Product planning

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Product planning

  1. 1. Product Planning and Development
  2. 2. Chapter Goals <ul><li>To gain an understanding of: </li></ul><ul><li>The meaning of total “product” and “new” product </li></ul><ul><li>Classification of business and consumer products and its relevance to marketing planning </li></ul><ul><li>Product innovation </li></ul><ul><li>The product-development process </li></ul><ul><li>When to add new products to a product line </li></ul><ul><li>The adoption and diffusion process for products </li></ul><ul><li>Organizational structures for product planning and development </li></ul>
  3. 3. What is a Product? <ul><li>it is more than physical products; includes services, places, persons, and ideas </li></ul><ul><li>it is easy to visualize the products of Esso, but more difficult to describe those of the Toronto Symphony, UNICEF, or the Salvation Army </li></ul><ul><li>some products are sold only to consumers, while others are sold to organizations </li></ul><ul><li>whether a product is a consumer product or a business product depends on how it is used </li></ul>
  4. 4. Seller’s services Product quality Physical characteristics of goods Price Brand Design Packaging Product warranty Seller’s reputation Colour The Total Product
  5. 5. Consumer Goods Classes <ul><li>Consumer products can be classified by the buying behaviour of the consumers: </li></ul><ul><li>Convenience goods are bought with little time and effort, such as milk, bread, a chocolate bar. </li></ul><ul><li>Shopping goods are those where extensive comparison is the norm-- cars, furniture, clothes. </li></ul><ul><li>Specialty goods are those for which consumers have a strong brand preference. BMW, Armani. </li></ul><ul><li>Unsought goods are those now unknown to the consumer or, if known, undesired. </li></ul>
  6. 6. Classifying Business Products <ul><li>raw materials : unprocessed, become part of other manufactured products </li></ul><ul><li>manufactured parts and materials: processed products that become part of other products </li></ul><ul><li>installations: major buildings and equipment </li></ul><ul><li>accessory equipment: used in operations, include computers, desks, tools </li></ul><ul><li>operating supplies : low value, used by most firms, convenience products for businesses </li></ul>
  7. 7. Innovation is Required <ul><li>Products go through life cycles-- you need new ones coming on stream. </li></ul><ul><li>Profits highest when products new. </li></ul><ul><li>Consumers more selective: they look carefully at each purchase. Also a little jaded. </li></ul><ul><li>High failure rates in the 75% range. </li></ul><ul><li>Leads to new products: </li></ul><ul><ul><li>Innovative= truly unique </li></ul></ul><ul><ul><li>Improved, with valuable new benefits </li></ul></ul><ul><ul><li>Imitative, another “me too” product. </li></ul></ul>
  8. 8. <ul><li>1. Ford’s Edsel automobile. </li></ul><ul><li>2. Dupont’s Corfam synthetic leather. </li></ul><ul><li>3. Polaroid’s Polavision. </li></ul><ul><li>4. United Artist’s Heaven’s Gate western movie. </li></ul><ul><li>5. RCA’s Videodisc. </li></ul><ul><li>6. Time’s TV-Cable Week magazine. </li></ul><ul><li>7. IBM’s PCjr. </li></ul><ul><li>8. New Coke. </li></ul><ul><li>9. R.J. Reynolds’ Premier cigarette. </li></ul><ul><li>10. Nutrasweet’s Simplesse fat substitute. </li></ul>Ten World-Class Product Failures
  9. 9. New Product Development <ul><li>companies must be constantly modifying existing products and developing new ones; the marketplace demands it </li></ul><ul><li>how new is new? most new products are modifications of or extensions to existing ones </li></ul><ul><li>the introduction of a new product is a strategic decision which should be guided by the company’s goals and a new product introduction strategy </li></ul>
  10. 10. Identify the strategic role of new products, then... 1. Idea generation 2. Screening of ideas 3. Business analysis 4. Prototype development 5. Market Tests 6. Commer- cialization The New Product Development Process
