Product Strategies New Product Development and Life Cycle Strategies

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Product Strategies New Product Development and
Life Cycle Strategies

• Week 6, Bus 352X
• Margaret Cornish

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Creative Introduction PRODUCT STRATEGIE

• Tracey, Vivian, Jodie and Wendi

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June 7 Chapters 8 9Objectives

• Products and their major classifications
• Roles of branding, packaging, labeling and
  product support
• Development of product lines and mixes
• Development of new product ideas
• Steps in new product development
• Evolution of marketing strategy over product life
  cycle

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June 10 Mid-termBUS352 X Room P2067

• Bring student ID
• First 7chapters The detail will come into focus
  now that you know more context
• Test consists of multiple choice and essays (in
  which you apply theory to given scenario)
• Exam booklet Quest 1 is followed by space to
  answer then Quest 2 and answer space and so
  on. Multiple choice is in different section of
  booklet. Be sure to answer all questions.
  Allocate your time carefully.

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Product StrategiesChapter 8

• Product bundle of benefits
• Offered to a market
• For attention, ownership, use or consumption
• Satisfy a need or want
• Object, service, place, organization or idea

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Product Service Continuum

• Pure tangible good (soap)
• Tangible good augmented by service(s)
• Clothes, camcorder
• Hybrid offer equal parts product/service
  (custom suit)
• A service with accompanying goods-
• Airplane trip
• An intangible benefit -(doctors appt)

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Product Onion

• Core Product core benefit to buyer
• Actual Product quality level, design, brand
  name, packaging
• Augmented Product Additional services and
  benefits surrounding the product

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Planning a product

• Identify the core consumer need to be satisfied
• Design the actual product to meet these needs
  and
• Find ways to complete or facilitate consumers
  purchase and consumption of product. Most
  competition occurs at product augmentation level

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Product Classifications

• Consumer Products
• Industrial Products
• Organizations, Persons, Places and Ideas
• Placesbusiness site marketing and tourism
  marketing

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Consumer Product Classifications

• Convenience products
• Staples, impulse and emergency
• Shopping products
• Specialty products
• Unsought products

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Marketing Considerations for Consumer
ProductsTable 8-1

• The pattern of consumer buyer behavior for a
  given product influences how it is marketed

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8-1 Analytical Dimensions

• Consumer buying behavior frequency, degree of
  planning and purchase effort degree of customer
  involvement degree of comparison
• Price
• Distribution
• Promotion

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Convenience Product

• Buy it often, little planning or comparison, low
  involvement
• Price low
• Distribution widespread, convenient locations
• Promotion Mass (by the producer)
• Examples toothpaste, detergent

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Shopping Product

• Buy it less often, do plan and do compare brands
  on quality, price, style
• Price higher (than convenience)
• Distribution Selective but still reasonable
  convenient locations
• Promotion advertising and personal selling by
  producer and reseller
• Examples computer, furniture, clothing

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Specialty Products

• Strong brand preference, special purchase effort,
  little comparison, low price sensitivity
• Price high
• Distribution one or a few outlets
• Promotion carefully targeted by producer and
  reseller
• Examples luxury and some hobby goods

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Unsought Product

• Little awareness or interest until needed often
  negative interest
• Price varies
• Distribution varies
• Promotion Aggressive ads and personal selling by
  producer/reseller
• Ex funeral home, dental services

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Stages in Product Planning

• Product Attributes
• Branding decisions
• Packaging
• Labeling
• Product support services

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Product quality level and consistency

• Level at which it performs its functions
• Consistency or conformance quality reliability
  in delivering the described level of performance
  paid for and expected by consumer
• For marketer investment in quality must be tied
  to bottom line return on quality

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Product Features

• Key basis for differentiation
• Firms develop new features by asking what
  customers want
• Ongoing process of adding new features and
  culling products with less features less valued
  by consumer
• Design changes to improve performance vs style
  changes

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Brand

• A brand is a name, sign, symbol or design
  intended to identify a good/service of one seller
  and to differentiate it from competitors
• A brand enables consumer to identify products
  with benefits they might want, helps define
  quality, gives product or service a personality
  (eg perfume)

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Brand

• A promise by the seller to deliver consistency a
  specific set of features, benefits and services

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Brands can convey up to 4 levels of meaning

• Attributes of the product durable, prestigious,
  fast, safe
• Benefits emotional or functional benefit of
  attributes
• Values suggested by the product which buyer
  identifies with
• Personality evokes an image consistent with
  buyers self-image or desired self-image

