Marketing Essentials

1. Marketing Essentials nChapter 30 Product Planning Section 30.1 Product Planning, Mix, and Development

2. SECTION 30.1 Product Planning, Mix, and Development What You'll Learn • The nature and scope of product planning • The concept of product mix • The different product mix strategies • The steps in new product development

3. SECTION 30.1 Product Planning, Mix, and Development Why It's Important • Product planning allows a business to make or sell products that are wanted by customers. Product planning is also used to design appropriate marketing programs that help create increased sales and profit opportunities.

4. SECTION 30.1 Product Planning, Mix, and Development Product Planning A product is anything a person receives in an exchange—a tangible item (car), a service (haircut), an idea (a good education), or a combination of all of these concepts. Productplanning involves making decisions about features needed to sell a business's products, services, or ideas.

5. SECTION 30.1 Product Planning, Mix, and Development Product Mix • Product mix includes all the different products that a company makes or sells. • A large manufacturer may have hundreds of products in its product mix. • Retail stores must plan their product mix carefully because they cannot offer all of the products that customers may want.

6. SECTION 30.1 Product Planning, Mix, and Development Product Items and Lines • A product line is a group of closely related products manufactured and/or sold by a business. • A product item is a specific model, brand, or size of a product within a product line.

7. SECTION 30.1 Product Planning, Mix, and Development Product Width and Product Depth • Product width refers to the number of different product lines a business manufactures or sells. • Product depth refers to the number of product items offered within each product line.

8. SECTION 30.1 Product Planning, Mix, and Development The Concept of Product Mix Width of the Product Mix Blades and Razors WritingInstruments Lighters Toiletries Series Adorn Toni Right Guard Silkience Soft and Dri Foamy Dry Look Dry Idea Brush Plus MACH 3 Sensor Trac II Atra Swivel Double-Edge Lady Gillette Super Speed Twin Injector Techmatic Cricket S.T. Dupont Paper mate Flair The width and depth of product lines define product mix. What does product depth tell you about the importance of a given product line? Why do you think a company would choose to produce so many different razors?

9. SECTION 30.1 Product Planning, Mix, and Development Product Mix Strategies A product mix strategy is the plan for how the business determines which products it will make or stock. Businesses will either develop a new product or expand an existing product to add to their mix.

10. SECTION 30.1 Product Planning, Mix, and Development Developing New Products • New products can add substantially to a company’s overall sales and boost its market share. New products can: • make a company look innovative • increase profits because they are generally priced 10 to 15 percent above older items • become a major part of a product line Slide 1 of 2

11. SECTION 30.1 Product Planning, Mix, and Development Developing New Products • New product development generally involvesseven key steps: 1. Generating ideas 2. Screening ideas 3. Developing a business proposal 4. Developing the product 5. Testing the product 6. Introducing the product (commercialization) 7. Evaluating customer acceptance Slide 2 of 2

12. SECTION 30.1 Product Planning, Mix, and Development Generating Ideas • New product ideas come from a variety of sources: • customers • competitors • channel members • company employees • research and development departments

13. SECTION 30.1 Product Planning, Mix, and Development Screening Ideas Ideas for new products are screened and evaluated, and matched against the company's overall objectives to see if they fit. Some ideas are eliminated. The best ideas are put through further evaluation. Finally, one or two ideas are selected for development.

14. SECTION 30.1 Product Planning, Mix, and Development Developing a Business Proposal A product idea must be considered in regard to its potential for profit. A business proposal is developed to evaluate the size of the market, potential sales, production requirements, costs, profit potential, technological trends, and risk.

15. SECTION 30.1 Product Planning, Mix, and Development Developing the Product During product development, a prototype (a model of the product) is made, and marketers develop a marketing strategy. The prototype is tested, and adjustments are made to improve the final product.

16. SECTION 30.1 Product Planning, Mix, and Development Testing the Product • Newly developed products are usuallytested to obtain customers' responses. Common strategies are: • test marketing in a certain geographic area • evaluation by a focus group

17. SECTION 30.1 Product Planning, Mix, and Development Introducing the Product • If customer response is favorable, the product is introduced into the marketplace. This stage is called commercialization. The costs of introducing a new product often are quite high. At this stage, the company will need to: • advertise the product • create or revise a distribution network • train its sales force

18. SECTION 30.1 Product Planning, Mix, and Development Evaluating Customer Acceptance After the product has been introduced, marketers track new product performance to evaluate customer acceptance of the product and the marketing strategies used to introduce the product.

19. SECTION 30.1 Product Planning, Mix, and Development Developing Existing Products • In order to build on an established image, appeal to new markets, and increase sales and profits, companies can either: • expand an existing product line or • modify an existing product Slide 1 of 3

20. SECTION 30.1 Product Planning, Mix, and Development Developing Existing Products • Line Extensions Companies can expand product offerings by adding new product lines, items, or services. • Example:Tylenol expanded to Tylenol Flu, Tylenol Cold, and Tylenol Allergy/Sinus • Extensions can also be new lines of products. • Example:Bic pens and Bic lighters Slide 2 of 3

21. SECTION 30.1 Product Planning, Mix, and Development Developing Existing Products • Product modification is an alteration in a company's existing product. Product modifications are a relatively quick and easy way to add new products to a company's product line. Slide 3 of 3

22. SECTION 30.1 Product Planning, Mix, and Development Deleting a Product or Product Line • Sometimes companies decide that they will no longer produce or sell a particular product or perhaps even a whole product line. Some of the reasons for this are: • obsolescence • loss of appeal • conflict with current company objectives • replacement with new products • lack of profit • conflict with other products in the line Slide 1 of 4

