Product Planning Project

7/29/2019 Product Planning Project

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Product Planning

Product planning is the process of creating a product idea and followingthrough on it until the product is introduced to the market. Additionally, a small

company must have an exit strategy for its product in case the product does notsell. Product planning entails managing the product throughout its life usingvarious marketing strategies, including product extensions or improvements,increased distribution, price changes and promotions.

Developing the Product Concept

The first phase of product planning is developing the product concept.

Marketing managers usually create ideas for new products by identifying certainproblems that consumers must solve or various customer needs. For example, asmall computer retailer may see the need to create a computer repair division forthe products it sells. After the product idea is conceived, managers will startplanning the dimensions and features of the product. Some small companies willeven develop a product mock-up or model.

Studying the Market

The next step in the product planning process is studying the competition.Most small companies will order secondary research information from vendorssuch as the NPD Group and Forrester Research. Secondary research usuallyprovides details on key competitors and their market share, which is the percentof total sales that they hold in the marketplace. Some companies may also do aSWOT analysis (strengths, weaknesses, opportunities and threats), according toNetMBA.com, which will help them compare their strengths and weaknessesagainst those of key competitors. The business can then determine places inwhich it has an advantage over the competition to identify areas of opportunity.

For example, a small company with a high-quality image may be able to findadditional markets for its products.


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Marketing Research

A small company should consider doing both qualitative and quantitativemarketing research for its new product. Focus groups are an example ofqualitative information. Focus groups allow companies to ask their consumersabout their likes and dislike of a product in small groups. A focus group allowsthe company to tweak the product concept before testing it through phonesurveys--a more quantitative marketing research function. Phone surveysenables a company to test its product concept on a larger scale, the results ofwhich are more predictable across the general population.

Product Introduction

If the survey results prove favorable, the company may decide to sell thenew product on a small scale or regional basis. During this time, the company willdistribute the products in one or more cities. The company will runadvertisements and sales promotions for the product, tracking sales results todetermine the products potential success. If sales figures are favorable, thecompany will then expand distribution even further. Eventually, the company maybe able to sell the product on a national basis.

Product Life Cycle

Product planning must also include managing the product through variousstages of its product life cycle. These stages include the introduction, growth,maturity and decline stages, according to QuickMBA.com. Sales are usuallystrong during the growth phase, while competition is low. However, continuedsuccess of the product will pique the interest of competitors, which will developproducts of their own. The introduction of these competitive products may force asmall company to lower its price. This low pricing strategy may help prevent thesmall company from losing market share. The company may also decide to

better differentiate its product to keep its prices steady. For example, a small cellphone company may develop new, useful features on its cell phones.


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Product Development

Definition: The overall process of strategy, organization, concept generation,

product and marketing plan creation and evaluation, and commercialization of a

new product

Innovative new products are the fuel for the most powerful growth engineyou can connect to. You can grow without new products--AT&T sold essentiallythe same telephones for decades while becoming the world's largesttelecommunications concern--but most small companies will find it difficult togrow at all, much less rapidly, without a constant stream of new products thatmeet customer needs.

How do you know when you need new products? Early detection of a

problem with existing products is critical. The following eight symptoms of adeclining product line will provide clues far enough in advance to help you dosomething about the problem before it's too late. Not all the symptoms will beevident in every situation, but you can start suspecting your product line whenmore than just one or two crop up.

1. You're experiencing slow growth or no growth.A short-term glitchin product sales can happen any time. If, however, company revenue

either flattens or declines over an extended period, you have to look forexplanations and solutions. If it isn't the economy or some outside forcebeyond your control, if your competitors didn't suddenly become morebrilliant, if you still have confidence in your sales force, and if there are nomajor problems with suppliers, examine your product line.

2. Your top customers are giving you less and less business.It maynot be worth your trouble to determine your exact market share when arough idea of where you stand will suffice. But knowing how muchbusiness you get compared to your competitors is critical. Every piece ofbusiness your competitors are getting is business you aren't getting--andmay never get. If your customers' businesses are growing and thebusiness you get from them isn't, your product may be the culprit. Chancesare, someone else is meeting your customers' needs.


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3. You find yourself competing with companies you've never heardof. If you've never heard of a new competitor or don't know much aboutthem, watch out! They have found a way to jump into a market with newproducts and technology that could leave you wondering what hit you. Itmight not be that your product has a fundamental flaw. It's more often the

case that someone has brought innovation to the industry. You earn nopoints for status quo thinking.

4. You're under increasing pressure to lower your prices. No onelikes to compete strictly on price. When your product is clearly superior andoffers more value than lower-priced competitors, you don't have to.Everyone understands that great new products eventually run their courseand turn into commodities. One day, a customer tells you she can't

distinguish the benefits of your widget from those of one or more of yourcompetitors, and now you are in a price squeeze. If you want the business,you have to lower your prices to stay competitive. If that was where itended, things might stabilize, although at a lower price level. But lowerprices usually mean lower profit margins, which usually mean lessinvestment in keeping the product current, which means more pricepressure, lower margins? and so it goes.

5. You're experiencing higher-than-normal turnover in your salesforce.Good salespeople want to win customers so they can make moremoney. When they have trouble competing, they can't win customers ormake money. So they look for new opportunities and challenges that willbring them what they want. You'll always have turnover, but heavy turnoveris a symptom of something very wrong. It could be an ill-advised change inthe compensation scheme or a new sales manager coming in with anegative attitude. But it could also be that members of your sales team arefrustrated because they're having trouble selling your products. Whenbusiness owners start to pressure their sales forces to get order levels up,morale drops because the salespeople know there isn't much they can do.

6. You're getting fewer and fewer inquiries from prospective

customers. We all dread the time when the phone stops ringing andprospects stop coming in. When advertising or other forms of promotionaren't creating the results you want, and you see fewer positive results


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from the money spent, something could be wrong with the way customerssee your company. An obsolete product line positions you as an obsoletecompany.

7. Customers are asking for product changes you can't or don'twant to make. Here is a not-too-subtle sign that your product may nolonger meet market needs. There will be times when you have to decidewhether filling a customer's request is in your company's best interests.When customers say "I want it this way," you may want to say no becauseyou doubt you could ever recover the costs of the change, even by raisingthe selling price. But when the customer says "I want it this way, and it'sstandard at ABC Widgets," you should suspect you aren't keeping up withchanging customer needs. When your competitors have leapt ahead of

you in features and benefits, you must either catch up or leap ahead ofthem with innovations of your own, or you'll fall so far behind you become amarketplace postscript.

8. Some of your competitors are leaving the market.In the short term,this sounds great. Your competitors drop out, and you pick up the businessthey leave behind. The pie is shrinking, and as it does, business gets betterthan ever. But beware: This is a classic signal of a declining market.Nobody walks away from a growth business. Vibrant growth markets attractnew competitors; they don't discourage them.

If you decide to develop new products as part of your growth plan, you're ingood company. Small companies like yours contribute at least half of the majorindustrial innovations occurring in the United States, according to the SBA. At thesame time, approximately one-third of all new products are unsuccessful, and insome industries the percentage of failures is much higher. The way to increaseyour chances of coming up with good ideas is to follow the tested track to new

product development success.

