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Bad 67051Bad 67051Marketing ManagementMarketing Management

Lecture 5Lecture 5Product Strategy, Planning, Product Strategy, Planning,

and Developmentand Development

I. Product Development

A. The development of new products

B. The continuous improvement of existing products

C. WHY bother?

The Product Life CycleThe Product Life Cycle

Introduction Growth Maturity DeclineStage:

Dollars

Time

Emphasis in Marketing Mix Promotion Distribution Price Cost

Reduction

Drop Product

Innovate, RedesignTotal Market

Sales

The Product Life CycleThe Product Life Cycle

Introduction Growth Maturity DeclineStage:

Dollars

Time

Emphasis in Marketing Mix Promotion Distribution Price Cost

Reduction

Drop Product

Innovate, RedesignTotal Market

Sales

Total Market Profit

II. The “Total Product”

A. Defined:

Broad spectrum [bundle] of tangible and intangible benefits

B. Primary Characteristics:

basic features of the core product

C. Auxiliary Dimensions:

supplementary benefits

Core and Augmented Product Example

Core Product--Close Up

Toothpaste

Core and Augmented Product Example

Core Product--Close Up

Toothpaste

Primary Characteristics: basic features of the core product

ESSENTIAL BENEFITS•Clean Teeth•Prevent Tooth Decay

Augmented Product -- Auxiliary Dimensions

Core Product--Close Up

Toothpaste

Flip top package

Brand Name-- Close Up

800 help phone line

Fluoride

Flavor

Tartar Control

Benefits of the Augmented Product

Core Product--Close Up

Toothpaste

Flip top package

Brand Name-- Close Up

800 help phone line

Fluoride

Flavor

Tartar Control

Social Confidence;Romance;White Teeth

Safety

Lower Dental Bills

Cleaner Teeth

Good TasteFresh Breath

Convenient Storage

III. Classifying Products

A. End Use Market1. Agricultural Products & Raw Materials

2. Organizational Goods

3. Consumer Goods

Agricultural & Raw Materials

For example: Ingredients (zinc, pig iron, cotton)– Rather Homogeneous– Sold in bulk– Low value per unit

Organizational Products

1. Manufactured materials and component parts: (electrical resistors, screws, electric motors)

2. Process materials: used in production, not part of finished product (chemicals)

3. Installations: primary production equipment and major capital items (buildings, computer hardware, assembly lines)

Organizational Products

4. Accessory equipment: (word processors, trucks)

5. Operating Supplies: facilitate routine operations (writing paper, hand tools)

6. Services: work provided by others (maintenance, repairs)

Consumer Goods

1. Based on Durability/Tangibility Classification

SHOVEL RESTAURANTEMPLOYMENT

AGENCY

GOOD GOOD/SERVICE SERVICE

Consumer Goods

2. Based on CONSUMER’S Interest

CONVENIENCEPRODUCT

SHOPPINGPRODUCT

SPECIALTYPRODUCT

Willingness to Expend Effort for ProductLOW HIGH

CONVENIENCE PRODUCTSCHARACTERISTICS:1. Relatively Inexpensive2. Purchase is regular and

recurring3. Little Thinking Involved4. Minimal Shopping Effort5. Bought a most convenient

location6. Bought on impulse

STRATEGY:1. Make available in every

possible place2. Must be visible inside the

store3. Distribution is a major

marketing mix factor4. Easy substitution by

similar brands5. Extensive advertising is

used

Shopping ProductsCHARACTERISTICS:

1. Product comparisons occur

2. Consumer seek information

3. Decisions are based on thought

4. Relatively higher prices

5. Often fashion oriented

6. Monetary & social risks

7. Brand loyalty may be found

STRATEGY:

1. Selective distribution

2. Consumers will seek products in less visible locations

3. Quality is important

4. Product differentiation is possible

Specialty ProductsCHARACTERISTICS:

1. Substitutes are not accepted

2. Infrequently purchased

3. Extensive Search

4. Brand loyalty may be strong

5. Loyalty to retailer may be as important as brand selection

6. May travel great distances to acquire

STRATEGY:

1. Limited distribution

2. Consumers will seek products regardless of location

3. Extensive product and price differentiation

4. Strong brand image

IV. Does your product offer Quality or Value?

QUALITY----degree of excellence or superiority your product

has (or service provides)--CUSTOMER’S perception of quality is key--TQM and ISO 9000VALUE----what the customer gets in exchange for what the

customer gives.--”Am I satisfied?” “How much did it cost?”

V. Product Mix TerminologyProduct Mix

All of the products we offer for saleProduct Line

A group of closely related productsWidth of Product Mix

The number of product lines carriedDepth of Product Mix

Average Number of Products in each lineConsistency of Product Mix

How similar are our product lines?

Product Mix Example

Hair Care SaltySnacks

DentalCare

SoftDrinks

Shampoo Chips Toothbrush Colas

Conditioner Nuts Toothpaste GingerAle

Hair Spray Crackers DentalFloss

Root Beer

Comb

Width (Number of Product Lines)

Depth# of Items

VI. Brand Equity

A. Branding identifies and distinguishes one marketer’s product from another's

– Customers use brand information as important buying cues.

1. A BRAND is any name, term, symbol, sign, design, or unifying combination of these that identifies a product.

VI. Brand Equity

a. A BRAND NAME is the verbal part of the brand.

b. A BRAND MARK is a unique symbol that is part of the brand.

c. A logo, or logotype, is a brand name or company name written in a distinctive style.

VI. Brand Equity

2. Brand equity is the “value” of the brand caused by goodwill and brand reputation.– It is a valuable asset that must be

managed!– Strong equity makes market position

easier to defend.– Strong equity makes new products

easier to introduce.

