chapters 9-10 Product Decisions and Marketing’s Role in New Product Development

Understand important factors involved in new product success –Product Characteristics –Implementation Issues –Market/Consumer Characteristics Categorize products by type and understand product mix decisions Understand growth strategies Basics of Branding/Packaging Objectives

Products are the set of features, functions, and benefits that customers purchase Consumer Products ConvenienceShoppingSpecialtyUnsought Business-to-Business Products InstallationsAccessories Raw Materials Component Parts/Materials Supplies What is a Product?

Product Mix Decisions Product mix - all the products a company markets Product Line: A group of related items in a company’s product portfolio Product mix width - the number of product lines a company markets Product mix depth - the number of brands within each product line

Product Development Why such a strong desire to produce/market new products? Why do so many new products fail? What is really required for a successful product in the marketplace?

New Product Success Requires… * A New Product Necessary resources: –Business expertise –Financial resources –Channel Power Ability to get product to buyers Fast enough diffusion through society * Meeting requirements does not guarantee success

5 characteristics affect the adoption rate for new, truly innovative products. 1. Relative advantage—superior to current products? 2. Compatibility—coincides with cultural values and/or experiences of buyers? 3. Complexity—degree of difficulty in using/understanding? 4. Trialability—can it be sampled/tested easily? 5. Observability—can buyers see its effectiveness? Examples:

Important Notes: Relative Advantage is perceptual “Questionable” products sometimes make it Really good products sometimes fail Many reasons for product failure Cannibalization Rate Important!!! –Crispy m & m ’s example

Cannibalization Rate ???

The Product Life Cycle product life cycleA product life cycle consists of the aggregate demand for all brands comprising a generic product category over time. A PLC consists of four stages: –Introduction—most risky and expensive. –Growth—both sales and profits rise, often rapidly. –Maturity—sales increase at a decreasing rate and profits decline. –Decline—demand drops, often because of another product development.

Dollars Time in years Loss 0 Profit Sales Volume INTRODUCTIONGROWTHMATURITYDECLINE Fig The Product Life Cycle

Length of the Product Life Cycle Ranges from a few weeks to decades. Length of individual stages varies from one product category to the next. Stages of any given life cycle usually last for different periods.

The Importance of New Products + 0 – Dollars Time Profits New product 1 New product 2 Sales volume Profits Sales volume

Products Markets Existing New Existing New Product DevelopmentProduct Diversification Market Penetration Market Development Product Growth Opportunities

Market Penetration Strategy of increasing sales of existing products in existing markets –Introduce new products/variations –cut price Product Growth Opportunities

Products Markets Existing New Existing New Product Development Product Diversification Market Penetration Market Development Product Growth Opportunities

Product Development Introduction of new products into established markets

Products Markets Existing New Existing New Product DevelopmentProduct Diversification Market Penetration Market Development Product Growth Opportunities

Market Development Strategy of identifying new markets for existing products –find new buyers –add usefulness or change its positioning to make it appeal to more / increase consumption

Products Markets Existing New Existing New Product Development Product Diversification Market Penetration Market Development Product Growth Opportunities

Product Diversification Strategy of offering new products to new markets –New Arm & Hammer Products

Managing New Product Development: Pps (MKTG 4) Read Lightly (No exam questions)

Consumer Characteristics

The Product Diffusion Process Innovators: n First purchasers of a new product n Venturesome, willing to accept risk, communicative, and cosmopolitan Innovators Early Adopters Laggards Early Majority Late Majority 3%

The Product Diffusion Process Early Adopters: n Are the next customers to buy new product n Enjoy leadership, prestige, and respect that early purchases bring n Tend to be opinion leaders n Adapt new ideas but use discretion Innovators Early Adopters Laggards Early Majority Late Majority 13%

The Product Diffusion Process Early Majority: n First part of mass market n Outgoing, communicative, and attentive to information cues Innovators Early Adopters Laggards Early Majority Late Majority 34.0%

The Product Diffusion Process Late Majority: n Second part of mass market n Less cosmopolitan and responsive to change n Include lower economic and social brackets, those past middle age, and skeptics Innovators Early Adopters Laggards Early Majority Late Majority 34.0%

The Product Diffusion Process Laggards: n Last to purchase n Price conscious, suspicious of change, low income and status, tradition bound, and conservative n Often difficult to market to this small group Innovators Early Adopters Laggards Early Majority Late Majority 16.0%

Branding

Branding Terms Brand Name: words, letters, and/or numbers that can be vocalized Brand Mark: the part of a brand that appears in the form of a symbol, design, or distinctive coloring or lettering Trademark: a brand that has been adopted by a seller and given legal protection

Characteristics of a good brand name E VALUATING BRAND NAMES Which Brand Names meet the “Ideal” brand characteristics? Suggests something about the product’s benefits and use: Easy to pronounce, spell, and remember: Distinctive: Mr. Clean Windex Adaptable to additions to product line: Capable of being legally protected: Cleaning Products 409

Brand Loyalty

Brand Loyalty / Equity Brand Loyalty is evidenced by favorable attitudes and by repeat patronage of some product/service/brand Brand Equity is the added value bestowed on a product by the brand name

Packaging

Contain and Protect Functions of Packaging Promote Facilitate Storage, Use, and Convenience Facilitate Recycling

OTHER PACKAGING CONCERNS Many ethical concerns surrounding packaging: Misleading - Deceptive terminology, labeling, size, pricing, wasteful, environmentally damaging etc

Packaging as Marketing Tool Create / Reinforce Brand Image Generate Attention / Excitement Enhance value of product –Convenience

CONVENIENCE is KEY!!! Works better Cheaper Easier to use Saves time Prevents hassle Etc.

Listerine mouthwash dropped its paper wrapper and barbell-shaped bottle: REJUVENATING PACKAGES Most packaging is looked at every two or three years or even more often. Typically, changes are modest (e.g., colors may be brightened). Sometimes, changes are major: Coke Bottles / Cans:

Trademarks A Trademark is the exclusive right to use a brand.  Many parts of a brand and associated symbols qualify for trademark protection.  Trademark right comes from use rather than registration.  The mark has to be continuously protected.  Rights continue for as long as the mark is used.  Trademark law applies to the online world.

Product Warranties Warranty Express Warranty Implied Warranty A confirmation of the quality or performance of a good or service. A written guarantee. An unwritten guarantee that the good or service is fit for the purpose for which it was sold. (UCC) Look up Warranty information on your own.