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Objectives
To understand:
The meaning of the word “product” in its fullest sense.
The classification of consumer and business products.
The major product-mix strategies.
The importance of product innovation.
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Objectives
To understand:
The steps in the product-development process.
Organizational structures for product planning and development.
Adoption and diffusion processes for new products.
Managing products throughout the life cycle.
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The Meaning of Product
The essence of what the company is offering the consumer.
The consumer is buying the benefit provided by the product attributes.
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Product Attributes
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The Meaning of Product
A product…
Can be a physical item or a service, place, person, or idea.
Has a set of tangible attributes, including packaging, colour, price, quality, brand, and the services and reputation of the seller.
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7. Product Classification Systems
Whether a product is considered a consumer or business good depends on the intended target market, how it is used, and by whom.
Often one product can be both a consumer and business good.
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8. Classification of Consumer Goods
Classification is based upon the nature of the
buying process.
Convenience Goods – purchased with minimum effort.
Shopping Goods – purchased after the buyer has spent some time and effort.
Specialty Goods – purchased after some special effort made; unsought, consumer not aware, does not yet want.
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9. Classification of Business Goods
Classification based on goods’ broad uses.
Raw Materials – unprocessed, become part of other manufactured products.
Manufactured Parts and Materials – processed products that become parts of other products.
Installations – long-lived major capital goods.
Accessory Equipment – used in operation.
Operating Supplies – short-lived, low-priced items; convenience goods for businesses.
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10. Strategic Decisions Pertaining to the Organization’s Products
The product mix is a collection of products offered for sale, and has both breadth and depth.
Breadth  number of product lines offered.
Depth  the assortment within the line.
Product line  group of related products
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11. Product Mix – Breadth and Depth
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Product Positioning
The ability to appropriately position a product
is a major determinant of company
profitability.
Positioning in relation to a competitor– by drawing comparisons.
Positioning in relation to a product class or an attribute – by stressing certain attractive characteristics.
Positioning in relation to a target market.
Positioning by price and quality.
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13. Product-Mix Expansion
Increasing the depth within a particular product line and/or the number of lines.
Line extensions
Mix extensions
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14. Mix-Extension Strategies
Related-product, same brand.
Unrelated product, same brand.
Unrelated product, different brand.
Related product, different brand.
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15. Other Product-Mix Strategies
Trading up
Trading down
Modification of existing products
Product-mix contraction
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16. Developing New Products
Changing consumer needs and competition renders company’s current products obsolete.
As product ages, profitability declines.
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Risks
95% of new products FAIL:
Not perceived as new
Do not deliver on promise
Market too small
Poor positioning
Lack of marketing support
Poor value
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What is NEW?
Truly innovative – truly unique.
Replacements that are significantly different.
Imitative products that are new to the company.
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19. Criteria for New Products
Adequate market demand.
Must satisfy key financial criteria.
Must be compatible with environmental standards.
Must fit with the company’s marketing structure.
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20. New Product Strategy Statement
A statement that identifies the role the new product is expected to play in achieving company and marketing goals.
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21. New Product Development Process
Generating new product ideas
Screening ideas
Business analysis
Prototype development
Market tests
Commercialization
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22. Organizing for Product Innovation
There must be strong, long-term commitment.
Companies take a variety of approaches to organizing the new product function:
Product-planning committee
New-product department
Venture teams
Product manager
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23. New Product Adoption and Diffusion
Product Adoption  A set of successive
decisions a customer makes before accepting
a new product.
Product Diffusion  The process by which
the innovation spreads through the market.
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24. Stages in the Adoption Process
Awareness – customer is exposed to the innovation.
Interest – customer is interested and seeking information.
Evaluation – assessment of the advantages and disadvantages of the new product.
Trial – customer adopts the product on a limited basis; may be sample or test.
Adoption – customer decides whether to use full scale.
Confirmation – customer becomes a user and seeks immediate assurance that the decision was correct.
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Adopter Categories
People adopt an innovation at different points in time:
Innovator
Early Adopter
Early Majority
Late Majority
Laggard
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26. How New Product Characteristics Affect Adoption
Relative advantage
Compatibility
Complexity
Trialability
Observability
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The Product Life Cycle
The concept of the product life cycle applies to product categories, not to brands.
It consists of the aggregate sales over time for all brands.
A product will pass through four stages over its life cycle:
Introduction
Growth
Maturity
Decline
Each stage requires different marketing strategies.
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28. Typical Life Cycle of a Product Category
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29. Characteristics of the Stages
Introductory Stage – developing the market.
Reaching the innovators
Growth Stage – competition begins, sales grow quickly, profits peak and decline.
Reaching the early and late majority.
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30. Characteristics of the Stages
Maturity Stage – competition is intense, sales slow down, differentiated product offerings, few new entrants.
Reaching the late majority and laggards.
Decline Stage – customers move to other options, competitors leave, profits low, consider exit.
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31. Length of Product Life Cycle
Length of the life cycle will vary.
Some are quite short, may be getting shorter
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Life Cycle Management
The shape of the sales and product curves for a product category can be controlled through the collective action of the competing firms.
Individual firms attempt to develop strategies to maximize success for their own brands.
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Life Cycle Management
Predict the shape of the proposed product cycle before it is introduced.
Adapt strategies at each stage.
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34. Life Cycle Stage Strategies
Entry strategies – what stage to enter at?
Managing on the rise
Managing during maturity
Surviving decline
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