BUS M 300 Lecture 8 Outline of Last Lecture I NO CLASS SINCE HE WAS OUT OF TOWN LECTURE AND NOTES ARE ONLINE Outline of Current Lecture II What is a product III Product Line and Product Mix IV Classification of Products V Types of Products VI Why products fail VII The New Product Development Process Current Lecture What is a product o It is a good service or idea consisting of a bundle of tangible and intangible attributes that satisfy consumers and is received in exchange for money or some other unit of value o The life of a company often depends on how it conceives produces and markets new products o Products can be physical goods services ideas people or places Product Line and Product Mix o A product line is a group of products that are closely related because they satisfy a class of needs are used together These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute are sold to the same customer group are distributed through the same type of outlets or fall within a given price range o The product mix is the number of product lines offered by a company Classification of Products o Durable goods provide long term benefit expensive and purchased less frequently o Nondurable goods wide distribution and heavy consumer advertising are essential inexpensive and purchased frequently Types of Products o Defining a product to create customer value A product is comprised of 4 levels Core Product actual benefits received by consumer Theodore Levitt said buyers do not buy quarter inch drills they buy quarter inch holes o An automobile that transports people from point A to point B o A watch that tells time very accurately o Base function of the product o Anyone can design products to do core functions Actual product the quality level features design packaging and brand name of the product o Marketing begins here Augmented product delivery and credit warranty and after sale service associated with the product o How people perceive the product o Actual and augmented features can help us find the desired product features o Develops relationships with customers Desired product the product consumers really want o Types of Consumer Products Convenience products products that are purchased frequently immediately and with a minimum of effort Shopping products products purchased only after comparisons with other products have been made More on the durable goods list Differentiation is important here Specialty products unique products that cause a buyer to prize them and make special efforts to obtain them People are loyal to where they buy things from here Low competitors Customers don t shop around More expensive Durable goods Unsought goods items that the consumer either does not know about or knows about but does not initially want o What are new products The Federal Trade Commission FTC advises that the term new be limited to use with a product only up to six months after it enters regular distribution A company s idea of a new product is simply anything different from the previous one Customers view of a new product may be classified according to the degree of learning required in order to use the product properly Why products fail o Insignificant point of difference Must be important enough for consumers to switch from a competing product o Incomplete market and product definition before product development starts Customers specific needs wants and preferences are not clearly defined o Too little market attractiveness The target market may be too small and or competitive to warrant the product o Poor execution of the marketing mix Name package price promotion and distribution must be executed precisely or the new product will fail o Poor product quality or insensitivity to consumer needs on critical factors If the product doesn t meet the consumers needs it will fail o Bad timing o No economic access to buyers The New Product Development Process o New Product Strategy Development This stage is used to identify opportunities or threats to a company Involves defining the role for a new product in terms of the firm s overall corporate objectives Helps the company to identify new markets it can compete in o Idea Generation Many good ideas come from consumers employees and competitive products o Screening and Evaluation Most new products don t pass this step Separate ideas that have merit from those that do not o Business Analysis Involves specifying the features of the product and the marketing strategy needed to commercialize it o Development The measurement of consumer attitudes and perceptions relevant to the product A prototype of the product is developed here o Test Marketing Process of selecting a specific geographical area considered to be generalizable to the product s overall target market Marketers monitor this stage closely Companies who skip this stage run a huge risk of failure o Commercialization At this stage the product is in full scale production and sales