Dayton High School Mr. Martin

Lesson Objectives After this lesson, you will be able to:  Describe the process of product planning and development.  Define product terms and explain their role in product planning.  Explain how changes in the consumer market, competition, and production capabilities influence product planning.  List the six stages of product development.  Describe and discuss the characteristics of a products life cycle.

Product Planning  Product planning is the direction and control of all stages in the life of a product—from the time of its creation to the time of its removal from the company’s product line.  Product planning decisions may be the most important decisions marketers make because they commit a company’s money or capital.

Product Planning Costs Money  Product planning decisions cost money and takes a great deal of time and effort to plan new products or change established ones.  Manufacturing and equipment cost, inventory development, handling, and storage may become major expenses.  A mistake could cost millions. The BIC Corporation spent $11 million to market a flask of perfume but only made $6 million.

Product Terms Defined  Product: Goods or services  Product Item: A specific, physical product  Product Line: A group of similar types of product items that are closely related because they satisfy a class of customer needs, are used together, or sold to the same customer groups  Product Mix: The total of all product items and product lines offered for sale by a company.

Influences on Product Planning Product Planning involves finding answers to seven questions: 1. What products do our customers need and want? 2. When should we introduce a new product? 3. How broad a product mix should we offer? 4. Should we expand or modify any product line? 5. What product or products should we drop? 6. How can we develop new uses and a new image for our product? 7. How should the product be packaged and branded?

Influences on Product Planning  The answers to these questions will be guided by the company’s product objectives.  Strategies to meet product objectives may include: Introducing new products Improving existing products Developing a complete product line Eliminating unprofitable products

Changes in the Consumer Market  The demands of a constantly changing consumer market are a powerful influence on product planning.  Example: A lot of companies are moving into the digital world by creating phone and tablet apps for basically anything to account for the high demand of instant satisfaction.

Competition  Competition is one of the strongest influences on product development.  If two competing products are very similar, on marketer may try to make a better-quality product or offer better service.

Developing New Products Six Steps of Product Development Process: 1. Generating Ideas 2. Screening Ideas 3. Evaluating Ideas 4. Preparing a Prototype of the Product 5. Testing the Product 6. Introducing the product into the marketplace

Generating Ideas  Ideas for new products can come from a company’s customers, employees, research staff, competitors, or computer software programs.  Example: Post-it Notes

Screening Ideas  A company interested in developing a new product usually starts out with a large number of ideas.  The company then reviews them, saving those that have special merit and eliminating those that seem unfit.

Evaluating Ideas  Companies carefully evaluate the ideas that pass the screening stage. They are put through a thorough business analysis.  Some questions asked include: Will the product meet a definite customer need? Will the product be a logical addition to the company’s product mix? Can the product be developed, produced, and marketed at a reasonable cost? Will the product produce a profit for the company?

Preparing a Prototype  After a company screens and evaluates a new product idea, work on the actual product begins.  A company must develop a product it can manufacture easily and at a competitive price.  A company must design the product and determine the kind quality of materials to be used.  Prototype is a model of a new product.

Testing the Product  Once a prototype has been made, it is tested.  It can be tested in a lab, by a special group of customers, or under actual market conditions.  Test Marketing is the introduction of a product in a small marketing area to check customers’ reactions.  The test market is chosen as a representative of the total market.

Marketing the New Product  When the new product passes all the tests, it is ready for full-scale introduction to a market.  Can be introduced nationwide or to a limited market.  A limited market can be a certain state, type of consumer, geographic region, or type of marketer.

Product Life Cycle  Product Life Cycle is an identifiable cycle in a product’s life, which is represented by its sales history over a period of time and is usually divided into the four stages of introduction, growth, maturity, and decline.  The stages of PLC are influenced by marketing conditions such as competition and consumer behavior.

Introduction Stage  Introduction Stage is the first appearance of the product on the market.  A company puts all its effort into the marketing and production in order to make the product a marketing success.  This is the least profitable segment of a products life.

Growth Stage  Growth Stage is the period in a product life cycle when sales and profits are rising.  The length of the growth stage depends on the product and the marketing techniques used.  In order for a product to experience growth, it is important that sales increase at this time.

Maturity Stage  Maturity Stage is the period in a products life cycle when sales remain at a fairly even level.  Sales begin to level off during this stage.  When a product matures, it is time for marketing management to consider ways to extend the product’s life cycle, gradually phase it out, or replace it with another product.

Decline Stage  Decline Stage is the period in a products life cycle during which sales slow down.  Sometimes an increased marketing effort will boost sales again for a while, but the sales gain is usually temporary and sometimes not worth the cost.

Influences on the PLC  Managing marketing strategies is difficult because many factors can influence the PLC at the same time.  Three major influences on the PLC are competition, the product’s features, and consumer reactions.

Product Elimination  The decision to eliminate a weak product may be difficult.  Even though sales may be down for a product, people may still depend on it.  If a product is dropped to quickly, the company’s image may be hurt.

Product Extension  A marketer may discover that changing a successful product actually would lose customers.  The sales and profit position of the product may be strong.  This could be a chance to add a new product to the line, or to gain more customers by changing the marketing mix in other ways.

Promote New Uses and Benefits  Old products can have new uses.  For example: Arm & Hammer baking soda, which was originally marketed for baking, is now also promoted as a refrigerator freshener and toothpaste.

Change Pricing or Distribution  To answer a competitive challenge, a marketer may raise or lower the price of a successful product.  Although the product does not change, its image may.  As a result, customers may consider it a new bargain or a new prestige item.

Product Modification  Product Modification is a planned change in a product or its packaging that may include changes in features, quality, or style.  Most product modifications are changed periodically just to hold a competitive position.  New packaging can build customer interest or add convenience.