1. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10  Product planning is crucial to the launch and success of new products. Essential Questions How does branding impact society? What makes a product a success or failure? Why do marketers need to know the lifecycle stage of a product?

2. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10  Why do marketers need to know the lifecycle stage of a product?

3. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 3 Product Concepts

4. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 4 WHAT ARE PRODUCTS AND SERVICES? CLASSIFYING PRODUCTS  Consumer Products Consumer Products Convenience Products Shopping Products Specialty Products Unsought Products 10-4

5. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 5 Types of Consumer Products 5 Convenience Product Shopping Product Specialty Product Unsought Product A relatively inexpensive item that merits little shopping effort A product that requires comparison shopping, because it is usually more expensive and found in fewer stores A particular item for which consumers search extensively and are reluctant to accept substitutes A product unknown to the potential buyer or a known product that the buyer does not actively seek Copyright 2010 by Cengage Learning Inc. All Rights Reserved

6. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 6 How a consumer product is classified affects what products consumers buy and the marketing strategies used 10-6

7. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 7 Rolex Watch What type of consumer product? 10-7

8. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 8 Little Remedies How does an extensive product line benefit both consumers and retailers? 10-8

9. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 9 Product Items, Lines, and Mixes 9 Product Item Product Line Product Mix A specific version of a product that can be designated as a distinct offering among an organization’s products. A group of closely-related product items. All products that an organization sells. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

10. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 10  Product Item Product Item  Product Line Product Line  Product Mix Product Mix Stock Keeping Unit (SKU) WHAT ARE PRODUCTS AND SERVICES? PRODUCT ITEMS, LINES, AND MIXES 10-10

11. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 Campbell’s Product Lines and Mix 11 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

12. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter10 Product Life Cycles  Explain the concept of product life cycles 12

13. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 13 Product Life Cycle A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death).

14. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 14 Introductory Stage  High failure rates  Little competition  Frequent product modification  Limited distribution  High marketing and production costs  Negative profits with slow sales increases  Promotion focuses on awareness and information  Communication challenge is to stimulate primary demand 14

15. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 Growth Stage  Increasing rate of sales  Entrance of competitors  Market consolidation  Initial healthy profits  Aggressive advertising of the differences between brands  Wider distribution 15

16. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 Maturity Stage  Sales increase at a decreasing rate  Saturated markets  Annual models appear  Lengthened product lines  Service and repair assume important roles  Heavy promotions to consumers and dealers  Marginal competitors drop out  Niche marketers emerge 16

17. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 Decline Stage  Long-run drop in sales  Large inventories of unsold items  Elimination of all nonessential marketing expenses  “Organized abandonment” 17

18. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 18 Product Life Cycle Time Dollars Profits SalesIntroductoryStageGrowthStageMaturityStageDeclineStage 0

19. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 19 Product Life Cycles for Styles, Fashions, and Fads

20. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 THE PRODUCT LIFE CYCLE DIMENSIONS  The Life Cycle and Consumers Diffusion of Innovation  Innovators  Early Adopters  Early Majority  Late Majority  Laggards

21. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 FIGURE 11-4 FIGURE 11-4 Five categories and profiles of product adopters (diffusion of innovation)

22. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 22 REVIEW LEARNING OUTCOME Product Life Cycles Time INTRODUCTIONGROWTHMATURITYDECLINE Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models Limited Wholesale/ retail distributors Expanded dealers. Long- term relations Extensive. Margins drop. Shelf space Phase out unprofitable outlets Awareness. Stimulate demand.Sampling Aggressive ads. Stimulate demand Advertise. Promote heavily Phase out promotion High to recoup development costs Fall as result of competition & efficient produc- tion. Prices fall (usually). Prices stabilize at low level. Sales

23. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 Big Question for Today  How do marketers begin the new product development process?

24. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 The Importance of New Products Explain the importance of developing new products and describe the six categories of new products 24

25. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter10 25 Market Development Diversification Increase market share among existing customers Attract new customers to existing products Introduce new products into new markets Create new products for present markets Categories of New Products New-to-the-World New Product Lines Product Line Additions Improvements or Revisions Repositioned Products Lower-Priced Products

26. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 The New Product Development Process Explain the steps in the new-product development process 26

27. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 27 New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product

28. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 Volvo’s YCC How are new-product ideas generated? 10-28

29. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter10 29 Diversification Idea Generation Customers Employees Distributors Competitors Vendors R & D Consultants Sources of New-Product Ideas

30. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 30 Screening Idea Screening The first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason.

31. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 THE NEW-PRODUCT PROCESS SCREENING AND EVALUATION  External Approach  Internal Approach Customer Experience Management (CEM) Concept Tests 10-31

32. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 32 Concept Test A test to evaluate a new-product idea, usually before any prototype has been created.

33. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 33 Business Analysis Considerations in Business Analysis Stage Demand Cost Sales Profitability

34. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 34 Development  Creation of prototype  Marketing strategy  Packaging, branding, labeling  Promotion, price, and distribution strategy  Manufacturing feasibility  Final government approvals if needed

35. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 35 Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. Test Marketing

36. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 36 Alternatives to Test Marketing  Single-source research using supermarket scanner data  Simulated (laboratory) market testing  Online test marketing

37. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter10  Speed as a Factor in New-Product Success Time to Market (TtM) THE NEW-PRODUCT PROCESS COMMERCIALIZATION 10-37

38. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter10 REVIEW LEARNING OUTCOME New-Product Development Process 38

39. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter10 Why New Products Fail  No discernible benefits  Poor match between features and customer desires  Overestimation of market size  Incorrect positioning  Price too high or too low  Inadequate distribution  Poor promotion  Inferior product

40. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter10 40 Success Factors Match between product and market needs Different from substitute products Factors in Successful New Products Benefit to large number of people

41. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 41 REVIEW LEARNING OUTCOME Why Products Succeed and Others Fail