New product development can be described as a five-stage process,beginning with generating ideas and progressing to marketing completedproducts. In between are processes where you evaluate and screen productideas, take steps to protect your ideas, and finalize design in an R&D stage.Following are details on each stage:


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Generating ideas.Generating ideas consists of two parts: creating an idea and

developing it for commercial sale. There are many good techniques for idea

creation, including brainstorming, random association and even daydreaming.

You may want to generate a long list of ideas and then whittle them down to a

very few that appear to have commercial appeal.

Evaluating and screening product ideas.Everybody likes their own ideas,

but that doesn't mean others will. When you are evaluating ideas for their

potential, it's important to get objective opinions. For help with technical issues,

many companies take their ideas to testing laboratories, engineering consultants,

product development firms, and university and college technical testing services.

When it comes to evaluating an idea's commercial potential, many entrepreneurs

use the Preliminary Innovation Evaluation System (PIES) technique. This is a

formal methodology for assessing the commercial potential of inventions and

innovations.

Protecting your ideas.If you think you've come up with a valuable idea for a

new product, you should take steps to protect it. Most people who want to protect

ideas think first of patents. There are good reasons for this. For one thing, you

will find it difficult to license your idea to other companies, should you wish to do

so, without patent protection. However, getting a patent is a lengthy, complicated

process, and one you shouldn't embark on without professional help; this makesthe process expensive. If you wish to pursue a patent for your ideas, contact a

registered patent attorney or patent agent.

Many firms choose to protect ideas using trade secrecy. This is simply a matter

of keeping knowledge of your ideas, designs, processes, techniques or any other

unique component of your creation limited to yourself or a small group of people.

Most trade secrets are in the areas of chemical formulas, factory equipment, and

machines and manufacturing processes. The formula for Coca-Cola is one of the

best-recognized and most successful trade secrets.

Finalizing design research and development.Research and development

is necessary for refining most designs for new products and services. As the

owner of a growing company, you are in a good position when it comes to this

stage. Most independent inventors don't have the resources to pay for this costly


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and often protracted stage of product introduction. Most lenders and investors

are trapped by a Catch-22 mentality that makes them reluctant to invest in ideas

until after they're proven viable in the marketplace. If you believe in your idea,

you can be the first to market.

R&D consists of producing prototypes, testing them for usability and other

features, and refining the design until you wind up with something you think you

can make and sell for a profit. This may involve test-marketing, beta testing,

analysis of marketing plans and sales projections, cost studies, and more. As the

last step before you commit to rolling your product out, R&D is perhaps the most

important step of all.

Promoting and marketing your product. Now that you have a ready-for-

sale product, it's time to promote, market and distribute it. Many of the rules thatapply to existing products also apply to promoting, marketing and distributing

new products. However, new products have some additional wrinkles. For

instance, your promotion will probably consist of a larger amount of customer

education, since you will be offering them something they have never seen

before. Your marketing may have to be broader than the niche efforts you've

used in the past because, odds are, you'll be a little unsure about the actual

market out there. Finally, you may need to test some completely new distribution

channels until you find the right place to sell your product.

A Format for Production Planning

Production planning originated in the 1960s, but back then the systemoperated in a backwards fashion. All of the planning was based on the deliverydate and working back through the production stages from there. In the 21stcentury, companies must adapt to new ways of planning and scheduling productprocesses. With the introduction of lean manufacturing techniques, planning

needs to be just as streamlined if not more so to increase productivity, keep upwith demand and maximize the company's return on investments.


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Streaming Data

o It used to be that planning and productions schedules were done ona week-to-week basis. Companies of today need to have "real-time"data in order to be effective and competitive. All levels of the

production planning process must be able to access current, up-to-the-minute data in order to properly plan production schedules. Thisform of planning is part of the newest generation of planning calledthe APS -- advanced planning and scheduling -- system.

Bracketed Scheduling

o Scheduling used to be based upon the proposed delivery date. Now

production planning needs to be moving in a forward direction.Delivery dates are based on when production will actually begin. Allof the factors involved, including inventory, tooling, manpower andmaterial availability, are combined into an equation that determinesa more realistic estimate of the delivery date for the customer.

Visibility

o Most lean manufacturing environments are using a made-to-order

attitude when it comes to production planning. This approach givesthe manufacturer the ability to monitor the actual progress of theorder instead of using complex algorithms to define what resourceswill be needed to complete it. This real-time method streamlines theinventory-control aspect of planning.

Delivery Promises

o Failing to keep delivery-date promises has always been the bane ofany production environment. Using the APS system to allocate andorder supplies before the production even begins helps keep thedelivery promises more realistic. Add to that the ability of obtainingup-to-date data on all of the aspects of the project and delivery datesbecome more of a reality than a guess.


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Multi-Site Planning

o Interdependency of production between two or more sites hasalways been a problem in production planning. When multiple sitesare need to complete the whole project, organization and proper

planning are essential. New APS systems allow the planners theability to communicate with other manufacturing sites to streamlinethe flow process and significantly reduce downtime.

Cost Optimization

o Optimizing the cost performance of any production project isparamount for companies. Efficiency of the planning and scheduling

teams is essential to lowering costs by delivering on time, reducingdowntime, reducing defects and keeping the supply inventory to aminimum while still applying the pull method of production. Loweringcosts makes the product even more valuable.

Dynamic Planning

o Dynamic planning should also be employed to prepare the companyfor the "what if" situations that always arise. Having plans already

made to accommodate a variety of different scheduling possibilitiesis just good business. With a dynamic planning structure built intothe already existing plans, companies can change over to differentprojects without all of the usual chaos.

Stages in Production Planning

Production planning is important to any business that manufacturesbecause it identifies how the business is going to meet customer needs togenerate revenue. As explained by Production Planning, the entire purpose ofproduction planning is to minimize production cost and time while maximizingresources. Production planning has three distinct stages that help anorganization meet this objective.


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Mapping and Research

o In the mapping stage of production planning, also known as theplanning or research stage, business leaders gather data todetermine the needs of the customer. For example, they may review

previous sales records of similar products and find that sales havesteadily increased. This data would allow a projection of the numberof products the company should manufacturer. This is known ascapacity planning. They also determine the materials necessary forproduction, the cost of those materials and what other resources(e.g., staff) are required. Lastly, business leaders identify whatstages will be present in the manufacturing sequence and how longeach sequence should take. As part of setting up the product lifecycle, managers may use process flow diagrams to eliminateredundancies and identify trends.

Scheduling

o Once managers have finished all their research, they proceed to thescheduling phase. The managers piece together a productionschedule that meets the customer's needs and that suits theresources the company has. The dates of each manufacturingactivity may not be concrete, but the managers put down estimatedend and start dates and assign staff to the production process.

