITY a. Interrelated Parts Many 4 b. Life Cycle Growth 4 Raw Score (a x b) = 16 Points Assigned: 11 6. NEED FOR SERVICE a. Education Extensive 3 b. Installation Extensive 3 c. Inspection Extensive 3 d. Repair Extensive 3 Raw Score (a + b + c + d) = 12 Points Assigned: 12 7. FREQUENCY OF PURCHASE/ RAPIDITY OF CONSUMPTION a. Type Good Highly Durable 5 b. Consumption Partly 2 Rapidity of Consumption (a x b) = 10 -Va1ue Points: 8 c. Replacement Rate When 2 Raw Score (VP x c) = 16 Points Assigned: 13 8. EXTENT OF USAGE a. Variety of Users Concentrated 3 b. Number of Users Under 10% 4 c. Variety of Uses Over two 3 Raw Score (a x b x c) = 36 Points Assigned: 12 98 IBM COMPUTER (cont.) Unit Value Significance of Purchase Time and Effort Spent Purchasing Rate of Technological Change Technical Complexity Need for Service Frequency of Purchase/Rapidity of Consumption Extent of Usage TOTAL POINTS Points 10 10 12 10 ll 12 13 12 90 PRODUCT V: POLAROID "SWINGER" UNIT VALUE a. Price b. Relationship Raw Score (a x b) = 1 SIGNIFICANCE OF PURCHASE a. Importance b. Risk -Functiona1 -Psychosocial Total Risk Raw Score (a x b) = 8 $25 Below Points Assigned: Esteem 1 1 Points Assigned: TIME AND EFFORT SPENT PURCHASING a. Potential Gain b. Distribution Raw Score (a x b) = 9 RATE OF TECHNOLOGICAL CHANGE Moderate Moderately Limited Points Assigned: a. Routine Improvements b. Major Advances c. Technical Breakthroughs d. Blue-Sky Projects Raw Score (a + b + c + d) = 4 Occasionally Seldom Seldom None Points Assigned: Scoring Points Oi—‘i—‘N POLAROID "SWINGER" (cont.) 5. TECHNICAL COMPLEXITY a. Interrelated Parts b. Life Cycle Raw Score (a x b) = 8 NEED FOR SERVICE 3. Education b. Installation c. Inspection d. Repair Raw Score (a + b + c + d) = 5 FREQUENCY OF PURCHASE/ RAPIDITY OF CONSUMPTION a. Type Good b. Consumption Rapidity of Consumption (a x b) -Va1ue Points: c. Replacement Rate Raw Score (VP x c) - l4 EXTENT OF USAGE a. Variety of Users b. Number of Users c. Variety of Uses Raw Score (a x b x c) = 4 100 Few Growth Points Assigned: Slight None Moderate Moderate Points Assigned: Durable Partly 8 When Points Assigned: Differentiated 25% - 50% One Points Assigned: Scoring Points bN NNOH Mb 11 l—‘NN 101 POLAROID "SWINGER" (cont.) 1. Unit Value 2. Significance of Purchase 3. Time and Effort Spent Purchasing 4. Rate of Technological Change 5. Technical Complexity 6. Need for Service 7. Frequency of Purchase/Rapidity of Consumption 8. Extent of Usage TOTAL POINTS Points PRODUCT VI: SALEM CIGARETTES UNIT VALUE a. Price b. Relationship Raw Score (a x b) = O SIGNIFICANCE OF PURCHASE a. Importance b. Risk -Functiona1 -Psychosocia1 Total Risk Raw Score (a x b) = 0 50¢ Even Points Assigned: Esteem 0 0 Points Assigned: TIME AND EFFORT SPENT PURCHASING a. Potential Gain b. Distribution Raw Score (a x b) = 1 RATE OF TECHNOLOGICAL CHANGE a. Routine Improvements b. Major Advances c. Technical Breakthroughs d. Blue-Sky Projects Raw Score (a +‘b + c + d) = 0 102 None Not Limited Points Assigned: Never Never Never Never Points Assigned: Scoring Points NO 0000 SALEM CIGARETTES (cont.) 5. TECHNICAL COMPLEXITY