VII. Family Branding

A. Family branding is a strategy that uses a single brand name for different items in a product line

– e.g., Heinz, Del Monte, General Electric

VIII. Individual Brands

A. Use of Separate Brand Names for each product.

Example:

--Goodyear

--Dunlop

--Springfield

Goodyear Target MarketsGoodyear Dunlop Kelly

Cust. FamilyCentered

Euro-cool Blue collar

Audience Mirror ofActiveAmerica

On the wayup

Taking Careof Basics

Age 34-54 24-34 ??

Price High end Mid-range Lower end

Slogan SeriousTechnology.Freedomfrom worry

Point ofDeparture

Honest tires,HonestPrices

Brand Positioning ShareTIDE Tough, powerful cleaning 31.1%CHEER Tough cleaning, color safe 8.2BOLD Detergent + Fabric Softener 2.9GAIN Sunshine scent & odor protection 2.6ERA Stain removal 2.2DASH Value priced 1.8OXYDOL Whitening 1.4SOLO Liquid detergent & softener 1.2DREFT For baby clothes & tender skin 1.0IVORY Simple, basic, no frills soap SNOW Safe for fine fabrics & babies .7ARIEL Tough cleaner, Hispanic market .1

Proctor & Gamble’s Portfolio

IX. Warranties

A. A product warranty provides a written guarantee of a product’s integrity and the manufacturer’s responsibility for repairing or replacing defective parts.

B. Warranties reduce customers’ perceived risk by suggesting product quality.

C. HONOR THY WARRANTY to create customer satisfaction!

X. Packaging

A. Packaging contains the product and protects it, aids in usage, identification, promotion, and ecology.

B. Packaging involves decisions about labeling, inserts, instructions, design, and sizes.

C. Packages serve as cues to customers as they purchase.

XI. The Product Audit

Think Product Portfolio Management, ala the Boston Consulting Group Matrix:

--Review products to determine whether they should be continued as is, improved, modified, or deleted.

XII. Differing Perspectives of New ProductsA. Management perspective:

1. New-to-the-world products

High Risk

2. Product category extensions

Diversification into an established market for an existing product--BUT, new to the firm

3. Product line extensions

Additions to existing product lines

XII. Differing Perspectives of New Products

A. Management perspective:

4. Product modifications

a. product improvements

b. cost reductions

c. repositionings

B. Consumer Perspective:1. Continuous innovations

Variations of existing productsNo behavior changes

2. Dynamically continuous innovationsImprovement of existing productsMinor behavior changes

3. Discontinuous innovationsNew functionMajor behavior changes

XII. Differing Perspectives of New Products

XIII. Characteristics of Success for a New Product

A. Relative AdvantageAn enhanced bundle of benefits

B. CompatibilitySimilar usage or consumption, patterns, and values

C. TrialabilityOpportunity for buyer testing through sampling or divisibility

XIII. Characteristics of Success for a New Product

D. Observability

Buyers see the newness

E. Simplicity

Complexity is a disadvantage which slows diffusion

XIV. The Product Development Process

•Salespeople

•Dealers

•Customers

•Engineers

•R&D

•Competitors

•Trade Shows

•Ad agencies

•Market Research

•U.S. Dept of Commerce

•Patent Office

•Licenses

•Private Labs

•Independent Inventors

•University Labs

Search for New Product

Ideas

To Stage 2

Stage 1

XIV. The Product Development Process

•Initial Evaluation of Market Potential

•Check product fit in company mission and competencies

•Consider Effects on other products

•Raw materials supply

•Patent position

Screening

To Stage 3

Stage 2

XIV. The Product Development Process

•Check against customer needs

•Establish target market

•Check competition’s position

•Develop target position

•Develop initial product specifications

•Perform economic analysis

•Revise and refine as needed

Concept Development

To Stage 4

Stage 3

XIV. The Product Development Process

•Supply chain process•Manufacturing process

•Manufacturing Control system process

•Marketing programs

•Update costs and financial plans

•Ensure target costs are met

Development Plan

(Concurrent)

To Stage 5

Stage 4

XIV. The Product Development Process

•Create Prototype

•Lab Testing

•Customer Use Tests

•Customer reaction to planned marketing mix

•Feedback and Revision

•Re-test by customers

•Re-evaluation against competition

Development&

Testing

To Stage 6a

Stage 5

To Stage 6

OR

XIV. The Product Development Process

•Test promotion methods

•Check repurchase rate

•Test media mix

•Measure Trade Acceptance

•Test prices

•Build product inventories

•Develop additional distribution channels

•Revise as needed

TestMarket

To Stage 6

Stage 6a

XIV. The Product Development Process

•Ramp up Production

•Ramp up purchasing

•Activate Quality focused control systems

•Mass training of sales or service personnel

•Dealer meetings

•Trade and customer ads

•Press conference

Launch

To Stage 7

Stage 6

XIV. The Product Development Process

•Analyze sales data

•Analyze profits

•Revise promotion mix

•Adjust product specs

•Reallocate sales force

•Phase out weak items

Evaluation

Continuous Improvement

Stage 7

XV. Why New Products Fail

No Competitive AdvantageCompetitive ReactionBadly PositionedPoor QualityDoes Not Deliver Promised BenefitsToo Little Marketing Support (SYNERGY!)Low Perceived Value

XV. Why New Products Fail

Bad Estimates of Market Potential (or other marketing research errors)

--Forecasts are dangerous, especially those about the future!!!

Poor estimates of Production &/or Marketing Costs

Poor Selection of Marketing Channels Rapid Change in the Marketing Environment

..so Research, Research, RESEARCH!!

Thinking about research and sample size…– http://www.robertniles.com/stats/sample.shtml