Coordination

o Manufacturing begins after the scheduling phase. At this point,everyone is working together to create the product according to theproject schedule. The managers periodically inspect themanufactured product and compare the production results to theproduction schedule goals. They then adjust the production

schedule as needed. For example, if a manager finds that only 100units of a toy are complete at the end of a month when 150 werescheduled, then the manager knows that he must extend theproduction schedule. Alternately, the manager may make resourceadjustments such as hiring more staff to get the schedule back ontrack.


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Product Development

The creation of products with new or different characteristics that offer new oradditional benefits to the customer.

Product development may involve modification of an existing product or itspresentation, or formulation of an entirely new product that satisfies a newlydefined customerwant ormarket niche.

Four-Step Process of Product Planning

Product planning is a four-step process. The process is most active during thefirst stage of the product life cycle.
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STEP-1, IDEA GENERATION:

New product ideas can come from within the firm-from managers, employees (or)research and development (R&D) laboratories. They can also come from theoutside-from company distributions and inventors. New ideas may be either

market-oriented (or) technology-oriented. The most obvious source of new ideasis marketing, which must be in tune with the needs of customers. Market studiesmay reveal better ways of serving established markets. Technologicalinnovations can affect either the product (or) the processes. Inventories can alsoimprove processes within the production system, which in turn may create newproducts.

STEP-2, SCEENING:

There may be a number of new product ideas but it has to be decision aboutwhich one will be the worthwhile. Some ideas do not fit the companys mission.Others are dismissed for failing to meet.

i) Market criteria,

ii) Production operations criteria,

iii) Financial criteria.

Marketing criteria include competitors, effects on current products, marketabilityto present customers, promotional requirements ad changes in distributionchannels, operations criteria include technical feasibility and capability withcurrent processes, work force, equipment and facility locations. Financial criteriainclude investment requirements, risk expected annual sales, profit margin perunit and anticipated length of products life cycle.

STEP-3 DEVELOPMENT AND TESTING:

Next, the technical feasibility is thoroughly protested, which often involvesconsiderable engineering work. Prototypes may be built for testing and analysisof the products features. Beyond engineering production operations gets involvedin assessing process, facility and material needs. Finally, marketing tests inlimited markets may help to gauge customer reactions to the specific features ofthe product and the way it is presented before it is actually marketed. The end


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result may give an assurance that the product is technically feasible, can beeconomically produced in quantity and has customer appeal.

STEP -4 FINAL PRODUCT DESIGN:

During final product design, product characteristics are designed in detail. Thisdetail may include the specifications process formulae and drawings. Substantialinvestments in financial and human resources are committed at this stage.Production begins and marketing starts its promotional program with salesmeeting and preview presentations at trade exhibits.

8 Step Process Perfects New Product Development

Every entrepreneur knows thatproductivityis one of the key ingredients forsuccessful product development. One of the two key processes in Roberts Rulesof Innovation is the NEW PRODUCT DEVELOPMENT PROCESS. A formalized,NPD process also referred to and best practice: the Stage Gate Process isa must, from simple to sophisticated.

The New Product Development process is often referred to as The Stage-Gate innovation process, developed by Dr. Robert G. Cooper as a result of

comprehensive research on reasons why products succeed and why they fail.

When teams collaborate in developing new innovations, having thefollowing eight ingredients mixed into your teams new product developmenta lrepertoire will ensure that its overall marketability will happen relatively quick,and accurately making everyone productive across the board.

Step 1: Generating

Utilizing basic internal and external SWOT analyses, as well as current marketing

trends, one can distance themselves from the competition by generatingideologies which take affordability, ROI, and widespread distribution costs intoaccount.

Lean, mean and scalable are the key points to keep in mind. During the NPDprocess, keep the system nimble and use flexible discretion over which activities
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are executed. You may want to develop multiple versions of your road mapscaled to suit different types and risk levels of projects.

Step 2: Screening The Idea

Wichita, possessing more aviation industry than most other states, is seeingmany new innovations stop with Step 2 screening. Do you go/no go? Setspecific criteria for ideas that should be continued or dropped. Stick to the agreedupon criteria so poor projects can be sent back to the idea-hopper early on.

Because product development costs are being cut in areas like Wichita,prescreening product ideas, means taking your Top 3 competitors newinnovations into account, how much market share theyre chomping up, what

benefits end consumers could expect etc. An interesting industry fact: Aviationindustrialists will often compare growth with metals markets; therefore, whenBoeing is idle, never assume that all airplanes are grounded,

Step 3: Test ing The Concept

As Gaurav Akrani has said, Concept testing is done after idea screening. And itis important to note, it is different from test marketing.

Aside from patent research, design due diligence, and other legalities involvedwith new product development; knowing where the marketing messages will workbest is often the biggest part of testing the concept. Does the consumerunderstand, need, or want the product or service?

Step 4: Bus iness Analyt ics

During the New Product Development process, build a system of metrics to

monitor progress. Include input metrics, such as average time in each stage, aswell as output metrics that measure the value of launched products, percentageof new product sales and other figures that provide valuable feedback. It isimportant for an organization to be in agreement for these criteria and metrics.

Even if an idea doesnt turn into product, keep it in the hopper because it canprove to be a valuable asset for future products and a basis for learning andgrowth.
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Step 5: Beta / Marketab i l i ty Tests

Arranging private tests groups, launching beta versions, and then forming testpanels after the product or products have been tested will provide you withvaluable information allowing last minute improvements and tweaks. Not to

mention helping to generate a small amount of buzz. WordPress is becomingsynonymous with beta testing, and its effective; Thousands of programmerscontribute code, millions test it, and finally even more download the completedend-product.

Step 6: Technical i t ies+ Product Development

Provided the technical aspects can be perfected without alterations to post-beta

products, heading towards a smooth step 7 is imminent. According to Akrani, inthis step, The production department will make plans to produce the product.The marketing department will make plans to distribute the product. The financedepartment will provide the finance for introducing the new product.

As an example; In manufacturing, the process before sending technical specs tomachinery involves printing MSDS sheets, a requirement for retaining an ISO9001 certification (the organizational structure, procedures, processes andresources needed to implement quality management.)

In internet jargon, honing the technicalities after beta testing involves finaldatabase preparations, estimation of server resources, and planning automatedlogistics. Be sure to have your technicalities in line when moving forward.

Step 7: Commercial ize

At this stage, your new product developments have gone mainstream,consumers are purchasing your good or service, and technical support isconsistently monitoring progress. Keeping your distribution pipelines loaded with

products is an integral part of this process too, as one prefers not to give physical(or perpetual) shelf space to competition. Refreshing advertisements during thisstage will keep your products name firmly supplanted into the minds of those inthe contemplation stages of purchase.
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Step 8: Post Launch Review and Perfect Pricing

Review the NPD process efficiency and look for continues improvements. Mostnew products are introduced with introductory pricing, in which final prices arenailed down after consumers have gotten in. In this final stage, youll gauge

overall value relevant to COGS (cost of goods sold), making sure internal costsarent overshadowing new product profits. You continuously differentiateconsumer needs as your products age, forecast profits and improve deliveryprocess whether physical, or digital, products are being perpetuated.

