k 29 bad 67051 marketing management lecture 5 product strategy planning and development l.
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K 29 Bad 67051 Marketing Management Lecture 5 Product Strategy, Planning, and Development. I. Product Development. A. The development of new products B. The continuous improvement of existing products C. WHY bother?. The Product Life Cycle. Innovate, Redesign. Total Market Sales. D o

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i product development
I. Product Development

A. The development of new products

B. The continuous improvement of existing products

C. WHY bother?

slide3

The Product Life Cycle

Innovate, Redesign

Total Market Sales

D

o

l

l

a

r

s

Drop Product

Time

Growth

Maturity

Decline

Introduction

Stage:

Emphasis in Marketing Mix

Cost Reduction

Price

Promotion

Distribution

slide4

The Product Life Cycle

Innovate, Redesign

Total Market Sales

D

o

l

l

a

r

s

Total Market Profit

Drop Product

Time

Growth

Maturity

Decline

Introduction

Stage:

Emphasis in Marketing Mix

Cost Reduction

Price

Promotion

Distribution

ii the total product
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 and Augmented Product Example

Core Product--

Close Up

Toothpaste

core and augmented product example7
Core and Augmented Product Example

Primary Characteristics: basic features of the core product

Core Product--

Close Up

Toothpaste

  • ESSENTIAL BENEFITS
    • Clean Teeth
    • Prevent Tooth Decay
augmented product auxiliary dimensions
Augmented Product -- Auxiliary Dimensions

Flip top package

Brand Name-- Close Up

Flavor

Core Product--

Close Up

Toothpaste

800 help phone line

Tartar Control

Fluoride

benefits of the augmented product
Benefits of the Augmented Product

Convenient Storage

Flip top package

Social Confidence;

Romance;

White Teeth

Brand Name-- Close Up

Good Taste

Fresh Breath

Flavor

Core Product--

Close Up

Toothpaste

800 help phone line

Tartar Control

CleanerTeeth

Safety

Fluoride

Lower Dental

Bills

iii classifying products
III. Classifying Products

A. End Use Market

1. Agricultural Products & Raw Materials

2. Organizational Goods

3. Consumer Goods

agricultural raw materials
Agricultural & Raw Materials
  • For example: Ingredients (zinc, pig iron, cotton)
    • Rather Homogeneous
    • Sold in bulk
    • Low value per unit
organizational products
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 products13
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

SHOVEL

EMPLOYMENT

AGENCY

RESTAURANT

GOOD GOOD/SERVICE SERVICE

Consumer Goods

1. Based on Durability/Tangibility Classification

consumer goods15

Willingness to Expend Effort for Product

LOW

HIGH

CONVENIENCE

PRODUCT

SHOPPING

PRODUCT

SPECIALTY

PRODUCT

Consumer Goods

2. Based on CONSUMER’S Interest

convenience products
CHARACTERISTICS:

1. Relatively Inexpensive

2. Purchase is regular and recurring

3. Little Thinking Involved

4. Minimal Shopping Effort

5. Bought a most convenient location

6. Bought on impulse

STRATEGY:

1. Make available in every possible place

2. Must be visible inside the store

3. Distribution is a major marketing mix factor

4. Easy substitution by similar brands

5. Extensive advertising is used

CONVENIENCE PRODUCTS
shopping products
CHARACTERISTICS:

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

Shopping Products
specialty products
CHARACTERISTICS:

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

Specialty Products
iv does your product offer quality or value
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 9000

VALUE--

--what the customer gets in exchange for what the customer gives.

--”Am I satisfied?” “How much did it cost?”

v product mix terminology
V. Product Mix Terminology

Product Mix

All of the products we offer for sale

Product Line

A group of closely related products

Width of Product Mix

The number of product lines carried

Depth of Product Mix

Average Number of Products in each line

Consistency of Product Mix

How similar are our product lines?

product mix example
Product Mix Example

Width (Number of Product Lines)

Depth

#

of

Items

vi brand equity
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 equity23
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 equity24
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
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
VIII. Individual Brands

A. Use of Separate Brand Names for each product.

Example:

--Goodyear

--Dunlop

--Springfield

slide29

Proctor & Gamble’s Portfolio

Brand Positioning Share

TIDE Tough, powerful cleaning 31.1%

CHEER Tough cleaning, color safe 8.2

BOLD Detergent + Fabric Softener 2.9

GAIN Sunshine scent & odor protection 2.6

ERA Stain removal 2.2

DASH Value priced 1.8

OXYDOL Whitening 1.4

SOLO Liquid detergent & softener 1.2

DREFT For baby clothes & tender skin 1.0

IVORY Simple, basic, no frills soap

SNOW Safe for fine fabrics & babies .7

ARIEL Tough cleaner, Hispanic market .1

ix warranties
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
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
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 products
XII. Differing Perspectives of New Products

A. 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 products34
XII. Differing Perspectives of New Products

A. Management perspective:

4. Product modifications

a. product improvements

b. cost reductions

c. repositionings

xii differing perspectives of new products35
XII. Differing Perspectives of New Products

B. Consumer Perspective:

1. Continuous innovations

Variations of existing products

No behavior changes

2. Dynamically continuous innovations

Improvement of existing products

Minor behavior changes

3. Discontinuous innovations

New function

Major behavior changes

xiii characteristics of success for a new product
XIII. Characteristics of Success for a New Product

A. Relative Advantage

An enhanced bundle of benefits

B. Compatibility

Similar usage or consumption, patterns, and values

C. Trialability

Opportunity for buyer testing through sampling or divisibility

xiii characteristics of success for a new product37
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

XIV. The Product Development Process

Stage 1

To Stage 2

slide39

Initial Evaluation of Market Potential

  • Check product fit in company mission and competencies

Screening

XIV. The Product Development Process

Stage 2

  • Consider Effects on other products
  • Raw materials supply
  • Patent position

To Stage 3

slide40

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

XIV. The Product Development Process

Stage 3

To Stage 4

slide41

Supply chain process

  • Manufacturing process
  • Manufacturing Control system process
  • Marketing programs
  • Update costs and financial plans
  • Ensure target costs are met

Development Plan

(Concurrent)

XIV. The Product Development Process

Stage 4

To Stage 5

slide42

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

XIV. The Product Development Process

Stage 5

OR

To Stage 6a

To Stage 6

slide43

Test promotion methods

  • Check repurchase rate
  • Test media mix
  • Measure Trade Acceptance
  • Test prices
  • Build product inventories
  • Develop additional distribution channels
  • Revise as needed

Test

Market

XIV. The Product Development Process

Stage 6a

To Stage 6

slide44

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

XIV. The Product Development Process

Stage 6

To Stage 7

slide45

Analyze sales data

  • Analyze profits
  • Revise promotion mix

Evaluation

XIV. The Product Development Process

  • Adjust product specs
  • Reallocate sales force
  • Phase out weak items

Stage 7

Continuous Improvement

xv why new products fail
XV. Why New Products Fail
  • No Competitive Advantage
  • Competitive Reaction
  • Badly Positioned
  • Poor Quality
  • Does Not Deliver Promised Benefits
  • Too Little Marketing Support (SYNERGY!)
  • Low Perceived Value
xv why new products fail47
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
..so Research, Research, RESEARCH!!
  • Thinking about research and sample size…
    • http://www.robertniles.com/stats/sample.shtml