Anything that is offered to the market for

attention, acquisition, use or consumption that

satisfies a want or a need PRODUCT - Everything that goes with the purchase. - Ranges from the tangible (products) to the intangible (services).

Product is . . . . . Product is . . . . .

• Product Quality• - Select quality level that supports your position in the target mkt.

This is a major factor.• - QUALITY is how well the product meets the cons. needs. If you

think a pen will last 3 weeks and it lasts 3 months your satisfied; vice versa and you are not.

• Product Features• - Add or delete features to create diff. models to meet the needs of

diff. segments.• - Consumer/user research important for deciding to change features

that will solve problems and make sales.• Product Design• - Not nearly enough ergonomics or human engineering.• - Placement of controls - car, 3.5" eject button and on/off button on

computer, labeling of controls.• - Cords - should always be a place to wind them, plus length

sufficient, and the right length to wind properly.• - Buttons for setting watches - label• - Buttons for setting clocks - forward and backward.• - Should watch how people use things.

Product classification• Durable• Non – durable• Services• Durable Goods• - Non-Durable Goods – consumed during use - soap, food.• Services - selling performance • Continuum between Services and Goods – McD’s • - Consumer Goods - bought for personal use.• - Convenience - Freq. purchase, min. effort, buy on price or brand. • Impulse Goods - no preplanning, not on your list, going shopping while

hungry or without a list leads to more impulse buying, as do in-store displays and sale items.

• - Shopping - Considerable time & effort, durable/big ticket, comparisons made. - Specialty - unique. Cust. will go out of their way to find, little or no comparison shopping, price relatively unimportant. - Unsought - Cons. don't seek out or don't know about. Life ins., encyclopedias. - Industrial Goods - diff. by use.

Consumer goods classification

• Convenience goods

• Shopping goods

• Specialty goods

• Unsought goods

Industrial goods classification

• Materials and Parts

- raw materials

- manufactured materials and parts

• Capital items

• Supplies and business services

Product Mix

• The assortment ( collecting & categorizing ) of products that a company offers to a market

• Width – how many different product lines?• Length – the number of items in the product mix• Depth – The no. of variants offered in a product

line• Consistency – how closely the product lines are

related in usage

Product Items, Lines, and Mixes

Product ItemProduct Item

Product LineProduct Line

Product MixProduct Mix

A specific version of a product that can be designated as a distinct offering among an organization’s products.

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.

A group of closely-related product items.

All products that an organization sells.

All products that an organization sells.

Product Line decisions

• Product rationalization ( effective changes )• Market rationalization• Product line length

too long – when profits increase by dropping a product in the line

too short – when profits increase by adding products to the product line

• Line pruning – capacity restrictions to decide

Gillette’s Product Lines & Mix

Blades and Writingrazors Toiletries instruments Lighters

Fusion – 5 bladeMach 3 TurboMach 3 Series Paper Mate CricketSensor Adorn Flair S.T. Dupont Trac II Toni S.T. DupontAtra Right GuardSwivel Silkience Double-Edge Soft and Dri Lady Gillette Foamy Super Speed Dry LookTwin Injector Dry Idea Techmatic Brush Plus

Width of the product mixWidth of the product mix

De

pth

of

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pro

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line

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ep

th o

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es

Organizing for Product Management

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Product market strategy• The Ansoff Product-Market Growth Matrix is a marketing tool created by Igor Ansoff

and first published in his article "Strategies for Diversification" in the Harvard Business Review (1957). The matrix allows marketers to consider ways to grow the business via existing and/or new products, in existing and/or new markets – there are four possible product/market combinations. This matrix helps companies decide what course of action should be taken given current performance. The matrix consists of four strategies:

• Market penetration (existing markets, existing products): Market penetration occurs when a company enters/penetrates a market with current products. The best way to achieve this is by gaining competitors' customers (part of their market share). Other ways include attracting non-users of your product or convincing current clients to use more of your product/service, with advertising or other promotions. Market penetration is the least risky way for a company to grow.

• Product development (existing markets, new products): A firm with a market for its current products might embark on a strategy of developing other products catering to the same market (although these new products need not be new to the market; the point is that the product is new to the company). For example, McDonald's is always within the fast-food industry, but frequently markets new burgers. Frequently, when a firm creates new products, it can gain new customers for these products. Hence, new product development can be a crucial business development strategy for firms to stay competitive.

• Market development (new markets, existing products): An established product in the marketplace can be tweaked or targeted to a different customer segment, as a strategy to earn more revenue for the firm. For example, Lucozade was first marketed for sick children and then rebranded to target athletes. This is a good example of developing a new market for an existing product. Again, the market need not be new in itself, the point is that the market is new to the company.

• Diversification (new markets, new products): Virgin Cola, Virgin Megastores, Virgin Airlines, Virgin Telecommunications are examples of new products created by the Virgin Group of UK, to leverage the Virgin brand. This resulted in the company entering new markets where it had no presence before.

• The matrix illustrates, in particular, that the element of risk increases the further the strategy moves away from known quantities - the existing product and the existing market. Thus, product development (requiring, in effect, a new product) and market extension (a new market) typically involve a greater risk than `penetration' (existing product and existing market); and diversification (new product and new market) generally carries the greatest risk of all. In his original work [1], which did not use the matrix form, Igor Ansoff stressed that the diversification strategy stood apart from the other three.

