Week 6 Product area And we re moving on this diagram I presented the first day From moving from the center of the diagram to the inner ring of the diagram And we re moving to the marketing mix decision variables product price distribution and promotion Product a tangible good a service or an idea or some combination tangible good has a function to do but also some psychological payoffs or benefits associated with product EX Washing machine provides function of cleaning clothes but psychological payoffs it provides convenience Classifying products Consumer products or Industrial products based on buyer s intended use of product important bc products class has impact on how its marked Industrial Business products B2B buying it to resell it intended use of product is directly or indirectly in production of something that will be sold EX ingredient or component part If for resale industrial product If for daily business operations business product Consumer product used by someone in that persons household for their use EX Groceries gasoline Traditional classification of goods Convenience goods relatively inexpensive frequently purchased items for which buyers exert minimal purchasing effort Shopping goods items for which buyers are willing to expend considerable effort in planning and making purchases Buyer hasn t totally decided what they want and is willing to make comparisons Specialty goods items with unique characteristics that buyers are willing to expend considerable effort to obtain Buyer knows what they want Unsought goods products purchases to solve a sudden problem products of which customers are unaware and products that people don t necessarily think of buying EX buying chains when in the snow mountains but never using them again because you live in Texas Product life cycle a set of ideas that basically says that a product has a certain life to it It is born it grows it matures and it declines And that s why we call this set of ideas that s coupled up in idea of product life cycle talking more about the life of a product category how long a product category is around Stages Introduction stage where the first forum in the industry brings out the product just the one company that s operating to introduce that product Why would profits be below zero Company has invested heavily in it or to some degree they re starting out kind of below zero company promotes the concept or the idea in general Growth stage begins when competitors enter that industry sales began to take off and continue to rise until peak then decline industry moves from a single firm to multiple firms that are selling the product Maturity stage stage of a products life cycle when the sales curve peaks and starts to decline and profits continue to fall Some competitors are driven out of business Competitive activity is intense Decline stage stage of a products life cycle when sales fall rapidly Extreme price competition Variance in the length of product life cycles If we think about the life cycle for something like automobiles The life cycle has been lengthy over 100 years for cars Is the car going to live forever The cars will not certainly live forever is it Factors that affect the length of the life cycle Ease of competitive entry how easy is it for competitors to enter an industry Barriers to entry amount of money needed for investment trade secrets Rate of customer acceptance don t assume it will reach 100 eventually Rate of rejection rate at which people stop using a product category they previously used Product line a group of closely related product items viewed as a unit because of marketing technical or end use considerations Product mix set of products that an organization offers for sale at a given point in time Depth of the product mix is the average number of product items within each line within a mix You have to be prepared to alter your product mix or go out of business How you can alter the product mix Line extensions take existing product and alter to bring out another product allowing original product to be kept in the mix Quality improvement making the product more durable or more reliable through better materials and or engineering Feature improvement making the product safer more convenient easier to use more versatile Product elimination informal approach also called a piecemeal approach to get rid of the product mix quick and expensive systematic approach also called a periodic evaluation approach evaluate each product in your product mix regularly when you see early signs of weakness reevaluate your marking strategy Gives you some alternatives gives you time to take corrective action if you think that that s the best approach look at 3 factors sales cost and profits What it contributes to sales What it contributes to the firm s costs What it contributes to the firm s profitability Why is that important We re not satisfied using the same products all the time Developing new products Stages 1 Idea generation build inventory of new product ideas 2 screening evaluate the idea 3 concept testing try the product out on a group of people 4 business analysis try to determine what would happen to the firm s total sales the firm s total costs and the firm s total profits if the company were to bring out the product 5 product development put it into a physical form converting into actual product 6 Test marketing put product into retail stores in some test cities very expensive 7 commercialization product comes out of testing and sells for real