DEVELOP A NEW PRODUCT 10.1 What Is a Product? CHAPTER 10 4/23/2017 DEVELOP A NEW PRODUCT 10.1 What Is a Product? 10.2 Components of a New Product 10.3 Product Market Classifications 10.4 Developing Successful New Products © South-Western Publishing MARKETING

WHAT IS A PRODUCT? GOALS for Lesson 10.1 Explain that, for consumers, products are more than just the tangible objects that are offered for sale. Describe the role of marketing in keeping the focus on consumers during product development. © South-Western Publishing

More Than Just a Tangible Object Product – anything tangible offered to a market by the business to satisfy needs. “More than an item” – physical characteristics (durable, attractive, safe), must be useful and meet needs “Consumers know best” – business people vs. consumers interest (car example) © South-Western Publishing

Product Development as a Marketing Functions “5 out of every 10 new product ideas will be unsuccessful” The role of marketing Marketing activities in product development The product planning function © South-Western Publishing

The role of marketing Businesses must understand and apply the marketing concept Products that meet customer needs vs. Products that do not meet customer needs Easier to sell, increase brand image, return customers Tough for sale people, consumers not happy, consumers will not buy your companies products © South-Western Publishing

Marketing activities in product development “Marketing is the eyes, ears, and mouth of the customer in a business” Gathering information – study the results and use it to assist with planning Types of information, ways of collecting info Designing strategies – different strategies will apply to different products or situations Testing marketing mixes – test marketing, focus groups, panels © South-Western Publishing

The product planning function Marketers need to work cooperatively with the individuals in product development in order to meet the needs of the consumers. © South-Western Publishing

Marketing Supports Product Development Gathering Information Designing Effective Marketing Strategies Testing Marketing Mixes Customers Companies Product Development © South-Western Publishing

COMPONENTS OF A NEW PRODUCT GOALS for Lesson 10.2 Show how even a very simple product can be a complex mix of a basic item with assorted features. Describe the three steps of the product design process. Explain the importance of product lines, packaging, and brand development. © South-Western Publishing

Parts of the Product Mix Element Basic product Features Options Services Brand name Packaging Guarantee Uses Example – Tooth Brush © South-Western Publishing

Designing a Product Basic product – readily identifiable product in its simplest form, able to easily see the need, similar to competitors (computer, shampoo, bike) Enhanced product – features, options, colors, quality, brand names, packaging Extended product – services, guarantees, information on effective use, additional products to improve the product © South-Western Publishing

Product Mix Components Product line – a group of similar products with slight variations in the marketing mix to satisfy different needs in a market Variation in quantity Variation in quality Product Assortments – complete set of all products a business has to offer Packaging Ease of use Safety Attraction Handling Environment Brand development Brand – name, symbol Trademark – legal Licensed Brand – selling (Disney, sports) © South-Western Publishing

Levels of Brand Recognition Non-recognition Consumers are unable to identify the brand. Rejection Consumers will not purchase the product because of the brand. Recognition Consumers can recall brand name but it has little influence on purchases. They reject other brands. Preference Consumers view the brand as valuable and will chose it if available. Insistence Consumers value the brand to the extent that they reject other brands. © South-Western Publishing

PRODUCT MARKET CLASSIFICATIONS GOALS for Lesson 10.3 Define consumer markets and describe what is meant by direct demand. Define business markets and explain the business product classification system. Understand the importance of product classifications for product planning. © South-Western Publishing

The Product/Service Classification System The system is based on two factors: The importance of the purchase to the consumer The willingness of the consumer to shop and compare products before making the purchase © South-Western Publishing

Classifying Products for the Consumer Markets Convenience goods – staple, impulse, emergency Shopping goods – price, attribute Unsought goods Specialty goods Direct Demand – quantity of a product needed to meet the needs of the consumer © South-Western Publishing

Classifying Products for the Consumer Market Convenience Goods Staple goods – bread, milk, snacks Impulse goods – unplanned purchases Emergency goods – repairs, medical services Shopping Goods Attribute / Qualities -based goods Price-based goods Specialty Goods – brand loyalty, well known, delay purchase Unsought Goods – life insurance, preparing a will © South-Western Publishing

Business Markets Capital equipment – land, buildings, large pieces of equipment Operating equipment – tools, small machines, furniture Supplies – office supplies, parts for repairs Raw materials – unprocessed material used in production Component parts – partially or totally processed parts Derived Demand – the quantity of a product or needed by a business in order to operate at a level that will meet the demand of its customers. © South-Western Publishing

Planning Products for Consumer and Business Markets Need to know if the customer is the final consumer or a business consumer Some products are sold to both consumer markets and business markets © South-Western Publishing

DEVELOPING SUCCESSFUL NEW PRODUCTS GOALS for Lesson 10.4 Understand what businesses mean by “new” products. Describe the six steps in new product development. © South-Western Publishing

What Is a New Product? Is it really new? Federal Trade Commission regulates the use of the term “new.” Entirely new or changed in an important and noticeable way Six-month time limit © South-Western Publishing

The Steps in New Product Development Idea development Gathering information from consumers Organizing panels Regular meetings with employees Identifying problems that consumers have Brainstorming, creative thinking exercises © South-Western Publishing

The Steps in New Product Development Idea Screening – evaluate ideas Is there an identified market for the product? Is the competition in the market reasonable? Do we have or can we obtain the resources to produce the product? Is the product legal and safe? Can we produce a quality product at a reasonable cost? © South-Western Publishing

The Steps in New Product Development Strategy Development – 1. Create and test a sample marketing strategy (research to clearly identify an appropriate target market and insure that customers exists) 2. Marketing mix is planned and analyzed (product, distribution, price, promotion) © South-Western Publishing

The Steps in New Product Development Financial Analysis Cost of production and marketing Sales projections for the target market Calculations of profits Scenario analysis (worst case vs. best case) © South-Western Publishing

The Steps in New Product Development Product Development and Testing Designing the production process Obtaining the needed equipment and materials Training the production staff Identifying a producer or manufacturer Design a prototype to be tested quality and cost / used in the test market © South-Western Publishing

The Steps in New Product Development Product Marketing Introduction into the market Cooperating companies must be involved (wholesalers, retailers, transportation companies, ad agencies Production levels must be high enough All activities must be coordinated © South-Western Publishing

Introduction Stage competing against older, established products businesses need to identify those that are dissatisfied with the current problems product should be basic and not too complicated guarantees and warranties not widely distributed – test markets price usually high promotion needs to inform the customer © South-Western Publishing

Distribution, Price, and Promotion Distribution is the marketing mix element that facilitates the physical exchange of products and services between businesses and their customers Price as a marketing mix element is defined as the amount a buyer pays as well as the methods of increasing the value of the product to the customers. Promotion includes the methods and information communicated to customers to encourage purchases and increase their satisfaction. © South-Western Publishing

Distribution Where will the customer be best able to obtain the product? Where will the customer use the product? Are there special requirements to transport, store or display the product? When should distribution occur? Who should be responsible for each type of distribution activity? © South-Western Publishing

Price Does the business want to increase sales, increase profits, or enhance image of the product? Should price be based on cost, what customers are willing to pay, or what competitors are charging? Will there be one price for all customers, negotiation, discounts? Will the price be clearly communicated? Are there things that clearly satisfy the customer and make the product better and more valuable than alternatives? © South-Western Publishing

Promotion Will the audience for the promotion be a general market or specific segment? Is the specific goal of promotion to increase knowledge, to change attitudes, or influence behavior? What specific information does the audience need? What means of promotion will be most effective? How much money is needed for effective marketing? What information does the business need from consumers? © South-Western Publishing