Product Planning and Development

CHAPTER 3

Product Planning and Development

Definitions

Product Anything offered to a market for attention,

acquisition, use, or consumption that might satisfy a need or want.

Service A form of product that consists of activities, benefits

or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

Goal 1: Understand products and their classifications

Product

Services

Levels of a product

Levels of Product Core Product

what the buyer really buying. For example a woman buying lipstick she buys more than lip color, or a person buying Nokia N97, is buying more than a wireless mobile phone, like email, internet, web browsing, pictures etc.

Actual Productthe product planner must turn the core benefits into actual product. That is design, quality level, a brand name, and packaging.

Augmented productwhen consumer buy the Nokia N97, the company and its dealer also might give buyers a warranty on parts and workmanship, instruction on how to use the device

What are the three levels of this product?

Classification of product

Consumer productProduct that are bought by the consumers for personal use. Consumer products include Convenience, Shopping, Specialty and Unsought Products.

Industrial ProductProduct bought by individuals and organizations for further processing or for use in conducting a business.

Consumer products

Industrial products

Types of Consumer Products

ConvenienceShoppingSpecialtyUnsought

Frequent purchases bought with minimal buying effort and little comparison shopping

Low price of product Producer made

widespread distribution of product.

Mass production and promotion by producer

For Example. Soap, candy, newspaper

and fast food.Goal 1: Understand products and their classifications

Types of consumer products

Convenience products



Consumer product that the consumer, in the process of selection and purchases, characteristically compares on such basis as suitability, quality, price and style.

Less frequent purchases More shopping effort for

comparisons. Higher than convenience good

pricing Selective distribution in fewer

outlets Advertising and personal selling For example. Furniture, clothing,

cars, major appliances, hotel and airline services.

Goal 1: Understand products and their classifications

Types of consumer products

Shopping products



Consumer product with unique characteristics or brand identification for which a significant group of buyers are willing to make a special purchasing effort.

High price Exclusive distribution Carefully targeted

promotions For example, specific brand

types of cars, like Lamborghini, designer clothes, and services of a medical or legal specialist.Goal 1: Understand products and their

classifications

Types of consumer products8 - 16

Specialty products


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Unsought Products are products you haven't actively been looking for.

These are products whose purchase is unplanned by the consumer but occur as a result of marketer’s actions. Such purchase decisions are made when the customer is exposed to promotional activity, such as a salesperson’s persuasion or purchase incentives like special discounts offered to certain online shoppers.

Consumer product that the consumer either does not know about or knows about but does not normally think of buying

Little product awareness and knowledge (or if aware, sometimes negative interest)

Aggressive advertising and personal selling by producers and resellers

For example. Blood donation, life insurance. gravestone.Goal 1: Understand products and their

classifications

Industrial product

Three groups of industrial product and services.

1. Material and parts2. Capital items3. Supplies and

services.

Industrial product

Material and parts Material and parts include raw material and manufactured material and parts used for reprocessing in industries.

For example material parts, fruit, vegetables, example of manufactured parts are, iron, cement, wires

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Industrial product

Capital parts

Supplies and services

Capital parts are industrial products that use in the production or operations, including installation and accessory equipment.

For example Generators, drills, large computer systems.

Supplies include operating supplies (lubricants, paper, pencil) and repair and maintenance items (paint)

Business services include maintenance and repair services (window cleaning, computer repair)

Product and Service Decisions

Individual Product

Product Line Product Mix

Product attributes (benefits) (Quality, features, style and

design) Branding( a brand is a name,

term, sign, or design or combination of these) that identifies the maker or seller of a product or services and differentiate them from those of competitors.

Packaging-the activities of designing and producing the container or wrapper for a product.

Labeling-label range from simple tags attached to products to complex graphics, label indentifies the product or brand. Label might also describe several things about the product, like who made it, where it was made, when it was made, its contents, and how it is to be used and how to use it safely.

Product support services- include warranty and after sale services and spares.

