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7-1Prentice Hall, Copyright 2009

What Is a Product?

Products are:

Anything that can be offered to a market for

attention, acquisition, use, or consumption

and that might satisfy a want or need.

Includes physical objects, services, events,

persons, places, organizations, ideas, or somecombination thereof.

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What Is a Service?

Services are:

Any activity or benefit that one party can

offer to another that is essentially intangible

and does not result in the ownership of

anything.

E.g., banking, hotel, airline, retail, tax

preparation, home repairs.

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Products and Technology

High tech products:

Those products that reflect state-of-the-art-

technology, highly sophisticated and involvesscientific knowledge.

E.g., laser and digital technology

Mid tech products:Those products that are less sophisticated with

new uses of existing resources.

E.g., TV and spare parts.

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Products and Technology

Low tech products

Those products that involves slight changes

in existing products and are made easily.

E.g., toys, printers

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Products Classification

Industrial products:

Those purchased for further processing or for use

in conducting businessDistinction between consumer and industrial

products is based on the purposefor which an itemis bought.

Consumer products:Products and services bought by final consumers

for personal consumption

Classified by how consumers buy them

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Types of Consumer Goods

Convenience goods:

Purchased frequently and immediately with

little comparison shopping

Low priced

Widespread distribution with many

convenient locations

E.g., candy, soda, newspapers

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Shopping products:

Bought less frequently, more planning and effort,

brand comparisons on basis of price, quality, style

Higher price

Selective distribution in fewer purchase locations

Advertising and personal selling is undertaken byboth producer and reseller

E.g., furniture, clothing, cars, appliances

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Specialty products:

Strong brand preference and loyalty, special

purchasing effort, little comparison shopping

High price

Exclusive distribution in only one or a few outlets

per market areaCarefully targeted promotion by both producer

and reseller

E.g., Rolex watches

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Unsought products:

Little product awareness or knowledge of

the brand, sometimes negative interestPricing strategies vary

Distribution strategies vary

Require aggressive advertising and personalselling by both producer and resellers

E.g., life insurance, blood donation

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Product Development Process

New product development:

The development of original products,

product improvements, productmodifications, and new brands through thefirms own product development efforts.

New product innovation is veryexpensive and very risky.

70% to 90% of new consumer products failwithin 12 months

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New-Product Failures

Why do new products fail?

Overestimation of market size

Design problemsIncorrectly positioned, priced, or advertised

Pushed despite poor marketing research

findingsExcessive development costs

Competitive reaction

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Idea generation

Idea screening

Concept development and testing Marketing strategy development

Business analysis

Product development

Test marketing

Commercialization

Diffusion

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Idea generation:

Internal sources:

Company employees at all levels

External sources:

Customers

CompetitorsDistributors

Suppliers

Outsourcing

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Idea screening:

Process used to spot good ideas and drop poor ones.

Concept development and testing:Product idea:

Idea for a possible product that the company can see itselfoffering to the market.

Product concept:

Detailed version of the new-product idea stated in meaningfulconsumer terms. Product proposal

Concept testing:

Testing new-product concepts with groups of target consumersto find out if the concepts have strong consumer appeal.

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Marketing strategy development:

Part One:

Describes the target market, planned valueproposition, sales, market share, and profit goals.

Part Two:

Outlines the products planned price, distribution,

and marketing budget.Part Three:

Describes the planned long-run sales and profitgoals, marketing mix strategy.

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Business analysis:Involves a review of the sales, costs, and profit projections

to assess fit with company objectives.

If results are positive, project moves to the productdevelopment phase.

Product development:Develops concept into a physical product

Calls for a large jump in investment

Prototypes are made

Prototypes must have correct physical features and conveypsychological characteristics

Prototypes are subjected to physical tests

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Testing marketing:

Product and program are introduced in a

more realistic market setting

Not needed for all products

Can be expensive and time consuming, but

better than making a major marketing

mistake

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Commercialization:

Must decide on timing(i.e., when to

introduce the product)

Must decide on whereto introduce the

product (e.g., single location, state, region,

nationally, internationally)

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Diffusion:

Must ensure the penetration of product in

market to be profitable

Attention given to Competitors, well know

how to deal with false market tests and

management assumptions.

Documents

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