a. Interrelated Parts b. Life Cycle Raw Score (a x b) = 2 NEED FOR SERVICE a. Education b. Installation c. Inspection d. Repair Raw Score (a + b + c + d) = O FREQUENCY OF PURCHASE/ RAPIDITY OF CONSUMPTION a. Type Good b. Consumption Rapidity of Consumption (a x b) -Va1ue Points: c. Replacement Rate Raw Score (VP x c) = l EXTENT OF USAGE a. Variety of Users b. Number of Users c. Variety of Uses Raw Score (a x b x c) = l 103 None Saturation Points Assigned: None None None None Points Assigned: Perishable Fully 1 Before Points Assigned: Undifferentiated 50% - 100% One Points Assigned: Scoring Points NH 0000 i-H-ii—I 104 SALEM CIGARETTES (cont.) 1. Unit Value 2. Significance of Purchase 3. Time and Effort Spent Purchasing 4. Rate of Technological Change 5. Technical Complexity 6. Need for Service 7. Frequency of Purchase/Rapidity of Consumption 8. Extent of Usage TOTAL POINTS Points 0 PRODUCT VII: 1. MEMOREX MAGNETIC TAPES UNIT VALUE a. Price b. Relationship Raw Score (a x b) = 3 SIGNIFICANCE OF PURCHASE a. Importance b. Risk -Functiona1 -Psychosocia1 Total Risk Raw Score (a x b) = 5 $5 Above Points Assigned: Self-Actualization l 0 Points Assigned: TIME AND EFFORT SPENT PURCHASING a. Potential Gain b. Distribution Raw Score (a x b) = 2 RATE OF TECHNOLOGICAL CHANGE a. Routine Improvements b. Major Advances c. Technical Breakthroughs d. Blue-Sky Projects Raw Score (a + b + c + d) = 4 105 Slight Not Limited Points Assigned: Occasionally Seldom Seldom Never Points Assigned: Scoring Points i-‘N OHI—‘N 106 MEMOREX MAGNETIC TAPES (cont.) Scoring Points 5. TECHNICAL COMPLEXITY a. Interrelated Parts Few 2 b. Life Cycle Growth 4 Raw Score (a x b) = 8 Points Assigned: 6 6. NEED FOR SERVICE a. Education Slight 1 b. Installation None 0 c. Inspection None 0 d. Repair None 0 Raw Score (a + b + c + d) = 1 Points Assigned: l 7. FREQUENCY OF PURCHASE/ RAPIDITY OF CONSUMPTION a. Type Good Semidurable 3 b. Consumption Partly 2 Rapidity of Consumption (a x b) = 6 -Value Points: 6 c. Replacement Rate Before 1 Raw Score (VP x c) = 6 Points Assigned: 5 8. EXTENT OF USAGE a. Variety of Users Undifferentiated l b. Number of Users 25% - 50% 2 c. Variety of Uses One 1 Raw Score (a x b x c) = 2 Points Assigned: l 107 MEMOREX MAGNETIC TAPES (cont.) Points 1. Unit Value 3 2. Significance of Purchase 5 3. Time and Effort Spent Purchasing 1 P2 4. Rate of Technological Change 4 1 5. Technical Complexity 6 6. Need for Service 1 i f 7. Frequency of Purchase/Rapidity of Consumption 5 8. Extent of Usage 1 TOTAL POINTS 26 PRODUCT VIII: TIMEX WRIST WATCH UNIT VALUE a. Price b. Relationship Raw Score (a x b) = 1 SIGNIFICANCE OF PURCHASE a. Importance b. Risk —Functiona1 -Psychosocia1 Total Risk Raw Score (a x b) = 8 TIME AND EFFORT SPENT PURCHASING a. Potential Gain b. Distribution Raw Score (a x b) = 4 RATE OF TECHNOLOGICAL CHANGE a. Routine Improvements b. Major Advances c. Technical Breakthroughs d. Blue-Sky Projects Raw Score (a + b + c + d) = 2 108 $25 Below Points Assigned: Esteem 1 1 Points Assigned: Slight Slightly Points Assigned: Occasionally Never Never Never Points Assigned: Scoring Points N OOON 109 TIMEX