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chapters 6-7
Product Decisions and Marketing’s Role in New Product Development
• Understand important factors involved in new product success– Product Characteristics– Implementation Issues– Market/Consumer Characteristics
• Categorize products by type and understand product mix decisions
• Understand growth strategies• Basics of Branding/Packaging
Objectives
• Products are the set of features, functions, and benefits that customers purchase
Consumer ProductsConsumer ProductsConvenienceConvenience
ShoppingShopping
SpecialtySpecialty
UnsoughtUnsought
Business-to-Business Business-to-Business ProductsProductsInstallationsInstallations
AccessoriesAccessories
Raw MaterialsRaw Materials
Component Parts/MaterialsComponent Parts/Materials
SuppliesSupplies
What is a Product?
Product Mix Decisions
• Product mix - all the products a company markets• Product Line: A group of related items in a
company’s product portfolio• Product mix width - the number of product lines a
company markets• Product mix depth - the number of brands within
each product line
Product Development
• Why such a strong desire to produce/market new products?
• Why do so many new products fail?
• What is really required for a successful product in the marketplace?
New Product Success Requires…*
• A New Product
• Necessary resources:– Business expertise– Financial resources– Channel Power
• Ability to get product to buyers
• Fast enough diffusion through society
* Meeting requirements does not guarantee success
5 characteristics affect the adoption rate for new, truly innovative products.
1. Relative advantage—superior to current products?
2. Compatibility—coincides with cultural values and/orexperiences of buyers?
3. Complexity—degree of difficulty in using/understanding?
4. Trialability—can it be sampled/tested easily?
5. Observability—can buyers see its effectiveness?
Examples:
Important Notes:
• Relative Advantage is perceptual
• “Questionable” products sometimes make it
• Really good products sometimes fail
• Many reasons for product failure
• Cannibalization Rate Important!!!
– Crispy m&m’s example
CannibalizationRate ???
The Product Life Cycle• A product life cycleproduct life cycle consists of the aggregate demand for all
brands comprising a generic product category over time.
• A PLC consists of four stages:
– Introduction—most risky and expensive.
– Growth—both sales and profits rise, often rapidly.
– Maturity—sales increase at a decreasing rate and profits decline.
– Decline—demand drops, often because of another product development.
Do
llars
Time in yearsLoss
0
Profit
Sales Volume
INTRODUCTION GROWTH MATURITY DECLINE
Fig. 9-2 - The Product Life CycleFig. 9-2 - The Product Life Cycle
Length of the Product Life Cycle
• Ranges from a few weeks to decades.• Length of individual stages varies from one
product category to the next.• Stages of any given life cycle usually last for
different periods.
The Importance of New Products
+
0–
Do
llars
Time
Profits
New product 1New product 2
Sales volume
Profits
Sales volume
Pro
duct
s
MarketsE
xist
ing
Exi
stin
gN
ewN
ew
ExistingExisting NewNew
Product Development Product Diversification
Market Penetration
Market Development
Product Growth Opportunities
• Market Penetration• Strategy of increasing
sales of existing products in existing markets
– Introduce new products/variations
– cut price
Product Growth OpportunitiesProduct Growth Opportunities
Pro
duct
sP
rodu
cts
MarketsMarkets
Exi
stin
gE
xist
ing
Ne
wN
ew
ExistingExisting NewNew
Product Development
Product Diversification
Market Penetration Market Development
Product Growth Opportunities
Product Growth OpportunitiesProduct Growth Opportunities
• Product Development• Introduction of new products
into established markets
Pro
duct
sP
rodu
cts
MarketsMarkets
Exi
stin
gE
xist
ing
Ne
wN
ew
ExistingExisting NewNew
Product Development Product Diversification
Market PenetrationMarket
Development
Product Growth Opportunities
Product Growth OpportunitiesProduct Growth Opportunities
• Market Development• Strategy of identifying
new markets for existing products– find new buyers– add usefulness or
change its positioning to make it appeal to more / increase consumption
Pro
duct
sP
rodu
cts
MarketsMarkets
Exi
stin
gE
xist
ing
Ne
wN
ew
ExistingExisting NewNew
Product DevelopmentProduct
Diversification
Market Penetration Market Development
