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K 29 Bad 67051 Marketing Management Lecture 5 Product Strategy, Planning, and Development

K 29 Bad 67051 Marketing Management Lecture 5 Product Strategy, Planning, and Development. I. Product Development. A. The development of new products B. The continuous improvement of existing products C. WHY bother?. The Product Life Cycle. Innovate, Redesign. Total Market Sales. D o

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K 29 Bad 67051 Marketing Management Lecture 5 Product Strategy, Planning, and Development

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  1. K 29Bad 67051Marketing ManagementLecture 5Product Strategy, Planning, and Development

  2. I. Product Development A. The development of new products B. The continuous improvement of existing products C. WHY bother?

  3. The Product Life Cycle Innovate, Redesign Total Market Sales D o l l a r s Drop Product Time Growth Maturity Decline Introduction Stage: Emphasis in Marketing Mix Cost Reduction Price Promotion Distribution

  4. The Product Life Cycle Innovate, Redesign Total Market Sales D o l l a r s Total Market Profit Drop Product Time Growth Maturity Decline Introduction Stage: Emphasis in Marketing Mix Cost Reduction Price Promotion Distribution

  5. II. The “Total Product” A. Defined: Broad spectrum [bundle] of tangible and intangible benefits B. Primary Characteristics: basic features of the core product C. Auxiliary Dimensions: supplementary benefits

  6. Core and Augmented Product Example Core Product-- Close Up Toothpaste

  7. Core and Augmented Product Example Primary Characteristics: basic features of the core product Core Product-- Close Up Toothpaste • ESSENTIAL BENEFITS • Clean Teeth • Prevent Tooth Decay

  8. Augmented Product -- Auxiliary Dimensions Flip top package Brand Name-- Close Up Flavor Core Product-- Close Up Toothpaste 800 help phone line Tartar Control Fluoride

  9. Benefits of the Augmented Product Convenient Storage Flip top package Social Confidence; Romance; White Teeth Brand Name-- Close Up Good Taste Fresh Breath Flavor Core Product-- Close Up Toothpaste 800 help phone line Tartar Control CleanerTeeth Safety Fluoride Lower Dental Bills

  10. III. Classifying Products A. End Use Market 1. Agricultural Products & Raw Materials 2. Organizational Goods 3. Consumer Goods

  11. Agricultural & Raw Materials • For example: Ingredients (zinc, pig iron, cotton) • Rather Homogeneous • Sold in bulk • Low value per unit

  12. Organizational Products 1. Manufactured materials and component parts: (electrical resistors, screws, electric motors) 2. Process materials: used in production, not part of finished product (chemicals) 3. Installations: primary production equipment and major capital items (buildings, computer hardware, assembly lines)

  13. Organizational Products 4. Accessory equipment: (word processors, trucks) 5. Operating Supplies: facilitate routine operations (writing paper, hand tools) 6. Services: work provided by others (maintenance, repairs)

  14. SHOVEL EMPLOYMENT AGENCY RESTAURANT GOOD GOOD/SERVICE SERVICE Consumer Goods 1. Based on Durability/Tangibility Classification

  15. Willingness to Expend Effort for Product LOW HIGH CONVENIENCE PRODUCT SHOPPING PRODUCT SPECIALTY PRODUCT Consumer Goods 2. Based on CONSUMER’S Interest

  16. CHARACTERISTICS: 1. Relatively Inexpensive 2. Purchase is regular and recurring 3. Little Thinking Involved 4. Minimal Shopping Effort 5. Bought a most convenient location 6. Bought on impulse STRATEGY: 1. Make available in every possible place 2. Must be visible inside the store 3. Distribution is a major marketing mix factor 4. Easy substitution by similar brands 5. Extensive advertising is used CONVENIENCE PRODUCTS

  17. CHARACTERISTICS: 1. Product comparisons occur 2. Consumer seek information 3. Decisions are based on thought 4. Relatively higher prices 5. Often fashion oriented 6. Monetary & social risks 7. Brand loyalty may be found STRATEGY: 1. Selective distribution 2. Consumers will seek products in less visible locations 3. Quality is important 4. Product differentiation is possible Shopping Products

  18. CHARACTERISTICS: 1. Substitutes are not accepted 2. Infrequently purchased 3. Extensive Search 4. Brand loyalty may be strong 5. Loyalty to retailer may be as important as brand selection 6. May travel great distances to acquire STRATEGY: 1. Limited distribution 2. Consumers will seek products regardless of location 3. Extensive product and price differentiation 4. Strong brand image Specialty Products

  19. IV. Does your product offer Quality or Value? QUALITY-- --degree of excellence or superiority your product has (or service provides) --CUSTOMER’S perception of quality is key --TQM and ISO 9000 VALUE-- --what the customer gets in exchange for what the customer gives. --”Am I satisfied?” “How much did it cost?”

  20. V. Product Mix Terminology Product Mix All of the products we offer for sale Product Line A group of closely related products Width of Product Mix The number of product lines carried Depth of Product Mix Average Number of Products in each line Consistency of Product Mix How similar are our product lines?

  21. Product Mix Example Width (Number of Product Lines) Depth # of Items

  22. VI. Brand Equity A. Branding identifies and distinguishes one marketer’s product from another's • Customers use brand information as important buying cues. 1. A BRAND is any name, term, symbol, sign, design, or unifying combination of these that identifies a product.

  23. VI. Brand Equity a. A BRAND NAME is the verbal part of the brand. b. A BRAND MARK is a unique symbol that is part of the brand. c. A logo, or logotype, is a brand name or company name written in a distinctive style.