WRIST WATCH (cont.) Scoring Points 5. TECHNICAL COMPLEXITY a. Interrelated Parts Several 3 b. Life Cycle Maturity 3 Raw Score (a x b) = 9 Points Assigned: 7 6. NEED FOR SERVICE a. Education None 0 b. Installation None 0 c. Inspection Slight 1 d. Repair Extensive 3 Raw Score (a + b + c + d) = 4 Points Assigned: 4 7. FREQUENCY OF PURCHASE] RAPIDITY OF CONSUMPTION a. Type Good Durable 4 b. Consumption Partly 2 Rapidity of Consumption (a x b) = 8 -Va1ue Points: 7 c. Replacement Rate When 2 Raw Score (VP x c) = 14 Points Assigned: 11 8. EXTENT OF USAGE a. Variety of Users Undifferentiated 1 b. Number of Users 50% - 100% 1 c. Variety of Uses Two 2 Raw Score (a x b x c) = 2 Points Assigned: 1 110 TIMEX WRIST WATCH (cont.) 1. Unit Value 2. Significance of Purchase 3. Time and Effort Spent Purchasing 4. Rate of Technological Change 5. Technical Complexity 6. Need for Service 7. Frequency of Purchase/Rapidity of Consumption 8. Extent of Usage TOTAL POINTS Points PRODUCT IX: GOODRICH RADIAL TIRES UNIT VALUE a. Price $50 b. Relationship Over Raw Score (a x b) - 6 Points Assigned: SIGNIFICANCE OF PURCHASE a. Importance Safety b. Risk -Functional 2 -Psychosocial 0 Total Risk Raw Score (a x b) = 4 Points Assigned: TIME AND EFFORT SPENT PURCHASING a. Potential Gain Fairly Heavy b. Distribution Heavily Limited Raw Score (a x b) = 16 Points Assigned: RATE OF TECHNOLOGICAL CHANGE a. Routine Improvements Occasionally b. Major Advances Occasionally c. Technical Breakthroughs Occasionally d. Blue-Sky Projects Seldom Raw Score (a + b + c + d) a 7 Points Assigned: 111 Scoring Points (BM 11 l-‘NNN T". 'a :a-J 112 GOODRICH RADIAL TIRES (cont.) 5. TECHNICAL COMPLEXITY a. Interrelated Parts b. Life Cycle Raw Score (a x b) = 4 NEED FOR SERVICE 3. Education b. Installation c. Inspection d. Repair Raw Score (a + b + c + d) = 4 FREQUENCY OF PURCHASE/ RAPIDITY OF CONSUMPTION a. Type Good b. Consumption Rapidity of Consumption (a x b) -Va1ue Points: 4 c. Replacement Rate Raw Score (VP x c) = 8 EXTENT OF USAGE a. Variety of Users b. Number of Users c. Variety of Uses Raw Score (a x b x c) = 2 None Growth Points Assigned: None Mbderate Slight Slight Points Assigned: Durable Fully = 4 When Points Assigned: Undifferentiated 25% - 50% One Points Assigned: Scoring Points l-‘I-‘NO rdtora 113 GOODRICH RADIAL TIRES (cont.) 1. Unit Value 2. Significance of Purchase 3. Time and Effort Spent Purchasing 4. Rate of Technological Change 5. Technical Complexity 6. Need for Service 7. Frequency of Purchase/Rapidity of Consumption 8. Extent of Usage TOTAL POINTS Points 6 4 11 43 PRODUCT X: HUSH PUPPIES MEN'S SHOES 1. UNIT VALUE a. Price $12 b. Relationship Below Raw Score (a x b) = 1 SIGNIFICANCE OF PURCHASE a. b. Importance Risk -Functional -Psychosocia1 Total Risk Raw Score (a x b) = 8 Points Assigned: Esteem 0 2 Points Assigned: TIME AND EFFORT SPENT PURCHASING a. b. Potential Gain Distribution Raw Score (a x b) = 6 RATE OF TECHNOLOGICAL CHANGE Slight Moderately Limited Points Assigned: a. b. c. d. Raw Score (a +‘b + c + d) = 1 Routine Improvements Major Advances Technical Breakthroughs Blue—Sky Projects Occasionally