Remember: The Process Is Loose

The entire new product development process is an ever evolving testing

platform where errors will be made, designs will get trashed, and loss could berecorded. Having your entire team working in tight synchronicity will ensure thesuccessful launch of goods or services, even if reinventing your own wheel.Productivity during product development can be achieved if, and only if, goals areclearly defined along the way and each process has contingencies clearlyoutlined on paper.

Levels of Product

There are 3 levels of products

Core Product- Marketers must first define what the core BENEFITS theproduct will provide the customer.

Actual Produc t-Marketer must then build the actual product around thecore product. May have as many as five characteristics:

o Quality levelo Featureso Brand nameo Packaging

all combined to carefully deliver the core benefit(s).

Augm ented Produc t-offer additional consumer benefits and services.o Warrantyo Customer training
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Classifying Products

Products can be classified depending on who the final purchaser is.

Components of the marketing mix will need to be changed depending on who the

final purchaser is.

Consumer products: destined for the final consumer for personal, familyand household use.

Business to businessproducts: are to satisfy the goals of theorganization.

The same product can be purchased by both, for example a computer, for

the home or the office.

The following are classifications for consumer products:

Convenience: Packaging is important to sell the product. Consumers willaccept a substitute. Marketers focus on intense distribution, time utility.Convenience products can be categorized into staple (milk), impulse (notintended prior to shopping trip).

Shopping: Consumers expend considerable effort planning and makingpurchase decisions. IE appliances, stereos, cameras. Consumers are notparticularly brand loyal. Need producer intermediary cooperation, highmargins, less outlets than convenience goods. Use of sales personnel,communication of competitive advantage, branding, advertising, customerservice etc. Attribute based (Non Price Competition), product with the bestset of attributes is bought. If product attributes are judged to be similar,then priced based.

Specialty: Buyer knows what they want and will not accept a substitute, IEMercedes. Do not compare alternatives. Brand, store and person loyal.Will pay a premium if necessary. Need reminder advertising.

Unsought: Sudden problem to resolve, products to which consumers areunaware, products that people do not necessary think of purchasing.

The following are classifications for Business to Business products:

Product ion Goodso Raw Materials:o Component parts: becomes part of the physical product
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o Process materials: not readily identifiable part of the production ofother products

Support Goodso Major Equipment:o Accessory Equipment: Type writers and toolso Consumable Supplies: IE Paper, pencils or oilso Business to Business services: Financial, legal marketing research

etc.

Elements of a Product MixIf an organization is marketing more than one product it has a product mix.

Produc t item--a single product Product l ine--all items of the same type Product mix--total group of products that an organization markets

Depth measures the # of products that are offered within each product line.

Satisfies several consumer segments for the same product, maximizes shelf

space, discourages competitors, covers a range of prices and sustains dealer

support. High cost in inventory etc.

Width measures the # of product lines a company offers. Enables a firm todiversify products, appeals to different consumer needs and encourages onestop shopping.

Proctor & Gamble example in class.Why so many different products?Different needs of different target markets for the same product. Channels ofdistribution economies etc.

Product Positioning and Product Repositioning

This refers to a place a product offering occupies in consumers' minds on

important attributes, relative to competing offerings.

How new and current items in the product mix are perceived, in the mindsof the consumer, therefore reemphasizing the importance ofperception.
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New Product -- need to communicate benefitsEstablished Products -- need to reinforce benefits

Ideal Characteristics

Need to introduce products that possess characteristics that the target

market most desires, ideal. Product positioning is crucial.

Consumers desires refer to the attributes consumers would like theproducts to possess--IDEAL POINTS. Whenever a group of consumers has adistinctive "ideal" for a product category they represent a potential target marketsegment.

A firm does well if its attributes (of the product) are perceived byconsumers as being close to their ideal. The objective is to be "more ideal" thanthe competitors.

Each product must provide some unique combination of new featuresdesired by the target market.

Instead of allowing the customer to position products independently,marketers try to influence and shape consumers concepts and perceptions.

Existing Products

Handout...Here Comes the Sun to Confound Health-Savvy Lotion Makers

^||

Old Position | New Position|||

Glamour--------------------------------------------------Health

||||||

Traditional sun tan lotion positioned as aiding in getting a very glamorous deeptan etc.Dermatologist reports...skin cancer etc.


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Lifestyle needs change, move to more health conscious (previously discussed)Need to reposition sun tan lotion as a healthy way to be exposed to the sun.Target market has shifted from the left quartile to the right quartile as far asneeds are concerned.Sun tan marketers need to do same as far as changing consumers perception for

the product.How?

Change Promotion: "Tan don't Burn" The St. Tropez Tan vs. Ultra SweatProof Serious tan for...Be Sun Smart

Change Product: Sunscreen and sunless tanning agent.

Handout...BMW Banks on Affordability...^

Very Safe| Lexus/infiniti

| Mercedes| BMW|||

Cheap--------------------------------------------------Expensive|||||||

Very UnsafeBMW, to reposition up to the left

Due to the exchange rate, Lexus moves to the right

Why did they repositition?Safety

AffordabilityCompetitors include Infiniti, Lexus, Mercedes Benz and Aurora

If you already have a brand in the market, must be sure to avoid cannibalization.

Attributes and brand image should give a product distinct appeal.
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New Product Positioning

When developing a new product, a company should identify all the

features that are offered by all its major competitors.

Second, identify important features/benefits used in making purchasedecisions.

Determine the overall ranking of features by importance and relate theimportance of each feature to its "uniqueness".

For example you wouldn't buy a spreadsheet program that if it didn'tperform basic math, so basic math is very important.However since every spreadsheet has that its an "important fundamentalfeature", instead of an "important differentiating feature".

The flip side would be a spreadsheet that displays all numbers in binary (0-1) instead of "normal" numbers (0-9). This is unique but not important.

The evaluation becomes a 2 x 2 matrix with uniqueness on the X-axis andimportance on the Y-axis.

^X Important to TM (Stockbroker) XMath functions | Import Data

|||||

----------------------------------------------------------Unique||||||| X

Binary Data

If the feature is in the upper right hand corner then you have probably got a winning feature.

This is known as feature positioning, as opposed to product positioning.One can then see what type of customer needs the important (and perhapsunique) features.


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If your spreadsheet accepts continuous data in real-time (such as stockmarket data) while Lotus 1-2-3 doesn't, you'd position your spreadsheet as a"real-time spreadsheet with all calculations needed by Wall Street."

Its a claim that tells something unique about your product, who it's for, and

by implication, that Lotus 1-2-3 can't do it.

Developing and Managing Products

To compete effectively and achieve goals of an organization, the

organization must be able to adjust its product mix.

Need to understand competition and customer attitudes and preferences.

Developing New ProductsNeed to develop new products. A new product can be:

Continuous Innovation...No new buyer behavior to learn, i.e. -productsnot previously marketed by the firm, but by others

Dynamic Continuous Innovation...minor education needed forconsumers to adopt product

Discontinuous Innovation...entirely new consumption patterns

Handout...In Battle over Video Disk Standard

What will be the winning format?