• While the latter are usually followed with the same technical, financial, and merchandising resources which are used for the original product line, diversification usually requires new skills, new techniques, and new facilities. As a result it almost invariably leads to physical and organizational changes in the structure of the business which represent a distinct break with past business experience.

• For this reason, most marketing activity revolves around penetration.

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CHAPTER - 2

New Product Planning &Development - Organizing

• companies must be constantly modifying existing products and developing new ones; the marketplace demands it

• how new is new? most new products are modifications of or extensions to existing ones• 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• there must be adequate market demand: this is necessary but not sufficient for success• must satisfy key financial criteria• must be compatible with environmental standards• must fit with the company’s marketing structure• should also be compatible with production capabilities, satisfy legal requirements, and fit with

corporate goals and objectives

The New Product Development Process

• A new product is best developed through a series of six stages:– The first two stages provide a focus for

generating new-product ideas and a basis for evaluating them.

– The next three stages deal with ideas and are the least expensive.

9-7

Identifythe strategicrole of newproducts,

then...

Identifythe strategicrole of newproducts,

then...

1.Idea

generation

1.Idea

generation

2.Screeningof ideas

2.Screeningof ideas

3.Businessanalysis

3.Businessanalysis

4. Prototype

development

4. Prototype

development

5.MarketTests

5.MarketTests

6.Commer-cialization

6.Commer-cialization

The New Product Development Process

Launch Strategy

Company Goals

Product Strategy Examples

Defend market share

Introduce addition toexisting produce line/ revise existing product

Pizza Hut’s “BigNew Yorker” and “Stuffed Crust” pies

Strengthenreputation as an innovator

Introduce a really new product - not just an extension of an existing product

Digital camerasintroduced by Sony, Canon, and other firms

Reason s for new product failure• Many new products with satisfactory potential have failed to make the grade.

Many of the reasons for new product failure relate to execution and control problems. The following is a brief list of some important causes of new product failures after they have been carefully screened, developed and marketed.

• No competitive point of differene, unexpected reactions from competitors, or both.

• Poor positioning. • Poor quality of product. • Nondelivery of promised benefits of product. • Too little marketing support. • Poor perceived prices/quality (value) relationship. • Faulty estimates of market potential and other marketing research mistakes. • Faulty estimates of production and marketing costs. • Improper channels of distribution selected. • Rapid change in the market (economy) after the product was introduced.

• Marketers assess the marketing climate inadequately.

• The wrong group is targeted.

• A weak positioning strategy is used.

• A less-than-optimal "configuration" of product or service attributes and benefits is selected.

• A questionable pricing strategy is implemented.

• The advertising campaign generates an insufficient level of new product/new service awareness.

• Cannibalization depresses corporate profits.

• Over-optimism about the marketing plan leads to a forecast that cannot be sustained in the real world.

• The marketing plan for the new product or service is not well implemented in the real world.

• The marketer believes that the new product and its marketing plan has died and cannot be revived, when, in fact there is the potential for resurrection.

Consumer Adoption • different new products are adopted by consumers at

different rates• the individual consumer goes through certain stages

before adopting a new product• marketers must be interested in first creating awareness,

then interest, then trial, before the consumer is considered an adopter

• some people are genuine innovators, while others wait and try later; some never adopt

Consumer – new product• Adoption process:Adoption process: The decision-making activity

of an individual through which the new product is accepted.

• Diffusion:Diffusion: The process by which an innovation is spread through a social system over time.

Stages in the Adoption Process

• awareness:awareness: customer is exposed to the product• interest:interest: interest and information seeking• evaluation:evaluation: assessment of the advantages and

disadvantages of the new product• trial:trial: customer tries the product in low-risk situation;

may be a sample or test drive• adoption:adoption: customer decides to buy the product• confirmation:confirmation: customer decides to stay with the

product; attempts dissonance reduction

The Product Life Cycle Concepts

•A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.

• The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below:

•

•       Product Life Cycle Diagram    

•

• Introduction Stage• In the introduction stage, the firm seeks to build product awareness

and develop a market for the product. The impact on the marketing mix is as follows:

• Product branding and quality level is established, and intellectual property protection such as patents and trademarks are obtained.

• Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.

• Distribution is selective until consumers show acceptance of the product.

• Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.

• Growth Stage• In the growth stage, the firm seeks to build

brand preference and increase market share.• Product quality is maintained and additional

features and support services may be added.• Pricing is maintained as the firm enjoys

increasing demand with little competition.• Distribution channels are added as demand

increases and customers accept the product.• Promotion is aimed at a broader audience.

• Maturity Stage• At maturity, the strong growth in sales diminishes.

Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit.

• Product features may be enhanced to differentiate the product from that of competitors.

• Pricing may be lower because of the new competition.• Distribution becomes more intensive and incentives may

be offered to encourage preference over competing products.

• Promotion emphasizes product differentiation.

• Decline Stage• As sales decline, the firm has several options: • Maintain the product, possibly rejuvenating it by adding

new features and finding new uses.• Harvest the product - reduce costs and continue to offer

it, possibly to a loyal niche segment.• Discontinue the product, liquidating remaining inventory

or selling it to another firm that is willing to continue the product.

• The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.

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