Chapter 30 Product Planning Section 30.1 Product Planning, Mix, and Development

Product Planning  A product is anything a person receives in an exchange –Can be tangible –Can be intangible (service) an idea such as an education

Product Planning  A product includes: –Physical features –seller’s reputation, –Seller’s service –Warranties  Perception of the product

Product Planning  Product Planning- involves making decisions about those features that are needed to sell a business’s products, services, or ideas. Decisions involve: –Product features  Packaging  Labeling  Branding  Product Services include: –Warranties –Support services for products

Product Planning o Planning allows a business to coordinate existing products and features offered to customers, add new products, and delete products that no longer appeal to customers.

Product Mix  includes all the different products that a company makes or sells. –A manufacturer may include several product lines such as Kraft foods includes Maxwell house, Oscar Meyer, Post, Jello and Planters Peanuts –A Retailer has a product mix of all the different products they carry in their store –Retailers must plan the number of different items, based on their target markets wants and needs and not try to offer everything to everyone

Product Mix  Selecting Products should be based on: –Objectives of the business –The image the business wants to project –Market it is trying to reach

Product Mix  Product Items and Lines: –Product line –is a group of closely related products manufactured and/or sold by a business. Many stores carry multiple brands, Best Buy – Sony, RCA, or Toshiba –Product Item – a specific model, brands, or size of a product within a product line. GM carries the Avalanche, Aveo, Corvette, Equinox, HHR etc…

Product Mix  Product Width and Product Depth –Product width – refers to the number of different product lines business manufacturers or sells. –Product depth – reefers to the number of product items offered within each product line.

Product Mix Strategies  Determines which products a business will stock o Product Mix Strategies starts with the identification of the target market, its competitors, and the image the business wants to project.  Once the image is determined a business must determine its product lines and items to manufacture and sell.  Some businesses develop completely new lines to go with their existing lines  Some businesses expand upon their current product lines  Some drop lines to add others  Deciding on what product lines to keep and which ones to get rid of –Businesses must look at existing sales and current trends –Changes in consumer wants and needs

Product Mix Strategies  Developing new Products (new products account for 35% of major consumer and industrial sales) –Benefits of new products  Give the perception that the business is an innovator  Increases mark-up

Steps in New Product Development 1.Generating ideas – involves tracking cultural trends and observing customer behaviors to generate ideas –Ideas come from a variety of sources, customers, competitors, channel members, and company employees –Larger companies will establish research and development departments –Creativity is essential

Steps in New Product Development 2.Screening ideas – Ideas for new products are screened and evaluated. Some ideas are eliminated while the vest ideas are put through further evaluation. Finally, one or two ideas are selected for development and a business proposal is written. –Products are matched against the company’s overall objectives to see if it fits –Evaluated against potential conflicts with existing products –Product ideas are tested through marketing research by consumers to see if they might be successful

Steps in New Product Development 3.Developing The Product – During the development stage, a prototype is made. The prototype is tested, and adjustments are made to improve the final product –A business proposal is developed to evaluate a products:  Market size  Potential sales  Costs  Profit potential  Technological changes  Competition  Level of risk  Time needed for production and introduction  Can the product be produced efficiently  Can it be sold at a competitive price

Steps in New Product Development 4.Testing the Product – Newly developed products are test marketed to obtain customer’s responses –Once the product is tested is checked for consumer acceptance –Products are then test marketed  Geographically  Focus Groups  Some companies may even by pass this if it is too costly or nothing like it exists to compare to

Steps in New Product Development 5.Introducing the Product – if customer response is favorable, the product is introduced into the marketplace  Also called commercialization, products are advertised t introduce benefits to the customers  Training programs are developed for sales personnel  The earlier the product gets to market the greater the chances for success

Steps in New Product Development 6.Evaluating customer acceptance – After the product has been introduced, marketers track customer acceptance. –Assess consumer acceptance –Assess marketing strategies  Study sales information

Developing Existing Products o used in expanding their product mix to see if they can further expand their product lines or modify their existing products  Companies often add to their successful lines to take advantage of the consumers favorable toward that brand  Disadvantage the cost factor  Potential that if a new product is harmful then it could damage a brands image

