MAR3023 Test 2 Notes2/13/13- Cinthia Satornino• Product Concepts and New Product Development• What is a product?• A product is a good, service, or idea (or a combination of two or more of these)• EX: Good, service, idea• Goods- a tangible, physical entity• Services- an intangible, result of application of human…• Idea- ….• Product concepts• EX: Kids would choose to play with Lego’s over regular product, because they like to build things and then play with them• Product types• Consumer products- purchased to satisfy personal and family needs • Business products- purchased to use for operations, to resell…• Managing existing products• Product hierarchy• Core products- physical or intangible service that the customer receives• Branded products- core products plus characteristics that allow the consumer to differentiate it from similar products• Augmented products- enhance value beyond that of the core and branded products• Core vs. brands• EX: Not really a difference between Coors Light, Blue Moon, Budweiser• Product Line• A product line consists of the closely related products marketed by an organization• Product line depth• The number of items in a product line• Product line breadth• The number of different lines that a company or SBU markets• Product life cycle• Cycle:• Introduction- unknown product• Growth- product starts to get attention• Maturity- hits a peak• Decline- new product enters market and takes customers• Several kinds of product life cycles are possible: high-technology products, fads, and styles or fashions• Extending the product life cycle• Selling to a new segment• Harley Davidson targets women• Stimulate more frequent use• Encourage more use per occasion• Promoting more varied use• Improvements and repositioning• Repositionings• Arm & Hammer• Toothpaste, fridge freshener…• Alternatives to New Product Development (NPD)• NPD is risky• Less risky alternatives• Line extensions- creating a version of existing product, but original doesn’t go away• Product modifications- previous model goes away• Down market extensions• Products become cheaper• EX: Mercedes introducing a B class• Up market extensions• Products become more expensive/fancier• EX: Hershey’s fancy chocolates, $600 bottle of beer• Product modifications• Changes to one or more characteristics of a product• The old version usually doesn’t stay in line• Cost reduction (quality modification)• Products at a lower price• Products at same price at lower manufacturing costs• Internal modifications• Functional modifications• Change something about the product to make it easier/more convenient• Developing new products• EX: Dry Bath- convenience and cleanliness• Infamous NPD predictions• Two goals for NPD• 1. Understanding NPD from the Firm’s Perspective• 2. Understanding NPD from the Customer’s Perspective• 7 stages of NPD• 1. Idea generation• 2. Screening- most promising ideas?• 3. Concept testing- sample of potential buyers?• 4. Business analysis- potential contribution to firm?• 5. Product development- technically feasible?• 6. Test marketing- limited introduction, will it work?• 7. Commercialization- plan for full scale release• Product adoption process• 1. Awareness- buyer becomes aware of the product• 2. Interest- buyer seeks information and is receptive to learning about the product• 3. Evaluation- buyer considers product’s benefits and decides whether to try it• 4. Trial- buyer examines, tests, or tries the product to determine if it meets his or her needs• 5. Adoption- buyer purchases the product and is expected to use it again whenever the need for this general type of product arises• New product adoption• Innovators- first to adopt new product• Early adopters- choose new products carefully, help spread word-of-mouth• Early majority- adopt just prior to average person• Late majority- skeptics who adopt new products when they feel it is necessary• Laggards- last to adopt a new product• 80% of new products fail• Why?• Ineffective or inconsistent branding, poor timing, overestimation of market size, ineffective promotion, insufficient distribution – a failure of one or more of the 4 P’s (product, place/distribution, price, promotion)• One of the most common reasons• Product offering does NOT meet customer’s needs• Deleting a product• Product deletion- eliminating a product; sometimes necessary• 1. Weak product is a drain• 2. Difficult to do• 3. Three methods2/18/13• Services: what are they?• Service- a “deed, process, or performance.”• Some overlap: service exists in ALL physical goods• “Customer service” in support of manufactured goods• Dell reps• Ordering• Distribution of physical goods• Even bulk goods have service• Return of defective goods• Factors contributing to growth• Aging population- Baby Boomers• Longer life expectancies• Implications?• Movement to information age• Implications• Increased leisure time• High per capita income• Discretionary income• Changing social and cultural• Current state of the service industry• EX: YouTube video- United Breaks Guitars• Almost 13 million views and an appearance on 20/20• EX: Discussion- what separates services from products?• Think about your most recent haircut• Now think about a hair product you bought recently• How do they differ?• How do you evaluate each?• Characteristics of services: the “big four”• Intangibility- lack of tangible assets which can be seen, touched, or smelled prior to purchase• Stress tangible cues• Price-quality relationship in services• EX: if a lawyer is only $20/hour we assume they suck• Customer referrals• Word of mouth• Perishability- inability of a service to be inventories or stored• Manage supply and demand• The marketing mix• Pricing• EX: movies- matinee, early bird specials• Promotions• EX: frequent flier restrictions• Inseparability- simultaneous production and consumption of a service• Employees are key• You remember how you were treated• EX: bank, airline, fast food, etc.• Key: the physical environment• EX: Rainforest café has bad food, good environment• Other customers are a factor• EX: perceived similarity, crying babies, drunks• Variability- unwanted or
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