Key Decisions

Goal 2: Learn decisions companies make regarding products

Examples of Packaging8 - 22

Examples of Packaging8 - 23


Individual Product


Product line A group of products

that are closely related because they may: function in a similar

manner be sold to the same

customer groups, be marketed through

the same types of outlets

fall within given price ranges

For example- HP computers, Scanners, Printers, fax machines.

Key Decisions


Product Line


Individual Product


Product mix Consists of all the

product lines and items that a particular seller offers for sale.

For example- Samsung product mix consists of GSM phones, LCD, Computers, Laptops, Washing Machines, Micro waves, digital cameras

Key Decisions


Product mix

New Product Development&

Product Life-Cycle

New Product Development Process

1. Idea Generation 2. Screening3. Concept Development and Testing4. Business Analysis5. Product Development6. Market testing7. Commercialization

New Product Development ProcessStep 1. Idea Generation

Internal Sources:Research and Development can be done in market for more new

and customer oriented ideas.Employees can also give good ideas according to the objectives

and capability of organizationFor example, Samsung has built a special center to encourage and support new product innovation ideas internally by their employees.

New Product Development ProcessStep 1. Idea Generation

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External Sources:Customers. The Company can analyze customer questions and

complaints to find new product that better solve consumer problems.

Competitors. The company buy competitors product to analyze their sale, and to see how it works and decide whether they should bring out a new product of their own.

Distributors. Distributer are close to the market and can pass information about consumer problems and new product possibilities.

Suppliers. Suppliers can tell the company about new concepts, techniques and materials that can be used to develop new product.

New Product Development ProcessStep 2. Idea Screening

Process to spot Good ideas & drop Poor ones; The screeners must ask at least these questions:

Will the customer in the target market benefit from the product?

What is the size and growth forecasts of the market segment/target market?

What is the current or expected competitive pressure for the product idea?

What are the industry sales and market trends on which the product idea is based on?

Is it technically feasible to manufacture the product? Will the product be profitable when manufactured and

delivered to the customer at the target price?

http://en.wikipedia.org/wiki/Target_market

New Product Development ProcessStep 3. Concept Development & Testing

Develop the Marketing and Engineering Details • Who is the target market and who is the decision maker in

the purchasing process? • What product features must the product incorporate or

delivers? • What benefits will the product provide? • How will consumers react to the product? • How will the product be produced most cost effectively

(with lowest price)?• What will it cost to produce the product? • Testing the concept by asking a sample of prospective

customers that what they think of the idea.

New Product Development ProcessStep 4. Business Analysis

Business Analysis Estimate likely selling price based upon

competition of same and substitutes products in the market by customer feedback.

Estimate sales volume based upon size of market

Estimate profitability and breakeven point of your product that you wants to offer in the market.

New Product Development ProcessStep 5. Product Development

Product Development;Developing the product concept into physical product in order to ensure that the product idea can be turned into a workable product.

New Product Development ProcessStep 6. Market Testing

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Test the product (and its packaging) in the market on small scale in typical usage situations.

Conduct focus group customer interviews or introduce at trade show or seminars to target customers.

Make adjustments where necessary, as suggested by the target customers in the test marketing session.

Produce an initial sample of the product and sell it in a test market area to determine customer acceptance and feedback for improvement.

New Product Development ProcessStep 7. Commercialization

Commercialization means launching the product in the market on large scale.

Produce and place advertisement and other promotions in the market.

Fill the distribution pipeline with products which you wants to launch.

Critical path analysis is most useful at this stage which means that you should analyze each possible best option for launching the product in the market.

Product Life Cycle

Time

ProductDevelop-

ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments ($)

Sales andProfits ($)

Introduction Stage of the PLC

SalesCostsProfits

Marketing Objectives

Low sales

High cost per customer

NegativeCreate product awareness

and trial

Growth stage of PLC

SalesCostsProfits


Rapidly rising sales

Average cost per customer

Rising profits

Maximize market share

Maturity Stage of PLC

SalesCostsProfits


Peak sales

Low cost per customer

High profitsMaximize profit while defending

market share

Decline Stage of PLC

SalesCostsProfits


Decreasing sales

Low cost per customer

Low profitsTrying to servive while defending

existing market share

End of Chapter

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Product Planning and Development