INTRODUCING AND MANAGING THE PRODUCT

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Chapter 7

• INTRODUCING AND MANAGING THE PRODUCT

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Learning Objectives

• Perspectives on product manufacturer,
  consumer, public
• Three levels inherent in products
• Classification systems of products appropriate
  marketing strategies
• Difference between goods and service products
• Processes involved in product planning and
  strategy formulation determination of
  objectives, identification and resolution of
  factors with impact
• Eight steps in new product development system

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Product

• Tangible / intangible offering of a firm that
  satisfies customers
• Single product, combination of products,
  product-service combination
• Generic brand name
• Profitable / potentially profitable
• Meets the requirements of various publics
  governing/influencing society

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Perspectives

• Kraft Foods macaroni and cheese dinner
• Manufacturer food product containing certain
  ingredients, packaged, distributed, priced,
  promoted in a unique manner return on investment
• Consumer nutritious food item, quick, easy to
  prepare, readily consumed by family, especially
  kids
• Public e.g., Food and Drug Administration set of
  ingredients that must meet particular minimum
  standards, in terms of food quality, storage,
  distribution

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Product Levels

• Core what the consumers feel they are getting
  when they purchase the product e.g., an
  overweight individual buying a tread-mill
• Tangible quality level, features, brand name,
  styling and packaging helps to evaluate, choose
  e.g., a young guy buying a car looks for styling,
  brand, same guy at middle-age looks for quality,
  features
• Augmented host of supporting services e.g.,
  restrooms in a department store
• Promised implied promise, characteristic
  attached to the product over time e.g., car
  industry rates brands by their trade-in value

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Product Classification

• Consumer vs. industrial
• Goods products (durable and non-durables) vs.
  service products

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Classification Consumer Goods

• Convenience
• Shopping
• Specialty

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Convenience

• Minimum amount of effort, time, planning by
  consumer
• Primary marketing strategy extensive
  distribution
• Must be available in every conceivable outlet
  easy accessibility e.g., vending machines
• Low unit value, highly standardized, nationally
  advertised
• Extensive mass advertising, sales promotion e.g.,
  coupons, effective packaging create high brand
  awareness, recognition

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Shopping

• Compare products e.g., furniture
• Wide distribution
• Retailers ability to differentiate strong
  brand-name e.g., Sears Roebuck effective
  merchandising aggressive personal selling
  credit availability
• Promotional discounting
• Slow product turnover, capital tied in inventory
• Manufacturers strong support

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Specialty

• Unique products consumers will go to any length
  to seek out and purchase them
• Price is not a principal factor affecting sales
• Custom-made sufficiently differentiated in the
  mind of the consumer e.g., Crisco
• Specialty class marketing activities targeted
  towards achieving this

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Classification Industrial Goods

• Perspectives
• The producer and how they shop for the product
• Manufacturer and how the product is produced and
  how much it costs

• Extractive farm and natural
• Manufactured
• Semi-manufactured
• Parts
• Process machinery
• Equipment
• Supplies and service

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Extractive

• Farms products semi or fully processed
• Natural forests, mines, quarries

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Manufactured

• Demands derived from demands for ultimate
  consumer goods
• Semi-manufactured e.g., crude oil
• Parts e.g., lawn mowers motors
• Process machinery / installations e.g., physical
  plant (boilers, elevators)
• Equipment e.g., fork lift trucks
• Supplies, services e.g., paper, soap, office
  cleaning, plumbing, legal advice

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Services vs. Goods

• Service products utilities, barbers, travel
  agencies Goods cars, food items
• Intangible a deed vs. an object
• Simultaneous production and consumption vs.
  production, storage, consumption
• Little standardization vs. consistent levels of
  satisfaction
• High buyer involvement, customization vs. fixed
  product
• Perishability

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Product Planning

• The determination of product objectives
• The development of product plans to achieve
  product objectives
• The development of strategies appropriate for the
  introduction, management of products

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Objectives

• Growth in sales
• Finding new uses for established products
• Using excess capacity
• Maintaining / improving market share
• Developing a full line of products
• Expanding products appeal to new market segments

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Product Plan

• Product Life Cycle
• Product development ideas are generated,
  operationalized, tested prior to
  commercialization
• Introduction initial distribution and promotion
• Growth accepted by consumers, trade
  word-of-mouth
• Maturity serious competition cuts market
  position
• Decline obsolete, decline in sales

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• Duration of product lifecycle curve is dependent
  on
• Lasting distinctiveness or market protection
  e.g., secrecy, patent protection, time and cash
  needed to develop competitive products, vs.
  perishable distinctiveness
• Vigorous promotional program or a dramatic price
  cut may temporarily improve sales in the decline
  period

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Strategies

• Consistently evaluate existing products
• Modifies where necessary
• Deletes products that no longer contribute to the
  firm
• Introduces new products
• Product management gather necessary data,
  utilize a framework to evaluate it in light of a
  particular product / group of products, select
  appropriate strategy, implement

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Issues

• Approaches to the market
• Product differentiation appeal to whole market
• Market extension attracting additional types of
  buyers, discovering and promoting new users
• Market segmentation focus on part of the market

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Issues

• Key product management decisions
• Product features
• Packaging
• Branding
• Related services

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Product features

• Form
• Color
• Size
• Weight
• Odor
• Material
• Tactile qualities

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Packaging

• Self- service marketing
• Get consumers to notice product through effective
  packaging
• Motivational research, color testing,
  psychological manipulation
• Role of product quality, safety, distinction,
  affordability, convenience, aesthetic beauty
• Design of package color, size, texture, location
  of trademark, name, product information,
  promotional materials

