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MKTG 504 - Product and Product Management A product is anything the consumer thinks it is!! Dr. Dennis Pitta University of Baltimore.

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Presentation on theme: "MKTG 504 - Product and Product Management A product is anything the consumer thinks it is!! Dr. Dennis Pitta University of Baltimore."— Presentation transcript:

1 MKTG Product and Product Management A product is anything the consumer thinks it is!! Dr. Dennis Pitta University of Baltimore

2 PRODUCT zA complex bundle of attributes zMost important element of the marketing mix. zCharles Revson: “In the factory we make cosmetics, in the store we sell _HOPE” zElmer Wheeler: “Don’t sell the steak, sell the SIZZLE.”

3 Product: Not limited to goods - it is goods, ideas, services, people, organizations, places.

4 Product: = Physical product + other tangible components + intangible components + social impact

5 Product Component Examples: Physical good: wood, plastic, chemical (shaver) Other tangibles: service, brand name, close shave, package Intangible: Eminem likes it Social Impact: More young men are clean shaven

6 What is the product? University degree Politician You - Yourself as a job candidate

7 Really what is product? ANYTHING A CONSUMER THINKS IT IS

8 Examples of what people think zBubble-Yum Bubble Gum - MADE WITH SPIDER’S EGGS zKentucky Fried RAT zWORMS in Big Macs

9 Product Life Cycle A dynamic model of how product changes over time. Importance: different product characteristics at each stage: zLead to different marketing strategies zEmphasize different combinations of the 4 P’s.....

10 Sales & Profit Life CyclesIntroductionGrowthMaturityDecline Time Sales & profits ($)

11 Important Characteristics => PLC zSALES zRATE OF SALES GROWTH z# OF COMPETITORS zPRODUCT zPROMOTIONAL STRATEGY zPRICING zDISTRIBUTION

12 Tracking the PLC over time: PETRIFICATION SALES__________ RATE OF SALES GROWTH__________ # OF COMPETITORS__________ PRODUCT__________ PROMOTIONAL STRATEGY__________ PRICING__________ DISTRIBUTION__________

13 Bucky Beaver and Ipana

14 Examples of Products in Each PLC Stage zIntro: DVD-R DRIVES zGrowth: DVD’S zShakeout: PC’S zMat-Sat: VCR’S zDecline: RECORD CHANGERS zPetrification: IPANA TOOTHPASTE

15 CLASSIFYING PRODUCTS zProduct Category (Class): yAutomobile/container/Timepiece zProduct Form: yConvertible/Tin Can/Watch - Wrist zProduct Item (brand): yFord Probe/American Can/Seiko

16 How much effort would you spend buying chewing gum?

17 How much effort would you spend buying a refrigerator?

18 How much effort would you spend buying a one of a kind masterpiece by Rembrandt?

19 CLASSIFICATION OF CONSUMER GOODS zCONVENIENCE zSHOPPING zSPECIALTY zUNSOUGHT

20 Specialty Products Unsought Products Shopping Products Buy less frequently > Gather product information > Fewer purchase locations > Compare for: Suitability & Quality Price & Style Convenience Products Special purchase efforts > Unique characteristics > Brand identification > Few purchase locations New innovations > Products consumers don’t want to think about. >Require much advertising & personal selling Buy frequently & immediately > Low priced > Many purchase locations > Includes: Staple goods Impulse goods Emergency goods Consumer-Goods Classification

21 CLASSIFICATION OF CONSUMER GOODS zCONVENIENCE yPURCHASED WITH A MINIMUM OF EFFORT zSHOPPING yHEAVY COMPARISON OF PRICE, QUALITY, AND STYLE zSPECIALITY yVERY STRONG BRAND PREFERENCE: SPECIAL TIME AND EFFORT - PRICE NOT VERY IMPORTANT

22 CLASSIFICATION OF CONSUMER GOODS zUNSOUGHT yThis is a difficult product. Examples: xLife insurance to young unmarried men xUmbrellas to young unmarried men xVacuum cleaners to young unmarried men….. xChain Saws to young unmarried women….

23 Product Mix Width Width - number of different product lines Length Length - total number of items within the lines Length Length - total number of items within the lines Depth Depth - number of versions of each product Product Mix - all the product lines offered Product Mix - all the product lines offered Consistency

24 Product Mix Strategy Decisions made at three levels: 1Product ITEM (specific version) - keep or drop. 2Product LINE (group of related products) - deepen or shorten. 3Product MIX (composite of all products) - ‘what markets to be in’

25 Product Mix Strategy 1WIDTH - How many different product line there are within the company. (Sears - WIDE - Circuit City - NOT AS WIDE; Britches - NARROW)

26 Product Mix Strategy 2 DEPTH - The average number of items offered by the company within each line. Maxwell House Coffee - DEEP; Sears - NOT SO DEEP The LIMITED STORE - How deep?

