1. Good Afternoon
Please take out your ch. 30 notes and be ready to start! Turn to Product Mix Strategies.
I will be leaving halfway through the hour so we need to get started ASAP.
PPT will be on my website (pull up my site now – we will use it)

2. -Low costs, creative ideas, customer engagement
We now know that a companies Product Mix is defined by the width and depth of its line(s), but how do companies determine what to make or stock?
Have you voted for a new flavor/color (M&M, Crayola, Ben & Jerry’s)? What are the benefits of recruiting outsiders and especially current customers to generate new product ideas?
-Low costs, creative ideas, customer engagement

3. Product Mix Strategies
A product mix strategy is a plan for determining which products a business will make or stock.
Some businesses will change their lines by modifying products, creating new ones, and/or dropping old ones. (NEW, EXISTING, DELETE)
EX 1: P&G 15% of Research & Dev. Budget goes to developing new products
EX 2: Starbucks uses “Crowdsourcing” – Use Social Media/blogs to gain feedback on ideas – LINK ON MY WEBSITE /
Pg is #1 manf. Of household/personal care products
Marketing Essentials Chapter 30, Section 30.1

4. I. Developing New Products (Today – 2&3 tom)
According to one study, new products (those less than five years old) account for about 35 percent of total sales for major consumer and industrial goods companies.
*70% of new product introductions fail at the retail level.
Kelloggs has a 400,000 sq ft devoted to global product dev.
Marketing Essentials Chapter 30, Section 30.1

5. Developing New Products
New product development generally involves seven key steps:
Generating ideas
Screening ideas
Developing a business proposal
Developing the product
Testing the product with consumers
Introducing the product (commercialization)
Evaluating customer acceptance
Marketing Essentials Chapter 30, Section 30.1

6. Developing New Products
1. Generating Ideas
New product ideas can come from a variety of different sources including:
Customers (focus groups/panels)
Competitors
Channel members
Employees
Creativity is essential
Marketing Essentials Chapter 30, Section 30.1

7. Developing New Products
Consumer Products: Products bought from retail stores for personal, family, or household use. (why do you think tf used? Diff background/training bring in strengths/weaknesses)
vs.
Industrial products: Products companies purchase to make other products, which they then sell. (why vent? Dev new products so need to be free from dept influences)
Best buy- employees (engineers, programmers, sales people) live in housing “idea incubators” until establish an idea.
Developing New Products
Many companies that manufacture consumer packaged goods use a task force approach to new product development, bringing together employees from different departments (i.e. sales, marketing, manufacturing, finance, and research and development) to take a concept from the idea stage through the steps of product development.
Companies that manufacture and sell industrial products often use venture teams that are independent of any particular department. These teams often develop products not currently part of the existing business.
Why use task force/venture?
Marketing Essentials Chapter 30, Section 30.1

8. Developing New Products
2. Screening Ideas
Ideas for new products are screened and evaluated, and matched against the company's overall objectives to see if they fit.
Some ideas are eliminated. The best ideas are put through further evaluation.
Finally, one or two ideas are selected for development.
a lot of ideas are thrown out!
Ideas are also checked to see if they could potentially conflict with existing products (ex. manufacture of digital thermometers – new way to measure temp) .
Screening may involve concept testing with consumers (likes and dislikes)
Throw away – color changes
Imp early step- a lot of ideas are thrown out!
Marketing Essentials Chapter 30, Section 30.1

9. Developing New Products
3. Developing a Business Proposal
Products that made it through screening in terms of PROFIT potential
A business proposal is developed to evaluate the new product in terms of the:
Size of the market and potential sales
Costs and profit potential
Technological trends
Overall competitive environment and level of risk
*Must also consider production requirements – time frame and efficiency/competitive pricing
Marketing Essentials Chapter 30, Section 30.1

10. Developing New Products
4. Developing the Product
During product development, the new product idea takes on a physical shape (Prototype- model of new product), and marketers develop a marketing strategy.
The company makes plans relating to production, packaging, labeling, branding, promotion, and distribution.
Technical evaluations are made to see if the product is practical to make.
(ex. B&J’s technical eval of
the flavor Cherry Garcia)
Had difficulty when first developing because while cherries did not work coated in choc (too large for machine) – choc would break off – after numerous tests finally added them separately.
Had difficulty when first developing because while cherries did not work coated in choc (too large for machine) – choc would break off – after numerous tests finally added them separately.
Marketing Essentials Chapter 30, Section 30.1

11. Developing New Products
The products are also tested to see how they will hold up during normal and not-so-normal use by the consumer.
If applicable, goods are also tested for side effects during this stage (ex. medicines, hygiene products, etc).
Problems should be detected at this stage so they can be corrected before full-scale use (ex. Toyota's lawsuit $1.2 B)
Millions can be spent on this stage!
Ex. recall on Toyata – biggest fine ever – billion dollars
Prototype Ex: “Concept Car”
Marketing Essentials Chapter 30, Section 30.1