  24. VI. Brand Equity 2. Brand equity is the “value” of the brand caused by goodwill and brand reputation. • It is a valuable asset that must be managed! • Strong equity makes market position easier to defend. • Strong equity makes new products easier to introduce.

  25. VII. Family Branding A. Family branding is a strategy that uses a single brand name for different items in a product line • e.g., Heinz, Del Monte, General Electric

  26. VIII. Individual Brands A. Use of Separate Brand Names for each product. Example: --Goodyear --Dunlop --Springfield

  27. Goodyear Target Markets

  28. Proctor & Gamble’s Portfolio Brand Positioning Share TIDE Tough, powerful cleaning 31.1% CHEER Tough cleaning, color safe 8.2 BOLD Detergent + Fabric Softener 2.9 GAIN Sunshine scent & odor protection 2.6 ERA Stain removal 2.2 DASH Value priced 1.8 OXYDOL Whitening 1.4 SOLO Liquid detergent & softener 1.2 DREFT For baby clothes & tender skin 1.0 IVORY Simple, basic, no frills soap SNOW Safe for fine fabrics & babies .7 ARIEL Tough cleaner, Hispanic market .1

  29. IX. Warranties A. A product warranty provides a written guarantee of a product’s integrity and the manufacturer’s responsibility for repairing or replacing defective parts. B. Warranties reduce customers’ perceived risk by suggesting product quality. C. HONOR THY WARRANTY to create customer satisfaction!

  30. X. Packaging A. Packaging contains the product and protects it, aids in usage, identification, promotion, and ecology. B. Packaging involves decisions about labeling, inserts, instructions, design, and sizes. C. Packages serve as cues to customers as they purchase.

  31. XI. The Product Audit Think Product Portfolio Management, ala the Boston Consulting Group Matrix: --Review products to determine whether they should be continued as is, improved, modified, or deleted.

  32. XII. Differing Perspectives of New Products A. Management perspective: 1. New-to-the-world products High Risk 2. Product category extensions Diversification into an established market for an existing product--BUT, new to the firm 3. Product line extensions Additions to existing product lines

  33. XII. Differing Perspectives of New Products A. Management perspective: 4. Product modifications a. product improvements b. cost reductions c. repositionings

  34. XII. Differing Perspectives of New Products B. Consumer Perspective: 1. Continuous innovations Variations of existing products No behavior changes 2. Dynamically continuous innovations Improvement of existing products Minor behavior changes 3. Discontinuous innovations New function Major behavior changes

  35. XIII. Characteristics of Success for a New Product A. Relative Advantage An enhanced bundle of benefits B. Compatibility Similar usage or consumption, patterns, and values C. Trialability Opportunity for buyer testing through sampling or divisibility

  36. XIII. Characteristics of Success for a New Product D. Observability Buyers see the newness E. Simplicity Complexity is a disadvantage which slows diffusion

  37. Salespeople • Dealers • Customers • Engineers • R&D • Competitors • Trade Shows • Ad agencies • Market Research • U.S. Dept of Commerce • Patent Office • Licenses • Private Labs • Independent Inventors • University Labs Search for New Product Ideas XIV. The Product Development Process Stage 1 To Stage 2

  38. Initial Evaluation of Market Potential • Check product fit in company mission and competencies Screening XIV. The Product Development Process Stage 2 • Consider Effects on other products • Raw materials supply • Patent position To Stage 3

  39. Check against customer needs • Establish target market • Check competition’s position • Develop target position • Develop initial product specifications • Perform economic analysis • Revise and refine as needed Concept Development XIV. The Product Development Process Stage 3 To Stage 4

  40. Supply chain process • Manufacturing process • Manufacturing Control system process • Marketing programs • Update costs and financial plans • Ensure target costs are met Development Plan (Concurrent) XIV. The Product Development Process Stage 4 To Stage 5

  41. Create Prototype • Lab Testing • Customer Use Tests • Customer reaction to planned marketing mix • Feedback and Revision • Re-test by customers • Re-evaluation against competition Development & Testing XIV. The Product Development Process Stage 5 OR To Stage 6a To Stage 6

  42. Test promotion methods • Check repurchase rate • Test media mix • Measure Trade Acceptance • Test prices • Build product inventories • Develop additional distribution channels • Revise as needed Test Market XIV. The Product Development Process Stage 6a To Stage 6

  43. Ramp up Production • Ramp up purchasing • Activate Quality focused control systems • Mass training of sales or service personnel • Dealer meetings • Trade and customer ads • Press conference Launch XIV. The Product Development Process Stage 6 To Stage 7

  44. Analyze sales data • Analyze profits • Revise promotion mix Evaluation XIV. The Product Development Process • Adjust product specs • Reallocate sales force • Phase out weak items Stage 7 Continuous Improvement

  45. XV. Why New Products Fail • No Competitive Advantage • Competitive Reaction • Badly Positioned • Poor Quality • Does Not Deliver Promised Benefits • Too Little Marketing Support (SYNERGY!) • Low Perceived Value

  46. XV. Why New Products Fail • Bad Estimates of Market Potential (or other marketing research errors) --Forecasts are dangerous, especially those about the future!!! • Poor estimates of Production &/or Marketing Costs • Poor Selection of Marketing Channels • Rapid Change in the Marketing Environment

  47. ..so Research, Research, RESEARCH!! • Thinking about research and sample size… • http://www.robertniles.com/stats/sample.shtml

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