27 Product Mix Strategy 3 CONSISTENCY - Relationship of products to one another - in end use. (i.e., INTERACTION - together) G.E.; XEROX - GOOD CONSISTENCY HUNT-WESSON -Paint, Matches, Food

28 Product Mix Strategy A continual addition of new products and deletions of old to meet the company’s needs.

29 Something new... New Product Development

30 Product Innovation Process (New Product Development) zStarts with a product idea zLet’s take a North American summer staple - corn

31 How does one hold corn on the cob?

32 z With a corn holder!!

33 What does corn look like? z  One end is pointed z  One end is blunt

34 What is a problem with ordinary corn holders? z It is tough to get them out of an ear that has been eaten z One sticks in the blunt end z Getting it out is often messy

35 The Solution?

36 The Pitta Improved Cornholder (PIC)

37 PIC Product Benefits zEasy to remove (the one stuck in the blunt end of the ear comes off easily) zFun at parties - (dodge the flying corn cob) zSaves laundry (less mess, less laundry)

38 Where would someone get this idea? …from eating corn!!

39 Product Innovation Process z1IDEA GENERATION zSources: yOrganization ySecondary sources: xPatent Office; Idea Mills; xIndependent Inventors xConsumers (e.g., Kleenex)

40 Who thought of the product: z Army nurses (after WWI) z Thought cellulose fiber bandages might be useful z ‘Facial Tissue’

41 A product is anything someone thinks it is…. zWhen was the last time someone blew his or her ‘face’? zWe use Kleenex as a disposable handkerchief! zIs it a facial tissue??

42 Product Innovation Process - Stage 2 z2SCREENING zCritical evaluation zPossible problems: yRejecting a Good Product (Type 1 Error) Handgrenades  Accepting a Bad Product as a good one (Type II Error) (I would hate to make this type testing Handgrenades)

43 The Pitta Improved Cornholder (PIC) Critical Evaluation zWe asked friends zWe asked our mothers zWe asked our wives zWe demonstrated the PIC to strangers...

44 Product Innovation Process - Stage 3 z3 ECONOMIC ANALYSIS yForecast Sales yReturn on Investment yEffect on Product Line yCash Flow yProfit yBreakeven Analysis

45 The Pitta Improved Cornholder (PIC) Economic Analysis zBreakeven Analysis zThe first cornholder cost $27,000 zThe second cost $.02 zProbable retail price for two=> $1 zProbable wholesale price for two =>$.50

46 (PIC) Breakeven Analysis zCalculates # of units to be sold at a price to just breakeven zFixed Cost = $27,000 zVariable Cost (per unit) = $.20 (2 holders, packaging, overhead) zPrice (wholesale) = $.50 per unit

47 (PIC) Breakeven Analysis zBE = FC/(P-VC) = units zBE (in units) = $27,000/( ) = 90,000 units zForget it!

48 Product Innovation Process 4DEVELOPMENT Determining Product Benefits Creating the Package, Brand Name 5TEST MARKETING (Small Scale Introduction) Marketing Plan 6COMMERCIALIZATION (Roll Out)

49 MKTG Product and Product Management Commercialization – the last stage of the Product Innovation Process Dr. Dennis Pitta University of Baltimore

50 COMMERCIALIZATION zA public offering of the product to the marketplace zTwo forms yCommercialization - Nationwide yRoll Out – limited geographic areas – one at a time

51 Roll out – an example  Tio Sancho rolled out its new non- fracturing taco shell against the largest Tex-Mex food manufacturer – Old El Paso. z Tio Sancho was small with few resources

52 Roll Out vs. Commercialization Commercialization Roll Out zvery Costly zComplex zHits the whole market simultaneously (Comprehensive) z Less expensive z Simpler z Risks being copied in the regions not covered

53 2 1 /2% Innovators 13 1 /2% Early adopters 34% Early majority 34% Late majority 16% Laggards Time of adoption innovations Adopter Categorization of the Basis of Relative Time of Adoption of Innovations

54 What is a Brand? FeaturesBenefitsAdvantages Culture User Personality

55 Good Brand Names: Suggest Product Benefits Distinctive Lack Poor Foreign Language Meanings Suggest Product Qualities Easy to: Pronounce Recognize Remember

56 Product Differentiation Form Fea- tures Perfor- mance Quality Conform- ance Quality Dura- bility Relia- bility Repair- ability StyleDesign

57 Maturity Stage zMarket Modification zProduct Modification zMarketing-Mix Modification

58 Decline Stage zIncrease investment zResolve uncertainties - stable investment zSelective niches zHarvesting zDivesting

59 Market Evolution zEmergence zGrowth zMaturity zDecline

60 Upcoming Topic zPRICE


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