MKTG 504 - Product and Product Management. A product is anything the consumer thinks it is!! Dr. Dennis Pitta University of Baltimore. PRODUCT. A complex bundle of attributes Most important element of the marketing mix.
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MKTG 504 - Product and Product Management A product is anything the consumer thinks it is!! Dr. Dennis Pitta University of Baltimore
PRODUCT • A complex bundle of attributes • Most important element of the marketing mix. • Charles Revson: “In the factory we make cosmetics, in the store we sell _HOPE” • Elmer Wheeler: “Don’t sell the steak, sell the SIZZLE.”
Product: Not limited to goods - it is goods, ideas, services, people, organizations, places.
Product: = Physical product + other tangible components + intangible components + social impact
Product Component Examples: Physical good: wood, plastic, chemical (shaver) Other tangibles: service, brand name, close shave, package Intangible: Eminem likes it Social Impact: More young men are clean shaven
What is the product? University degree Politician You - Yourself as a job candidate
Really what is product? ANYTHING A CONSUMER THINKS IT IS
Examples of what people think • Bubble-Yum Bubble Gum - MADE WITH SPIDER’S EGGS • Kentucky Fried RAT • WORMS in Big Macs
Product Life Cycle A dynamic model of how product changes over time. Importance: different product characteristics at each stage: • Lead to different marketing strategies • Emphasize different combinations of the 4 P’s.....
Sales&profits($) Introduction Growth Maturity Decline Time Sales & Profit Life Cycles
Important Characteristics => PLC • SALES • RATE OF SALES GROWTH • # OF COMPETITORS • PRODUCT • PROMOTIONAL STRATEGY • PRICING • DISTRIBUTION
Tracking the PLC over time: PETRIFICATION SALES __________ RATE OF SALES GROWTH __________ # OF COMPETITORS __________ PRODUCT __________ PROMOTIONAL STRATEGY __________ PRICING __________ DISTRIBUTION __________
Examples of Products in Each PLC Stage • Intro: DVD-R DRIVES • Growth: DVD’S • Shakeout: PC’S • Mat-Sat: VCR’S • Decline: RECORD CHANGERS • Petrification: IPANA TOOTHPASTE
CLASSIFYING PRODUCTS • Product Category (Class): • Automobile/container/Timepiece • Product Form: • Convertible/Tin Can/Watch - Wrist • Product Item (brand): • Ford Probe/American Can/Seiko
How much effort would you spend buying a one of a kind masterpiece by Rembrandt?
CLASSIFICATION OF CONSUMER GOODS • CONVENIENCE • SHOPPING • SPECIALTY • UNSOUGHT
Convenience Products Shopping Products Unsought Products Specialty Products Consumer-Goods Classification • Buy frequently & immediately • Low priced • Many purchase locations • Includes: • Staple goods • Impulse goods • Emergency goods • Buy less frequently • Gather product information • Fewer purchase locations • Compare for: • Suitability & Quality • Price & Style • Special purchase efforts • Unique characteristics • Brand identification • Few purchase locations • New innovations • Products consumers don’t want to think about. • Require much advertising & • personal selling
CLASSIFICATION OF CONSUMER GOODS • CONVENIENCE • PURCHASED WITH A MINIMUM OF EFFORT • SHOPPING • HEAVY COMPARISON OF PRICE, QUALITY, AND STYLE • SPECIALITY • VERY STRONG BRAND PREFERENCE: SPECIAL TIME AND EFFORT - PRICE NOT VERY IMPORTANT
CLASSIFICATION OF CONSUMER GOODS • UNSOUGHT • This is a difficult product. Examples: • Life insurance to young unmarried men • Umbrellas to young unmarried men • Vacuum cleaners to young unmarried men….. • Chain Saws to young unmarried women….
Product Mix - all the product lines offered Consistency Product Mix Width - number of different product lines Length - total number of items within the lines Depth - number of versions of each product
Product Mix Strategy Decisions made at three levels: 1 Product ITEM (specific version) - keep or drop. 2 Product LINE (group of related products) - deepen or shorten. 3 Product MIX (composite of all products) - ‘what markets to be in’
Product Mix Strategy 1 WIDTH - How many different product line there are within the company. (Sears - WIDE - Circuit City - NOT AS WIDE; Britches - NARROW)
Product Mix Strategy 2 DEPTH - The average number of items offered by the company within each line. Maxwell House Coffee - DEEP; Sears - NOT SO DEEP The LIMITED STORE - How deep?
Product Mix Strategy 3 CONSISTENCY - Relationship of products to one another - in end use. (i.e., INTERACTION - together) G.E.; XEROX - GOOD CONSISTENCY HUNT-WESSON -Paint, Matches, Food
Product Mix Strategy A continual addition of new products and deletions of old to meet the company’s needs.
Something new... New Product Development
Product Innovation Process (New Product Development) • Starts with a product idea • Let’s take a North American summer staple - corn
How does one hold corn on the cob? • With a corn holder!!
What does corn look like? • One end is pointed • One end is blunt
What is a problem with ordinary corn holders? • It is tough to get them out of an ear that has been eaten • One sticks in the blunt end • Getting it out is often messy
PIC Product Benefits • Easy to remove (the one stuck in the blunt end of the ear comes off easily) • Fun at parties - (dodge the flying corn cob) • Saves laundry (less mess, less laundry)
Where would someone get this idea? …from eating corn!!
Product Innovation Process • 1 IDEA GENERATION • Sources: • Organization • Secondary sources: • Patent Office; Idea Mills; • Independent Inventors • Consumers (e.g., Kleenex)
Who thought of the product: • Army nurses (after WWI) • Thought cellulose fiber bandages might be useful • ‘Facial Tissue’
A product is anything someone thinks it is…. • When was the last time someone blew his or her ‘face’? • We use Kleenex as a disposable handkerchief! • Is it a facial tissue??
Product Innovation Process - Stage 2 • 2 SCREENING • Critical evaluation • Possible problems: • Rejecting a Good Product (Type 1 Error) • Accepting a Bad Product as a good one (Type II Error) (I would hate to make this type testing Handgrenades)
The Pitta Improved Cornholder (PIC) Critical Evaluation • We asked friends • We asked our mothers • We asked our wives • We demonstrated the PIC to strangers...
Product Innovation Process - Stage 3 • 3 ECONOMIC ANALYSIS • Forecast Sales • Return on Investment • Effect on Product Line • Cash Flow • Profit • Breakeven Analysis
The Pitta Improved Cornholder (PIC) Economic Analysis • Breakeven Analysis • The first cornholder cost $27,000 • The second cost $.02 • Probable retail price for two=> $1 • Probable wholesale price for two =>$.50
(PIC) Breakeven Analysis • Calculates # of units to be sold at a price to just breakeven • Fixed Cost = $27,000 • Variable Cost (per unit) = $.20 (2 holders, packaging, overhead) • Price (wholesale) = $.50 per unit
(PIC) Breakeven Analysis • BE = FC/(P-VC) = units • BE (in units) = $27,000/(.50-.20) = 90,000 units • Forget it!
Product Innovation Process 4 DEVELOPMENT Determining Product Benefits Creating the Package, Brand Name 5 TEST MARKETING (Small Scale Introduction) Marketing Plan 6 COMMERCIALIZATION (Roll Out)
MKTG 504 - Product and Product Management Commercialization – the last stage of the Product Innovation Process Dr. Dennis Pitta University of Baltimore
COMMERCIALIZATION • A public offering of the product to the marketplace • Two forms • Commercialization - Nationwide • Roll Out – limited geographic areas – one at a time