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Bad 67051Bad 67051Marketing ManagementMarketing Management
Lecture 5Lecture 5Product Strategy, Planning, Product Strategy, Planning,
and Developmentand Development
I. Product Development
A. The development of new products
B. The continuous improvement of existing products
C. WHY bother?
The Product Life CycleThe Product Life Cycle
Introduction Growth Maturity DeclineStage:
Dollars
Time
Emphasis in Marketing Mix Promotion Distribution Price Cost
Reduction
Drop Product
Innovate, RedesignTotal Market
Sales
The Product Life CycleThe Product Life Cycle
Introduction Growth Maturity DeclineStage:
Dollars
Time
Emphasis in Marketing Mix Promotion Distribution Price Cost
Reduction
Drop Product
Innovate, RedesignTotal Market
Sales
Total Market Profit
II. The “Total Product”
A. Defined:
Broad spectrum [bundle] of tangible and intangible benefits
B. Primary Characteristics:
basic features of the core product
C. Auxiliary Dimensions:
supplementary benefits
Core and Augmented Product Example
Core Product--Close Up
Toothpaste
Core and Augmented Product Example
Core Product--Close Up
Toothpaste
Primary Characteristics: basic features of the core product
ESSENTIAL BENEFITS•Clean Teeth•Prevent Tooth Decay
Augmented Product -- Auxiliary Dimensions
Core Product--Close Up
Toothpaste
Flip top package
Brand Name-- Close Up
800 help phone line
Fluoride
Flavor
Tartar Control
Benefits of the Augmented Product
Core Product--Close Up
Toothpaste
Flip top package
Brand Name-- Close Up
800 help phone line
Fluoride
Flavor
Tartar Control
Social Confidence;Romance;White Teeth
Safety
Lower Dental Bills
Cleaner Teeth
Good TasteFresh Breath
Convenient Storage
III. Classifying Products
A. End Use Market1. Agricultural Products & Raw Materials
2. Organizational Goods
3. Consumer Goods
Agricultural & Raw Materials
For example: Ingredients (zinc, pig iron, cotton)– Rather Homogeneous– Sold in bulk– Low value per unit
Organizational Products
1. Manufactured materials and component parts: (electrical resistors, screws, electric motors)
2. Process materials: used in production, not part of finished product (chemicals)
3. Installations: primary production equipment and major capital items (buildings, computer hardware, assembly lines)
Organizational Products
4. Accessory equipment: (word processors, trucks)
5. Operating Supplies: facilitate routine operations (writing paper, hand tools)
6. Services: work provided by others (maintenance, repairs)
Consumer Goods
1. Based on Durability/Tangibility Classification
SHOVEL RESTAURANTEMPLOYMENT
AGENCY
GOOD GOOD/SERVICE SERVICE
Consumer Goods
2. Based on CONSUMER’S Interest
CONVENIENCEPRODUCT
SHOPPINGPRODUCT
SPECIALTYPRODUCT
Willingness to Expend Effort for ProductLOW HIGH
CONVENIENCE PRODUCTSCHARACTERISTICS:1. Relatively Inexpensive2. Purchase is regular and
recurring3. Little Thinking Involved4. Minimal Shopping Effort5. Bought a most convenient
location6. Bought on impulse
STRATEGY:1. Make available in every
possible place2. Must be visible inside the
store3. Distribution is a major
marketing mix factor4. Easy substitution by
similar brands5. Extensive advertising is
used
Shopping ProductsCHARACTERISTICS:
1. Product comparisons occur
2. Consumer seek information
3. Decisions are based on thought
4. Relatively higher prices
5. Often fashion oriented
6. Monetary & social risks
7. Brand loyalty may be found
STRATEGY:
1. Selective distribution
2. Consumers will seek products in less visible locations
3. Quality is important
4. Product differentiation is possible
Specialty ProductsCHARACTERISTICS:
1. Substitutes are not accepted
2. Infrequently purchased
3. Extensive Search
4. Brand loyalty may be strong
5. Loyalty to retailer may be as important as brand selection
6. May travel great distances to acquire
STRATEGY:
1. Limited distribution
2. Consumers will seek products regardless of location
3. Extensive product and price differentiation
4. Strong brand image
IV. Does your product offer Quality or Value?
QUALITY----degree of excellence or superiority your product
has (or service provides)--CUSTOMER’S perception of quality is key--TQM and ISO 9000VALUE----what the customer gets in exchange for what the
customer gives.--”Am I satisfied?” “How much did it cost?”
V. Product Mix TerminologyProduct Mix
All of the products we offer for saleProduct Line
A group of closely related productsWidth of Product Mix
The number of product lines carriedDepth of Product Mix
Average Number of Products in each lineConsistency of Product Mix
How similar are our product lines?
Product Mix Example
Hair Care SaltySnacks
DentalCare
SoftDrinks
Shampoo Chips Toothbrush Colas
Conditioner Nuts Toothpaste GingerAle
Hair Spray Crackers DentalFloss
Root Beer
Comb
Width (Number of Product Lines)
Depth# of Items
VI. Brand Equity
A. Branding identifies and distinguishes one marketer’s product from another's
– Customers use brand information as important buying cues.
1. A BRAND is any name, term, symbol, sign, design, or unifying combination of these that identifies a product.
VI. Brand Equity
a. A BRAND NAME is the verbal part of the brand.
b. A BRAND MARK is a unique symbol that is part of the brand.
c. A logo, or logotype, is a brand name or company name written in a distinctive style.
VI. Brand Equity
2. Brand equity is the “value” of the brand caused by goodwill and brand reputation.– It is a valuable asset that must be
managed!– Strong equity makes market position
easier to defend.– Strong equity makes new products
easier to introduce.
