Product Development and Management

1. Dayton High School Mr. Martin Product Development and Management

2. Lesson Objectives After this lesson, you will be able to: • Describe the process of product planning and development. • Define product terms and explain their role in product planning. • Explain how changes in the consumer market, competition, and production capabilities influence product planning. • List the six stages of product development. • Describe and discuss the characteristics of a products life cycle.

3. Product Planning • Product planning is the direction and control of all stages in the life of a product—from the time of its creation to the time of its removal from the company’s product line. • Product planning decisions may be the most important decisions marketers make because they commit a company’s money or capital.

4. Product Planning Costs Money • Product planning decisions cost money and takes a great deal of time and effort to plan new products or change established ones. • Manufacturing and equipment cost, inventory development, handling, and storage may become major expenses. • A mistake could cost millions. The BIC Corporation spent $11 million to market a flask of perfume but only made $6 million.

5. Product Terms Defined • Product: Goods or services • Product Item: A specific, physical product • Product Line: A group of similar types of product items that are closely related because they satisfy a class of customer needs, are used together, or sold to the same customer groups • Product Mix: The total of all product items and product lines offered for sale by a company.

6. Influences on Product Planning Product Planning involves finding answers to seven questions: • What products do our customers need and want? • When should we introduce a new product? • How broad a product mix should we offer? • Should we expand or modify any product line? • What product or products should we drop? • How can we develop new uses and a new image for our product? • How should the product be packaged and branded?

7. Influences on Product Planning • The answers to these questions will be guided by the company’s product objectives. • Strategies to meet product objectives may include: • Introducing new products • Improving existing products • Developing a complete product line • Eliminating unprofitable products

8. Changes in the Consumer Market • The demands of a constantly changing consumer market are a powerful influence on product planning. • Example: • A lot of companies are moving into the digital world by creating phone and tablet apps for basically anything to account for the high demand of instant satisfaction.

9. Competition • Competition is one of the strongest influences on product development. • If two competing products are very similar, on marketer may try to make a better-quality product or offer better service.

10. Developing New Products Six Steps of Product Development Process: • Generating Ideas • Screening Ideas • Evaluating Ideas • Preparing a Prototype of the Product • Testing the Product • Introducing the product into the marketplace

11. Generating Ideas • Ideas for new products can come from a company’s customers, employees, research staff, competitors, or computer software programs. • Example: • Post-it Notes

12. Screening Ideas • A company interested in developing a new product usually starts out with a large number of ideas. • The company then reviews them, saving those that have special merit and eliminating those that seem unfit.

13. Evaluating Ideas • Companies carefully evaluate the ideas that pass the screening stage. They are put through a thorough business analysis. • Some questions asked include: • Will the product meet a definite customer need? • Will the product be a logical addition to the company’s product mix? • Can the product be developed, produced, and marketed at a reasonable cost? • Will the product produce a profit for the company?

14. Preparing a Prototype • After a company screens and evaluates a new product idea, work on the actual product begins. • A company must develop a product it can manufacture easily and at a competitive price. • A company must design the product and determine the kind quality of materials to be used. • Prototype is a model of a new product.

15. Testing the Product • Once a prototype has been made, it is tested. • It can be tested in a lab, by a special group of customers, or under actual market conditions. • Test Marketing is the introduction of a product in a small marketing area to check customers’ reactions. • The test market is chosen as a representative of the total market.

16. Marketing the New Product • When the new product passes all the tests, it is ready for full-scale introduction to a market. • Can be introduced nationwide or to a limited market. • A limited market can be a certain state, type of consumer, geographic region, or type of marketer.

17. Product Life Cycle • Product Life Cycle is an identifiable cycle in a product’s life, which is represented by its sales history over a period of time and is usually divided into the four stages of introduction, growth, maturity, and decline. • The stages of PLC are influenced by marketing conditions such as competition and consumer behavior.

18. Introduction Stage • Introduction Stage is the first appearance of the product on the market. • A company puts all its effort into the marketing and production in order to make the product a marketing success. • This is the least profitable segment of a products life.

19. Growth Stage • Growth Stage is the period in a product life cycle when sales and profits are rising. • The length of the growth stage depends on the product and the marketing techniques used. • In order for a product to experience growth, it is important that sales increase at this time.

20. Maturity Stage • Maturity Stage is the period in a products life cycle when sales remain at a fairly even level. • Sales begin to level off during this stage. • When a product matures, it is time for marketing management to consider ways to extend the product’s life cycle, gradually phase it out, or replace it with another product.

21. Decline Stage • Decline Stage is the period in a products life cycle during which sales slow down. • Sometimes an increased marketing effort will boost sales again for a while, but the sales gain is usually temporary and sometimes not worth the cost.

22. Influences on the PLC • Managing marketing strategies is difficult because many factors can influence the PLC at the same time. • Three major influences on the PLC are competition, the product’s features, and consumer reactions.

23. Product Elimination • The decision to eliminate a weak product may be difficult. • Even though sales may be down for a product, people may still depend on it. • If a product is dropped to quickly, the company’s image may be hurt.

24. Product Extension • A marketer may discover that changing a successful product actually would lose customers. • The sales and profit position of the product may be strong. • This could be a chance to add a new product to the line, or to gain more customers by changing the marketing mix in other ways.

25. Promote New Uses and Benefits • Old products can have new uses. • For example:Arm & Hammer baking soda, which was originally marketed for baking, is now also promoted as a refrigerator freshener and toothpaste.

26. Change Pricing or Distribution • To answer a competitive challenge, a marketer may raise or lower the price of a successful product. • Although the product does not change, its image may. • As a result, customers may consider it a new bargain or a new prestige item.

27. Product Modification • Product Modification is a planned change in a product or its packaging that may include changes in features, quality, or style. • Most product modifications are changed periodically just to hold a competitive position. • New packaging can build customer interest or add convenience.