MKT 230 1st Edition Lecture 15Outline of Last Lecture I. Productsa. Total ProductII. Classifying ProductsIII. Stages of Product Life CycleIV. 5 Stages of Product AdoptionOutline of Current Lecture I. Managing Existing ProductsII. Developing New ProductsIII. Product Differentiation and Product QualityCurrent LectureI. Managing Existing Products1. Line extensions2. Product Modifications3. Quality Modifications4. Functional Modifications5. Aesthetic Modifications- Line extensions –development of a product that is closely related to an existing producto Adapting something that is already existingo Example: line extensions for Reese’s Peanut Butter Cups include products like Reese’s Minis, Reese’s Puffs cereal, Reese’s eggs and Christmas trees, 2 pack of Reese’s, Reese’s ice cream, etc.o Reasons for line extensions1. Puts new appeal on something that is already existing and brings more uniqueness/awareness to the productThese 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.2. Focus on different segments3. More precisely satisfy needs of the current segment4. Capture market share from competitors- Product Modification – Changing things on an existing producto Original product does not remain in the lineo Example: cars – new models come out and they stop making the old ones; iPhones o 3 basic conditions have to occur for product modification to take place1. Product has to be modifiable2. Consumer has to be able to tell that the changes were made3. Brings consumer satisfactiono Potential drawback: if you don’t have good information you can screw up your product, like when Coke started selling a new formula Coke and lost customers because they wanted the old one back- Quality Modification – why do it? If you increase quality you can increase price; you can attract more customerso Example: Schlitz beer- Functional Modification – changes affecting the product’s versatility, effectiveness, convenience, or safetyo Benefits: make product more useful and therefore enlarging market, places product in favorable competitive position by providing benefits that competing brands don’t offer, and helps organization get a progressive image- Aesthetic Modification – changes in sensory appeal of a product by altering taste, textures, sound, smell or appearanceo This can sometimes strongly affect a customer’s purchaseo It can help a firm: differentiate products from competing brands and gain market shareo Example: Domino’s Pizza changed their pizza recipe to make it taste bettero Drawback: everyone’s tastes are subjective so they vary from person to personII. Developing New Products- New products enhances a firm’s product mix and add depth to a product line- “New product” can have multiple meanings:o Innovative benefitso Different and better than the existing producto Never sold before by anyoneo Never sold before by the particular firm or in a specific market- New Product Development:1. Idea2. Screening3. Concept Testing4. Business Analysis5. Product Development6. Test Marketing7. Commercialization- Idea Generation – seek product ideas to help achieve organizational objectiveso Very few ideas are good enough for commercial successo Some ideas come from pure chance1. Example: Chocolate chip cookies, Viagrao Sources for new product ideas:1. Internal (managers, researchers, employees, sales personnel)2. External (customers, competitors, advertising agencies, consultants)- Screening – choosing ideas with the greatest potential for further reviewo Do product ideas match organizational objectives and resources?1. Concerns about cannibalization of existing customers (Don’t want to harm yourself)2. Company capabilities to produce and market a new product3. Nature and wants of buyers- Concept testing – small sample of potential buyers is presented with a product idea to determine their attitudes and buying intentionso Low-cost o Get to see customer reactionso Example: Flea and tick control product concept test- Business Analysis – product idea is evaluated to determine potential contribution to sales, costs, and profits- Product Development – organization determines if it is feasible and cost effective to produce the producto Uses a prototypeo Overall functionality testedo Lengthy and expensive phaseo Few products make it this far- Test Marketing – limited introduction of a product in geographic area chosen to represent the intended marketo Test markets must be a representative sample of the target marketo Aim to determine if customer will buy producto Benefits:1. Ability to identify weaknesses2. Marketers measure sales performance3. Experimentation with advertising, pricing, and packagingo Risks:1. Expensive2. Competitors may interfere3. Competitors have time to copy the product- Commercialization – refining and finalizing plans and budgets for full-scale manufacturing and marketing of a producto Expenditures may not be recovered for a few years- Gradual Product Introductiono Roll-outIII. Product Differentiation and Quality- Product Differentiation – process of creating and designing products so customers perceive them as different- Product Quality - characteristics of a product that allow it to perform as expected in satisfying customer need s- Level of Quality: amount of quality a product possesses- Consistency of Quality: degree to which a product ha the same level of quality over