23. SECTION 30.1 Product Planning, Mix, and Development Deleting a Product or Product Line • Obsolescence Changing interests and technology make many products obsolete. They are dropped in favor of newer technologies. • Loss of Appeal As consumer tastes change, companies drop products that no longer appeal to popular tastes. Slide 2 of 4

24. SECTION 30.1 Product Planning, Mix, and Development Deleting a Product or Product Line • Conflict with Current Company Objectives Sometimes a product does not match a company's current objectives. • Example:Sears sold unrelated businesses to concentrate on retail. • Replacement with New Products A store decides it can make more money selling a different brand, or replaces one brand for another because another manufacturer offers better terms. Slide 3 of 4

25. SECTION 30.1 Product Planning, Mix, and Development Deleting a Product or Product Line • Lack of Profit To increase profits, retailers will handle only fast-moving and profitable items. Product developers may drop products when sales drop below company objectives. • Conflict with Other Products in the Line Sometimes increased sales of one product can cause decreased sales of another product. Slide 4 of 4

26. ASSESSMENT 30.1 Thinking Critically • Suppose a company is developing a new product, when a competitor introduces a new product that is similar. What are some things the company should consider in deciding whether to proceed with the development of its new product?

27. 30.1 Graphic Organizer Developing New Products Evaluate Customer Acceptance Introduce the Product Test the Product Develop a the Product Develop a Business Proposal Screen Ideas Generate Ideas

28. Marketing Essentials nChapter 30 Product Planning Section 30.2 Sustaining Product Sales

29. SECTION 30.2 Sustaining Product Sales What You'll Learn • The product life cycle • The concept of product positioning • The purpose of category management

30. SECTION 30.2 Sustaining Product Sales Why It's Important • After products are introduced in the marketplace, they go through different stages of growth and decline. It is important to understand the different marketing strategies used to sustain product sales over time.

31. SECTION 30.2 Sustaining Product Sales Product Planning • A product life cycle represents the stages that a product goes through during its life. There are four stages of the life cycle: • introduction • growth • maturity • decline

32. SECTION 30.2 Sustaining Product Sales The Product Life Cycle The life cycle of a product can be divided into four stages: introduction, growth, maturity, and decline. Why are sales not at their highest during the introduction stage? At what stage do you think a product would be most profitable?

33. SECTION 30.2 Sustaining Product Sales Managing During the Introduction Stage • When the product is introduced to the market, the focus of the company's efforts is on promotion and production. During this stage: • Special promotions may get customers to try the new product. • Profits at their lowest because costs of introducing a product are high. Therefore, this is usually the least profitable stage of the life cycle.

34. SECTION 30.2 Sustaining Product Sales Managing During the Growth Stage • During the growth phase of the product life cycle, the product is enjoying success as shown by increasing sales and profits. During this stage: • Advertising may now focus on consumer satisfaction. • Competitors may offer new competing products. • The company may introduce new models or modify the existing product.

35. SECTION 30.2 Sustaining Product Sales Managing During the Maturity Stage • A product reaches the maturity stage when its sales level off or slow down. During this stage: • The product may have more competition, or most of the target market may already own it. • Advertising expenses climb as the company fights off competition. • The company decides whether it can improve the product to gain sales.

36. SECTION 30.2 Sustaining Product Sales Managing During the Decline Stage • During the decline stage, sales fall. Profits may reach a point where they are smaller than costs. The company’s options include: • dropping the product • selling or licensing the product • recommitting to the product line • discounting the product • regionalizing the product • modernizing or altering the product Slide 1 of 3

37. SECTION 30.2 Sustaining Product Sales Managing During the Decline Stage • Sell or License the Product Companies sell or license their poorly performing products to risk-taking companies that try to rejuvenate products. • Recommit to the Product Line Decide that a declining product can be marketed for other uses to help improve sales. Slide 2 of 3

38. SECTION 30.2 Sustaining Product Sales Managing During the Decline Stage • Discount the Product Discount the product to compete with cheaper store or private brands. • Regionalize the Product Sell declining products only in the geographic areas where there is strong customer loyalty. • Modernize or Alter the Product Redesign, repackage, or reformulate the product to avoid deleting it. Slide 3 of 3

39. SECTION 30.2 Sustaining Product Sales Product Positioning • The focus of product positioning is the image a product projects. The goal of product positioning is to set the product apart from the competition. Products can be positioned: • by price and quality • by features and benefits • in relation to the competition • in relation to other products in a line Slide 1 of 3

40. SECTION 30.2 Sustaining Product Sales Product Positioning • Positioning by Price and Quality Stresses high price as a symbol of quality or low price as an indication of value. • Positioning by Features and Benefits Stresses product features and benefits, or unique characteristics. Slide 2 of 3

41. SECTION 30.2 Sustaining Product Sales Product Positioning • Positioning in Relation to the Competition Stresses comparison to the competition. • Positioning in Relation to Other Products in a Line Stresses association with a successful brand. Slide 3 of 3

42. SECTION 30.2 Sustaining Product Sales Category Management Category management is a process that involves managing product categories—groups of products that have the same target market and distribution channels—as individual business units. The manufacturer can customize the category's product mix, merchandising, and promotions according to customer preference on a store-by-store basis. Slide 1 of 2

43. SECTION 30.2 Sustaining Product Sales Category Management Planograms are computer-developed diagrams that show retailers how and where products within a category should be displayed on a shelf at individual stores. Each store then can stock more of the products that appeal to people in its trading area. Slide 2 of 2

44. ASSESSMENT 30.2 Thinking Critically • Identify a possible product modification or product extension for an electric shaver, a toothbrush, and animal crackers.