Product Development

Products Fall into 2 Categories: ► Business Goods: goods purchased by organizations for use in their operation.  Ex: Foot Locker purchases shoes from Nike.  Promotion Method: Discounts for large volume purchases ► Consumer Goods: goods purchased and used by the consumer for personal use. ► Ex: We buy Nike shoes at Foot Locker. ► Promotion Method: TV, Magazines, Sporting Events

► Point of Difference: Unique product characteristic or benefit that sets the product apart from a competitor’s product.

Steps in New Product Development

#2. Idea Generation – Generating new product ideas. New ideas come from: ► Consumers ► Employees ► Research ► Development Departments ► Competitors Protocol: statement that identifies a target market, specifies customers needs and wants, explains the new product and its point of difference.

► Focus Groups: a panel of six to ten consumers who discuss opinions about a topic under the guidance of a moderator.

Business Analysis: Financial aspect of producing and marketing the product are analyzed.

Development: Creating the product ► Prototype: the first model of the product. Company tests its production capabilities to see if the product can be produced at a reasonable cost.

#6: Test Marketing ► Test marketing involves offering the product for sale in a small geographic area. This helps project sales.

#7: Commercialization – ► Produce the product for mass market.

Product Life Cycle ► Product Life Cycle: stages that a product goes through during its life in the marketplace.

Introduction Stage: ► The product is first introduce into the market place.  Ex: Gatorade  Biggest challenge: Attaining shelf space in retail outlets.  Two pricing strategies: ► Price Skimming – pricing products high to cover research and development costs ► Penetration pricing – price products low in comparison to a competitors product to increase demand for the product.

Growth Stage ► Competitors enter the marketplace if they see that a new product is successful. ► New product features are added – new flavors, colors, sizes ► Distribution outlets increase (vending machines, fountain service, snack bars)

Maturity Stage ► Sales slow down for the product ► Must be innovative with your product to move out of this stage. ► Hardees ($6.00 burger)

Decline Stage ► Sales, profits and profiles begin to drop. ► Technological changes can cause an entire product category to go to the decline (8- Track, cassettes, cd players) ► When they reach this stage, a company does one of two things:  Drop the product  Keep the product in the market in smaller quantities for brand loyal customers.