MKTG 370 PRODUCT Lars Perner, Instructor 1
PRODUCTS AND LIFE CYCLE STRATEGIES Products and
product lines New products:
Development, successes and failures
The Product Life Cycle and Diffusion of Innovations
Branding
MKTG 370 PRODUCT Lars Perner, Instructor 2
Product Lines vs. Product Mix Product Line: A number of similar or related
products—e.g., BIC writing utensils Boeing Commercial Aircraft (aircraft and parts) Nike shoes; Nike clothing
Product Mix: assortment of different products offered E.g., “KFC—we do chicken right!” (Only one
product line) 3M: Tapes, adhesives, Post-its, chemicals,
computer disks, overhead projectors (things that are bonded together
MKTG 370 PRODUCT Lars Perner, Instructor 3
Reasons for Product Failure
Insignificant “Point of Difference” Incomplete prior market and
product definition Insufficient market attractiveness Poor execution of the marketing
mix Poor product quality or customer
need sensitivity Bad timing Lack of economical access to
customers
MKTG 370 PRODUCT Lars Perner, Instructor 4
Stages in New Product Development Process
Text, p. 279. Copyright © 2002 McGraw-Hill.
MKTG 370 PRODUCT Lars Perner, Instructor 5
Idea Generation
Sources of new ideas Customer based
Outright suggestions Observation of customer problems and tasks Market research on processes and problems
Supplier suggestions Employee suggestions R&D Breakthroughs Competitive ideas Adaptation of products seen in foreign
markets
MKTG 370 PRODUCT Lars Perner, Instructor 6
Screening
Internal screening Technical feasibility Consistency with
strategic objectives External screening
Marketing research Questionnaires Conjoint analysis
(determines importance of attributes)
MKTG 370 PRODUCT Lars Perner, Instructor 7
Business Analysis and Development Business analysis
Financial feasibility
Legal issues Impact on sales
of existing products
Financial projections
Development Design Prototypes Refinements
MKTG 370 PRODUCT Lars Perner, Instructor 8
Test Marketing and Commercialization Test marketing
Limited regional release
May pre-test prices and positioning
Simulated test markets
Laboratory Computer based
Commercialization Positioning Launching product Risks
Slotting fees Failure fees Withdrawal due to
insufficient sales
MKTG 370 PRODUCT Lars Perner, Instructor 9
The Product Life Cycle
Text, p. 295. Copyright © 2002 McGraw-Hill.
MKTG 370 PRODUCT Lars Perner, Instructor 10
Some PLC Stage Examples
Color TVs: Maturity Black and white TVs:
Decline HDTV: Growth VCRs: Decline DVD players: Growth Jeans: Maturity Fast food:
Growth/maturity Traditional
photography: Maturity
Digital photography: Growth
Fax machines: Maturity
Internet access (U.S.) Dial-up: Mature DSL, Cable: Growth
Travel agencies: Decline
Autism education: Introduction
Cranberry juice: Revitalization
MKTG 370 PRODUCT Lars Perner, Instructor 11
The Product Life Cycle (PLC) involves ________ over time Demand for the
product Awareness of the
product Competition in
supplying the product Price Features Differentiation
Profitability Alternatives available
to the product
Investment opportunities (Boston Consulting Group model)
Appropriate strategies
MKTG 370 PRODUCT Lars Perner, Instructor 12
Dimensions of the Product Life Cycle (PLC) Length
Tend to be increasingly short
Especially short in Japan
Shape Effects of learning
opportunities Product level
Class (e.g., TVs) Form (e.g., HDTV)
Diffusion among consumer segments
MKTG 370 PRODUCT Lars Perner, Instructor 13
The International Life Cycle Market for older
technology tends to exist in less developed countries Manufacturing of
older generation technology--e.g., Pentium I computers
Resale of capital equipment—e.g., DC 8 aircraft, old three part canning machines
Some countries tend to be more receptive to innovation than others
“Leap frogging” Going directly
from old technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology)
Shortening of product life cycles
MKTG 370 PRODUCT Lars Perner, Instructor 14
Types of Innovations
Continuous--same product, just small improvements over time--e.g., typical automobile/stereo system model changes
Dynamically continuous--product form changed, but function and usage are roughly similar--e.g., jet aircraft, ball point pen, word processor
Discontinuous--entirely new product; usage approach changes (e.g., fax)
MKTG 370 PRODUCT Lars Perner, Instructor 15
Some Diffusion Examples
ATMs Easy observability Significant relative
advantage Credit cards
“Chicken-and-egg” problem
Jump-starting the cycle
Faded, torn jeans Fads Innovations do not
have to be high tech
Fax machines Network economies
Rap music Low barriers to
entry Spread to a new
consumer group Hybrid corn
Trialability Imitation
MKTG 370 PRODUCT Lars Perner, Instructor 16
To Adopt or Not to Adopt: How Will Consumers Answer the Question?
Some causes of resistance to adoption perceived risk--financial and
social self image effort to implement and/or learn
to use the product incompatibility inertia
MKTG 370 PRODUCT Lars Perner, Instructor 17
Influences on the Speed of Diffusion Risk to expected benefit ratio
(relative advantage) Product pricing Trialability Switching difficulties and learning
requirements/ ease of use
MKTG 370 PRODUCT Lars Perner, Instructor 18
Branding
Brands Product or product line
specific brands E.g., Tide, DeWalt, Hayes
modem International issues
“Umbrella Brands” 3M
National vs. regional National vs. international Store brands
Trade marks and “genericide”
Branding has been tracedto whiskey casks that were identified for quality.
MKTG 370 PRODUCT Lars Perner, Instructor 19
Brand as Category Label: A Mixed Blessing Brand names potentially in danger
Coke (“cola drink”) Kleenex (“facial tissue”) FedEx (“overnight express”) Xerox (“photo copy”)
Market share benefit of descriptive brand name Distributional Consumer “mind share”
MKTG 370 PRODUCT Lars Perner, Instructor 20
Brand Value and Image
Brand equity: Value added to product based on brand name Choice likelihood Ability to charge higher price Use of product as loss leader
Benefit in market share, temporary revenue (Coca Cola)
Possible damage to long term brand image (Louis Vuitton suitcases in Japan)
Brand “personality:” Associations with product
MKTG 370 PRODUCT Lars Perner, Instructor 21
Co-branding To take advantage of
assets of both firms Types
Distributional: Egalitarian: Carl’s Jr.
and Green Taco Hierarchical: Kodak
as official film of Disney Parks
Line filling—e.g., airline code sharing
Ingredients: Cooperative:
Dreyers’ ice cream with Mars M&Ms
Independent: Local computer maker advertises Maxtor hard drive components
Intrusive: “Intel Inside”
Partial: McD’s serves Coca Cola
Sponsorship: Good Housekeeping seal of approval
MKTG 370 PRODUCT Lars Perner, Instructor 22
Branding Issues To extend or not to extend?
Congruence--are products consistent in image to be represented by the same brand name?
Coke and Diet Coke Miller vs. Miller Light Beer
Perception of ability to make product well Extention should not be exploitative (e.g.,
Heinecken Popcorn) Order of entry: First manufacturer of new
to market product should not extend