1. Chapter 30
Product Planning

2. Standards
1.2.11A- Read and understand essential content of information texts and documents.
1.6.11AD- Listen to others. Contribute to discussions.

3. Product Planning, Mix, and Development 30.1
After finishing this section you will know:
The nature and scope of product planning
The concept of product mix
The different product mix strategies
The steps in new product development

4. Product Planning
Product planning- making decisions about those features that are needed to sell a business’s products, services, or ideas
These decisions relate to features such as:
Packaging
Labeling
Branding
These decisions related to services such as:
Product warranties necessary to support the product

5. Product Mix
Product mix- all the different products that a company makes or sells

6. Product Items and Lines
Product line- a group of closely related products manufactured and or sold by a business
Retailers frequently sell more than one product line
Product item- a specific model, brand, or size of a product within a product line
Retailers usually carry several product items for each product line they sell

7. Product Width and Depth
Product width- the number of different product lines a business manufactures or sells
Product depth- the number of product items offered within each product line
Product depth for a company that sells jeans is sizes, price ranges, colors, and styles

8. Product Mix Strategies
The plan for how the business determines which products it will make or stock

9. Developing New Products
New products can add substantially to a company’s overall sales
New products (those less than 5 years old) account for 35% of total sales
New product development generally involves 7 key steps:
Generating ideas
Screening ideas
Developing a business proposal
Developing the product
Testing the product
Introducing the product
Evaluating customer acceptance

10. Generating Ideas
Tracking cultural trends and observing customer behaviors to generate ideas
New ideas come from many sources:
Customers
Competitors
Channel members
Company employees
Research development departments
Creativity is essential for new product development

11. Screening Ideas
Matched against the company’s overall objectives to see if they fit
Evaluated on potential conflict with existing products
One or two ideas are selected for development and a business proposal is written

12. Developing a Business Proposal
New product ideas are evaluated in terms of their profit potential
Business proposals consider:
Size of market
Potential sales
Costs
Profit potential
Technological trends
Overall competitive environment
Level of risk

13. Developing the Product
A prototype is made, tested, and adjustments are made to improve the final product
Prototype- model of a product

14. Testing the Product Test marketed to get customers’ responses
Not all new products are test marketed in a geographic area, some are tested in focus groups
Marketers may forgo testing because they fear that a time delay will allow competitors to enter the market before their product is ready

15. Introducing the Product
If the customer response is favorable, the product is introduced into the marketplace
Commercialization- after a product has been researched it is ready for full market introduction
Costs of introducing new products are high
Must be advertised to introduce its benefits to consumers
To pay for these costs, companies must get their products into the market quickly
The first company to: introduce a new product has an advantage in acquiring customers and building brand loyalty

16. Evaluating Customer Acceptance
After products have been introduced, marketers track new product performance
Customized reports can be prepared from marketing data gathered from scanning equipment and computer systems
These reports can help answer key questions such as:
Who are the best customers for our new product?
What new products are customers buying?
How often do customers buy the new product?
When did customers last buy the new product?

17. Developing Existing Products
Businesses constantly review their product mix to see if they can further any product lines
This builds on an already established image
Appeals to new markets
Increases sales and profits
Disadvantage- cost through increased inventory, promotion, storage, and distribution

18. Line Extension
Companies can extend product offerings by adding new product lines, items, or services
May or may not be related to current products
Line extension- designed to be a different product that appeals to somewhat different needs of consumers
Company wants to provide a wider range of choices to increase product depth

19. Product Modifications
Product modification- an alteration in a company’s existing product
When modifying a product: the old product usually gets phased out
Packaging may be modified to appeal to consumers

20. Deleting a Product of a Product Line
Reasons to delete a product line:
Obsolescence- changes in interests and technology
Older models of desktop computers are slow and outdated

21. Deleting a Product of a Product Line
Loss of appeal- changes in consumer tastes lead to companies dropping products
Ovaltine hot chocolate
Conflict with current company objectives- sometimes a product conflicts with current objectives
Sears sold Caldwell Banker real estate company because they were losing market share to other realtors

22. Deleting a Product of a Product Line
Replacement with new products
Shelf space is limited, so retailers must make shelf or display space for new products
Products may be dropped because the store thinks it can make more money by carrying a different product
One manufacturer may offer better buying terms than another

23. Deleting a Product of a Product Line
Conflict with other products in the line- sometimes products take business away from other products in the same line
Example: Proctor & Gamble discontinued White Cloud Tissue in order to improve its return on similar products

24. Assignment
Page 556
Reviewing Key Terms
# 1-6

25. Sustaining Product Sales 30.2
After finishing this section you will know:
The product life cycle
The concept of product positioning
The purpose of category management

26. The Product Life Cycle
Product life cycle- the stages that a product goes through during its life

27. Managing During the Introduction Stage
Focus is on promotion and production
Major goal: draw the customer’s attention to the new product
Build sales by increasing product awareness
The least profitable stage of the cycle

28. Managing During the Growth Stage
The product is enjoying success as shown by increasing sales and profits
Much of the target market knows about and buys the product
Advertising focuses on customer satisfaction rather than new product benefits
Competition is aware of new product and likely to release new products to compete
To keep sales up, companies may have to introduce new models or modify the existing product

29. Managing During the Maturity Stage
This stage occurs when sales level off or slow down
More competition or most of the target market already has the product
Most of the marketing dollars are spent fighting off competiton

30. Managing During the Decline Stage
Sales fall and profits are smaller than costs
If a company doesn’t want to discontinue the product they have other choices:
Sell of license the product- products are sold to risk-taking companies who try to rejuvenate the product by changing it’s image or introducing it to a new market

31. Managing During the Decline Stage
Recommit to the product line- declining product may have other uses that can improve sales
Discount the product- product lines can be saved by discounting them so that they can compete with cheaper store of private brands

32. Managing During the Decline Stage
Regionalize the product- selling products only in geographical areas where there is a strong customer loyalty
Modernize or alter the product offering- can mean complete redesign, packaged differently, or reformulated

33. Product Positioning
Product positioning- the image the product projects
The effort a business makes to identify, place, and sell its products in the marketplace
Goal- to set the product apart from the competition
Create an image of the product that appeals to customers
Identify customer’s need and determine how their product compares to the competition

34. Product Positioning
Strategies used to position products in the marketplace:
Positioning by price and quality- stresses high price as a symbol of quality and low price as a indication of value
Economy line, mid-priced line, and luxury line
Positioning by features and benefits- products are positioned by stressing their features and benefits to the buyer
Companies position products to highlight the products unique characteristics

35. Product Positioning
Positioning in relation to the competition- to compete directly with product of other companies
Positioning in relation to other products in a line- in relation to products in the same line

36. Category Management
Category management- process that involves managing product categories as individual business units
Category manager- responsible for all the profits and losses for one specific product line
Planogram- computer-developed diagram that shows retailers how and where products within a category should be displayed on a shelf at individual stores

37. Assignment
Page 562
Reviewing Key Terms
# 1-6