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Brand Equity

• Value of a brand
• Extent to which brand attracts high consumer
  loyalty name awareness, perceived quality, and
  strong brand associations regarding trademarks
  (what it looks like), channel relationships
  (where it can be found)

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Branding Decisions

• Brand or not to brand
• Brand name selection
• Brand sponsorship
• Brand strategy
• Brand repositioning

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Brand name selection

• Suggest something about product benefit
• Short and easy to pronounce
• Distinctive
• Translate easily into other languages!!!
• Capable or registration and legal protection

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Brand Sponsorship

• Manufacturers brand
• Private label
• Owner by reseller
• Licensed brand
• Eg, fashion, sports names
• from overseas manufacturer
• Co-branding
• Swiss Chalet and Harveys

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Brand Strategies

• New brands
• Line extensions
• Brand extensions
• Multibrands

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Brand Strategies Line extension

• Existing brand extended to new forms, sizes and
  flavors in same product category. Objective
  capture share from competitors Risk
• Risk brand dilution - qualities of new offer not
  sufficiently similar to original product
  possibility that new offer cannibalizes own line
  

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Brand Strategies Brand Extension

• Launch new or modified product in new product
  category using an existing brand
• e.g. Disney Cruises, Objective capture share in
  new product market using equity of existing
  brand.
• Brands associations must fit new product.
• Risk failure of new product damages existing
  brand

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Brand Strategies Multi-branding

• Two or more brands in same product category
  known as flanker and fighter brands
• Offer different features to appeal to different
  buying motives
• Serve to protect existing brand but filling in
  positions which might be taken by competitors
• May be adaptations for different geographic or
  cultural markets
• Risk too many, unprofitable brands

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Brand Strategies New Brand

• New brand appropriate for new product in new
  product category
• Helps denote different line of products by same
  company
• If existing brand is weak, may revive sales by
  new approach
• May be result of an acquisition
• Risk high cost of launching new brand

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Packaging 5 second ad

• Packaging concept what the package can be or do
  for the product
• Contain and protect product
• Attract attention get shelf space
• Protect user (child proof, tamper resistant)
• Labeling of a package identify, describe,
  promote, date and price
• Legal requirements must be met

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Product Line

• Product line closely related products, function
  in similar way, sold to same customer groups,
  through same types of outlets, or fall within
  given price ranges

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Product Line DecisionsLength Stretching and
Filling

• If line is too short, stretching can increase
  total sales. If too long, pruning increases total
  sales
• Is desired positioning that of full line?
• Moving to higher growth or higher margin segment
  
• Stretching downward filling a hole to block a
  competitor (Mercedes response following intro of
  Toyota Lexus)

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Product Line DecisionsStretching both ways

• Marriott has developed differentiated hotels
  (offers) to suit each type of traveler
• Marriott Marquis top execs
• Marriotts middle managers
• Courtyards salespeople
• Fairfield Inns vacationers, low budget

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Product Mix Decisions mix or assortment

• Range of product lines a seller has for sale
• Key dimensions width, length, depth and
  consistency

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Product Strategy

• Company can seek growth by
• Add product lines to widen mix
• Lengthen existing lines to become full line
• Add more product versions to deepen
• Emphasize consistency by pruning, or not, if firm
  seeks to build reputation is several areas

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New Product DevelopmentAlarmingly high failure
rate. Why?

• New Products include
• Original products
• Product improvements
• Product modifications
• New brands
• How do you increase success rate in development
  of new products?

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What do successful new products have in common?

• Unique, superior product
• Well-defined product concept prior to development
• Deep understanding of consumer, market and
  competitor

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New Product Development Process

• Idea Generation
• Idea Screening (degree of fit, weeding out
  losers)
• Concept Development expanding idea into various
  alternatives
• Concept Testing finding out which have
  strongest consumer appeal

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Marketing Strategy Development (for a product
concept)

• Describe the target market
• Plan the product positioning
• Model the sales, market share, and profit goals
  of first few years (realistically)!!

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Business AnalysisEvaluating attractiveness

• Review, sales, costs and profit projections for a
  new product to determine if they meet firms
  reqts
• Use sales histories (growth rates) of similar
  products
• Estimate min-max sales range to define risk
• Then estimate costs incl production, marketing,
  RD,distribution etc. Estimate profits.

