Chapter 7: Product Planning and Strategies

What is a Product?  It is a set of tangible and intangible attributes, including packaging, colour, price, quality, and brand, plus service and reputation, that provides a set of perceived benefits to consumers  it is more than physical products; includes services, places, persons, and ideas  it is easy to visualize the products of Esso, but more difficult to describe those of an art gallery, UNICEF, or the Salvation Army

Figure 7-1 Product Attributes

Consumer and Business Products  Whether a product is considered a consumer or business product depends on the intended target market; how it is used and by whom  Some products are sold only to consumers and households for non-business purposes; others are sold to organizations for use in the business, for resale, or to provide services

Classifying Consumer Products  convenience products: low price, low risk, consumer is not prepared to shop around, widely available in a variety of retail stores  shopping products: consumer will want to compare quality and price, risk and price are higher, available in selected retail outlets  specialty products: consumer has strong brand preferences, risk is high, prepared to seek out exclusive retail outlets

Classifying Business Products  raw materials: unprocessed, become part of other manufactured products  manufactured parts and materials: processed products that become part of other products  installations: major buildings and equipment  accessory equipment: used in operations, include computers, desks, tools  operating supplies: low value, used by most firms, convenience products for businesses

Deciding on the Product Mix  the product mix is a collection of product lines; it has both breadth and depth  the breadth is explained by the number of product lines within the mix  the depth refers to the variety of sizes, models, or items within each product line  a product line is a group of related products  some companies carry a wide product mix, while others maintain a narrow mix

Figure 7-2 Product Mix – Breadth and Depth

Product Positioning  a product’s position refers to the image that it projects in the minds of consumers  a product may be positioned in relation to a competitor by drawing comparisons  or in relation to a product class or an attribute by stressing certain attractive characteristics  or to appeal to a specific target market segment  or by stressing that it offers attractive prices or superior quality or value

Expanding the Product Mix  expansion is accomplished by increasing the depth of lines or by adding lines  increasingly, this involves line extensions  may add related products under the same brand  or unrelated products under the same brand  or unrelated products under a different brand  or related products under a different brand

Other Product-Mix Strategies  trading-up refers to the addition of a higher-priced product to reach a broader market  trading-down involves adding a lower-priced product to a line to attract people who can not afford the higher-priced original  occasionally, a product will be altered to improve it or to allow for its repositioning  companies will also eliminate products or entire product lines which are unprofitable

New Product Development  companies must be constantly modifying existing products/services 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

Criteria for New Products  there must be adequate market demand: 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

New-Product Development Process  generate ideas from a number of sources  screen ideas to identify those to pursue  conduct a business analysis to determine likelihood of commercial success  develop prototype for initial internal testing  conduct market tests with prospective customers  if business case and market tests are favourable, proceed with commercialization

Figure 7-3 Major Stages in the New- Product Development Process

New-Product Organization  companies take a variety of approaches to organizing the new product function  product-planning committees  new-product departments  cross-functional new venture teams  product managers  many larger firms are replacing the product manager with category managers

Adoption-Diffusion Process  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

Stages in the Adoption Process  awareness: customer is exposed to the product  interest: interest and information seeking  evaluation: assessment of the advantages and disadvantages of the new product  trial: customer tries the product in low-risk situation; may be a sample or test drive  adoption: customer decides to buy the product  confirmation: customer decides to stay with the product; attempts dissonance reduction

Factors Affecting Adoption Rate  why are some products accepted more readily?  some have obvious relative advantages over existing alternatives  some are more compatible with current values  increased complexity slows the adoption rate  it helps if a new product can be sampled before a commitment is made to buy  it also helps if the benefits of the new product can be easily observed

The Product Life Cycle  the concept of the product life cycle applies to product categories, not to brands; it is related to the concept of diffusion of innovation  different products will have differently-shaped life cycle curves; will diffuse at different rates  a product is normally perceived to pass through four stages over its life cycle; introduction, growth, maturity, and decline  each stage requires different marketing strategies

Figure 7-4 Typical Life Cycle of a Product Category

Characteristics of the Stages  introductory stage: developing the market, creating awareness, reaching the innovators  growth stage: competition begins, sales grow quickly, profits peak, market penetration  maturity stage: competition is intense, sales slow down, differentiated product offerings, customers are brand loyal, few new entrants  decline stage: customers move to other options, competitors leave, profits are low, consider exit

Characteristics of Life Cycles  length of the life cycle will vary; some are quite short and may be getting shorter  some fads have very short life cycles, while other products stay at maturity for years  in high-tech markets, life cycles are very short  some products do not make it through all four stages; they may fail in introduction  the life cycle must be considered in relation to a market; stage may vary across segments

Figure 7-5 Product Life Cycle Variations

Managing the Life Cycle  successful life-cycle management requires predicting the shape of the curve and then successfully adapting strategies at each stage  when to consider entering the market  how to manage to capitalize on growth  it is possible to develop strategies that will extend the maturity stage; modify the product, devise new uses, or design new appeals  greatest challenge comes at the decline stage