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  • Chapter 11 Developing and Managing Products
  • Mkt08

    1. 1. Create the Product
    2. 2. What is a Product? <ul><li>Physical Objects </li></ul><ul><li>Services </li></ul><ul><li>Events </li></ul><ul><li>Persons </li></ul><ul><li>Places </li></ul><ul><li>Organizations </li></ul><ul><li>Ideas </li></ul><ul><li>Combinations of above </li></ul><ul><li>Anything that can be acquired, used, consumed, adopted or enjoyed to satisfy a want or need </li></ul><ul><li>The starting point of the Marketing Mix </li></ul>
    3. 3. Build a Better Mousetrap <ul><li>Value proposition: Benefits consumers receive when buying a good or service </li></ul><ul><ul><li>Tangible vs. intangible </li></ul></ul><ul><ul><li>Durable vs. nondurable </li></ul></ul>
    4. 4. Product Layers Brand Name Quality Level Packaging Design Features Delivery & Credit Installation Warranty After- Sale Service Core Benefit or Service Actual Product Core Product Augmented Product
    5. 5. Product Classifications <ul><li>Unsought Products </li></ul><ul><li>New innovations </li></ul><ul><li>Little interest until need arises </li></ul><ul><li>Much advertising & personal </li></ul><ul><li>selling </li></ul><ul><li>Specialty Products </li></ul><ul><li>Special purchase efforts </li></ul><ul><li>High $/unique characteristics </li></ul><ul><li>Brand identification </li></ul><ul><li>Few purchase locations </li></ul><ul><li>Shopping Products </li></ul><ul><li>Buy less frequently </li></ul><ul><li>Higher price </li></ul><ul><li>Fewer purchase locations </li></ul><ul><li>Comparison shop </li></ul><ul><li>Convenience Products </li></ul><ul><li>Buy frequently & immediately </li></ul><ul><li>Low priced </li></ul><ul><li>Mass advertising </li></ul><ul><li>Many purchase locations </li></ul>
    6. 6. Product Group Activity <ul><li>Unsought products often call to mind situations that a consumer would like to ignore. </li></ul><ul><li>Break into small groups and select an example of an unsought product. </li></ul><ul><li>Suggest a Marketing approach to get consumers interested in, and ultimately purchase, such a product? </li></ul><ul><li>How does ethics factor in to promoting this product? </li></ul>
    7. 7. Business-to-Business Produc ts <ul><li>Classified by how organizations use them </li></ul><ul><li>Equipment </li></ul><ul><li>Maintenance, repair & operating (MRO) </li></ul><ul><li>Raw materials </li></ul><ul><li>Processed materials </li></ul><ul><li>Specialized services </li></ul><ul><li>Component parts </li></ul>
    8. 8. Other Marketable Entities Profit (businesses) & nonprofit (schools & churches) Public health, environmental, family planning, etc. Politicians, entertainers, sports figures, doctors & lawyers Organizations Persons Places Business sites & tourism Ideas
    9. 9. “ New and Improved” <ul><li>Innovation: A product that customers perceive to be new & different from existing products </li></ul><ul><li>The Federal Trade Commission says: </li></ul><ul><ul><li>A product must be entirely new or changed significantly to be called “new” and </li></ul></ul><ul><ul><li>May be called “new” for only six months </li></ul></ul><ul><li>New products are expensive to develop & even more costly if they fail </li></ul>
    10. 10. Causes of New Product Failures <ul><li>As many as 80% of new consumer products fail </li></ul><ul><li>Only 40% are around 5 years after introduction </li></ul><ul><li>Why? </li></ul><ul><ul><li>Overestimation of market size </li></ul></ul><ul><ul><li>Product design problems </li></ul></ul><ul><ul><li>Product incorrectly positioned, priced, advertised </li></ul></ul><ul><ul><li>Launched despite poor M/R findings </li></ul></ul><ul><ul><li>Competitive actions </li></ul></ul>
    11. 11. Continuous Innovation <ul><li>A modification to an existing product </li></ul><ul><li>Most common form of innovation </li></ul><ul><li>Learning & change are minimal </li></ul><ul><li>Examples: brand extensions, line extensions </li></ul><ul><li>Knockoffs copy (with slight modification) the design of an original product </li></ul>
    12. 12. Dynamically Continuous Innovation <ul><li>A pronounced modification to an existing product </li></ul><ul><li>Requires a modest amount of learning or behavior change </li></ul><ul><li>Convergence: The coming together of 2 or more technologies to create a new system with greater benefits than its parts </li></ul>
    13. 13. Discontinuous Innovation <ul><li>A totally new product </li></ul><ul><li>Creates major changes in the way we live </li></ul><ul><li>Significant new learning required </li></ul><ul><li>Examples: microwave ovens, cell phones </li></ul>
