Part 4 Product Decisions MARKETING 17e Hult • Pride • Ferrell © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

11: Strategic Product Management 12: Services Marketing 10: Product Decisions 11: Strategic Product Management 12: Services Marketing 13: Strategic Management of Branding and Packaging © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Objectives To understand how companies manage existing products through line extensions and product modifications To describe how businesses develop a product idea into a commercial product To understand the importance of product differentiation and the elements that differentiate one product from another To understand how businesses position their products To examine how product deletion is used to improve product mixes To describe organizational structures used for managing products © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Managing Existing Products Organizations must be able to adjust their products’ features in response to changes in customers’ needs A marketer must develop, alter and maintain an effective product mix By assessing the current product mix, a marketer can identify weaknesses and gaps which can lead to improving the product mix through Line Extensions Product Modifications © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Line Extensions A line extension is the development of a product closely related to existing products in the line but designed specifically to meet different customer needs Less risky and less costly than introducing a new product Line extensions may Increase sales Take market share from competitors © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point Tide Pods represent a line extension of the successful Tide laundry product line Can you think of other products that are line extensions? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Modifications A product modification means changing one or more characteristics of a product Differs from a line extension because the original product drops from the product line Certain conditions must exist for the modification to work The product must be modifiable Customers must recognize the modification The modification should make the product more consistent with customers’ desires © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Modifications Three major types of product modifications Quality modifications are changes to a product’s dependability and durability Functional modifications are changes that affect a product’s versatility, effectiveness, convenience or safety Aesthetic modifications are changes to the sensory appeal of a product Too much? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point Friday’s brings its food products to supermarkets in the form of ready-to-heat, frozen foods Still need a picture Have you tried Friday’s frozen food? If so, does it taste like the food in the restaurant? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point Snapshot. Need a picture without edit marks © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Do AXE Products Make Men More Desirable? Discussion Point Do AXE Products Make Men More Desirable? To effectively manage the brand, Unilever has regularly developed new products AXE’s product features are both tangible and psychological Love them or hate them, AXE commercials leave an indelible impression Take a look at the website How has AXE managed its product mix? How has AXE used line extensions to increase its reach among consumers? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Developing New Products Developing new products enhances a product mix and adds depth to a product line Introducing new products can be expensive and risky New product failures often occur and can create major financial problems for an organization Failing to introduce new products is also risky Companies can lose market share with failure to innovate and keep up with competitive products © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Developing New Products The term new product may have more than one meaning A new product can be an innovative product that has never been sold by any organization A new product can be a modified product that existed previously A new product may be a product a specific company has not marketed previously but similar products have been available from other companies A product can be viewed as new when it is brought to one or more markets from another market © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

New Products Red Mango low- fat frozen yogurt introduced dark chocolate to celebrate its 100th store opening © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Phases of the New-Product Development Process New-product development process is a seven-phase process for introducing products © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Idea Generation Idea generation is the activity of seeking product ideas to achieve organizational objectives There is a relationship between the amount of market research gathered and the number of ideas generated by work groups One trend is engaging customers online Ideas can come from several sources Internally through departments or franchisees Externally through customers, competitors, advertising agencies, consultants or even outsourcing © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Screening Screening means selecting the ideas with the greatest potential for further review Ideas are analyzed to determine whether they match the organization’s objectives and resources Keeping the product idea in focus and on track by understanding consumer needs and wants is the key to success A checklist is often used encouraging evaluators to be systematic Most new products are rejected during this phase © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Concept Testing Concept testing is seeking a sample of potential buyers’ responses to a product idea Often necessary in order to evaluate ideas properly A low-cost procedure allowing the company to determine customers’ initial reactions before investing resources in research and development The result of concept testing can help marketers understand which attributes and benefits are most important to potential customers © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Business Analysis Business analysis involves evaluating the potential impact of a product idea on the firm’s sales, costs and profits Marketers ask a series of questions and attempt to answer them through market information Results of customer surveys and secondary data supply the specifics needed to estimate potential sales, costs and profits Analysis based on estimates is useful but not precise © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Development Product development is determining if producing a product is technically feasible and cost effective To test acceptability, the idea is converted into a prototype or working model The prototype is tested for overall functioning both in the lab and in the field Crucial questions during this phase include how much quality to build into the product This phase is lengthy and expensive so a small number of product ideas are put into development © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Concept Testing Before M&M introduced a crunchy, chocolate-covered pretzel candy, they had to determine consumer interest in the new product © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Test Marketing Test marketing is a limited introduction of a product in geographic areas chosen to represent the intended market The aim is to