Product Decisions and Marketing’s Role in New Product Development

1. Product Decisions and Marketing’s Role in New Product Development chapters 9-10

2. Objectives • Understand important factors involved in new product success • Product Characteristics • Implementation Issues • Market/Consumer Characteristics • Categorize products by type and understand product mix decisions • Understand growth strategies • Basics of Branding/Packaging

3. What is a Product? • Products are the set of features, functions, and benefits that customers purchase Business-to-Business Products Installations Accessories Raw Materials Component Parts/Materials Supplies Consumer Products Convenience Shopping Specialty Unsought

4. Product Mix Decisions • Product mix - all the products a company markets • Product Line: A group of related items in a company’s product portfolio • Product mix width - the number of product lines a company markets • Product mix depth - the number of brands within each product line

5. Product Development • Why such a strong desire to produce/market new products? • Why do so many new products fail? • What is really required for a successful product in the marketplace?

6. New Product Success Requires…* • A New Product • Necessary resources: • Business expertise • Financial resources • Channel Power • Ability to get product to buyers • Fast enough diffusion through society *Meeting requirements does not guarantee success

7. 5 characteristics affect the adoption rate for new, truly innovative products. 1. Relative advantage—superior to current products? 2. Compatibility—coincides with cultural values and/or experiences of buyers? 3. Complexity—degree of difficulty in using/understanding? 4. Trialability—can it be sampled/tested easily? 5. Observability—can buyers see its effectiveness? Examples:

8. Important Notes: • Relative Advantage is perceptual • “Questionable” products sometimes make it • Really good products sometimes fail • Many reasons for product failure • Cannibalization Rate Important!!! • Crispy m&m’s example

9. Cannibalization Rate ???

10. The Product Life Cycle • A product life cycleconsists of the aggregate demand for all brands comprising a generic product category over time. • A PLC consists of four stages: • Introduction—most risky and expensive. • Growth—both sales and profits rise, often rapidly. • Maturity—sales increase at a decreasing rate and profits decline. • Decline—demand drops, often because of another product development.

11. Fig. 9-2 - The Product Life Cycle INTRODUCTION GROWTH MATURITY DECLINE Sales Volume Dollars Profit 0 Loss Time in years

12. Length of the Product Life Cycle • Ranges from a few weeks to decades. • Length of individual stages varies from one product category to the next. • Stages of any given life cycle usually last for different periods.

13. The Importance of New Products New product 1 New product 2 Sales volume Sales volume Dollars Profits Profits + 0 – Time

14. Markets New Existing Products Market Development Existing Market Penetration Product Development Product Diversification New Product Growth Opportunities

15. Product Growth Opportunities • Market Penetration • Strategy of increasing sales of existing products in existing markets • Introduce new products/variations • cut price

16. Markets New Existing Products Market Development Existing Market Penetration Product Development Product Diversification New Product Growth Opportunities

17. Product Growth Opportunities • Product Development • Introduction of new products into established markets

18. Markets New Existing Products Market Development Existing Market Penetration Product Development Product Diversification New Product Growth Opportunities

19. Product Growth Opportunities • Market Development • Strategy of identifying new markets for existing products • find new buyers • add usefulness or change its positioning to make it appeal to more / increase consumption

20. Markets New Existing Products Market Development Existing Market Penetration Product Development Product Diversification New Product Growth Opportunities

21. Product Growth Opportunities • Product Diversification • Strategy of offering new products to new markets • New Arm & Hammer Products

22. Managing New Product Development: • Pps. 168-174 (MKTG 4) • Read Lightly (No exam questions)

23. ConsumerCharacteristics

24. The Product Diffusion Process Innovators: • First purchasers of a new product • Venturesome, willing to accept risk, communicative, and cosmopolitan 3% EarlyAdopters EarlyMajority LateMajority Laggards Innovators

25. The Product Diffusion Process Early Adopters: • Are the next customers to buy new product • Enjoy leadership, prestige, and respect that early purchases bring • Tend to be opinion leaders • Adapt new ideas but use discretion 13% EarlyAdopters EarlyMajority LateMajority Laggards Innovators

26. The Product Diffusion Process Early Majority: • First part of mass market • Outgoing, communicative, and attentive to information cues 34.0% EarlyAdopters EarlyMajority LateMajority Laggards Innovators

27. The Product Diffusion Process Late Majority: • Second part of mass market • Less cosmopolitan and responsive to change • Include lower economic and social brackets, those past middle age, and skeptics 34.0% EarlyAdopters EarlyMajority LateMajority Laggards Innovators

28. The Product Diffusion Process Laggards: • Last to purchase • Price conscious, suspicious of change, low income and status, tradition bound, and conservative • Often difficult to market to this small group 16.0% EarlyAdopters EarlyMajority LateMajority Laggards Innovators

30. Branding

31. Branding Terms • Brand Name: words, letters, and/or numbers that can be vocalized • Brand Mark: the part of a brand that appears in the form of a symbol, design, or distinctive coloring or lettering • Trademark: a brand that has been adopted by a seller and given legal protection

32. EVALUATING BRAND NAMES Which Brand Names meet the “Ideal” brand characteristics? Cleaning Products Characteristics of a good brand name Mr. Clean 409 Windex Suggests something about the product’s benefits and use: Easy to pronounce, spell, and remember: Distinctive: Adaptable to additions to product line: Capable of being legally protected:

33. BrandLoyalty

34. Brand Loyalty /Equity • Brand Loyalty is evidenced by favorable attitudes and by repeat patronage of some product/service/brand • Brand Equity is the added value bestowed on a product by the brand name

35. Packaging

36. Packaging Contain and Protect Functions of Packaging Promote Facilitate Storage, Use, and Convenience Facilitate Recycling

37. OTHER PACKAGING CONCERNS Many ethical concerns surrounding packaging: Misleading - Deceptive terminology, labeling, size, pricing, wasteful, environmentally damaging etc

38. Packaging as Marketing Tool • Create / Reinforce Brand Image • Generate Attention / Excitement • Enhance value of product • Convenience

39. CONVENIENCE is KEY!!! • Works better • Cheaper • Easier to use • Saves time • Prevents hassle • Etc.

41. REJUVENATING PACKAGES Most packaging is looked at every two or three years or even more often. Typically, changes are modest (e.g., colors may be brightened). Sometimes, changes are major: • Listerine mouthwash dropped its paper wrapper and barbell-shaped bottle: • Coke Bottles / Cans:

43. A Trademark is the exclusive right to use a brand. Trademarks • Many parts of a brand and associated symbols qualify for trademark protection. • Trademark right comes from use rather than registration. • The mark has to be continuously protected. • Rights continue for as long as the mark is used. • Trademark law applies to the online world.

44. Warranty A confirmation of the quality or performance of a good or service. Express Warranty A written guarantee. Implied Warranty An unwritten guarantee that the good or service is fit for the purpose for which it was sold. (UCC) Product Warranties Look up Warranty information on your own.