VII. Family Branding
A. Family branding is a strategy that uses a single brand name for different items in a product line
– e.g., Heinz, Del Monte, General Electric
VIII. Individual Brands
A. Use of Separate Brand Names for each product.
Example:
--Goodyear
--Dunlop
--Springfield
Goodyear Target MarketsGoodyear Dunlop Kelly
Cust. FamilyCentered
Euro-cool Blue collar
Audience Mirror ofActiveAmerica
On the wayup
Taking Careof Basics
Age 34-54 24-34 ??
Price High end Mid-range Lower end
Slogan SeriousTechnology.Freedomfrom worry
Point ofDeparture
Honest tires,HonestPrices
Brand Positioning ShareTIDE Tough, powerful cleaning 31.1%CHEER Tough cleaning, color safe 8.2BOLD Detergent + Fabric Softener 2.9GAIN Sunshine scent & odor protection 2.6ERA Stain removal 2.2DASH Value priced 1.8OXYDOL Whitening 1.4SOLO Liquid detergent & softener 1.2DREFT For baby clothes & tender skin 1.0IVORY Simple, basic, no frills soap SNOW Safe for fine fabrics & babies .7ARIEL Tough cleaner, Hispanic market .1
Proctor & Gamble’s Portfolio
IX. Warranties
A. A product warranty provides a written guarantee of a product’s integrity and the manufacturer’s responsibility for repairing or replacing defective parts.
B. Warranties reduce customers’ perceived risk by suggesting product quality.
C. HONOR THY WARRANTY to create customer satisfaction!
X. Packaging
A. Packaging contains the product and protects it, aids in usage, identification, promotion, and ecology.
B. Packaging involves decisions about labeling, inserts, instructions, design, and sizes.
C. Packages serve as cues to customers as they purchase.
XI. The Product Audit
Think Product Portfolio Management, ala the Boston Consulting Group Matrix:
--Review products to determine whether they should be continued as is, improved, modified, or deleted.
XII. Differing Perspectives of New ProductsA. Management perspective:
1. New-to-the-world products
High Risk
2. Product category extensions
Diversification into an established market for an existing product--BUT, new to the firm
3. Product line extensions
Additions to existing product lines
XII. Differing Perspectives of New Products
A. Management perspective:
4. Product modifications
a. product improvements
b. cost reductions
c. repositionings
B. Consumer Perspective:1. Continuous innovations
Variations of existing productsNo behavior changes
2. Dynamically continuous innovationsImprovement of existing productsMinor behavior changes
3. Discontinuous innovationsNew functionMajor behavior changes
XII. Differing Perspectives of New Products
XIII. Characteristics of Success for a New Product
A. Relative AdvantageAn enhanced bundle of benefits
B. CompatibilitySimilar usage or consumption, patterns, and values
C. TrialabilityOpportunity for buyer testing through sampling or divisibility
XIII. Characteristics of Success for a New Product
D. Observability
Buyers see the newness
E. Simplicity
Complexity is a disadvantage which slows diffusion
XIV. The Product Development Process
•Salespeople
•Dealers
•Customers
•Engineers
•R&D
•Competitors
•Trade Shows
•Ad agencies
•Market Research
•U.S. Dept of Commerce
•Patent Office
•Licenses
•Private Labs
•Independent Inventors
•University Labs
Search for New Product
Ideas
To Stage 2
Stage 1
XIV. The Product Development Process
•Initial Evaluation of Market Potential
•Check product fit in company mission and competencies
•Consider Effects on other products
•Raw materials supply
•Patent position
Screening
To Stage 3
Stage 2
XIV. The Product Development Process
•Check against customer needs
•Establish target market
•Check competition’s position
•Develop target position
•Develop initial product specifications
•Perform economic analysis
•Revise and refine as needed
Concept Development
To Stage 4
Stage 3
XIV. The Product Development Process
•Supply chain process•Manufacturing process
•Manufacturing Control system process
•Marketing programs
•Update costs and financial plans
•Ensure target costs are met
Development Plan
(Concurrent)
To Stage 5
Stage 4
XIV. The Product Development Process
•Create Prototype
•Lab Testing
•Customer Use Tests
•Customer reaction to planned marketing mix
•Feedback and Revision
•Re-test by customers
•Re-evaluation against competition
Development&
Testing
To Stage 6a
Stage 5
To Stage 6
OR
XIV. The Product Development Process
•Test promotion methods
•Check repurchase rate
•Test media mix
•Measure Trade Acceptance
•Test prices
•Build product inventories
•Develop additional distribution channels
•Revise as needed
TestMarket
To Stage 6
Stage 6a
XIV. The Product Development Process
•Ramp up Production
•Ramp up purchasing
•Activate Quality focused control systems
•Mass training of sales or service personnel
•Dealer meetings
•Trade and customer ads
•Press conference
Launch
To Stage 7
Stage 6
XIV. The Product Development Process
•Analyze sales data
•Analyze profits
•Revise promotion mix
•Adjust product specs
•Reallocate sales force
•Phase out weak items
Evaluation
Continuous Improvement
Stage 7
XV. Why New Products Fail
No Competitive AdvantageCompetitive ReactionBadly PositionedPoor QualityDoes Not Deliver Promised BenefitsToo Little Marketing Support (SYNERGY!)Low Perceived Value
XV. Why New Products Fail
Bad Estimates of Market Potential (or other marketing research errors)
--Forecasts are dangerous, especially those about the future!!!
Poor estimates of Production &/or Marketing Costs
Poor Selection of Marketing Channels Rapid Change in the Marketing Environment
..so Research, Research, RESEARCH!!
Thinking about research and sample size…– http://www.robertniles.com/stats/sample.shtml