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

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Presentation on theme: "K 29 Bad 67051 Marketing Management Lecture 5 Product Strategy, Planning, and Development."— Presentation transcript:

1 K 29 Bad Marketing Management Lecture 5 Product 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 Introduction GrowthMaturityDecline Stage: DollarsDollars Time Emphasis in Marketing Mix Promotion Distribution Price Cost Reduction Drop Product Innovate, Redesign Total Market Sales

4 The Product Life Cycle Introduction GrowthMaturityDecline Stage: DollarsDollars Time Emphasis in Marketing Mix Promotion Distribution Price Cost Reduction Drop Product Innovate, Redesign Total Market Sales Total Market Profit

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 Core Product-- Close Up Toothpaste Primary Characteristics: basic features of the core product ESSENTIAL BENEFITS Clean Teeth Prevent Tooth Decay

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

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

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

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

16 CONVENIENCE PRODUCTS 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

17 Shopping Products 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

18 Specialty Products 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

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.

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26 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

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

28 Goodyear Target Markets

29 BrandPositioning Share TIDETough, powerful cleaning 31.1% CHEERTough cleaning, color safe 8.2 BOLDDetergent + Fabric Softener 2.9 GAINSunshine scent & odor protection 2.6 ERAStain removal 2.2 DASHValue priced 1.8 OXYDOLWhitening 1.4 SOLOLiquid detergent & softener 1.2 DREFTFor baby clothes & tender skin 1.0 IVORYSimple, basic, no frills soap SNOWSafe for fine fabrics & babies.7 ARIELTough cleaner, Hispanic market.1 Proctor & Gamble’s Portfolio

30 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!

31 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.

32 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.

33 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

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

35 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 XII. Differing Perspectives of New Products

36 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

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

38 XIV. The Product Development Process 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 To Stage 2 Stage 1

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

40 XIV. The Product Development Process 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 To Stage 4 Stage 3

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

42 XIV. The Product Development Process 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 To Stage 6a Stage 5 To Stage 6 OROR

43 XIV. The Product Development Process 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 To Stage 6 Stage 6a

44 XIV. The Product Development Process 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 To Stage 7 Stage 6

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

46 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

47 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

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


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