New Product (Technology)

Need to appeal to:

o Hollywoodo Ultimate consumers

Battle between:

o Sony and Phillipso Toshiba, Pioneer and Time Warner


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Swing voter...Matsushita Electric Industry (Toshiba/Pioneer)

DVD could transform movie business (like CDs for music) Movie studios

can resell all movies in new format therefore very important to them, also

sell through market, video rentals are decreasing, due to competing

service.

Set of requirements:

o 135 mins on 1 disco quality superior to vhso cd quality audioo able to add multiple languageso

parent lockout systemo iron clad copying protection

Sony announced going ahead (Vaporware!)

If 2 systems go to market, best system will win, only one technology can

survive, WINNER WINS BIG...LOSER LOSES BIG (DUE TO

INVESTMENT) VHS vs Betamax

For a new product to succeed it must have:

desirable attributes be unique have its features communicated to the consumer (mkt support necessary)

Developing new products is expensive and risky.

Failure not to introduce new products is also risky. IE Timex

Firms develop new products in two ways:

By acquisition, i.e. Timex bought Guess and Monet Jewellers in 1992,bringing in new products to their product mix.

Internal development, this is what we are going to focus on.
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17,363 (8,077 food) new items hit supermarket and drug stores in 1993,

according to marketing experts, a 9.3% increase over 1992.

Launching a new product name along with new product is very risky and

expensive therefore 75% of new products were brand-extension brands in 1993,

up from 68% in 1992 (continuous innovations)

Why New Products Fail

Lack of differentiating advantage Poor marketing plan Poor timing Target market too small Poor product quality No access to market

Seven phases to new product development:

1. New Product Strategy Development

Only a few ideas are good enough to reach commercialization. Ideas

can be generated by chance, or by systematic approach. Need a

purposeful, focused effort to identify new ways to serve a market. Newopportunities appear from the changes in the environment.

2. Idea Generation

Continuous systematic search for new product opportunities.

o Marketing oriented sources--identify opportunities based on

consumer needs, lab research is directed to satisfy that research. 1-800#s, research etc.o Laboratory oriented sources--identify opportunities based on pure

research or applied research.

Intrafirm devises--brain storming, incentives and rewards for ideas. 3MsPost it, from choir practice. Hewlett Parkards lab is open 24 hrs. day.

Analyzing existing products, reading trade publications.
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Brainstorming for your group project. Ideas should not be criticized, nomatter how off-beat they are.

3. Product Screening and Evaluation

New product check list; list new product attributes considered most

important and compare each with these attributes. Check list is

standardized and allows ideas to be compared.

--General characteristics, Marketing Characteristics and Production

Characteristics.

Ideas with the greatest potential are selected for further research.

Do they match the organizations goals (DuPont and ICI have many patentsthat they have not exploited for this very reason.)

Look at companies ability to produce and market the product.

Need to look at the nature and wants of the buyers and possibleenvironmental changes.

4. Business Analysis

Analyze potential contribution to sales, costs and profits.

Does the product fit into the current product mix?What kind of environmental and competitive changes can be anticipated?How will these changes effect sales etc.?

Are the internal resources adequate?Cost and time line of new facilities etc.?Is financing available?Synergies with distribution channel etc.

MIS to determine the market potential sales etc.Patentability should be determined, last 17 years, 14 years for apharmaceutical product.Find out if it is technically feasible to produce the new product.If you can produce the new product at a low enough cost so as to be ableto make a profit.
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5. Product Development

Develop a prototype, working model, lab test etc.

Attributes that consumers have identified that they want must be

communicated through the design of the product.

6. Test Marketing

Can observe actual consumer behavior.

Limited introduction in geographical areas chosen to represent intended

market.

Aim is to determine the reaction of probable buyers.

It is the sample launch of the Marketing Mix.

Determine to go ahead, modify product, modify marketing plan or drop the

product.

PROS are:

o Lessens the risk of product failure.o Reduces the risk of loss of credibility or undercutting a profitable

product.o Can determine the weaknesses in the MM and make adjustments.o Can also vary parts of the MM during the test market.o Need to select the appropriate MM and check the validity.

CONS are:

o Test market is expensive.o Firm's competitors may interfere.o Competitors may copy the product and rush it out. IE Clorox

detergent with bleach P&G. "In a live test you've tipped your hand,and believe me, the competition is going to come after you. Unless

you have patented chemistry, they can rip you off and beat you to anational launch" -Director of Marketing at Gillette's Personneldivision.

Alternatively can use a simulated test market. Free samples offered in the

mall, taken home and interviewed over the telephone later.
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7. Commercialization

Corresponds to introduction stage of the Product Life Cycle.

Plans for full-scale marketing and manufacturing must be refined and

settled.

Need to analyze the results of the test market to determine any changes in

the marketing mix.

Need to make decisions regarding warranties etc (reduces consumers

risk). Warranties can offer a competitive advantage.

Spend alot of $s on advertising, personnel etc. Combined with capitalexpenditure makes commercialization very expensive.

Need to consider:

the speed of acceptance among consumers and channel members; intensity of distribution, production capabilities, promotional capabilities, prices, competition, time period to profitability and commercialization costs.

Buyers' Product Adoption Process

1. Awareness

Buyers become aware of the product

2. Interest

Buyers seek information and is receptive to learning about product

3. Evaluation

Buyers consider product benefits and determines whether to try it

4. Trial
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Buyers examine, test or try the product to determine usefulness relative to

needs

5. Adoption

Buyers purchase the product and can be expected to use it when the needfor the general type of product arises.

Rate of adoption depends on consumer traits as well as the product and the

firm's marketing efforts.

Diffusion Process

The manner in which different members of the target market often accept

and purchase a product (go through the adoption process)

1. Innovators

Techno-savvies first customers to buy a product, 2.5 % of consumers

2. Early Adopters

Tend to be opinion leaders. Adopt new products but use discretion, 13.5%

3. Early Majority

34% of consumers, first part of the mass market to buy the product

4. Late Majority

Less cosmopolitan and responsive to change, 34%

5. Laggards


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Product Life Cycle

PLC can be applied to:

product category (Watch) product style (Digital) a product item/brand (Timex)

Four Stages to the Product Life Cycle:

1. Introduction2. Growth3. Maturity4. Decline

The following material refers to the PLC as far as the product category is

concerned unless otherwise stated.

Introduction

Failure rate for new products can range from 60%-90%, depending on the

industry. A product does not have to be an entirely new product, can be a new

model (car).

Marketing Mix(MM) considerations

Need to build channels of distribution/selective distribution

Dealers offered promotional assistance to support the product...PUSH strategy.

Develop primary demand/pioneering information, communications should stress the benefits of

the product to the consumer, as opposed to the brand name of the particular product, since

there will be little competition at this stage and you need to educate consumers of the product's

benefits.

Price sk imm ing...set a high price in order to recover developmental costs as soon as possible.

