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Chapter 5


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Chapter 5

  1. 1. Chapter 5 Product Development
  2. 2. <ul><li>Marketing Research reveals what the consumer wants and/or needs and points the way toward business opportunities. </li></ul><ul><li>Before a new product/service is developed two questions must be asked: “Can we produce it?” and “Can we sell it?” </li></ul><ul><li>The marketing department, through consumer research, will decide whether or not the product can be sold then it is up to the Production Department. </li></ul>
  3. 3. Production Department <ul><li>decides if the product can be produced (does the company have the facilities) </li></ul><ul><li>outlines the costs of making the new product (helps the marketing dept. to come up with a price) </li></ul><ul><li>If a company does not have it’s own production department, then they can hire one. </li></ul>
  4. 4. Section 5.2..Innovation or Invention <ul><li>Innovation ~ a product or service that uses new technology, items or processes to change existing products. </li></ul><ul><li>Innovation Video </li></ul><ul><li>Popular Mechanics </li></ul><ul><li>Invention ~ new devices, methods, or processes developed from study and experimentation. Businesses use inventions to create original solutions to meet consumer needs. </li></ul><ul><li>Best Inventions Of 2006 </li></ul><ul><li>2007 </li></ul><ul><li>Popular Science </li></ul>
  5. 5. Can You… <ul><li>List 5 inventions and 5 corresponding innovations: </li></ul><ul><li>Inventions: Innovations: </li></ul>
  6. 6. Why is it so hard to list modern day inventions, yet so easy to list modern day innovations? <ul><li>The answer may be that: </li></ul><ul><ul><li>“Everything has been done.” But has it? </li></ul></ul><ul><ul><li>With the rapid rate of change in the Information Age, there is no point in “reinventing the wheel” when you can just “replace the tire.” </li></ul></ul><ul><ul><li>The basic inventions were created a long time ago for us, now we just need to keep improving them. </li></ul></ul>
  7. 7. Section 5.3 ~ The Stages of Product Development
  8. 8. <ul><li>Idea Generation </li></ul><ul><li>Idea Screening ~ test new ideas with consumers and see if anyone else is already making this product/service </li></ul><ul><li>Concept Development ~ design a prototype (sample), see if it will work and market test it. ( Testing Consumer Products ) </li></ul><ul><li>Market Strategy ~ find out how to reach your target market </li></ul><ul><li>Feasibility Study ~ a study to determine how well a potential product or service would work ( Designing Toys) The product must be one that the company can make and sell, that consumers want and at a price they will pay, and that will produce a profit for the company. </li></ul><ul><li>Product Design ~ takes into consideration the preferences of the primary market </li></ul><ul><li>Test Marketing </li></ul><ul><li>Market Entry ~ product enters the product life cycle </li></ul>
  9. 9. Section 5.4 Product Development and Utility
  10. 10. <ul><li>Product development can add utility to a product. (Utility – what is added to a product to make it valuable on the market.) </li></ul><ul><li>Types of Utility; </li></ul><ul><li>Form </li></ul><ul><li>Information </li></ul><ul><li>Place </li></ul><ul><li>Time </li></ul><ul><li>Possession </li></ul>
  11. 11. <ul><li>Form Utility – relationship between a product or service’s form and its function. Form refers to the products “look” or the type of service. </li></ul><ul><li>Video </li></ul>
  12. 12. Types of Form Utility: <ul><li>Material- e.g. Columbia and other companies are always coming up with new materials </li></ul><ul><li>Scent </li></ul><ul><li>Flavour </li></ul><ul><li>Color – many consumers are influenced by color (Coffee Cans </li></ul><ul><li>Design – most important part of form utility. (Ergonomic designs; comfortable, easy to use etc. Aesthetics is also important, people will pay a lot for attractive cars, furniture etc.) </li></ul><ul><li>Packaging – an innovative package can create a whole industry </li></ul><ul><li>Video =-0EvsecMxbc&feature=related </li></ul>
  13. 13. Utility Continued <ul><li>Information Utility –providing knowledge, facts, instructions, and technical support for a product that adds value to the product. E.g. 24 hr. help line </li></ul><ul><li>Place Utility – making the product accessible for the consumer adds value to the product. E.g. available over the internet & in many stores </li></ul><ul><li>Time Utility – providing the product in the marketplace when the consumer needs it adds value to the product. E.g. open 24 hours (Homer Video) </li></ul><ul><li>Possession Utility – making a product easy to purchase adds value to the product. E.g. provide credit </li></ul>
  14. 14. Section 5.5 Product Development & the Marketing Concept
  15. 15. Product Development & the Marketing Concept <ul><li>To properly study the consumer’s & competition’s place in product development process, a business might use one or all of the following analytical tools: </li></ul>
  16. 16. Product Mapping <ul><li>classifying/grouping products together based on various criteria to create competitive segments and using those segments to create a market for a specific product. </li></ul><ul><li>Can demonstrate individual product attributes that consumers like or dislike. </li></ul>
  17. 17. Market Opportunity Analysis <ul><li>analysis of where in the market a product could fit. MOA is composed of three distinct parts: </li></ul><ul><ul><li>Overall Market –looking at the category your product/service fits into and analyzing every product/service in that category. </li></ul></ul><ul><ul><li>Indirect Competition – grouping competitive brands by features. (Frozen desserts – cakes, cookies, pies, ice cream, pudding etc.) </li></ul></ul><ul><ul><li>Direct Competition – identifying all competitive brands that compete for a share of the same market. </li></ul></ul>
  18. 18. Market Potential Analysis <ul><li>MOA can help determine market potential. (A figure calculated to find out how many people might buy the product being marketed. </li></ul><ul><ul><li>MP = N x P x Q </li></ul></ul><ul><ul><li>N = number of possible buyers; P = selling price; </li></ul></ul><ul><ul><li>Q = the average number of the item that each buyer purchases in a year. </li></ul></ul>
  19. 19. Benefit Analysis <ul><li>any feature of a product/service should add utility and provide benefit to the consumer. (Two types) </li></ul><ul><ul><li>Feature-Benefit Analysis – looking at each feature and finding the utility and benefit it adds to the product. </li></ul></ul><ul><ul><li>Cost-Benefit Analysis – comparison of the estimated costs of an action with the estimated benefits it is likely or intended to produce. (Is it worth changing or producing.) </li></ul></ul>