    14. 14. Innovation Individual Activity <ul><li>Think about 5 new products introduced over the last year. </li></ul><ul><li>Classify each as a continuous, dynamically continuous or discontinuous innovation. </li></ul><ul><li>Why did you select those classifications? </li></ul>
    15. 15. New Product Development <ul><li>Continuous search for entirely new products or ways to make existing products better </li></ul><ul><li>Successfully new product introduction is becoming more difficult </li></ul><ul><ul><li>R&D costs are enormous </li></ul></ul><ul><ul><li>Products become obsolete faster </li></ul></ul><ul><ul><li>Slotting fees are high </li></ul></ul>
    16. 16. Product Development Phases <ul><li>Phase 1: Idea generation </li></ul><ul><ul><li>Brainstorm about & systematically search for new products compatible with the firm’s mission </li></ul></ul><ul><li>Phase 2: Concept development & screening </li></ul><ul><ul><li>Test ideas for technical & commercial success </li></ul></ul><ul><ul><li>Choose one(s) with strongest appeal & potential </li></ul></ul><ul><li>Phase 3: Marketing strategy development </li></ul><ul><ul><li>Objectives & tactics </li></ul></ul>
    17. 17. Product Development Phases <ul><li>Phase 4: Business analysis </li></ul><ul><ul><li>Assess the product’s commercial viability </li></ul></ul><ul><li>Phase 5: Technical development </li></ul><ul><ul><li>Refine & perfect the new product </li></ul></ul><ul><ul><li>Design prototypes or test versions of the proposed product </li></ul></ul>
    18. 18. Product Development Phases <ul><li>Phase 6: Test marketing </li></ul><ul><ul><li>Test marketing mix in a small geographic area </li></ul></ul><ul><li>Phase 7: Commercialization </li></ul><ul><ul><li>Launch the new product </li></ul></ul><ul><ul><li>Begin full-scale production, distribution, advertising & sales promotion </li></ul></ul>
    19. 19. Adoption & Diffusion <ul><li>Product adoption </li></ul><ul><ul><li>Consumers or businesses begin to buy & use a new product </li></ul></ul><ul><li>Diffusion </li></ul><ul><ul><li>Product use spreads throughout a population </li></ul></ul><ul><ul><li>The tipping point </li></ul></ul>
    20. 20. Adoption Pyramid
    21. 21. Product Adoption Stages <ul><li>Awareness: </li></ul><ul><ul><li>Mass advertising generates product awareness </li></ul></ul><ul><li>Interest: </li></ul><ul><ul><li>Prospective adopters open to product info </li></ul></ul><ul><ul><li>Teaser ads used to stimulate interest </li></ul></ul><ul><li>Evaluation: </li></ul><ul><ul><li>Consumers weigh costs/benefits or may even make impulse purchases </li></ul></ul>
    22. 22. Product Adoption Stages <ul><li>Trial: </li></ul><ul><ul><li>Sales promotions & product demos critical </li></ul></ul><ul><li>Adoption: </li></ul><ul><ul><li>Goes beyond trial use </li></ul></ul><ul><li>Confirmation: </li></ul><ul><ul><li>Consumer weighs expected vs. actual benefits & costs </li></ul></ul><ul><ul><li>Reinforce consumer choice via reminder IMC </li></ul></ul>
    23. 23. Categories of Product Adopters
    24. 24. Innovation & Adoption Observability Relative Advantage Compatibility Complexity Trialabilty Factors Affecting Consumer Adoption
    25. 25. B2B Product Adoption <ul><li>Innovators </li></ul><ul><ul><li>New, smaller or younger firms </li></ul></ul><ul><li>Early-adopter firms </li></ul><ul><ul><li>Market-share leaders </li></ul></ul><ul><li>Late-majority firms </li></ul><ul><ul><li>Prefer status quo & have large investments in existing production technology </li></ul></ul><ul><li>Laggard firms </li></ul><ul><ul><li>Already losing money </li></ul></ul>
    26. 26. Improving New Product Success <ul><li>A successful new product should offer: </li></ul><ul><ul><li>A superior product (one with higher quality, features & value in use) </li></ul></ul><ul><ul><li>A well-defined concept (an identified target market, product requirements & benefits) </li></ul></ul>
    27. 27. New Product Class Discussion <ul><li>Not all new products are perceived to benefit consumers or society. </li></ul><ul><li>What are some examples of new products that have made our lives better? Why? </li></ul><ul><li>Give some examples of products that are harmful to consumers or society. Why? </li></ul><ul><li>Should there be a way to monitor or police new products that may be harmful? </li></ul>
    28. 28. Key Concepts Review <ul><li>Product </li></ul><ul><li>Core Product </li></ul><ul><li>Actual Product </li></ul><ul><li>Augmented product </li></ul><ul><li>Convenience Product </li></ul><ul><li>Shopping Product </li></ul><ul><li>Specialty Product </li></ul><ul><li>Unsought Product </li></ul><ul><li>“ New” Product </li></ul><ul><li>Types of Innovations </li></ul><ul><li>Product Adoption </li></ul><ul><li>Product Diffusion </li></ul><ul><li>Adoption Categories </li></ul><ul><li>Test Marketing </li></ul>