Developing and Managing

1. Developing and Managing Products and Services Chapter 8

2. Previewing the Concepts Define product and describe and classify different types of product offerings List and define the steps in the new-product development process and the major considerations in managing this process Describe the stages of the product life cycle and how marketing strategies change during the product’s life cycle Describe the decisions companies make regarding their individual products and services, products lines, and product mixes Identify the four characteristics that affect the marketing of services and the additional marketing considerations that services require

3. What is a Product? • Product: • Anything that can be offered to a market for attention, acquisition, use, or consumption that may satisfy a want or need • Includes tangible objects, services, events, persons, places, organizations, or ideas • Services: • Intangible activities, benefits, or satisfaction that do not result in the ownership of anything

4. What is a Product? Companies create experiences to differentiate products and services Companies consider three levels of value their product provides consumers Consumer products: Convenience, shopping, specialty and unsought products Industrial products: Materials and parts, capital items and supplies and services

5. New-Product Development Strategy • New-product development: • The development of original products, improvements, modifications, and new brands through the firm’s product-development efforts • New product innovation is expensive and risky • Estimated 80% of all new products fail or dramatically underperform

6. New-Product Development Process Major stages in new-product development:

7. New-Product Development Process • Idea generation: • Internal sources: • Company employees at all levels • External sources: • Customers • Competitors • Distributors and suppliers • Others (including trade magazines and shows, advertising agencies, marketing research firms, laboratories, and inventors)

8. New-Product Development Process • Idea screening: • Process used to spot good ideas and drop poor ones • Describe product or service, target market, and competition • Estimate market size, price, development time and costs, manufacturing costs, rate of return • Evaluate new-product ideas against a set of company criteria

9. New-Product Development Process • Concept development and testing: • Product concept: • Detailed version of the new-product idea stated in meaningful consumer terms • Concept testing: • Testing new-product concepts with groups of potential consumers to find out if the concepts have strong consumer appeal

10. New-Product Development Process • Marketing strategy development: • Involves designing an initial marketing strategy and a three part marketing strategy statement • Describe the target market, planned value proposition, sales, market share, and profit goals • Outline the product’s planned price, distribution, and marketing budget • Describe the planned long-run sales and profit goals, marketing mix strategy

11. New-Product Development Process • Business analysis: • Review of the sales, costs, and profit projections to assess fit with company objectives • If results are positive, project moves to the product development phase

12. New-Product Development Process • Product development: • Develops concept into a physical product • Calls for a large investment • Prototypes are developed and tested • Prototypes must have required functional features and convey psychological characteristics

13. New-Product Development Process • Test-marketing: • Product and marketing program are introduced into a realistic market setting • Not needed for all products • Provides marketing experience before going to the expense of full introduction • Commercialization: • Full-scale introduction of the product into the market

14. The Product Life Cycle • Product life cycle: The course of a product’s sales and profits in its lifetime • There are five distinct stages: • Product development • Introduction • Growth • Maturity • Decline

15. The Product Life Cycle (PLC) • Product class has the longest life cycle • Product form tends to have a standard PLC shape • Style: A basic and distinctive mode of expression • Fashion: A popular style in a given field • Fads: Temporary periods of unusually high sales driven by consumer enthusiasm

16. Stages of PLC • Introduction stage: • Low sales • High distribution and promotion expenses • Negative or low profits • Marketing objective is to create product awareness and trial

17. Stages of PLC • Growth stage: • Sales climb quickly • Unit manufacturing costs fall • Profits increase • New competitors enter the market • Marketing objective is to maximize market growth and market share

18. Stages of PLC • Maturity stage: • Experience a slowdown in sales growth • Competition leads to price mark-downs and increases in advertising and promotions • Drop in profit • Weaker competitors drop out • Marketing objective is to evolve product to meet changing consumer needs

19. Stages of PLC • Strategies used to manage the PLC during maturity include: • Modifying the market • Modifying the product • Modifying the marketing mix

20. Stages of PLC • Decline stage: • Sales and profits decline • Prices and promotions budgets drop • Competitors withdraw from the market • Marketing objective is to determine whether to maintain, harvest or drop declining products

21. Product and Service Decisions • Decisions about individual products involve: • Product attributes such as quality, features, style and design • Packaging • Labelling • Product support services

22. Product and Service Decisions • Decisions about product lines involve: • Product line length • Line filling or line stretching • Product mix has four dimensions: • Width • Depth • Consistency

23. Services Marketing • Services are the most important industry in Canada’s economy and includes: • Government services, hospitals, military, police, Canada Post, schools, not-for-profit organizations • Business services segment (for-profit companies) such as banks, airlines, hotels, real-estate firms

24. Services Marketing Consider four characteristics when designing services marketing programs:

25. Services Marketing • Service marketing faces three major marketing tasks, to increase: • Service differentiation • Service quality • Service productivity