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Branding

• Identify a product, meaningfully advertise,
  distinguish it from its competitors
• Easier for customers to track
• Legal protection
• Associate quality with successful brands
• Create loyalty
• Premium pricing

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Brand

• Brand Name, term, sign, symbol, design
• Brand names vocalizable part of the brand
• Brand mark recognizable part of the brand
• Trademark legal protection given because the
  brand is capable of exclusive appropriation

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Branding strategies

• Manufacturers branding policy producer refuses
  to manufacture merchandise under brands other
  than its own
• Exclusive distributors brands producer does not
  have a brand of his own but agrees to sell his
  products only to a particular distributor and
  carry his brand name (private brands)
• Mixed brand policy elements of both extremes

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Related Services

• Warranty limited e.g., VCR with 30-day warranty
  extended e.g., Craftsman tools division of Sears
  Roebuck
• Money-back guarantees
• Credit and financing
• Delivery (e.g., furniture), installation (e.g.,
  home computers), training and service

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• Why need them?
• Changes in consumer tastes, the size,
  characteristics of particular market segments
• Changes in availability or cost of raw materials,
  other production, marketing components
• Proliferation of small-share brands that reduce
  efficiencies in production, marketing, servicing
  of existing brands

Product Mix Strategies
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Options

• Product modification
• not too pricy for existing consumers
• the consumers perception of the product to be
  too good
• assert what the consumer want as improvements
• evaluate competitors improvements
• evaluate improvements developed within the
  company (RD)

• Product positioning
• market niche - place, rank, mental attitude,
  strategic process
• attributes, price, competitors, application,
  product user, product class, services provided
• Repositioning
• Changing perception of the market to make the
  product more competitive
• Change price, tangible product, promotional
  message

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Product Line

• Depth number of products in a product line
• Width number of separate product lines a company
  owns

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Decisions

• Full-line all conceivable product needed and
  wanted by the consumer
• Limited-line select items
• Line-extension adding goods related to initial
  product e.g., addition of software to hardware
• Line-filling void in the existing line has not
  been filled or a new void has developed due to
  competitors or consumers product proliferation,
  brand extension, private branding
• Line-pruning get rid off non-profitable products

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Product Deletion

• Product is losing money
• Drop weakest product in case of a long product
  line (product line simplification)
• Problem products absorb too much management time,
  inventory costs, promotion expenses, decline of
  company reputation
• Mixed opportunity costs
• Process of product deletion revival

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New Products

• Defining the New
• Consumers viewpoint degree of consumption
  modification, continuous innovations task
  experience
• Firms viewpoint changing the marketing mix,
  modification, differentiation, diversification
• Federal Trade Commissions definition entirely
  new or changed in a functionally significant or
  substantial respect

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Modes

• Internal sources basic research, applied
  research, development
• External sources acquisition of entire
  businesses to acquisition of a single component
  needed for internal new product development of a
  firm mergers and acquisitions, licenses and
  patents (products, process), joint venture

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NewProduct Development Process

• Generating new product ideas
• Screening product development ideas
• Business analysis
• Technical and marketing development
• Manufacturing planning
• Marketing planning
• Test marketing
• Commercialization
• Possible reasons for failure technical problems,
  bad timing, misunderstanding the consumer
  environment, competitors actions

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New Ideas

• Internal resources basic research,
  manufacturing, salesperson, top management
• External resources secondary sources of
  information, competitors, customers, resellers,
  foreign markets

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Screening

• Category appraisal
• Points to new product opportunities within an
  existing category
• to opportunities in a new adjacent category
• Objective discover what makes the category tick?
  e.g.,
• What drives consumer acceptability?
• Strengths and weaknesses?
• Opportunities to outperform existing products?
• Common techniques
• Simple checklist
• Weighing and ranking products on a scale of
  product compatibility

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Business Analysis

• Profits
• Social responsibilities
• Projected demand sales of product, sales or
  license of technology developed for or generated
  as a by-product of the given product
• Cost appraisal development, set-up, operating,
  marketing, management

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Technical Marketing Development

• Applied laboratory research develops exact
  product specification constructs prototypes
• Manufacturing-methods research best way of
  making the product in commercial quantities under
  normal manufacturing conditions
• Marketing research product concept test,
  description of a product idea that reflects core
  elements of the proposed product consumer
  testing

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Manufacturing Planning

• Appraisal of the existing production plant,
  necessary tooling required to achieve the most
  economical production
• Compromise between attractiveness and economy
• Consider other areas of the organization, what
  is required of each, co-ordination

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Marketing Planning

• Marketing plan
• Statement of objectives
• Fusion of product, distribution, promotion,
  pricing into an integrated program of marketing
  action

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Test Marketing

• Assess overall workability of the marketing plan
• Evaluate alternative allocations of the budget
• Determine whether a new product introduction is
  inspiring users to switch from their previous
  brands
• Estimate sales, market share, financial
  performance

• Product testing producer selects sample of
  consumers, provides them incentive to try out the
  product
• Test marketing simulations, test cities
  represent national market, consumers make the
  decision themselves, pay the money, test products
  compete with existing products in the actual
  marketing environment but on a limited basis,
  involves direct and indirect costs for
  manufacturer

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Commercialization

• Product is ready to go
• Lifecycle marketing plan
• Additional decisions about distribution,
  promotion, pricing