The Product and Its Development

1. The Product and Its Development How do I Identify the Best Product Match for the Firm and the Customer?

2. What is a Product? • a bundle of perceived tangible and intangible attributes that has the potential to satisfy present and potential customer wants and is received in exchange for money or other consideration

3. Three Dimensions of Product • Core Product • the basic benefit • Tangible Product • product attributes • packaging, brand • Augmented Product • extra support system • warranties, installation, delivery

4. Tangibility Continuum • Intangible ----------> Tangible • Services Only -----> Hands On Products • Satisfaction and Evaluation of the Product/Service tie to tangibility!

5. Classification of Products • Classified based on how long they last • Durable – benefits over long period • Nondurable – benefits for a short period • Consumer Goods – Classified by how bought • Convenience Goods – staples, impulse, emergency • Shopping Goods – attribute or price based • Specialty Goods – unique characteristics • Unsought Goods – little interest til need arises

6. Convenience Goods • products purchased frequently, immediately and with minimum effort • low-priced, branded, widely distributed • low risk, low effort

7. Shopping Goods • purchased after comparisons made of competing products and stores • compare on price, quality, style, color • also known as comparative goods

8. Specialty Goods • unique characteristics cause the buyer to prize a particular brand • infrequently purchased • time and effort high • exclusive distributorship

9. Unsought Goods • Products that the consumer: • does not know about • knows about but chooses not to seek them out! • Examples: burial plots, insurance

10. Industrial Products Classification • Installations - specialty goods! major capital purchases (buildings, land) • impact future earnings of the business • long-lived, expensive • Accessories - capital items, less expensive, shorter life span • computers, word processors • supplement production operations • Maintenance, repair

11. Industrial Products (cont’d) • Component Parts - finished products incorporated into the final product • often manufactured by another division or company • may undergo additional processing • examples: tires, brakes, chips • Raw Materials - necessary for production but need further refinement • wood, steel

12. Industrial Products Classifications • Supplies • regular expense items necessary for daily operation • not apart of the final product • examples: paper, oil • convenience goods to the industrial market

13. Product Innovation • essential for long-term survival • products become obsolete and replacements must be developed • for today’s more critical consumer - products need to be truly innovative vs. marginally different • environmental factors have an increasingly important role

14. What is a “new” product? • Breakthrough Innovations • computers, phone • Pioneering Innovations • PC, CD player • Adaptive Innovations • dryer sheets • Imitative New Products - clones

15. New Product Development Process • Generation of New Product Ideas - consumer hotlines • Screening and Evaluation - separating ideas with potential from those incapable of meeting company objectives • Business Analysis - measure consumer attitudes/perceptions to new product idea

16. New Product Development Process (cont’d) • Product Development - process of converting a potentially profitable idea to a tangible product • Test Marketing - determine consumer reactions to the product under near normal circumstances • Commercialization - complete implementation of product introduction

17. Criteria for Evaluation of New Product Ideas • adequate market demand • fit financial criteria • fits current environmental and social standards • fit company’s present marketing structure • fit company’s image and objectives

18. Product Adoption and Diffusion Process • Adoption Process • decision making activity of an individual through which a new product is accepted • Diffusion of a New Product • process by which the innovation is spread through a social system over time

19. Adoption Process • Awareness • Interest • Evaluation • Trial • Adoption/Rejection

20. 5 Categories of Adopters/Diffusion Process • Innovators - 3% • Early Adopters - 13% • Early Majority - 34% • Late Majority - 34% • Laggards - 16%

21. Five Characteristics of Innovation • Relative Advantage - superior • Compatability - consistent with experience and values • Complexity - difficulty in understanding • Communicability - observable use and communicability to others • Trialability - accessible for trial use

22. The Product Life Cycle • Introduction • primary demand stimulation • high percentage of product failures • operations costs are high • distribution limited • net losses expected

23. The PLC - Growth • sales volume rises rapidly • new consumers make initial purchases • early buyers repurchase • sales and profit begin to rapidly • competitors enter market • prices may fall • economies of scale begin to occur • begin to stimulate brand demand

24. PLC - Maturity • Industry sales continue to grow in early part of stage • sales increase at a decreasing rate • price competition intensifies • profits decline • competitors dropout

25. PLC - Decline • innovation may bring about declining demand • consumers’ preferences shift away from the product offerings • cost control becomes critical • competitors withdraw • promotional efforts reduced or withdrawn

26. How Do Marketing Strategies Change Across the PLC? • expanding the product line • Campbell’s soups offering single serving sizes • find new uses for the product • baking soda • find new markets • tobacco companies going overseas

27. The Product Mix • Width - number of product lines carried • Length - number of products carried • Depth - how many variations offered for each product in the line

28. Product Mix Strategies • Expansion Strategies - • add lines - related or unrelated • add depth • trading up - add a prestigious line • trading down - adding a lower priced line to a prestigious/high priced line • alteration of existing products - example redesign the package

29. Product Mix Strategies • Contraction - thinning out the product line, weed out low profit products • Product Positioning - placing the product in the minds of the consumer relative to the competitors

30. Branding • brand - concerns the name, term, symbol, special design intended to identify the product/service • brands are worth a great deal to the firm • easier to identify • BCM

31. Packaging Strategies • Packaging - all t hose activities of designing and producing a container or wrapper for a product • 3 purposes • safety and utilitarian purposes • part of the marketing program • increase profit or sales volume

32. Why is Packaging Important? • must do the selling at the point of purchase • retailers prefer manufacturers that use effective packaging • safety • use to cater to changing technology

33. Packaging Strategies • Changing the Package • take advantage of new materials • more effective packaging • Reuse of the Package • tins • Multiple Packaging • multiple units sold in one container