MAR3023 Module 3 Notes Overview Today is about managing products Products defined broadly Product Hierarchy PLC Managing a Product Line Line depth breadth Line Extensions Brand Extensions Modifications What is a Product A product is a good service about 80 U S or idea or a combination of two or more of these Includes supporting services installations guarantees and warranties Products Defined know difference and be able to recognize an example of each Goods a tangible physical entity Services an intangible result of application of human and mechanical efforts to people or objects hybrids Ideas concept philosophy image or issue LEGO A privately held Danish company that has produced the iconic toys since 1932 Name is derived from the Danish words Leg godt meaning play well Poor performance in the core LEGO business led to recent changes to the existing products Now have 46 retail stores 34 in the U S Six theme parks Denmark Germany UK Malaysia San Diego Orlando They diversify their portfolio in a way that is smart for investing Product Types Consumer Products purchased to satisfy personal and family needs and are classified according to how buyers generally behave when purchasing them Convenience products Shopping Products Specialty Products Unsought Products Business Products purchased to use for operations to resell or to use in manufacture of other products Managing Existing Products Product Hierarchy know ex of each Core Products are the physical or intangible service that the customer receives Branded Products are the core products plus the characteristics that allow the consumer to differentiate it from similar products Augmented Products have characteristics that enhance value beyond that of the core and branded product Ex guarantee warranty Core vs Brands Core product cereal soda etc Perception of particular good changes when you put a brand on it Ex generic brand to Honey Nut Cheerios Coca Cola etc Strategic Product Management below Product mix Product lines Depth Breadth Extensions Up Down PLC Modifications Product Mix A product mix is all of the products a company sells Coca Cola products Proctor Gamble Product Line A product line consists of the closely related products marketed by an organization Ex different types of Oreos to suit different tastes wants needs Product lines evolve from segmentation targeting strategy Product Line Depth vertically The number of items in a product line In the Excedrin example the Product Depth would be 8 Gels Extra Strength Migraine Menstrual Complete Tension Headache Back Body PM Sinus Headache of different variations of each product Product Line Breadth horizontally The number of different lines that a company or SBU markets In the Excedrin example Novartis Consumer Health markets 40 lines of consumer health products so their breadth score would be 40 Coca Cola Sprite Dr Pepper Fanta etc you can see the depth in each product PLC Product Life Cycle As time goes on Starts at introduction phase 7 Up 10 Growth phase Coke Zero Maturity Diet Coke Decline phase Pepsi in the beverage industry Introductory Stage High failure rates Little competition Frequent product modification Limited distribution High advertising production costs Negative profits Growth Stage Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Wider distribution Prices normally fall Maturity Stage Sales increase at a decreasing rate Saturated markets Lengthened product lines Heavy promotions to dealers consumers Marginal competitors drop out Prices and profits fall Several kinds of product life cycles are possible high technology products fads and styles fashions Different products have different life cycles Know when to stop spending on a product when the fad is over Reposition Improvements extending the PLC Repositioning Ex Arm Hammer baking soda for cooking and as a refrigerator deodorant Extending product life cycle Improvements modifications to product formulas or service processes Ex Wendy s modified their french fries Alternatives to NPD New Product Development NPD is risky Less risky alternatives Decline Stage Long run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses 1 Line extensions product developed is closely related to one or more successful products in existing product line but specifically designed to meet a somewhat different need 2 Product modifications product modification means changing one or more of the product s characteristics different from line extensions because the original product is removed from product line Down Market Extensions A company positioned in the middle market may want to introduce a lower priced line for any of the three reasons The company may notice strong growth opportunities as mass retailers attract a growing number of shoppers who want value priced goods The company may wish to tie up lower end competitors who might otherwise try to move up market The company may find that the middle market is declining Ex Mercedes B class lower price to attract a different segment of consumers Up Market Extensions Companies may wish to enter the high end of the market or simply to position themselves as full line manufacturers for more growth higher margins Ex Starbucks coffee Haagen Dazs ice cream Evian bottled water Ex Nissan s Infiniti Honda s Acura they ve invented entirely new names rather than using including their own names Brand Extensions Brand extensions product developed is not closely but should still be somewhat related to one or more products in existing product line Ex Starbucks coffee ice cream liqueur Ex Reese s peanut butter cup cereal peanut butter 2 Product Modifications Changes to one or more characteristics of a product The old version doesn t usually stay in the line ex cars models change per year etc Cost Reduction Quality Modification Products at a lower price to cut costs Products at Same Price at Lower Manufacturing Costs Ex Recipe Change higher prices are motivating some food makers to swap or cut ingredients hamburger helper Hershey kissables Pillsbury cookies Functional Modifications Changes affecting a product s versatility Usually just a modification with the packaging Extending the way consumers can use a product Ex Crystal Light On The Go Soup at Hand to go container Developing New Products New Products Developing flying cars operate out of regional airports Hybrid ATV vehicle Watercar jeep frame Squba water war on
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