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Product Development

• Move from concept to physical product, usually
  several prototypes test models
• Prototype must have required functional features
  and convey intended psychological characteristics
  not as easy as it sounds

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Test Marketing

• Standard test full marketing campaign in a few
  representative markets (eg London Ont!)
• Controlled Test Markets
• Simulated Test Markets

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Commercialization Introducing product to market

• Establish manufacturing facility
• Launch new product
• Timing now, if cannibalization - postpone
• Where one market, all markets
• Simultaneous intro will strengthen brand
  leadership but is costly and logistically complex

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Product Life Cycle

• Product development no sales
• Product introduction costs high, revenues begin
• Growth market acceptance, sharp rise in profits
• Maturity sales growth slows profits may
  stabilize or decline
• Decline sales fall profits slide

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Mid Term TopicsFirst seven chapters

• Marketing Mgmt
• Macro-environment
• Characteristics of consumer markets
• Consumer buyer behavior
• Characteristics of business markets
• Segmenting, targeting and positioning

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Marketing Philosophies can you name them?

• Production concept
• Product concept
• Selling concept
• Marketing concept
• Societal marketing concept

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Positioning Process

• The claim - undisputable leadership in a given
  target segment
• The evidence develop evidence to make dispute
  unreasonable
• Communications identify and address right
  audiences with right sequence with right versions
  of the message
• Feedback and adjustment in response to customer
  and competitor efforts to unposition you

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Firms microenvironment

• The company itself (departments)
• Suppliers
• Marketing Intermediaries
• Customers
• Competitors
• Publics media, market, govt, interest groups

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Macro-environment

• Demographics
• Economy
• Natural Environment
• Technology Issues
• Political and legal factors
• Cultural

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Positioning Formula

• For (target customer)
• Who needs ( statement of need or opportunity)
• The (product name) is a ( category)
• That (statement of key benefit the compelling
  reason to buy)
• Unlike (primary competitive alternative)
• Our product (statement of primary differentiation)

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Finding Competitive AdvantageA Framework p. 252

• Framework for identifying the one advantage that
  it makes most sense to develop
• Identify key advantages, assess your standing and
  that of competitor on each
• Grade importance of your improving on each,
  affordability and speed of doing so and finally
  competitors ability to improve on each

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Next Week June 14

• Pricing Chapt 10
• Pricing Strategies Chapt 11
• Financial Analysis
• Problems 1 2 only
• Case Swatchmobile pp 389. Have it read!

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Research Process Review

• Define problem research objectives
• Develop research plan for collecting data
• Collect and analyze data
• Interpret and report findings

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Review Market ResearchSetting Research
Objectives

• If marketer is unable to narrow definition of
  problem satisfactorily the research objective may
  be to gather preliminary info to help define the
  problem and suggest hypotheses
• This is called exploratory research

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Review Setting Research Objectives - Descriptive

• If problem has been defined satisfactorily,
  research objective will be either descriptive or
  experimental
• If the research intended to define or describe
  things such as market potential,demographics,
  attitudes toward a product, etc
• This research objective is descriptive research

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Review Setting Research Objectives - Experimental

• If problem has been defined satisfactorily and
  the objective is to determine causal
  relationships the research objective will be
  experimental
• Hypotheses are formed and tested

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Research MethodsObservation

• As part of developing research plan, you consult
  primary and secondary sources
• Must decide on research method for gathering
  primary data. Alternative methods incl
  observational, descriptive/survey and
  experimental
• Observation is useful when info can be observed
  readily. Findings more reliable than what people
  say they do. Some behaviour difficult/impossible
  to observe

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Research Approaches

• Observation feelings, attitudes motives. Adv
  reveals what people do rather than what they say
  Limitation difficult to observe private,
  infrequent and long-term behaviour Remedy use
  in conjunction with other collection method

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Research ApproachesSurvey/Descriptive

• Survey best suited to descriptive research
  mainstream data collection used for gathering
  wide range of info in variety of situations Adv
  flexibility simplicity low-cost? Relative to
  other methods Limitations resistance
  inaccuracy difficulty in reaching target market

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Research ApproachesExperimental

• Experimental suited to gathering causal
  information (matched groups, different
  treatments, controlling for unrelated factors,
  and checking for different relships
• Adv reality/behaviour based Limitations costly
  and time-consuming

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Research Approaches Which is appropriate?

• Kellog Impact of young children on parental
  buying decision
• University Bookstore insight into how students
  feel about stores merchandise, prices and
  service
• Swiss Chalet location decision
• Gillette Will new line of deodorant for children
  be profitable?

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Research MethodsExperimental/Observational

• Impact of kids on parental buying -
  observational or experimental (to test specific
  hypothesis)
• Location decision secondary data (census data)
  primary observational (traffic counting)
• Store customer attitudes survey
• Profitability