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Chapter 7. Product Planning and Strategies. Outline of Chapter:. The Meaning of Product Product Classification Systems Product Strategies Developing New Products New Product Adoption and Diffusion Managing Products Throughout the Product Life Cycle. The Meaning of Product.

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Chapter 7 l.jpg
Chapter 7

Product Planning

and Strategies

Ch 7: Product Planning and Strategies


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Outline of Chapter:

  • The Meaning of Product

  • Product Classification Systems

  • Product Strategies

  • Developing New Products

  • New Product Adoption and Diffusion

  • Managing Products Throughout the Product Life Cycle

Ch 7: Product Planning and Strategies


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The Meaning of Product

  • The essence of what the company is offering the consumer.

  • The consumer is buying the benefit provided by the product attributes.

Ch 7: Product Planning and Strategies


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The Meaning of Product:

Product - is a set of tangible and intangible attributes, including packaging, color, price, quality, and brand, plus a seller’s services and reputation.

It can be:

  • A product (tangible)

  • A service (intangible)

  • Place

  • Person

  • Idea

Ch 7: Product Planning and Strategies


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Product Attributes

Ch 7: Product Planning and Strategies


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Product Classification Systems

  • Whether a product is considered a consumer or business good depends on the intended target market, how it is used, and by whom.

  • Often one product can be both a consumer and business good.

Ch 7: Product Planning and Strategies


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Product Classification Systems

  • Business Products - are intended for resale, for use in producing other products, or for providing services in an organization.

  • Consumer Products - are intended for use by household consumers for non-business purposes

Ch 7: Product Planning and Strategies


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Categories of Consumer Goods:

1. Convenience goods

  • buy frequently,immediately, and with minimum comparison or buying effort

  • usually low-priced and widely available

  • consumer usually has complete knowledge of these products before going shopping

  • Ex: Mars Chocolate

Ch 7: Product Planning and Strategies


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Categories of Consumer Goods:

2. Shopping Goods

  • are less frequently purchased products that consumers compare on suitability, quality, price, and style

  • spend much time and effort in gathering information and making comparisons

  • Ex: Maytag products

Ch 7: Product Planning and Strategies


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Categories of Consumer Goods:

3. Specialty goods

  • products with unique characteristics or brand identification

  • significant group of buyers is willing to make a special purchase effort

  • products have a strong brand preference and are sold in very few outlets, so consumers are willing to go out of their way to get them

  • both the retailer’s name and the brand name are important

  • Ex: Rolls-Royce Luxury Cars

Ch 7: Product Planning and Strategies


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Categories of Consumer Goods:

4. Unsought goods

  • products that consumers are not yet aware of or that they do not think to buy

  • require extensive promotion

  • most major innovations are unsought goods until consumers become aware of them

Ch 7: Product Planning and Strategies


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Strategic Decisions Pertaining to the Organization’s Products

  • The product mix is a collection of products offered for sale, and has both breadth and depth.

    • Breadth  number of product lines offered.

    • Depth  the assortment within the line.

Ch 7: Product Planning and Strategies


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Product Mix – Breadth and Depth Products

Ch 7: Product Planning and Strategies


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Strategic Decisions Pertaining to the Organization’s Products

Product Line: is a group of products intended for essentially similar uses and possessing reasonably similar characteristics; a group of related products

  • Breadth - of the product line is the number of individual products composing the line.

  • Depth - is the number of different models, styles, colors, etc. for each product.

Ch 7: Product Planning and Strategies


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Major Product-Mix Strategies: Products

  • Product Positioning

  • Product Mix Expansion

  • Alteration of Existing Products

  • Trading Up and Trading Down

  • Product Mix Contraction

Ch 7: Product Planning and Strategies


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Product Positioning Products

The ability to appropriately position a product

is a major determinant of company

profitability.

  • Positioning in relation to a competitor– by drawing comparisons.

  • Positioning in relation to a product class or an attribute – by stressing certain attractive characteristics.

  • Positioning in relation to a target market.

  • Positioning by price and quality.

Ch 7: Product Planning and Strategies


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Product-Mix Expansion Products

  • Increasing the depth within a particular product line and/or the number of lines.