12. Government Required Testing
Extensive scientific testing in various stages: Prescription drugs & genetically engineered food products.
Genetically modifying foods or food crops can enhance taste and quality, increase nutrients or improve resistance to pests and disease. In some cases, GM foods help conserve natural resources, because the altered version might require less water or energy for processing.
Tests end with testing on human beings to determine side effects and product safety.
Can take years to get approval from gov’t

13. Developing New Products
5. Testing the Product With Consumers
New products frequently are test-marketed in certain geographic locations to see whether consumers will accept them. (Not every new product needs to be test-marketed).
A focus group evaluation can also provide additional input and uncover potential problems before production.
Large companies establish Research & Development Departments (work with marketing and marketing research staff and outside researching companies)
International customers do not typically like diet bevs
PepsiCo – Developed low cal drink combination in Europe. Took over 2 years of testing in market!
International customers do not typically like diet bevs

14. Developing New Products
Marketers may forgo testing because:
the costs of test marketing, focus groups, or direct marketing tests are too high
Or because the product isn’t ready yet or they do not want to give competitors information they could use.
Smart Phone Focus Groups

15. Developing New Products
6. Introducing the Product
Commercialization is the stage involving introducing a new product to the public.
Can be expensive! How much do you think it cost P&G to develop their Crest White Expressions campaign??
Advertisements should emphasize the product’s benefits to consumers.
A new or revised distribution network may be needed.
Training programs may need to be developed for sales force.
80M
Citrus herbal cinnamon

16. Why do you think its important companies get products into the market as quickly as possible?
Pay off costs
The first company to introduce a new product has an advantage (acquiring customers and brand loyalty
Hard to switch from the originator and you just build a bond/comfort with it

17. Developing New Products
7. Evaluating Customer Acceptance
One way to obtain customer responses to a new product is to study sales information. These reports can help answer key questions such as:
How often do customers buy the new product?
When did customers last buy the new product?
Where are the best customers for out new product?
What new products are customers buying?
Computer systems allow for this (reports)
Marketing Essentials Chapter 30, Section 30.1

18. II. Developing Existing Products
Companies constantly review their mix to see if they can further expand (extend) their product lines or modify existing products.
This is done to build on an already established image, appeal to new markets, and increase sale/profits
Disadvantages:
Cost - increase in inventory, promotion, storage, and distribution
May take sales from existing products
Risk if brand/corporate image is unpopular, poorly made, or harmful (all other products may suffer)
*Disadvantages still don’t usually keep companies from improving existing products
Marketing Essentials Chapter 30, Section 30.1

19. Developing Existing Products
Line Extensions
Line extensions add new product lines, items, or services.
Ex. Tylenol Flu, Tylenol Cold, and Tylenol Allergy Sinus are line extensions of the original Tylenol product. Plus, a variety of forms, tablets, caplets, and gel caps.
A line extension is intended to be a different product that appeals to different needs of consumers.
Goal is to provide a wider range of choices = Increase Product depth
Ext – customers fami with other products so easy to market
Marketing Essentials Chapter 30, Section 30.1

20. Developing Existing Products
Product Modification
A product modification - is an alteration in a company’s existing product. Modified products may be offered in new and different:
Varieties and formulations
Colors and styles
Features and sizes
Quick an easy way to add to a company’s product line
The old product may be phased out.
Packaging can also be modified to attract consumers to the new product
product modification
An alteration in a company’s existing product.
An attempt to extend the length of the products life –will talk about nex
Marketing Essentials Chapter 30, Section 30.1

21. Product Modifications
Line
Extensions
Both
Product Modifications
Change to an EXISTING product
May offer new colors, sizes, or features
Relatively quick and easy
DIFFERENT products appeal to somewhat different needs
Increase product depth within a line
Build on established image
Meet customers needs
Appeal to new markets
Increase sales and profits

22. III. Deleting a Product or Product Line
Companies will sometimes decide to stop production of a product or line due to:
Obsolescence (no longer useful)
Loss of appeal
Changes in company objectives
Replacement with new products
Lack of profit
Conflict with other products in the line
Marketing Essentials Chapter 30, Section 30.1

23. Planned/Perceived Obsolescence
Deleting a Product or Product Line
Obsolescence
Changes in technology has cause many products to be discontinued over time (ex. Listening devices- records, albums, cassette tapes, CDs – to MP3 & computer downloads)
Many analysts say land line phones are on their way to obsolescence.
Loss of Appeal
Consumer taste and interest change
Some older products may have lasting loyalties, but manufacturers must decide if they are worth keeping around
Ex’s: video games with better visual effects/features
Planned/Perceived Obsolescence
Ob-so-less-cents

24. Deleting a Product or Product Line Changes in the Company
Sometimes a product or entire mix no longer matches the company’s current objectives.
Ex. Wendy’s closed its 70 restaurants after operating in Japan for 30 years. Decided to focus more on other restaurants
Lack of Profit
Product developers may drop products when sales reach such a low level that the return on sales does not meet objectives.
Conflict With Other Products in the Line
Increased sales of one product may cause decreased sales of another in that line
Replacement With New Products
Companies may choose to totally replace an existing product with one meeting current company objectives.