Price p enetrat ion...set a low price in order to avoid encouraging competitors to enter the

market, also helps increase demand and therefore allows the company to take advantage of

economies of scale.
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Growth

Need to encourage strong brand loyalty, competitors are entering the market

place. Profits begin to decline late in the growth stage.

May need to pursue furthersegmentation.

MM considerations

May need to perform some type of product modification to correct weak or

omitted attributes in the product.

Need to build brand loyalty (selective demand), communications should stress

the brand of the product, since consumers are more aware of the products

benefits and there is more competition, must differentiate your offering from your

competitors.

May begin to move toward intensive distribution-the product is more accepted,therefore intermediaries are more inclined to risk accepting the product.

Price dealing/cutting or meeting competition, especially if previously adopted a

price skimming strategy.

Handout...Coca Cola Launches Fruit-Drink line...

Category doubled in size last year to about $300m - $325m Coca Cola's entrant--

Fruitopia expect sales this year to reach $400m

Fruitopia is in the Introductory stage when the Alternative Beverage market is in

the Growth stage. New competitors like Coca Cola will help grow the size of themarket.

Maturity

Sales curve peaks-severe competition, consumers are now experienced

specialists.

MM Considerations

A product may be rejuvenated through a change in the packaging, new models

or aesthetic changes.

Advertising focuses on differentiating a brand, sales promotion aimed at

customer (PULL) and reseller (PUSH).

Move to more intense distribution
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Price dealing/cutting or meeting competition

Provides company with a large, loyal group of stable customers. Generally cash

cows that can support other products.

Strategies during maturity include:

Modification of product...use line extensions Reposition Product

Handout...New Life Savers Ads Grab Hold of Taste

Reposition...Taste vs. moment

Line extension, gummy savers, breath savers, holes (unsuccessful)

Licensing name

Weaker competition will have left the market place.

Decline

Sales fall off rapidly. Can be caused by new technology or a social trend.

Can justify continuing with the product as long as it contributes to profits or

enhances the effectiveness of the product mix.

Need to decide to eliminate or reposition to extend its life.

MM Considerations

Some competition drop out

Need to time and execute properly the introduction, alteration and termination of

a product.

Handout...Cannibalism Is a Virtue in Computer Business

Problems with high-tech products, relate to Product Adoption Process etc.

Need to manage product mix through their respective life-cycles. When to decide

to introduce new (modified) products that compete with the current product

offering.

With high-tech products, need to consider introducing new (and competing)

products as the existing product is still in the growth stage of its life cycle.
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BrandingPart of theactualproduct.

Without brands, shoppers choice becomes arbitrary.

Definition:A name, term, design, symbol or any other feature that identifies oneseller's good or service as distinct from anothers.

Brand name is that part that can be spoken, including letters, words and#s, IE 7UP.Brand names simplify shopping, guarantee a certain level of quality andallow for self expression.

Brand mark-elements of the brand that cannot not be spoken, IE symbol Trade CharacterIE Ronald McDonald, Pillsbury Doughboy Trade mark-legal designation that the owner has exclusive rights to the

brand or part of a brand.1990, US Patent & Trademark Office had 680,000 trademarks registered,56,515 new in that year.

Tradename-The full legal name of the organization. IE Ford, not the namefor a specific product.

Benefits of Branding

Provides benefits to buyers and sellers

TO BUYER:

Help buyers identify the product that they like/dislike. Identify marketer Helps reduce the time needed for purchase. Helps buyers evaluate quality of products especially if unable to judge a

products characteristics. Helps reduce buyers perceived risk of purchase. Buyer may derive a psychological reward from owning the brand, IE Rolex

or Mercedes.

TO SELLER:

Differentiate product offering from competitors Helps segment market by creating tailored images, IE Contact lenses
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Brand identifies the companies products making repeat purchases easierfor customers.

Reduce price comparisons Brand helps firm introduce a new product that carries the name of one or

more of its existing products...half as much as using a new brand, lower

co. designs, advertising and promotional costs.EXAMPLE, Gummy Savers

Easier cooperation with intermediaries with well known brands Facilitates promotional efforts. Helps foster brand loyalty helping to stabilize market share. Firms maybe able to charge a premium for the brand.

Importance of Branding and How to Develop a Brand

Handout...American Movie Classics...

Why does AMC Brand Itself?

Increasing Competition, 500 channels etc.

Need to differentiate Product offering so consumers associate satisfying need to

see good movies to watching AMC

Consumers cannot check all brands therefore need to make choice easier for

them

"We compete now with many movie channels, If consumers think of you withouta Brand or personality, you become an inventory of pictures, In a world ofhundreds of channels, you'll get lost".

How does AMC Brand Itself?Advertise...emphasize need to keep movies in original stateBoutiques in stores to sell "AMC Collection"License Audrey Hepburn image...spokespersonCo-promotion w/ United Artists Theaters sponsoring afternoon vintage movies.

AMC news magazine at Newsstands.Logo and AMC Letters

Releasing AMC movies on video

TM = 72% over 35 years old

Brand loyalty is declining due to an increase in similar new products forcustomers to chose from, and an increase in marketing activities to encouragebrand switching and the increasing quality of private label products.


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Brand equity, financial value associated with the brand. Can be increased whenlicensing royalties can be gained.

Four Branding Decisions firms must make

Need to determine Corporate Name

A firms name logo and trade characters.

Over 1000 ongoing firms change names each year, DuPont

If nature of business changes, may need to alter name--Southwest Airlines??

Allegheny Airlines change to US Air due to expansion in geographic markets.

(United Brands changed name to CHIQUITA brands)

Boston Chicken vs. Boston Market

Geographic names not as popular as they used to be compared to surnames,descriptive names and coined names.

Kiwi airlines--named after a bird that cannot fly

Types of Brands

Manufacturers Brands:

Initiated by the producer.85% food items, all autos, 75% major appliances, more than 80% gasoline.

Requires the producer to be involved in distribution, promotion, and to some extent, pricing.

Brand loyalty is encouraged by quality, promotion and guarantees. Producer tries to stimulate

demand, encouraging middlemen to make the product available (PULL)

Private Distributor Brands:

Initiated and owned by the resellers. 50% of shoes, 33% tire market, 13% food,

25% appliances.

Manufacturers not identified in the product.Helps retailers develop more efficient promotion, generate higher margins and

increase store image.

Wholesalers brands-IGA

Retailers brands Sears Kenmore, JC Penney's Stafford Executive.

Presidents Choice, Loblaw, 1000 products

Our Compliments, MF. by Nabisco


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Master Choice, A & P

Select, Safeway

Kodak in Japan, market private label film since Mf. label not successful inmarketplace, "COOP" for the Japanese Consumer Cooperative Union.

DuPont, with Initiatives Inc, design/make fashion items, utilize its fiber resourcesand develop another customer for them. Work with retailers to design fashions.

The competition between manufacturers brands and private brands (15% retailgrocery) is intensifying.

