MKTG%20504%20-%20Product%20and%20Product%20Management

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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

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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 Dont sell the steak, sell the
  SIZZLE.

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Product

• Not limited to goods - it is goods,
• ideas, services, people, organizations, places.

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Product

• Physical product other tangible
• components
• intangible components
• social impact

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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

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What is the product?

• University degree
• Politician
• You - Yourself as a job candidate

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Really what is product?

• ANYTHING A CONSUMER
• THINKS IT IS

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Examples of what people think

• Bubble-Yum Bubble Gum - MADE WITH SPIDERS EGGS
• Kentucky Fried RAT
• WORMS in Big Macs

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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 Ps.....

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Sales Profit Life Cycles
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Important Characteristics gt PLC

• SALES
• RATE OF SALES GROWTH
• OF COMPETITORS
• PRODUCT
• PROMOTIONAL STRATEGY
• PRICING
• DISTRIBUTION

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Tracking the PLC over time PETRIFICATION

• SALES __________
• RATE OF SALES GROWTH __________
• OF COMPETITORS __________
• PRODUCT __________
• PROMOTIONAL STRATEGY __________
• PRICING __________
• DISTRIBUTION __________

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Bucky Beaver and Ipana
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Examples of Products in Each PLC Stage

• Intro DVD-R DRIVES
• Growth DVDS
• Shakeout PCS
• Mat-Sat VCRS
• Decline RECORD CHANGERS
• Petrification IPANA TOOTHPASTE

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CLASSIFYING PRODUCTS

• Product Category (Class)
• Automobile/container/Timepiece
• Product Form
• Convertible/Tin Can/Watch - Wrist
• Product Item (brand)
• Ford Probe/American Can/Seiko

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How much effort would you spend buying chewing
gum?
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How much effort would you spend buying a
refrigerator?
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How much effort would you spend buying a one of a
kind masterpiece by Rembrandt?
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CLASSIFICATION OF CONSUMER GOODS

• CONVENIENCE
• SHOPPING
• SPECIALTY
• UNSOUGHT

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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 dont want to
  think about.
• Require much advertising
• personal selling

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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

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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.

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Product Mix
Width - number of different product lines
Length - total number of items within the lines
Depth - number of versions of each product
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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

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Product Mix Strategy

• 1 WIDTH - How many different product line there
  are within the company.
• (Sears - WIDE - Circuit City - NOT AS WIDE
  Britches - NARROW)

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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?

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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

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Product Mix Strategy

• A continual addition of new products and
  deletions of old to meet the companys needs.

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Something new...

• New Product Development

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Product Innovation Process (New Product
Development)

• Starts with a product idea
• Lets take a North American summer staple - corn

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How does one hold corn on the cob?
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How does one hold corn on the cob?

• With a corn holder!!

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What does corn look like?

• ? One end is pointed
• ?One end is blunt

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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

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The Solution?
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The Pitta Improved Cornholder (PIC)
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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)

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Where would someone get this idea?

• from eating corn!!

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Product Innovation Process

• 1 IDEA GENERATION
• Sources
• Organization
• Secondary sources
• Patent Office Idea Mills
• Independent Inventors
• Consumers (e.g., Kleenex)

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Who thought of the product

• Army nurses (after WWI)
• Thought cellulose fiber bandages might be useful
• Facial Tissue

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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??

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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)

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The Pitta Improved Cornholder (PIC) Critical
Evaluation

• We asked friends
• We asked our mothers
• We asked our wives
• We demonstrated the PIC to strangers...

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Product Innovation Process - Stage 3

• 3 ECONOMIC ANALYSIS
• Forecast Sales
• Return on Investment
• Effect on Product Line
• Cash Flow
• Profit
• Breakeven Analysis

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The Pitta Improved Cornholder (PIC) Economic
Analysis

• Breakeven Analysis
• The first cornholder cost 27,000
• The second cost .02
• Probable retail price for twogt 1
• Probable wholesale price for two gt.50

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(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

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(PIC) Breakeven Analysis

• BE FC/(P-VC) units
• BE (in units) 27,000/(.50-.20) 90,000 units
• Forget it!

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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)

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MKTG 504 - Product and Product Management

• Commercialization the last stage of the Product
  Innovation Process
• Dr. Dennis Pitta
• University of Baltimore

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COMMERCIALIZATION

• A public offering of the product to the
  marketplace
• Two forms
• Commercialization - Nationwide
• Roll Out limited geographic areas one at a
  time

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Roll out an example

• Tio Sancho rolled out its new non-fracturing taco
  shell against the largest Tex-Mex food
  manufacturer Old El Paso.
• Tio Sancho was small with few resources

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Roll Out vs. CommercializationCommercialization
Roll Out

• very Costly
• Complex
• Hits the whole market simultaneously
  (Comprehensive)

• Less expensive
• Simpler
• Risks being copied in the regions not covered

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Adopter Categorization of the Basis of Relative
Time of Adoption of Innovations
Time of adoption innovations
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What is a Brand?
User
Culture
Personality
Features
Benefits
Advantages
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Good Brand Names
Distinctive
Lack Poor Foreign Language Meanings
Suggest Product Benefits
Suggest Product Qualities
Easy to Pronounce Recognize Remember
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Product Differentiation
Form
Fea- tures
Perfor- mance
Quality
Conform- ance Quality
Dura- bility
Relia- bility
Repair- ability
Style
Design
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Maturity Stage

• Market Modification
• Product Modification
• Marketing-Mix Modification

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Decline Stage

• Increase investment
• Resolve uncertainties - stable investment
• Selective niches
• Harvesting
• Divesting

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Market Evolution

• Emergence
• Growth
• Maturity
• Decline

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Upcoming Topic

• PRICE