Never Never Never Points Assigned: 114 Scoring Points WM OOOH 115 HUSH PUPPIES MEN'S SHOES 5. TECHNICAL COMPLEXITY a. Interrelated Parts b. Life Cycle Raw Score (a x b) = 3 NEED FOR SERVICE a. Education b. Installation c. Inspection d. Repair Raw Score (a + b + c + d) - l FREQUENCY OF PURCHASE/ RAPIDITY OF CONSUMPTION a. Type Good b. Consumption Rapidity of Consumption (a x b) -Va1ue Points: 7 c. Replacement Rate Raw Score (VP x c) = 7 EXTENT OF USAGE a. Variety of Users b. Number of Users c. Variety of Uses Raw Score (a x b x c) = 1 None Maturity Points Assigned: None Slight None None Points Assigned: Durable Partly = 8 Before Points Assigned: Undifferentiated 50% - 100% One Points Assigned: Scoring Points OOHO Nb rardla 116 HUSH PUPPIES man's SHOES (991m) 1. Unit Value 2. Significance of Purchase 3. Time and Effort Spent Purchasing 4. Rate of Technological Change 5. Technical Complexity 6. Need for Service 7. Frequency of Purchase/Rapidity of Consumption 8. Extent of Usage TOTAL POINTS Points 1 6 FOOTNOTES FOOTNOTES 1Gordon E. Miracle, "Product Characteristics and Marketing Strategy," Journal of Marketing Vol. 29 (January 1965): 18-24. 2Harry A. Lipson, John R. Darling, and Fred R. Reynolds, "A Two-Phase Interaction Process for Marketing Model Construction," M.S.U. Business Topics (Autumn 1971): pp. 34—44. 3Albert wesley Frey, Marketing Handbook (New York: The Ronald Press Company, 1965), p. 25.53. 4Robert D. Buzzell, Mathematical Models and Marketinnganagement (Boston: Harvard University Press, 1964), p. 3. 5Ibid., p. 34. 61b1d., p. 205. 7Philip Kotler, Marketing Management: Analysis, Planning and Control (Englewood Hills, N.J.: Prentice-Hall, Inc., 1967), p. 293. 8Frederick D. Sturdivant et al., Managerial Analysis in'Mar- keting (Glenview, 111.: Scott, Foresman and Company, 1970), p. 341. 9Ibid., pp. 341-342. 10Melvin T. Copeland, "Relation of Consumer's Buying Habits to ‘Marketing Methods," Harvard Business Review'Vol. 1 (April 1923): 282-289. 11Frey, p. 1.21. 12Sturdivant etzal., p. 342. 13Leo V. Aspinwall, "The Characteristics of Goods Theory and The Parallel Systems Theory," in Managerial Marketing: Perspectives and Viewpoints, ed. Eugene J. Kelley and William Lazer (Homewood, I11.: Richard D. Irwin, Inc., 1958), pp. 434-450. 14Ibid., pp. 437-440. lsIbid. ’ p. 441. 16Miracle, pp. 18-24. 117 118 17Ibid., p. 20. 13Ib1d, 19Aspinwall, p. 438. 201b1d., p. 437. 21Theodore N. Beckman and William R. Davidson, Marketing (New York: The Ronald Press Company, 1962), p. 679. 22James F. Engel, David T. Kollat, and Roger D. Blackwell, Consumer Behavior (New York: Holt, Rinehart & Winston, Inc., 1968), p. 429. 23John A. Howard and Jagdish N. Sheth, "A Theory of Buyer Behavior," in Perspectives in Consumer Behavior, ed. Harold H. Kassarjian and Thomas S. Robertson (Glenview, 111.: Scott, Foresman and Company, 1968), p. 485. 24A. H. Maslow, "A Theory of Human Motivation: The Basic Needs," in Perspectives in Consumer Behavior, ed. Harold H. Kassarjian and Thomas S. Robertson (Glenview, 111.: Scott, Foresman and Company, 1968), p. 210. 251bid., p. 202. 26Ibid., p. 206. 