Chapter 7: Product Planning and Strategies

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Chapter 7Product Planning and Strategies
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What is a Product?

• It is a set of tangible and intangible
  attributes, including packaging, colour, price,
  quality, and brand, plus service and reputation,
  that provides a set of perceived benefits to
  consumers
• it is more than physical products includes
  services, places, persons, and ideas
• it is easy to visualize the products of Esso, but
  more difficult to describe those of an art
  gallery, UNICEF, or the Salvation Army

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Consumer and Business Products

• Whether a product is considered a consumer or
  business product depends on the intended target
  market how it is used and by whom
• Some products are sold only to consumers and
  households for non-business purposes others
  are sold to organizations for use in the
  business, for resale, or to provide services

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Classifying Consumer Products

• convenience products low price, low risk,
  consumer is not prepared to shop around, widely
  available in a variety of retail stores
• shopping products consumer will want to compare
  quality and price, risk and price are higher,
  available in selected retail outlets
• specialty products consumer has strong brand
  preferences, risk is high, prepared to seek out
  exclusive retail outlets

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Classifying Business Products

• raw materials unprocessed, become part of other
  manufactured products
• manufactured parts and materials processed
  products that become part of other products
• installations major buildings and equipment
• accessory equipment used in operations, include
  computers, desks, tools
• operating supplies low value, used by most
  firms, convenience products for businesses

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Deciding on the Product Mix

• the product mix is a collection of product lines
  it has both breadth and depth
• the breadth is explained by the number of product
  lines within the mix
• the depth refers to the variety of sizes, models,
  or items within each product line
• a product line is a group of related products
• some companies carry a wide product mix, while
  others maintain a narrow mix

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Figure 7-2 Product Mix Breadth and Depth
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Product Positioning

• a products position refers to the image that it
  projects in the minds of consumers
• a product may be positioned in relation to a
  competitor by drawing comparisons
• or in relation to a product class or an attribute
  by stressing certain attractive characteristics
• or to appeal to a specific target market segment
• or by stressing that it offers attractive prices
  or superior quality or value

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Expanding the Product Mix

• expansion is accomplished by increasing the depth
  of lines or by adding lines
• increasingly, this involves line extensions
• may add related products under the same brand
• or unrelated products under the same brand
• or unrelated products under a different brand
• or related products under a different brand

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Other Product-Mix Strategies

• trading-up refers to the addition of a
  higher-priced product to reach a broader market
• trading-down involves adding a lower-priced
  product to a line to attract people who can not
  afford the higher-priced original
• occasionally, a product will be altered to
  improve it or to allow for its repositioning
• companies will also eliminate products or entire
  product lines which are unprofitable

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New Product Development

• companies must be constantly modifying existing
  products/services and developing new ones the
  marketplace demands it
• how new is new? most new products are
  modifications of or extensions to existing ones
• the introduction of a new product is a strategic
  decision which should be guided by the companys
  goals and a new product introduction strategy

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Criteria for New Products

• there must be adequate market demand necessary
  but not sufficient for success
• must satisfy key financial criteria
• must be compatible with environmental standards
• must fit with the companys marketing structure
• should also be compatible with production
  capabilities, satisfy legal requirements, and fit
  with corporate goals and objectives

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New-Product Development Process

• generate ideas from a number of sources
• screen ideas to identify those to pursue
• conduct a business analysis to determine
  likelihood of commercial success
• develop prototype for initial internal testing
• conduct market tests with prospective customers
• if business case and market tests are favourable,
  proceed with commercialization

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New-Product Organization

• companies take a variety of approaches to
  organizing the new product function
• product-planning committees
• new-product departments
• cross-functional new venture teams
• product managers
• many larger firms are replacing the product
  manager with category managers

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Adoption-Diffusion Process

• different new products are adopted by consumers
  at different rates
• the individual consumer goes through certain
  stages before adopting a new product
• marketers must be interested in first creating
  awareness, then interest, then trial, before the
  consumer is considered an adopter
• some people are genuine innovators, while others
  wait and try later some never adopt

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Stages in the Adoption Process

• awareness customer is exposed to the product
• interest interest and information seeking
• evaluation assessment of the advantages and
  disadvantages of the new product
• trial customer tries the product in low-risk
  situation may be a sample or test drive
• adoption customer decides to buy the product
• confirmation customer decides to stay with the
  product attempts dissonance reduction

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Factors Affecting Adoption Rate

• why are some products accepted more readily?
• some have obvious relative advantages over
  existing alternatives
• some are more compatible with current values
• increased complexity slows the adoption rate
• it helps if a new product can be sampled before a
  commitment is made to buy
• it also helps if the benefits of the new product
  can be easily observed

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The Product Life Cycle

• the concept of the product life cycle applies to
  product categories, not to brands it is related
  to the concept of diffusion of innovation
• different products will have differently-shaped
  life cycle curves will diffuse at different
  rates
• a product is normally perceived to pass through
  four stages over its life cycle introduction,
  growth, maturity, and decline
• each stage requires different marketing strategies

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Figure 7-4 Typical Life Cycle of a Product
Category
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Characteristics of the Stages

• introductory stage developing the market,
  creating awareness, reaching the innovators
• growth stage competition begins, sales grow
  quickly, profits peak, market penetration
• maturity stage competition is intense, sales
  slow down, differentiated product offerings,
  customers are brand loyal, few new entrants
• decline stage customers move to other options,
  competitors leave, profits are low, consider exit

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Characteristics of Life Cycles

• length of the life cycle will vary some are
  quite short and may be getting shorter
• some fads have very short life cycles, while
  other products stay at maturity for years
• in high-tech markets, life cycles are very short
• some products do not make it through all four
  stages they may fail in introduction
• the life cycle must be considered in relation to
  a market stage may vary across segments

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Figure 7-5 Product Life Cycle Variations
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Managing the Life Cycle

• successful life-cycle management requires
  predicting the shape of the curve and then
  successfully adapting strategies at each stage
• when to consider entering the market
• how to manage to capitalize on growth
• it is possible to develop strategies that will
  extend the maturity stage modify the product,
  devise new uses, or design new appeals
• greatest challenge comes at the decline stage