1. PRODUCTS AND LIFE CYCLE STRATEGIES
Products and product lines
New products: Development, successes and failures
The Product Life Cycle and Diffusion of Innovations
Branding

2. Product Lines vs. Product Mix
Product Line: A number of similar or related products—e.g.,
BIC writing utensils
Boeing Commercial Aircraft (aircraft and parts)
Nike shoes; Nike clothing
Product Mix: assortment of different products offered
E.g., “KFC—we do chicken right!” (Only one product line)
3M: Tapes, adhesives, Post-its, chemicals, computer disks, overhead projectors (things that are bonded together

3. Reasons for Product Failure
Insignificant “Point of Difference”
Incomplete prior market and product definition
Insufficient market attractiveness
Poor execution of the marketing mix
Poor product quality or customer need sensitivity
Bad timing
Lack of economical access to customers

4. Stages in New Product Development Process
Text, p Copyright © 2002 McGraw-Hill.

5. Idea Generation Sources of new ideas Customer based
Outright suggestions
Observation of customer problems and tasks
Market research on processes and problems
Supplier suggestions
Employee suggestions
R&D Breakthroughs
Competitive ideas
Adaptation of products seen in foreign markets

6. Screening Internal screening External screening Technical feasibility
Consistency with strategic objectives
External screening
Marketing research
Questionnaires
Conjoint analysis (determines importance of attributes)

7. Business Analysis and Development
Financial feasibility
Legal issues
Impact on sales of existing products
Financial projections
Development
Design
Prototypes
Refinements

8. Test Marketing and Commercialization
Limited regional release
May pre-test prices and positioning
Simulated test markets
Laboratory
Computer based
Commercialization
Positioning
Launching product
Risks
Slotting fees
Failure fees
Withdrawal due to insufficient sales

9. The Product Life Cycle
Text, p Copyright © 2002 McGraw-Hill.

10. Some PLC Stage Examples
Color TVs: Maturity
Black and white TVs: Decline
HDTV: Growth
VCRs: Decline
DVD players: Growth
Jeans: Maturity
Fast food: Growth/maturity
Traditional photography: Maturity
Digital photography: Growth
Fax machines: Maturity
Internet access (U.S.)
Dial-up: Mature
DSL, Cable: Growth
Travel agencies: Decline
Autism education: Introduction
Cranberry juice: Revitalization

11. The Product Life Cycle (PLC) involves ________ over time
Demand for the product
Awareness of the product
Competition in supplying the product
Price
Features
Differentiation
Profitability
Alternatives available to the product
Investment opportunities (Boston Consulting Group model)
Appropriate strategies

12. Dimensions of the Product Life Cycle (PLC)
Length
Tend to be increasingly short
Especially short in Japan
Shape
Effects of learning opportunities
Product level
Class (e.g., TVs)
Form (e.g., HDTV)
Diffusion among consumer segments

13. The International Life Cycle
Market for older technology tends to exist in less developed countries
Manufacturing of older generation technology--e.g., Pentium I computers
Resale of capital equipment—e.g., DC 8 aircraft, old three part canning machines
Some countries tend to be more receptive to innovation than others
“Leap frogging”
Going directly from old technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology)
Shortening of product life cycles

14. Types of Innovations
Continuous--same product, just small improvements over time--e.g., typical automobile/stereo system model changes
Dynamically continuous--product form changed, but function and usage are roughly similar--e.g., jet aircraft, ball point pen, word processor
Discontinuous--entirely new product; usage approach changes (e.g., fax)
Innovations can be classified into several different types, although lines may somewhat be a bit blurred.
The continuous innovation implies the inclusion of some new technology or ideas without any fundamental way in the way the product, idea, or service, is used. For example, although there are great technological differences between the electric typewriter, with its many moving parts, and the electronic typewriter based more on circuits, the two products may work very similarly. Whether a car has a carburetor or fuel injection, again, may not constitute a highly visible difference for the consumer, with established methods of operation left unchanged.
Dynamically continuous innovations involve some degree of change for the consumer, although such changes do not completely change existing ways of product usage. For example, digital watches, although different from electronic ones, basically serve the same purpose. The ball point pen, although somewhat more convenient, did not change the fundamental way people wrote.
A discontinuous innovation, on the other hand, fundamentally changes the way things are done. For example, many consumers had difficulty understanding the concept of a microwave oven when this device first came out. 11

15. Some Diffusion Examples
ATMs
Easy observability
Significant relative advantage
Credit cards
“Chicken-and-egg” problem
Jump-starting the cycle
Faded, torn jeans
Fads
Innovations do not have to be high tech
Fax machines
Network economies
Rap music
Low barriers to entry
Spread to a new consumer group
Hybrid corn
Trialability
Imitation

16. To Adopt or Not to Adopt: How Will Consumers Answer the Question?
Some causes of resistance to adoption
perceived risk--financial and social
self image
effort to implement and/or learn to use the product
incompatibility
inertia

17. Influences on the Speed of Diffusion
Risk to expected benefit ratio (relative advantage)
Product pricing
Trialability
Switching difficulties and learning requirements/ ease of use

18. Branding Brands Trade marks and “genericide”
Product or product line specific brands
E.g., Tide, DeWalt, Hayes modem
International issues
“Umbrella Brands” 3M
National vs. regional
National vs. international
Store brands
Trade marks and “genericide”
Branding has been traced
to whiskey casks that
were identified for quality.

19. Brand as Category Label: A Mixed Blessing
Brand names potentially in danger
Coke (“cola drink”)
Kleenex (“facial tissue”)
FedEx (“overnight express”)
Xerox (“photo copy”)
Market share benefit of descriptive brand name
Distributional
Consumer “mind share”

20. Brand Value and Image
Brand equity: Value added to product based on brand name
Choice likelihood
Ability to charge higher price
Use of product as loss leader
Benefit in market share, temporary revenue (Coca Cola)
Possible damage to long term brand image (Louis Vuitton suitcases in Japan)
Brand “personality:” Associations with product

21. Co-branding To take advantage of assets of both firms Types
Distributional:
Egalitarian: Carl’s Jr. and Green Taco
Hierarchical: Kodak as official film of Disney Parks
Line filling—e.g., airline code sharing
Ingredients:
Cooperative: Dreyers’ ice cream with Mars M&Ms
Independent: Local computer maker advertises Maxtor hard drive components
Intrusive: “Intel Inside”
Partial: McD’s serves Coca Cola
Sponsorship: Good Housekeeping seal of approval

22. Branding Issues
To extend or not to extend?
Congruence--are products consistent in image to be represented by the same brand name?
Coke and Diet Coke
Miller vs. Miller Light Beer
Perception of ability to make product well
Extention should not be exploitative (e.g., Heinecken Popcorn)
Order of entry: First manufacturer of new to market product should not extend