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Chapter 9:Chapter 9:

Designing and ManagingDesigning and Managing

ProductsProducts

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What is a Product?What is a Product?

A Product is anything that can be offered to aA Product is anything that can be offered to amarket for attention, acquisition, use, ormarket for attention, acquisition, use, orconsumption and that might satisfy a want or need.consumption and that might satisfy a want or need.

Includes:Includes:

Physical ObjectsPhysical Objects ServicesServices

EventsEvents

PersonsPersons

PlacesPlaces

OrganizationsOrganizations

IdeasIdeas

Combinations of the aboveCombinations of the above

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Core ProductCore Product

Facilitating ProductsFacilitating Products--must be present for the guest to use the coremust be present for the guest to use the core

serviceservice

Supporting ProductsSupporting Products

--Add value to the core productAdd value to the core product

Augmented ProductAugmented Product--physical environment, accessibility,physical environment, accessibility,

interactions, physical environmentinteractions, physical environment

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Chapter 9: Figure

9-1: Product

levels

Source: Gronroos,Developing the

Service Offering -

A source of

Competituive

Advantage, in

Add Value to YourService, C.

Suprenant, ed.,

Chicago:

American

Marketing

Association.

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Elements that enhance positioningElements that enhance positioning

and create augmented productsand create augmented products

AtmosphereAtmosphere

Customer interaction with serviceCustomer interaction with service

delivery systemdelivery system

Customer interaction with otherCustomer interaction with other

customerscustomers

Customer coCustomer co--productionproduction

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BrandBrand

Brands are among a companys mostBrands are among a companys most

valuable assetsvaluable assets

A Brand represents what the company is andA Brand represents what the company is and

what it stands forwhat it stands for

A Brand implies trust , consistency, and aA Brand implies trust , consistency, and a

defined set of expectationsdefined set of expectations

The strongest brands own a place in theThe strongest brands own a place in thecustomers mindcustomers mind

From Scott Davis,From Scott Davis, Brand Asset ManagementBrand Asset Management

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AdvantagesofBrand Names

Brand

Equity

Strong Brand

Association

Attributes

Quality & ValueConsistency

Identification

Perceived QualityName Awareness

High BrandLoyalty

BrandingBranding

This Land-O-Lakes ad shows the depth of the brand.

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Conditions That SupportB

randingConditions That SupportB

randingProduct is easy to identifyProduct is easy to identify

Product is perceived to be the best valueProduct is perceived to be the best value

for the pricefor the price

Quality and standards are easy toQuality and standards are easy tomaintainmaintain

Demand is enough to support brandingDemand is enough to support brandingefforteffort

There are economies of scaleThere are economies of scale

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New Product Development ProcessNew Product Development Process

IdeaIdeaGenerationGeneration

ConceptConceptDevelopmentDevelopment

and Testingand Testing

MarketingMarketingStrategyStrategy

DevelopmentDevelopment

IdeaIdeaScreeningScreening

BusinessBusinessAnalysisAnalysis

ProductProduct

DevelopmentDevelopment

MarketMarketTestingTesting

CommercializationCommercialization

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Customers Competitors Distributors Suppliers

Idea Generation is the Systematic Search for NewProduct Ideas Obtained Internally From Employees

and Also From:

New Product DevelopmentNew Product Development

ProcessProcess Step 1. Idea GenerationStep 1. Idea Generation

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ProcessProcess Step2. Idea ScreeningStep2. Idea Screening

Process to spot good ideas and drop poor ones as soonProcess to spot good ideas and drop poor ones as soonas possible.as possible.

Many companies have systems for rating and screeningMany companies have systems for rating and screeningideas which estimate:ideas which estimate:

Market SizeMarket Size

Product PriceProduct Price

Development Time & CostsDevelopment Time & Costs

Unit CostsUnit Costs

Rate of ReturnRate of Return

Then, the idea is evaluated against a set of generalThen, the idea is evaluated against a set of generalcompany criteria.company criteria.

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1. Develop New Product Ideasinto Alternative Detailed

Product Concepts

2. Concept Testing - Test theNew Product Concepts withGroups of Target Customers

3. Choose the One That Has theStrongest Appeal to Target

Customers


Step 3. Concept DevelopmentStep 3. Concept Development

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Part Three Describes Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Part Two Describes First-Year:Products Planned Price

DistributionMarketing Budget

Part One Describes Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share


ProcessProcess Step 4. Marketing StrategyStep 4. Marketing Strategy

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If No, Eliminate

Product Concept

Business AnalysisReview of Product Sales, Costs,and Profits Projections to See ifThey Meet Company Objectives

Step 5. Business AnalysisStep 5. Business AnalysisStep 6. Product DevelopmentStep 6. Product Development

If Yes, Move toProduct Development

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Advertising

Atmosphere

ProductBudget Levels

Positioning

LocationPricing

Branding

Elements thatMay be Test

Marketed by a

Company

Test Marketing is the Stage Where the Product andMarketing Program are Introduced into More Realistic MarketSettings.

Product Development ProcessProduct Development ProcessStep 7. Test MarketingStep 7. Test Marketing

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When is theRight Time to

IntroduceProduct?

Where toLaunch a

NewProduct?

Commercialization is the Introduction ofthe New Product into the Marketplace.


Step 8. CommercializationStep 8. Commercialization

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Product Development throughProduct Development through

AcquisitionAcquisition

Large companies will sometimes buy aLarge companies will sometimes buy a

small companies rather than develop theirsmall companies rather than develop their

own new companies.own new companies.

Sometimes, companies purchase distressedSometimes, companies purchase distressed

chains to turn them around. For example,chains to turn them around. For example,

Pepsico purchased KFC and Taco Bell.Pepsico purchased KFC and Taco Bell.

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Time

ProductDevelop-

ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments ($)

Sales andProfits ($)

Sales and Profits Over the Products Life From Inception toDemise

Product Life CycleProduct Life Cycle

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Source: Martin Bell, Marketing Concepts and Strategy, 3rd ed., p.267, 1979, Houghton Mifflin Company;

used by permission, Mrs.. Marcellette (Bell) Chapman.

Product Deletion Process

Documents

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