27Ibid. 28Ibid., p. 207. 291bid., pp. 207-208. 30Frey, p. 14.6. 31Raymond A. Bauer, "Consumer Behavior as Risk Taking," in Marketing and the Behavioral Sciences: Selected Readings, ed. Perry Bliss (Boston: Allyn and Bacon, Inc., 1968), p. 146. 32Sturdivant et al., pp. 169—170. 33Kotler, p. 72. 34Sturdivant et al., p. 170. 35Ibid. 36Perry Bliss, "Supply Considerations and Shopping Convenience," Journal of Marketing_Vol. 25 (July 1960): 43. 37Aspinwall, p. 440. 119 38Richard H. Holton, "The Distinction Between Convenience Goods, Shopping Goods and Specialty Goods," Journal of Marketing Vol. 3 (July, 1958): 53-54. 39Definitions Committee, American Marketing Association, "Report of the Definitions Committee," Journal of Marketing Vol. 13 (October, 1948): 206. 40Holton, "Distinction Between Goods," p. 56. 41Richard H. Holton, "What is Really Meant by 'Specialty' Goods?", Journal of Marketing Vol. 24 (July 1959): 65. 42Ibid., p. 64. 43Holton, "Distinction Between Goods," p. 54. 44Holton, "Specialty Goods," p. 66. 45Frey, p. 5.2. 46Edwin Mansfield, The Economics of Technological Change (New York: W. W. Horton, 1968), p. 10. 47Ib1d. 481b1d. 49Ibid., p. 131. 50Richard R. Nelson, Merton J. Peck, and Edward D. Kalachek, Technology, Economic Growth and Public Policy (washington, D.C.: The Brookings Institution, 1967), p. 30. 51Jacob Schmookler, Invention and Economic Growth.(Cambridge, Mass: Harvard University Press, 1966), p. 92. 52Nelson, Peck and Kalachek, p. 30. 53Ibid., p. 31. 54Ibid., p. 33. 551bid., p. 32. 56Ibid., p. 30. 57Ibid., p. 28. 58Mansfield, p. 7. 59James R. Bright, Research Development and Technological Innovation (Homewood, 111.: Richard D. Irwin, 1964), p. 435. 120 6OIbid., pp. 435-436. 61Miracle, p. 21. 62Kotler, p. 453. 63Frey, p. 9.1. 64Kotler, p. 453. 65Webster's New WOrld Dictionary of the American Language, (New York: The world Publishing Co., 1964), p. 299. 66Kot1er, p. 291. 67Eugene J. Kelley, "Ethics and Science in Marketing," in Managgrial Marketing: Perspectives and Viewpoints, ed. Eugene J. Kelley and William Lazer (Homewood, 111.: Richard D. Irwin, 1967), p. 86. 68Frey, p. 7.1. 691b1d. 70Ibid., p. 7.2. 71'Miracle, pp. 18-24. 72Aspinwall, p. 440. 73Sturdivant et al., p. 341. 74Kot1er, p. 294. 75George Katona, The Powerful Consumer: Psycholggical Studies of the American Economy (New York: McGraw-Hill Book Co., 1960), p. 126. 761bid., p. 127. 77Aspinwall, pp. 437-438. 78The Conference Board, A Guide to Consumer Markets - 1970 (New York: The Conference Board, Inc., 1970), p. 212. 791bid., p. 213. 8OIbid., p. 215. 81Miracle, p. 20. 828. watson Dunn, Advertising: Its Role in Modern Marketing (New York: Holt, Rinehart and Winston, 1969), p. 46. 121 83Miracle, p. 20. 84Sturdivant et al., p. 55. 85Ibid., p. 54. 86Ibid., p. 55. 87Kot1er, p. 57. BIBLIOGRAPHY BIBLIOGRAPHY Aspinwall, Leo V. "The Characteristics of Goods Theory and Parallel Systems Theory." In Managerial Marketing: Perspectives and Viewpoints, pp. 434-450. Edited by William Lazer and Eugene J. Kelley. Homewood, 111.: Richard D. Irwin, Inc., 1958. 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