“ Product Development” What is a Product? Consumer Markets Product Design Process Product Planning Product Mix Unit 3

Product A good, service, or idea sold to satisfy wants/needs Can be simple or complex Features – physical characteristics of product; used to enhance benefits wanted by consumers Benefits – the value or usefulness a consumer gets from a product Consumers know best what they want! Marketers are the “eyes, ears, and mouth” of a company. What does this mean?

How Products are Viewed by Businesses – tangible items their customers buy by Consumers – a means of satisfying their wants/needs (it’s durable, attractive, safe, tasty, convenient, etc). Consumers buy the idea of what that product will do for them. Consumers decide on a restaurant using factors like menu, taste, speed & quality of service, atmosphere, location, and price.

Business Consumers vs Final Consumers Some products are sold to businesses. Some products are sold to consumers. Some products are sold to BOTH. – Ex: Bananas – restaurant, family lunches What other products can you sell to both businesses and consumers?

Consumer Market – Convenience Goods – Shopping Goods – Unsought Goods – Specialty Goods Final Consumers – buy products for personal use.

Business Markets – Capital Equipment – Operating Equipment – Supplies – Raw Materials – Component Parts Business Consumers – buy goods to use themselves or to use in the making of other goods/services for resale.

Product Design Process **Improvement in design can improve Demand. 1.Basic product – same as competitors 2.Enhanced product – Features & Options – Packaging – Image (icon, logo, etc) 3.Extended product – Services & Warranties – Related items you buy separately

Product Planning Strategy P roduct’s L ife C ycle (or its life span) also helps planning  Consider: Type of competition in marketplace (direct, indirect, intense, nonexistent). Economic conditions. Strengths/Weaknesses of own business.

PLC StageCharacteristics Focus on meeting customer interest - features & benefits Prices are high Little or no competition Demand has to be created Slow sales at first Customers have to be prompted to try product No profit at this stage; limited distribution Public awareness increases Sales increase Costs reduced due to mass production Profits begin to rise Competition increases Price decreases to be competitive Product Life Cycle

PLC StageCharacteristics Costs get lower as production increases Sales peak & market is saturated Prices drop due to competition Brand & feature differentiation is emphasized Battle to maintain market share Consumer interest fades Marketing efforts reduced Sales decline Costs of production rise again Price must be reduced to maintain sales Little to no profit Product Life Cycle

TIme Sales & Profits Product Life Cycle

Influences on the PLC Keep up with consumer needs (features, etc). Fashion/trends change 12

Marketing Supports Product Development Companies want to build a “bridge” to reach their potential customers: new product development. Support for this “bridge” comes in 3 forms: Gathering information to determine wants/needs- (customer surveys & feedback, market research & analysis, etc) Designing marketing strategies (4Ps) Testing the strategies before entering marketplace – (prototype, focus groups, limited distribution, etc)

Companies come up with “NEW” products to keep customers satisfied and to help maintain a profit. What is “New”? New … or Modified/Improved? Federal Trade Commission regulates use of “new.” – “Entirely new or changed in a noticeable way.” – Six-month time limit Note: ____% of new products fail!!!

Product Mix Product Mix (Assortment) – the combination and make up of all the products a company has to offer. Includes 3 Parts: 1.Product Line – group of similar product items (soda). Can expand # of products easily by: Varying quantity – singles, 12-pak, 1liter, 12 oz, etc Varying quality – items priced by amount of features & options included; from basic to fully loaded.

2. Packaging – for what purpose? Information – identifies product, gives details Promotion – attractive & attention-getting Convenience – makes easier to carry and use.

3. Branding anything Brand – anything that IDs a product or company. Brand Name – NIKE Brand Mark – Trademark – legal protection of the brand Licensed Brand – well-known name or symbol sold for use on other companies’ products.

Product Mix Strategies Expansion – adding additional product items or lines; for current or new customers’ sake; beat competition. Contraction – removal of some items or lines; business decision; losing profitability or lost consumer appeal. Alteration – make changes to items or lines (style, flavor, packaging, size, pricing, etc). Trading Up – add a higher priced item or line; enhance company image, attract new target market. Trading Down – add a lower priced item or line; attract new target market or meet competition.