determine if potential customers will buy the product and used to lessen the risk of product failure Selection of test areas is important to provide accurate representation of the intended market Test marketing is expensive and competitors may try to interfere Not all test marketed products are launched © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Popular Test Markets © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Commercialization Commercialization is refining and finalizing plans and budgets for full-scale manufacturing and marketing of a product Marketers analyze results of test marketing and make needed changes to the marketing mix During this stage, decisions are made on services such as warranties, repairs and replacement parts Product enters the market with advertising, personal selling and promotion A roll-out is introducing a product in stages starting in one geographic area and expanding © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Stages of Expansion During Commercialization © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Commercialization Peapod, the nation’s leading online grocer, has placed a virtual store in Chicago to test the virtual store concept versus maintaining a strictly online presence to support sales © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point Merck & Company Merck develops, manufactures and markets a broad range of health-care products The firm’s Merck-Medco Managed Care Division manages pharmacy benefits for more than 40 million Americans What products has Merck developed and introduced recently? How does research facilitate new product development at Merck? Is Merck’s focus on research consistent with the firm’s mission and values? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Differentiation Product differentiation is creating and designing products so customers perceive them as different from competing products Customer perception is critical Three aspects of product differentiation companies must consider Product Quality Product Design and Features Product Support Services © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Quality Product Quality Level of Quality The overall characteristics of a product that allow it to perform as expected in satisfying customer needs Level of Quality The amount of quality a product possesses Consistency of Quality The degree to which a product has the same level of quality over time © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Discussion Point Dyson provides high-quality products known for exceptional design and performance Can you think of other products that are known for high-quality, design and performance? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Design and Features Product Design – how a product is conceived, planned and produced Styling – the physical appearance of a product Product Features – specific design characteristics that allow a product to perform certain tasks Marketers must determine the product designs and features customers desire Information from marketing research helps assess customers’ preferences © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Design Nike carefully designed the Nike Free shoes to be stylish and integrated with Apple performance- monitoring apps © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Support Services Customer Services – human or mechanical efforts or activities that add value to a product Examples include: Delivery/Installation Financing Customer training Warranties/Guarantees Repairs Layaway plans Convenient hours Adequate parking Toll-free numbers Websites © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Authenticity of the Artisan Food Label Discussion Point Authenticity of the Artisan Food Label Artisan food has traditionally been used to describe handcrafted food Tostito’s, Wendy’s and Subway have all used the term Domino’s sells artisan pizzas with unique toppings Is this enough to classify these pizzas as artisan? Is the term misleading? Are artisan food labels authentic? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Positioning Product positioning refers to the decisions and activities intended to create and maintain a certain concept of the product in customers’ minds This projected image is crucial because consumers tend to group, or position, products in their minds to simplify buying decisions Perceptual maps are created by questioning a sample of consumers about their perceptions of products, brands and organizations with respect to two or more dimensions © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Hypothetical Perceptual Map Perceptual maps © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Bases for Positioning Marketers can use several bases for product positioning Head-to head – best when products are equal and if price is lower Avoid competition – critical when introducing a brand into a market in which the company already has one or more brands Position can be based on specific product attributes or features Other bases include price, quality level and benefits © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Repositioning A brand’s market share and profitability may be strengthened by product repositioning of existing products Requires changes in perception and usually changes in product features Repositioning can be accomplished by changing any aspect of the marketing mix A marketer may reposition a product by aiming it at a completely different target market © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Deletion Product deletion means eliminating a product from the product mix when it no longer satisfies a sufficient number of customers Declining products reduce profitability and drain resources A dying product may lose favor with customers and negative feelings may transfer to a company’s other products Product deletions may be met with opposition by management, sales people and other employees © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Deletion A systematic review allows an organization to improve a product or delete a product Three ways to delete a product Phase-out – allows a product to decline without a change in marketing strategy Run-out – exploits any strengths left in the product Immediate drop – used when losses are too great © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Product Deletion Process © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Organizing to Develop and Manage Products Product Manager – the person within an organization who is responsible for a product, a product line or several distinct products that make up a group Brand Manager – the person responsible for a single brand Market Manager – the person responsible for managing the marketing activities that serve a particular group of customers Venture team – a cross-functional group that creates entirely new products that may be aimed at new markets © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Caterpillar Inc. Crawls Over the Competition with Product Development Discussion Point Caterpillar Inc. Crawls Over the Competition with Product Development Caterpillar Inc. is a global manufacturer of construction and mining equipment, machinery and engines Caterpillar’s continued success at product management will likely lead the company to take advantage of future opportunities in the global market Why is it important for Caterpillar to develop new products on a regular basis? Why is Caterpillar so careful to test-market its products prior to commercialization? © 2014 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.