    • Line extensions

    • Mix extensions

Ch 7: Product Planning and Strategies


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Mix-Extension Strategies Products

  • Related-product, same brand.

  • Unrelated product, same brand.

  • Unrelated product, different brand.

  • Related product, different brand.

Ch 7: Product Planning and Strategies


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The Importance of Product Innovation: Products

New product innovation is very important to an organization’s success because it helps:

1. sustain company growth

2. provide consumer choice

3. overcome high failure rates for new products.

Ch 7: Product Planning and Strategies


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Three categories of new products: Products

1.Truly innovative - new products that satisfy a real need.

2.Replacement products - new products that are significantly different from existing products in form, function or benefits provided.

3.Imitative products - products that are new to the company, but not to the market.

Ch 7: Product Planning and Strategies


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Six steps in the New Product Development Process: Products

Step 1: Idea generation

  • Companies must have a system for stimulating new ideas and for reviewing them promptly.

    Step 2: Screening of ideas

  • A new product strategy will guide the screening process.

Ch 7: Product Planning and Strategies


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Six steps in the New Product Development Process: Products

Step 3: Business analysis

  • What questions do you want answered at this stage?

    Step 4: Prototype development

  • A model of the product is manufactured and tested.

Ch 7: Product Planning and Strategies


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Six steps in the New Product Development Process: Products

Step 5: Test markets

  • Product is tested with consumers.

  • Product is adjusted based on the test results.

  • Go/no go decision is made.

    Step 6: Commercialization

  • Full scale production and marketing

Ch 7: Product Planning and Strategies


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Organizing For Product Innovation: Products

  • Product-planning Committee

  • New-product Department

  • Venture Team

  • Product Manager

Ch 7: Product Planning and Strategies


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New Product Adoption and Diffusion: Products

Adoption process - is the decision making activity of an individual through which innovation is accepted.

Diffusion process - is the process by which the innovation is spread through a market over time.

Ch 7: Product Planning and Strategies


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Stages in the Adoption Process: Products

1. Awareness

2. Interest

3. Evaluation

4. Trial

5. Adoption

6. Confirmation

Ch 7: Product Planning and Strategies


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Adopter Categories: Products

1. Innovators

2. Early adopters

3. Early majority

4. Late majority

5. Laggards

6. Non-adopters

Ch 7: Product Planning and Strategies


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Innovation Characteristics Affecting the Adoption Rate: Products

1. Relative advantage

2. Compatibility

3. Complexity

4. Trialability

5. Observability

Ch 7: Product Planning and Strategies


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Product Life Cycle: Products

  • The product life cycle curve represents the sales of a product category, not a particular brand.

  • The length of the cycle varies among products, but are generally getting shorter.

  • Not all products go through all stages of the cycle.

  • A product can be in different stages in the life cycle in different markets.

  • Product life cycles can be managed.

Ch 7: Product Planning and Strategies


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Typical Life Cycle of a Product Category Products

Ch 7: Product Planning and Strategies


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Life Cycle Stages Products

Introduction

  • high failure rate

  • increasing costs, low sales, net losses

  • limited distribution, few competitors

  • stimulate primary demand

  • appeal to innovators

  • increase product awareness and trial

Ch 7: Product Planning and Strategies


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Growth Products

  • market acceptance, early adopters start to purchase product

  • competitors enter market with “me-too” products

  • stimulate selective demand

  • distribution outlets increase

  • economies of scale in production and marketing

  • price may drop slightly

  • profit peaks and may start to decline

  • try to maximize market share

Ch 7: Product Planning and Strategies


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Maturity Products

  • sales increase at a decreasing rate, level off, then decline

  • profits decrease

  • marginal producers drop out

  • price competition increases

  • promotion increases to retain dealers and shelf space

  • new models introduced

Ch 7: Product Planning and Strategies


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Decline Products

  • brand loyal customers and laggards purchase product

  • advertising decreases; cost control important

  • competitors withdraw

  • decide to drop the product or try to revitalize the brand

  • try to have a profitable phase out

Ch 7: Product Planning and Strategies


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