Product Growth Opportunities
Product Growth OpportunitiesProduct Growth Opportunities
• Product Diversification
• Strategy of offering new products to new markets
– New Arm & Hammer Products
ConsumerCharacteristics
The Product Diffusion ProcessInnovators:Innovators: First purchasers of a new productFirst purchasers of a new product Venturesome, willing to accept risk, communicative, Venturesome, willing to accept risk, communicative, and cosmopolitanand cosmopolitan
InnovatorsEarly
Adopters LaggardsEarly
MajorityLate
Majority
3%3%
The Product Diffusion ProcessEarly Adopters:Early Adopters: Are the next customers to buy new productAre the next customers to buy new product Enjoy leadership, prestige, and respect that early Enjoy leadership, prestige, and respect that early purchases bringpurchases bring Tend to be opinion leadersTend to be opinion leaders Adapt new ideas but use discretionAdapt new ideas but use discretion
InnovatorsEarly
Adopters LaggardsEarly
MajorityLate
Majority
13%13%
The Product Diffusion ProcessEarly Majority:Early Majority: First part of mass marketFirst part of mass market Outgoing, communicative, and attentive to Outgoing, communicative, and attentive to information cuesinformation cues
InnovatorsEarly
Adopters LaggardsEarly
MajorityLate
Majority
34.0%34.0%
The Product Diffusion ProcessLate Majority:Late Majority: Second part of mass marketSecond part of mass market Less cosmopolitan and responsive to changeLess cosmopolitan and responsive to change Include lower economic and social brackets, those Include lower economic and social brackets, those
past middle age, and skepticspast middle age, and skeptics
InnovatorsEarly
Adopters LaggardsEarly
MajorityLate
Majority
34.0%34.0%
The Product Diffusion ProcessLaggards:Laggards: Last to purchaseLast to purchase Price conscious, suspicious of change, low income Price conscious, suspicious of change, low income
and status, tradition bound, and conservativeand status, tradition bound, and conservative Often difficult to market to this small groupOften difficult to market to this small group
InnovatorsEarly
Adopters LaggardsEarly
MajorityLate
Majority
16.0%16.0%
Branding
Branding Terms
• Brand Name: words, letters, and/or numbers that can be vocalized
• Brand Mark: the part of a brand that appears in the form of a symbol, design, or distinctive coloring or lettering
• Trademark: a brand that has been adopted by a seller and given legal protection
Characteristics of agood brand name
EVALUATING BRAND NAMES
Which Brand Names meet the “Ideal” brand characteristics?
Suggests somethingabout the product’sbenefits and use:
Easy to pronounce,spell, and remember:
Distinctive:
Mr. Clean Windex
Adaptable to additionsto product line:
Capable of beinglegally protected:
Cleaning Products
409
BrandLoyalty
Brand Loyalty / Equity
• Brand Loyalty is evidenced by favorable attitudes and by repeat patronage of some product/service/brand
• Brand Equity is the added value bestowed on a product by the brand name
Packaging
Packaging
Contain and Protect
Functionsof
Packaging
Promote
Facilitate Storage, Use, and Convenience
Facilitate Recycling
OTHER PACKAGING CONCERNS
Many ethical concerns surrounding packaging:
Misleading - Deceptive terminology, labeling, size, pricing, wasteful, environmentally damaging etc
Packaging as Marketing Tool• Create / Reinforce Brand Image
• Generate Attention / Excitement
• Enhance value of product– Convenience
CONVENIENCE is KEY!!!
• Works better• Cheaper• Easier to use• Saves time• Prevents hassle• Etc.
• Listerine mouthwash dropped its paper wrapper and barbell-shaped bottle:
REJUVENATING PACKAGES
Most packaging is looked at every two or three years or even more often.Typically, changes are modest (e.g., colors may be brightened).Sometimes, changes are major:
• Coke Bottles / Cans:
Trademarks
A Trademark is the exclusive right to use a brand.
Many parts of a brand and associated symbols qualify for trademark protection.
Trademark right comes from use rather than registration.
The mark has to be continuously protected. Rights continue for as long as the mark is used. Trademark law applies to the online world.
Product Warranties
Warranty
ExpressWarranty
Implied Warranty
A confirmation of the quality or performance of a good or service.
A written guarantee.
An unwritten guarantee that the good or service is fit for the purpose for which it was sold. (UCC)
Look up Warranty information on your own.