1. foundations of Chapter M A R K E T I N G Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Strategy 11

2. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Objectives 1.Explain the concept of the product mix, and indicate various mix decisions that can be made. 2.Describe the importance of developing a line of related products. 3.Explain the concept of the product life cycle, as well as its uses and limitations. 4.Relate product strategy to the variables of the marketing mix. 5.Identify the determinants of the speed of the adoption process. 6.Explain the methods of accelerating the speed of adoption. 7.Outline new-product strategies and the determinants of their success. 8.Describe various organizational arrangements for new-product development. 9. Examine the stages in the product development process. Product Strategy 11 11-1

3. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Mix The assortment of product lines and individual offerings available from a company. Product Strategy 11 11-2

4. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Line and Individual Offering Product Line A series of related products. Individual Offering Single product within a product line. Product Strategy 11 11-3

5. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. The Maple Leaf Foods International Mix WIDTH OF ASSORTMENT MeatsGroceriesNonedible Fresh and frozen meatsPeanut butterBy-products BaconCanned vegetables & fruitHides SausagesVegetable oils WienersLard Luncheon meatsShortening Canned meatFrench fries PoultryMaple syrup Jams Product Strategy 11 Table 11.1 DEPTH OF ASSORTMENT 11-4

6. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Cannibalizing Situation involving one product taking sales from another offering in a product line. Product Strategy 11 11-5

7. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Line Extension The development of individual offering that appeal to different market segments but are closely related to the existing product line. Product Strategy 11 11-6

8. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Importance of Product Lines Desire to grow Optimal use of company resources Increasing company importance in the market Exploiting product life cycle Product Strategy 11 11-7

9. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Life Cycle A product’s progress through introduction, growth, maturity, and decline stages. Product Strategy 11 11-8

10. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Strategy 11 Figure 11.1 11-9 Stages in the Product Life Cycle

11. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Overlap of Life Cycle for Products A and B Product Strategy 11 Figure 11.2 11-10

12. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Fashions Currently popular products that tend to follow recurring life cycles. Fads Fashions with abbreviated life cycles. Product Strategy 11 11-11

13. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Strategy 11 Figure 11.3 11-12 Alternative Product Life Cycles

14. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Fad Cycles Product Strategy 11 Figure 11.4 11-13

15. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Extending the Product Life Cycle 1.Increase frequency of use by present customers. 2.Add new users. 3.Find new uses for the product. 4.Change product quality or packaging. Product Strategy 11 11-14

16. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Strategy 11 Figure 11.5 11-15 Decay Curve of New-Product Ideas

17. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Improvement Strategy and Market Development Strategy Product Improvement Strategy A modification in existing products. Market Development Strategy Finding new markets for existing products. Product Strategy 11 11-16

18. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Development Strategy and Product Diversification Strategy Product Development Strategy Introducing new products into identifiable or established markets. Product Diversification Strategy The development of new products for new markets. Product Strategy 11 11-17

19. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Forms of Product Development Product Strategy 11 Table 11.3 Old ProductNew Product Old Market New Market Product diversificationMarket development Product improvementProduct development Source: Charles E. Meisch, “Marketers, Engineers Should Work Together in ‘New Product’ Development Departments,” Marketing News (November 13, 1981), p. 10. Used by permission of the American Marketing Association. Earlier discussion of these strategies is credited to H. Igor Ansoff, “Strategies for Diversification,” Harvard Business Review (September - October 1957), pp. 113-24; see also Philip Kotler, Principles of Marketing, 2nd ed. (Englewood Cliffs, NJ: Prentice Hall, 1983), pp. 34, 52. Reprinted with permission by the American Marketing Association. 11-18

20. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Structure for New-Product Development 1.Committee 2.Department 3.Product/Brand Manager 4.Venture Team Product Strategy 11 11-19

21. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Managers (Brand Managers) Individuals assigned one product or product line and given responsibility for determining its objectives and marketing strategies. Product Strategy 11 11-20

22. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Venture-Team Concept An organizational strategy for developing new products through combing the management resources of marketing, technology, capital, and management expertise in a team. Product Strategy 11 11-21

23. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Seven Stages of the New-Product Development Process Product Strategy 11 Figure 11.6 Business Strategy Develop new-product strategy Generate ideas/ concepts Screen and evaluate Conduct business analysis DevelopTestCommercialize Commercialized Product 11-22

24. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Concept Testing A marketing research project that attempts to measure consumer attitudes and perceptions relevant to a new-product idea. Product Strategy 11 11-23

25. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Basic Criteria for New-Product Screening 1. Company’s resources and abilities. Financial resources, R& D skills, engineering skills, marketing research, management, production, sales force and distribution resources and skills, advertising and promotion resources and skills. 2.Nature of the product. Newness to the market, newness to the company, how completely the product has actually been planned and technical issues dealt with, fit with current product line, superiority in meeting customer needs, quality relative to current competitive products. 3. Potential customers for the product. Similarity to current customers, level of felt need for the product. 4. Nature of competition. Similarity to current competition, intensity of competition, presence of price bases competition, number and size of competitors. 5. Nature of the market. Size of potential, growth rate, rate of change of needs of customers. Product Strategy 11 Table 11.4 Adapted from Robert Cooper, “The New Prod System: The Industry Experience,” Journal of Product Innovation Management (June 1992), pp. 125-26. Copyright © 1992, with permission from the Elsevier Science. 11-24

26. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Test Marketing Selecting areas considered reasonably typical of the total market, and introducing a new product to these areas with a total marketing campaign to determine consumer response before marketing product nationally. Product Strategy 11 11-25

27. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Adoption Process A series of stages consumers go through, from learning of a new product to trying it and deciding to purchase it regularly or to reject it. Product Strategy 11 11-26

28. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Consumer Adoption Process 1.Awareness 2.Interest 3.Evaluation 4.Trial 5.Adoption/Rejection Product Strategy 11 11-27

29. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Strategy 11 Figure 11.7 11-28 Categories of Adopters on the Basis of Relative Time of Adoption

30. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Consumer Innovators The first purchasers -- those who buy a product at the beginning of its life cycle. Product Strategy 11 11-29

31. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Diffusion Process The filtering and acceptance of new products and services by the members of a community or social system. Product Strategy 11 11-30

32. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. What Determines the Rate of Adoption? 1.Relative Advantage 2.Compatibility 3.Complexity 4.Divisibility 5.Communicability Product Strategy 11 11-31

33. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Hazardous Products Act A major piece of legislation that consolidated previous legislation and set significant new standards for product safety; defines a hazardous product as any product that is included in a list (called a schedule) compiled by Consumer and Corporate Affairs Canada or Health and Welfare Canada. Product Strategy 11 11-32

34. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Some Hazardous Products Act Regulations Bedding may not be highly flammable. Children’s sleepwear, dressing gowns, and robes must meet flammability standards. Children’s toys or equipment may not contain toxic substances (such as lead pigments) beyond a prescribed limit. Certain household chemical products must be labelled with appropriate symbols to alert consumers to their hazards. Hockey helmets must meet safety standards to protect young hockey players. Pencils and artists’ brushes are regulated to limit lead in their decorative coating. Matches must meet safety standards for strength and packaging. Safety glass is mandatory in domestic doors and shower enclosures. Liquid drain cleaners and furniture polishes containing petroleum-based solvents must be sold in child-proof packaging. Toys and children’s playthings must comply with safety standards. Crib regulations provide for increased child safety. Product Strategy 11 Table 11.5 11-33