MKTG PP Ch08-Developing Managing Products

8/7/2019 MKTG PP Ch08-Developing Managing Products

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Chapter

8

Developing and managingproducts


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Learning objectives

1 Define the termsproduct item,product lineandproduct mix

2 Explain the concept of product life cycles

3 Explain the importance of developing newproducts

4 Describe the six categories of new products

5 Explain the steps in the new-product

development process6 Explain the diffusion process through which

new products are adopted


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1Define the termsproduct item,

product line andproduct mix

Learning objective


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1 Product items, lines and

mixes

Product item

Product line

Product mix

A specific version of a productthat can be designated as a

distinct offering among anorganisations products.

A group of closely relatedproduct items.

All products that anorganisation sells.


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1 Benefits of product lines

Why form product lines?

advertising economies

package uniformity standardised components

efficient sales and distribution

equivalent quality


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1 Product mix width

The number of product lines anorganisation offers:

diversifies risk capitalises on established reputations.


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1 Adjustments

Productmodification

Productrepositioning

Product lineextension or

contraction

Adjustments toproduct items,lines and mixes


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1 Product modifications

Quality modification

Functional modification

Style modification


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1 Planned obsolescence

The practice of modifying products sothose that have already been sold

become obsolete before they actuallyneed replacement.


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1 Repositioning

Why reposition established brands?

changing demographics

declining sales changes in social environment.


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1 Product line extension

Adding additional products to anexisting product line in order to

compete more broadly in the industry.


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1 Product line contraction

Symptoms of product line over-extension

some products have low sales or cannibalisethe sales of other items

resources are disproportionately allocated toslow-moving products

items have become obsolete because ofnew-product entries.


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2Explain the concept of

product life cycles

Learning objective


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2 Product life cycle

A concept that provides a way to tracethe stages of a products acceptance,

from its introduction (birth)to its decline (death).


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2 Product life cycle (cont.)


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2 Introductory stage

Full-scale launch of new products High-failure rates

Little competition

Frequent product modification

Limited distribution

High marketing and production costs

Negative profits

Promotion focuses on awareness andinformation

Intensive personal selling to channels


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2 Growth stage

Second stage Increasing rate of sales

Entrance of competitors

Market consolidation

Initial healthy profits

Promotion emphasises brand ads

Goal is wider distribution

Prices normally fall

Development costs are recovered


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2 Maturity stage

A period during which sales increase ata decreasing rate Declining sales growth

Saturated markets Extending product line

Stylistic product changes

Heavy promotions to dealers and consumers

Marginal competitors drop out Prices and profits fall

Niche marketers emerge.


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2 Decline stage

Where sales keep declining over arelatively long period of time

Long-term drop in sales Large inventories of unsold items

Elimination of all nonessential marketingexpenses


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2 Product category

All brands that satisfy a particular typeof need.


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2 Product category (cont.)


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3Explain the importance of developing new

products

Learning objective


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3 Why new products?

New products are needed to sustaingrowth, profits and replace obsolete

items Ultimately in a FMCG market nine out of

ten new listed products fail

Product death occurs due to market

changes and the decline in quality,quantity and viability of consumerresearch.


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4Describe the six categories

of new products

Learning objective


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4 New product

A product new-to-the-world, themarket, the producer, the seller or some

combination of these.


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4 Categories of new products

Six categories of new products:

1 new-to-the-world

2 New-product lines3 product line additions

4 improvements/revisions

5 repositioned products

6 lower-priced products.


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5Explain the step in the

new-product development process

Learning objective


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5 Successful new-product

development process

New-product success factors:

long-term commitment

New-product strategy

capitalise on experience

establish an environment.


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5 New-product

development process New-product strategy

Idea generation

Idea screening

Business analysis

Development

Test marketing Commercialisation

New product.


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5 Idea generation

Sources of new-product ideas:

customers

employees distributors

competitors

research and development

consultants

creative thinking.


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5 Brainstorming

The process of getting a group to thinkof unlimited ways to vary a product or

solve a problem.


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5 Idea screening

The first filter in the product-development process, which eliminates

ideas that are inconsistent with theorganisations new-product strategy, orare inappropriate for some otherreason.


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5 Concept test

A test to evaluate a new-product idea,usually before any prototype has been

created.


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5 Business analysis

Considerations in business analysisstage:

preliminary demand cost

sales

profitability.


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5 Development

Creation of prototype

Marketing strategy

Technical production feasibility Final government approvals, if required.


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5 Test marketing

The limited introduction of a productand a marketing program to determine

the reactions of potential customers in amarket situation.


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5 Choosing a test market

Similar to planned distribution

Relative isolation and free of influences

Advertising availability; multiple media Diversified cross-section

No atypical purchase habits

Representative population/income

Not overly used or easily jammed Year-round sales stability

Available research/audit and retailers.


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5 Alternatives to test

marketing Single-source research using

supermarket scanner data

Simulated (laboratory) market testing.


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5 Commercialisation

Steps in marketing a new product:

production

inventory build-up distribution shipments

sales training

trade announcements

customer advertising.


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6Explain the diffusion process through

which new products are adopted

Learning objective


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6 Diffusion

The process by which the adoption of aninnovation spreads.


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6 Categories of adopters

Categories of adopters in the diffusionprocess:

innovators early adopters

early majority

late majority

laggards.


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6 Categories of adopters

(cont.)

Percentage

ofa

dopters

Time

Innovators2.5%

Earlyadopters13.5%

Latemajority

34%

Earlymajority

34%

Laggards16%


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6 Product characteristics and

the rate of adoption Product characteristics predict rate of

adoption.

Complexity Compatibility

Relative advantage

Observability

Triability.


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6 Marketing implications of

the adoption process Communication aids the diffusion

process

Word-of-mouth Direct from marketer.

Documents

MKTG PP Ch08-Developing Managing Products