Handout...How Country's Biggest Brands Are Faring at the Supermarket

Reason for increase in Private Brands:

Increasing prices of MB in 1980s with flat demand Increasing Quality of PB Increasing Promotion of PB PB offer retailers higher margins Offer regional products

Private brands have been growing:

1991 increase 4%

1992 increase 3%

1993 increase .8%

Manufacturer brands are beginning to fight back.

Reduce price (marlboro monday, reduced 20%) Promotions focus on quality and directed at PL New product launches, line extensions. Focus on core products

PB are still popular, also consumers are purchasing PB products that were once

bastions of MB, personal care etc., Beer/Cigarettes, another indication of

consumers' growing confidence of the quality of PBs.

Handout...Philip Morris Makes Dave's---

Marketers of MB products (esp. Philip Morris) are developing products that

appearto be PB products, in recognition to consumers growing preference for

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AbroadUK, Private Label is 36% of market. Why??

National Advertising Retailers are Marketers not landlords. Sainsburys launched 1400-1500

new products each year. 8000 of 16000 products are private label.

Generic Brands:

Indicates only product category.

Began as low cost alternative in the drug industry.

Less than 1% of supermarket revenue even though 85% stock them. Cheeper

than branded items.

Accounts for less than 1% of retail sales, was 10%.

Selecting a Brand NameCriteria for choosing a name:

Easy for customers to say, spell and recall (inc. foreigners) Indicate products major benefits Should be distinctive Compatible with all products in product line Used and recognized in all types of media Single and multiple words Bic, Dodge Grand Caravan, IBM PC (letters), or

a combination Mazda RX7 Availability, already over 400 car "name plates", this makes it difficult to

select a new one. Use words of no meaning to avoid negative connotation, Kodak, Exxon Can be created internally by the organization, or by a consultancy Legal restrictions, i.e. Food products must adhere to the Nutrition Labeling

and Education Act, 1990...May 8 1994

Handout...Let There Be 'Right'....

FDA, Pringles Right Crisps, as opposed to Light Only 1/3 less fat.

Considered Pringles Right Choice/Idea.

Light/Lite must be 1/2 fat of original content

Reduced fat = 25% reduction


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"Lite taste" can still be used :)...lite is a descriptor of the word taste, not of

the actaul product!!

Service-usually the company name, must be flexible enough to encompass

activity of current services as well as new ones in the future (Southwest Airlines).

Frequently use symbols, AT&Ts globe, Travellers insurance umbrella.

Naming process goes from idea generation to idea evaluation to legal evaluation.Should define objectives--what value to the product should the name provide.

Protecting a BrandNeed to design a brand that can be protected through registration.

Generic words are not protectable (aluminum foil), surnames and geographic orfunctional names are difficult to protect.

To protect exclusive rights to a brand, must make certain that the brand is

not likely to become considered an infringement on any existing registered brand.

Guard against a brand name becoming a generic term used to refer to

general products category. Generic cannot be protected. IE Aspirin, Shredded

Wheat ETC.

Xerox

Rollerblade

ThermosKleenex

Branding PoliciesFirst question is whether to brand or not to brand. Homogenous products are

difficult to brand (Not Purdue, Robinson Brick). Branding policies are:

Individual Branding: Naming each product differently P&G, facilitatesmarket segmentation and no overlap.

Overall Family Branding: All products are branded with the same name, orpart of a name, IE Kraft, promotion of one item also promotes other items.

Line Family Branding: Within one product line. IE P&Gs Ivory line. Brand Extension Branding: Use one of its existing brand names as part of

a brand for an improved or new product, usually in the same productcategory.75% new products are brand extensions!!


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Handout...Can Virgin Name sell Cola, Computers, Vodka and more.

To use brand extensions the products should be either related (not the

case for Virgin), or the brand name should have a value over and above

the particular product category, i.e. a counter culture image for example. If

that is the case, then it might work.

Brand LicensingApprove use of trade marks on other products for a licensing fee. IE Harley

Davidson with Cologne, McDonalds with McKids.

PRO Gain extra revenue and free publicity and trade mark protection, also helps

develop your brand, AMC

CON Lack of manufacturing control, bombardment of unrelated products.

PackagingPart of theactualproduct.

Consists of a products physical container, label and/or insert.

Approximately 10% of product selling cost.Development of a container and a graphic design for a product. Can effectpurchase decisions IE pump dispenser on a tube of toothpaste.

Packaging Functions include:

Protect product and maintain functional form, IE milk. Foil shop lifting Offer convenience, Usage (dispersement) Promote product by communicating features "last 5 seconds of mktg",

Campbells...Read Article Develop reusable package for alternative use. Segmentation, tailored to a specific group Contact Lenses
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Major Packaging ConsiderationsPackaging decision serve the channel members and the final consumer.

Cost--how much are customers willing to pay for the packaging?

Preprinted cost, use UPC codes Must comply with the FDA packaging regulations. Make product tampering evident to the reseller and customer, cost benefit

with liability Need to consider consistency among package designs--Family

packaging...category consistent...Pringles Need to inform potential buyers of new products content, features, uses,

advantages and hazards. Need to create a desirable image through color etc. Can be designed to

appear taller or shorter (thin vertical lines for taller) People associatespecific colors with certain feelings, Red with fire. Do not package meet ingreen!!

Must meet the needs of resellers--transportation, storage and handling. Environmental responsibility.

Packaging and Marketing StrategyPackaging can be a major component of the marketing strategy--giving a product

a competitive advantage. Need to reevaluate packaging periodically.

Altering the Package - must evolve with the timesChange style of package Coke, PepsiPepsi freshness dating, need extensive marketing effort to communicate this.Coke's new contoured bottle "feel the curves" "the ultimate form of refreshment",with a silhouette of a coke bottle on a bill board. Considering a contoured can inthe future!!

Multiple Packaging Twin packs, six packs etc...won't work for salt!! Stimulateextra use. Helps gain customer acceptance.

Handling Improved packagingPackaging changes during distribution, IE Cartons


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Criticism of Packaging

Functional problems, Flour, sugar. Packages that are difficult to open. Recyclability. Safety issues (sharp) Package deception. Customer confusion IE different size designations,

Giant, Econ etc. Increased costs attributed to packaging.

Labeling

Facilitates ID of a product Descriptive function Indicate the grade of the product Describe source of product, its content and major features How to use the product etc. Label can be a promotional tool Needs to fulfill federal obligations. Universal Product Code for Inventory and Information.

Product Planning and Development

Introduction to a product Tangibility continuum of a product Product Classification Branding Packaging Product Life Cycle Introduction to new product planning

Definition of a Product

Product could be defined as anything that can be offered to a market forattention, acquisition, use or consumption that might satisfy a want or aneed Phillip Kotler.
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Product could be of any of the following:

A physical product table, car, pen Person Bathiya and Santhus, Sanga, Ranil, Mahinda, Anarkali, Anjalina

Jollie, Mervin S. Place Anuradhapura, Rathnapura, London, Jerusalem Organization SLIM, CIM, UN, UNP, JVP, UNILEVER, DIALOG Idea Freedom, democracy, anti-corruption, social justice, anti drugs,

MADD, family planning Services education, lawyers service, bank service

Product Scope (three aspects)

1.) Physical Aspect is the physical aspect of the product. What it is?E.g. It is a herbal tooth paste

2.) Functional Aspect is what is does?E.g. It cleans tooth/prevents tooth decay

3.) Symbolic Aspect is what it means to the users emotion?E.g. The satisfaction of a person free from tooth decay

The Product Attributes

Product Sub Category

- Futher categorization of a product category.