  11. 11. The New Product Development Process <ul><li>A new product is best developed through a series of six stages: </li></ul><ul><ul><li>The first two stages provide a focus for generating new-product ideas and a basis for evaluating them. </li></ul></ul><ul><ul><li>The next three stages deal with ideas and are the least expensive. </li></ul></ul><ul><ul><li>In their haste, some companies skip stages — the most common omission being market tests. </li></ul></ul>9-7
  12. 12. Criteria for New Products <ul><li>there must be adequate market demand: this is necessary but not sufficient for success </li></ul><ul><li>must satisfy key financial criteria </li></ul><ul><li>must be compatible with environmental standards </li></ul><ul><li>must fit with the company’s marketing structure </li></ul><ul><li>should also be compatible with production capabilities, satisfy legal requirements, and fit with corporate goals and objectives </li></ul>
  13. 13. Development of New Product Strategy Digital cameras introduced by Sony, Canon, and other firms Introduce a really new product - not just an extension of an existing product Strengthen reputation as an innovator Pizza Hut’s “Big New Yorker” and “ Stuffed Crust” pies Introduce addition to existing produce line/ revise existing product Defend market share Examples Product Strategy Company Goals
  14. 14. Adoption-Diffusion P rocess <ul><li>different new products are adopted by consumers at different rates </li></ul><ul><li>the individual consumer goes through certain stages before adopting a new product </li></ul><ul><li>marketers must be interested in first creating awareness, then interest, then trial, before the consumer is considered an adopter </li></ul><ul><li>some people are genuine innovators, while others wait and try later; some never adopt </li></ul>
  15. 15. New Product Adoption and Diffusion <ul><li>Adoption process: The decision-making activity of an individual through which the new product is accepted. </li></ul><ul><li>Diffusion: The process by which an innovation is spread through a social system over time. </li></ul>
  16. 16. Stages in the Adoption Process <ul><li>awareness: customer is exposed to the product </li></ul><ul><li>interest: interest and information seeking </li></ul><ul><li>evaluation: assessment of the advantages and disadvantages of the new product </li></ul><ul><li>trial: customer tries the product in low-risk situation; may be a sample or test drive </li></ul><ul><li>adoption: customer decides to buy the product </li></ul><ul><li>confirmation: customer decides to stay with the product; attempts dissonance reduction </li></ul>
  17. 17. Adopter Categories <ul><li>Researchers have identified five categories of individual adopters for new products: </li></ul><ul><ul><li>Innovators — 3% of the market. </li></ul></ul><ul><ul><li>Early adopters — 13% of the market. </li></ul></ul><ul><ul><li>Early majority — 34% of the market. </li></ul></ul><ul><ul><li>Late majority — 34% of the market. </li></ul></ul><ul><ul><li>Laggards — 16% of the market. </li></ul></ul><ul><li>In addition, some individuals — nonadopters — never accept the innovation. </li></ul>
  18. 18. <ul><li>Evaluation of new safer baseball for youngsters : </li></ul><ul><ul><li>1. Relative advantage—superior to current balls in terms of safety but not tradition. </li></ul></ul><ul><ul><li>2. Compatibility—coincides with cultural values and experiences of parents but not of coaches. </li></ul></ul><ul><ul><li>3. Complexity—no problem understanding. </li></ul></ul><ul><ul><li>4. Trialability—ball can be easily tested. </li></ul></ul><ul><ul><li>5. Observability—can see a youngster who’s hit with the new ball dust off and trot to first base. </li></ul></ul>Five Characteristics Affecting Adoption Rate: Example
  19. 19. New Product Organization <ul><li>Companies take a variety of approaches </li></ul><ul><li>to organizing the new product function: </li></ul><ul><li>product-planning committees </li></ul><ul><li>new-product departments </li></ul><ul><li>cross-functional new venture teams </li></ul><ul><li>product managers </li></ul><ul><ul><li>many larger firms are replacing the product manager with category managers </li></ul></ul>

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