Developing Existing Products  Line Extensions – product lines, items, or services, which may or may not be related to current products. –Example: Reese’s peanut butter cup, pieces, cereal, ice cream etc… –Occurs when a company wants to provide a wider range of choices to increase product depth within a line –Example: Bic lighter, bic pen because of favorable brand

Developing Existing Products  Product modifications – an alteration in a company’s existing product –Offer new and different varieties, formulations, colors, styles, features, or sizes –Relatively easy and quick to add

Deleting a Product Line – reasons for:  Obsolescence – changing interests and technology cause many products to be dropped. Tube televisions?  Loss of Appeal – changes in consumer tastes, older products may no longer be in favor of a younger market. Some products may be kept if there is large enough brand loyalty  Conflict with current company objectives – A line or service simply does not fit in to the company’s vision  Replacement with new products – New products take space of existing products the store feels that it can make more money on  Lack of Profit – Companies may choose to stick to fast moving of highly profitable items and not keep those in-between –Drop products when they do not meet profit objects volume or margin  Conflict with other products in the line – Occurs when one product cannibalizes another successful products market share

Chapter 30 Product Planning Section 30.1 Product Planning, Mix, and Development

The Product Life Cycle  represents the stages that a product goes through during its life. Four stages all products go through

Stage One - Introduction  Managing During the Introduction Stage –Company’s concentrate their efforts on promotion and production –Major goal is to draw the customer’s attention to the new product  Increase product awareness  Special promotions  Focus is on consumer benefits  Least profitable stage due to the increase promotion costs and cost of development

Stage Two - Growth  Managing During the Growth Stage –During this stage the product is enjoying success as shown by increasing sales and profits –Target market is aware of the products –Advertising is focused on consumer satisfaction –New models or features are introduced to combat competition

Stage three - Maturity  Managing During the Maturity stage –Increased competition is now an issue –Most of the target market already owns the product –Companies spend more money fighting off competition –Companies must decide whether it can continue to improve the product to gain additional sales

Stage four - Decline  Managing during the Decline stage –At this stage profits may fall to the point of costs or below, therefore companies need to decide how long they will support the product

Stage four - Decline  Alternatives to dropping the product –Sell or license the product  Sell license to campaniles willing to take the risk of rejuvenating the products image –Recommit to the product line  Find other uses for the product –Discount the product  Discount the product to compete with store or generic brands

Stage four - Decline –Regionalize the product –  Only sell the products in areas where there is strong brand loyalty  Saves the money needed for a national advertising campaign –Modernize or alter the product offering  Products may be completely redesigned, packaged differently, or reformulated. Example Tide, to new tide and offered as a liquid  Takes advantage of the target market that has already been identified and successfully sold to

Product Positioning  The image the product projects –The goal is to set the product apart from the competition –Positioning is the way you get into your customer’s mind –Refers to the efforts a business makes to identify, place, and sell its products in the marketplace –It is an attempt to create an image that appeals to the customer –Changing the image is costly  To effectively position companies must identify customer needs and determine how their product compares to competition

Product Positioning Strategies  Positioning by Price and Quality – may offer an economy line, mid-priced line, and a luxury line. Emphasizes the higher the price the better the quality

Product Positioning Strategies  Positioning by Price and Quality – may offer an economy line, mid-priced line, and a luxury line. Emphasizes the higher the price the better the quality

Product Positioning Strategies  Positioning by features and benefits – stressing features and benefits to the customer verses the cost –Products are often associated with their features – Rockport shoes known for their comfort –Often companies position products to highlight the product’s unique characteristics

Product Positioning Strategies  Positioning in relation to the competition - position a product to compete directly with the competition –Commonly used when a company is trying to solidify its advantage over another company –Be cautious when competing against the industry leader

Product Positioning Strategies  Positioning in relation to other products in a line –Individual products in relation to other products in the same line. Washable crayons verses traditional crayons made by the same manufacturer

Category Management  A process that involves managing product categories as individual –Allows business to stay closer to their target market since they are only responsible for marketing one line of products –Utilizes t a category manager – a person responsible for all the profits and losses for one specific product line. Evolved from a brand manager position –Utilize planograms – a company developed diagram that shows retailers how and where products within a category should be displayed on a shelf at individual stores. al business units