Exam 3 Lecture notes Product design o Optimizing the combination of Function Value Aesthetics o Trade off with optimism and combining these three As you add more price goes up Most new product fail and lose o Like poker trying to win big to cover losses Pressures for new products o 1 Market saturation Can be caused by durable goods which are used for long period of time Popular Explanations for new product development o lifeblood it is essential to industry ex Fashion and is in constant o 2 New substitutes o 3 Changes in taste incomes customers o 4 Intensified competition development o Most General reasons Growth getting bigger Diversification to decrease risk o Use of excess capacity and bi products Marginal cost is lower economies of scale o Exploit strong channel relationships o The bottom line you think it is profitable and has expected profits Observations than others o 1 New products are much more important to some organizations and industries o 2 The product life cycle is becoming shorter Not physically but the payoff period Company that first makes the product has shorter Most companies are do not have first mover advantage Instead they are quick creative copycat who learns from their mistakes and don t spend upfront costs therefore need to make products faster have faster information to meet Stages of New Product Development model the initial stairs increased pressure from customers Generate ideas From customer B2B internal buy ideas Evaluate ideas Conduct business analysis Concept testing this is o The more experience the customer has the more valuable o Modification highly valuable customer feedback o Radically different customer feedback is unvaluable Develop product and marketing mix By far the longest and most expensive Where idea becomes a thing Test marketing is optional Commercialization o So at this point we modify the model back to the drawing board reworked parallel processing Unlikely to plan everything perfectly so something needs to be Dividing into parts to tackle simultaneously o Accelerate the process a need for speed increase Product champions A mentor for new product ideas o Their baby o Sponsor to increase the chances that it is successful o Help it overcome obstacles Product life cycle in marketing o Actual PLC is must less regular and predictable but concepts and recommendations still useful o Stage 1 Introduction childhood 0 10 Profits are negative o High start up costs Sales are low get off the ground o Secure trail There is risk of customers trying slotting allowance bribe o Promotion to inform At this point there is limited lines and competition o Stage 2 Growth youth and young adulthood 11 25 Profits are way up Sales are way up Looking to build loyalty o Retain and expand o Promotion to persuade Lines and competition are increasing o Will lose market share but market will grow o Stage 3 o Time where everyone can prosper but doesn t last long Maturity Adulthood 26 70 longer than other 3 stages put together Profit and sales begin to level out Need to combat competition o Forms o Promotion fight for market share Market is not growing anymore o Maximum levels Of competition sales profits substitutes o Stage 4 Decline old age 71 Profits and sales decline more Either ripe old age or killed off o Cut backs less ads etc o Bite the bullet having to make an important decision that you want to postpone Ex Pulling the plug People have a tendency to keep products around too long o Over the product life cycle Growth slows Customers become more knowledgeable More experience and information o Affects advertising Ads are strongest in beginning and weaker through PLC Opposite on price becomes more responsive to price changes o Check list for older products New users And new uses not easy to get more mileage out of these products Increased segmentation More specialized to reach and grow new customers Marketing mix changes Change something about the 4P s o attempted intimidations any innovations will be copied o Theories to forget about PLC Uncertain timing In practice we don t know how long each stage of the cycle will actual take and when they transition Outside events Self fulfilling prophesies Environmental factors are not constant or predictable You think something will happen so you take steps until it begins to happen Guidelines At best this model is just a guideline to follow and is not perfect o Product items SKU stock keeping unit or one item Product line set of related items Product categories substitutes from customers point of view Product mix all products a company is offering One stop shop wide variety but not much depth Specialty depth and assortment but not many product Product proliferation Excessive expansion of line o Too many choices o Caused by crazy marketers since all they care about is Branding doing anything to identify your stuff o Brand name the most familiar thing points scored You can say it o Brand mark you can see it o Trademark legal protection Brand can be most valuable asset o History Brands have been around for 150 years and as far back as 2000 Became important around industrial revolution 3 things became important o 1 Branding o 2 Advertising o 3 Packaging o An effective brand name is much more the result of effective marketing than the cause 4P s done right Tapping into strong emotions symbolism Involve stories to make the connection Just the name can be the most valuable thing in the company mere awareness can be good enough to get purchase o Branding is building the bond between you and 20 of the best customers Concentration on new customers Summary of all feelings and beliefs A collection of assocations Can be worth billions OSU 8 million o Types of brand names 4 National and manufacturer brands Oldest and best known Have the largest market share May outsource instead of make Resellers and private label brands Store brands Do not make them o Hire contractors Generic brands No brand name Low market share Licensed brands Name that is valuable recent years Brand Characters o In general brand loyalty for consumer products has decreased significantly in A way to give the brand personality Brandstanding what they want you to know about them Without saying much about functionality of the brand The battle of the brands Manufactures are losing ground to retailers Loyalty is down and customers shop more by price Packaging the 5th P o Importance varies by product o For every 1 spent on ads about 75 is spend on packaging More than
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