Eg. Toilet Soap category may be sub categorized as beauty soap andherbal soap

Product Brand

- There could be one or many brands in sub categories of the productline such as Lux and Dove

The Product

Tangible Attributes

Design, features,

performances, branding,

packaging

Intangible Attributes

Image, value, perception


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Product Mix Consistency

- How closely related the various product lines are in terms of channeldistribution, promotion or in other ways


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Product Life Cycle Theory (PLC)

It is assumed that a product will have a life cycle from development todecline.

It is measured in relation to time and sales. However every product may not go through the same life cycle or some

products will stay for along without getting on to the declining stage.

Stage of Life Cycle

1. Development stage2. Introductory stage3. Growth stage4. Maturity stage5. Declining stage

Introductory Growth Maturity Decline

Relatively short Relatively short Longer period Longer or short

Sales are usuallyslow and profitsare low

Sales increaseand profits will behigh

Sales growthbecome slowbut volume big

Drop in the sales

Competitors willwatch

New competitorsenter

Morecompetition andover capacity

Competitors donot enter due tolow margins

Distribution hasjust begun

More distributorstake up theproduct

Manydistributors andundercutting

Distributorsreduce or give up


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Introductory Growth Maturity Decline

Positioning and

brand awareness

Brand image is

established

Many brands

fight each other

Brand image is

low

Promotion budgetvery high

Promo budgetmay be increased

Promo budgetmay be standardor low

Not muchpromotions done

Only one or twomanufacturers

Fewmanufacturers

Manymanufacturers

Abundantmanufactures

High product Improve productquality andfeatures

Many changesin the Marketingmix to be done

May have to takea decision to stayon or not

Importance of Product Life Cycle to marketers

Important tool for forecasting and strategic planning It shows that product have a limited life span It graphically shows the trend in sales and profitability It shows the need to adopt different strategies in various stages

Limitation of the PLC

Many products may not have a life cycle as depicted by PLC Stages of PLC are difficult to distinguish Identifying where one stage ends and the other begins is very difficult Traditional shape may not occur. E.g. Fad items Ignores the application of marketing mix activities Strategic decisions can change the PLC. E.g. Repositioning


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Planning for New Products

Long term survival of many firms in the competitive world depends onlaunching new products successfully.

Planning for new products is an essential and demanding strategicactivity. There could be many types of new product.

Types of New Products

1.) Innovative Products these products are new to the world and newto the company.

- They are truly new to the customers and theyprovide completely different alternatives toexisting products.

E.g. Vaccine for AIDSProducts based on Nano TechnologyHeat seeking missileComputers

2.) Replacement Products although these products are new to

customers or even to the company, they are essentiallyimprovements or redesigns of existing products.

- Digital phones replaced the analogues- Disposable racers replaced the old blade base

racers- Shaving foam and gels have replaced the

shaving soaps

3.) Imitative Products These products are new to the company and

not new to the market- Many products come in this form to the market- One or few companies may come out with and

innovative or replacement products but manywill copy the technology and come out withsimilar products. They are called mee-tooproducts.


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E.g. After celltel>mobitel>dialog>hutchAfter signal>clogard>supirivicki>sudnathaAfter Mercedes benze>ford>GM>Toyota Nissan

Reasons for Introducing New Products

To suit the changes in customers needs

To adopt new technological advances and avoid obsolesce

To match competition

Product Life Cycle Concept

To bring down the cost

Stages of New Product Development

1.) Idea Generation

2.) Idea Screening

3.) Concept Development & Testing

4.) Marketing Strategy

5.) Business Analysis

6.) Product Development

7.) Test Marketing

8.) Commercialization (Launch)

Sources of New Ideas

Internal

Customers

Competitors

Outside inventors Channel members

Consultants


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Methods of Generating New Ideas

Searching new product idea publications, research publications, the

internet, exhibitions, conventions

Marketing Research Meet product and users and find out what kind of products that can be

used to satisfy their needs. Meet focus groups of consumers retailers to

discuss new products.

Technical Research

Firms internal research laboratories and other external laboratories could

generate new idea for you

Screening, Evaluating and Business Analysis

*Screening

There should be a very clear cut screening policy that would reject the

unpromising product ideas and further the promising ideas.

Two basic questions need to be answered at the screening stage

Is the idea could be practically developed into a product with development

production, marketing and financial capabilities of the company? Is the venture commercially feasible? (market attractiveness, profitability,

social and environmental concerns)

*Evaluation

After the initial screening more comprehensive evaluation is required. It is

better to have a buyers reaction also into the evaluation process.

A response from a sample of buyers potential buyers could be a very good

criteria to find out the ultimate demand for the product. (This is also called

proposed product concept testing) However, the actual product is not in

existence and it could not be able to get results as in a test marketing

process.


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Marketing Strategy Development

*Product

Brand name selection and registration

Government regulations as to pricing packaging and labeling etc

Determine packaging, sizes, shapes, colours, other properties

*Pricing

Finalize pricing strategy premium/skimming, penetrative, mark up etc

Dealer/distributor margins

Bulk selling discounts Credit periods

*Distr ibut ion

Select channels of distribution

Transportation

Point of sales materials (POSM)

Display racks, stand etc.

*Promot ion

Selection and briefing an advertising agency

Finalize segmentation and target markets

Finalize the positioning strategy

Have a theme

Communication budgets

Finalize advertising plan/promotion plan


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Business Analysis

Business analysis estimates the commercial performance of the proposed

product.

Revenue forecast Cost estimation

Profit projections

Acceptable level of profit for a given product development

Assess the amount of risk involve

Product Development and Testing

Prototype User tests

Manufacturing development

Component developments and collaborative product developments various

specialized manufacturers get involved.

Test Market the Product

During the test marketing, the marketers offer the product for sale in alimited area where they can measure the response.

Ideally the test market should reflect the target market for the product. The

marketers evaluate not only the customers reaction but all the elements of

the marketing mix.

Based on the results of test marketing, marketers determine how the

marketing mix should be adjusted before a full scale launch.


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Launch Product

first let the company wide employees know about the product and its

features and marketing objectives of the firm

determine method of launch selection of venue for launch

selection of media for launch

brief distributors about the product

press conference

distribute promotional material

execution of advertising strategy

Stages in Adoption Process

Awarenessthe consumer become aware of the innovation but lack

information about the product

Interest the consumer is induced to seek information about the

innovation

Evaluat ion the consumer consider whether to try the innovation

Trial the consumer tries the innovation to improve his or her estimate ofits value

Adopt ion the consumer decide to make full and regular use of the

innovation

Documents

Product Planning Project