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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
Chapter 7

Product Planning

and Strategies

Ch 7: Product Planning and Strategies

outline of chapter
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

the meaning of product
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

the meaning of product4
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

product attributes
Product Attributes

Ch 7: Product Planning and Strategies

product classification systems
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

product classification systems7
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

categories of consumer goods
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

categories of consumer goods9
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

categories of consumer goods10
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

categories of consumer goods11
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

strategic decisions pertaining to the organization s products
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

product mix breadth and depth
Product Mix – Breadth and Depth

Ch 7: Product Planning and Strategies

strategic decisions pertaining to the organization s products14
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

major product mix strategies
Major Product-Mix Strategies:
  • Product Positioning
  • Product Mix Expansion
  • Alteration of Existing Products
  • Trading Up and Trading Down
  • Product Mix Contraction

Ch 7: Product Planning and Strategies

product positioning
Product Positioning

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

product mix expansion
Product-Mix Expansion
  • Increasing the depth within a particular product line and/or the number of lines.
    • Line extensions
    • Mix extensions

Ch 7: Product Planning and Strategies

mix extension strategies
Mix-Extension Strategies
  • Related-product, same brand.
  • Unrelated product, same brand.
  • Unrelated product, different brand.
  • Related product, different brand.

Ch 7: Product Planning and Strategies

the importance of product innovation
The Importance of Product Innovation:

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

three categories of new products
Three categories of new 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

six steps in the new product development process
Six steps in the New Product Development Process:

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

six steps in the new product development process22
Six steps in the New Product Development Process:

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

six steps in the new product development process23
Six steps in the New Product Development Process:

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

organizing for product innovation
Organizing For Product Innovation:
  • Product-planning Committee
  • New-product Department
  • Venture Team
  • Product Manager

Ch 7: Product Planning and Strategies

new product adoption and diffusion
New Product Adoption and Diffusion:

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

stages in the adoption process
Stages in the Adoption Process:

1. Awareness

2. Interest

3. Evaluation

4. Trial

5. Adoption

6. Confirmation

Ch 7: Product Planning and Strategies

adopter categories
Adopter Categories:

1. Innovators

2. Early adopters

3. Early majority

4. Late majority

5. Laggards

6. Non-adopters

Ch 7: Product Planning and Strategies

innovation characteristics affecting the adoption rate
Innovation Characteristics Affecting the Adoption Rate:

1. Relative advantage

2. Compatibility

3. Complexity

4. Trialability

5. Observability

Ch 7: Product Planning and Strategies

product life cycle
Product Life Cycle:
  • 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

typical life cycle of a product category
Typical Life Cycle of a Product Category

Ch 7: Product Planning and Strategies

life cycle stages
Life Cycle Stages

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

growth
Growth
  • 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

maturity
Maturity
  • 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

decline
Decline
  • 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