Product Development

1
Product Development Value Package

• Value- Total Product Offer
• Product Line
• Product Mix
• Product Differentiation
• Service providers also have product lines and
  product mix

2
Product Line

• Product line is a group of products that are
  physically similar or are intended for similar
  buyers (market)
• Bar soaps
• Laundry detergents
• Sport cars
• Luxury cars

3
First Products Produced byFive Major Companies

• Hershey Caramels
• Amway No-rinse car wash
• Heinz Horseradish
• Avon Little Dot perfume set
• 3M Sandpaper

Horseradish
Source World Features Syndicate
4
Product Mix

• Is the combination of all product lines offered
  by a manufacturer or all the service lines
  offered by a service provider.
• Companies need to decide what product and service
  mix is best
• The mix may include both product and services
• Strategic Planning

5
Mickey Mouses Product Mix

• Theme parks resorts
• ABC Television Network
• TV radio stations
• Film studios production

• Video programs licensing
• Consumer products
• Publishing

6
Product Differentiators

• Product differences are accentuated to create a
  unique, attractive image
• Different products call for different marketing
  strategies
• Small businesses can gain market share with
  creative product differentiation
• Product Positioning

7
Marketing Classes of Goods Services

• Consumer
• Convenience
• Shopping
• Specialty
• Unsought
• Industrial

8
Classic Product Failures
Company
Loss
Failure
Edsel Corfam VideoDisc PCjr New Coke Premier
Ford Motor Co. DuPont RCA IBM Coca-Cola R. J.
Reynolds
250 M 100 M 500 M 40 M No Number No
Number
9
Product Packaging

• Very important in customers perception of the
  Value Package
• Changes the product by changing its visibility,
  usefulness or attractiveness
• It can be used to improve basic product (Molton
  Salt)
• More attractive to retailers (UPC)
• Carriers more of the promotional burden

10
Packaging

1. Protect
2. Attract
3. Describe
4. Explain
5. Warranties
6. Price, Value, Uses

11
Branding

• Brand Trademark?
• Categories
• Manufacturers
• Knockoff
• Dealer/Private
• Generic

• Equity
• Loyalty
• Awareness
• Association

Marys Fresh Fruit Jams Fresh Daily Straight from
the Garden
12
Market Value of A Brand Name
Billions of Dollars
Source Interbrand Group
13
A Good Brand Name...

• Speaks directly to products target customers
• Attracts/motivates consumers to try it
• Is memorable/sticks in customers minds
• Is distinctive enough to protect it legally

Brand Name
14
New-Product Development
Idea Generation
Screening
Analysis
Development
Testing
Commercialize
15
Figure 14.7 Sales and Profits During the PLC
16
What They Cost When First Introduced
1927 Transatlantic Call 75/3
min. 1947 Microwave Oven 3,000 1964 FAX
unit rental 850/month 1970 Pocket
Calculator 150 1974 VCR Tape 50
Source World Features Syndicate
17
Pricing

• Value- Service
• Break-Even
• Fixed Cost
• Variable Cost
• Strategies
• Skim
• Penetration
• EDLP
• High-Low
• Leadership

• Objectives
• ROI
• Traffic
• Market Share
• Sales
• Image
• Social
• Cost-Based

18
Breakeven Chart (Figure 14.9)
Total Revenue or Total Cost
Number of Units
19
Pricing Using Breakeven Analysis
Problem Should we charge 2 or 3 per
box? Costs Total Fixed Costs 400,000 Variabl
e Cost 1 per box
Market Research Forecast
Company can sell 290,000 boxes at 2 _at_
210,000 boxes at 3 _at_
Breakeven point total fixed cost
price - variable cost
(per unit) (per
unit) 2 price 400,000 400,000 units to
breakeven 2 - 1 3 price
400,000 200,000 units to breakeven 3 - 1
Breakeven Analysis
20
Market Share-Cable
Source Wall Street Journal 1/12/2000
21
Movies- Domestic Box Office Market Share
Source Wall Street Journal, 1/12/2000