MAR3023 ~ Module 3 NotesOverview:-Today is about managing products-Products defined broadly-Product Hierarchy-PLC-Managing a Product Line-Line depth, breadth-Line Extensions-Brand Extensions-ModificationsWhat 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 warrantiesProducts 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 issueLEGO:-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 investingProduct 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 productsManaging Existing ProductsProduct Hierarchy: [know ex. of each]-Core Products are the physical or intangibleservice that the customer receives-Branded Products are the core products plusthe characteristics that allow the consumer todifferentiate it from similar products-Augmented Products have characteristicsthat enhance value beyond that of the core andbranded product-(Ex. guarantee/warranty)Core vs. Brands:Core product = cereal, soda, etc-Perception of particular good changes whenyou put a brand on it-(Ex. generic brand to Honey NutCheerios, Coca-Cola, etc)Strategic Product Management: [below]-Product mix-Product lines-Depth, Breadth-Extensions (Up & Down)-PLC-ModificationsProduct 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 strategyProduct 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 productProduct 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 productPLC ( Product Life Cycle ) in the beverage industry: -As time goes on… Starts at introduction phase (7-Up 10) Growth phase (Coke Zero) Maturity (Diet Coke) Decline phase (Pepsi)Introductory Stage:-High failure rates-Little competition-Frequent product modification-Limited distribution-High advertising/production costs-Negative profitsGrowth Stage:-Increasing rate of sales-Entrance of competitors-Market consolidation-Initial healthy profits-Wider distribution-Prices normally fallMaturity Stage:-Sales increase at a decreasing rate-Saturated markets-Lengthened product lines-Heavy promotions to dealers/consumers-Marginal competitors drop out-Prices and profits fallDecline Stage:-Long-run drop in sales-Large inventories of unsold items-Elimination of all nonessential marketing expenses 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 (forcooking and as a refrigerator deodorant)-Extending product life cycle-Improvements: modifications to productformulas or service processes-Ex. Wendy’s modified their french-fries Alternatives to NPD-New Product Development (NPD) is risky -Less risky alternatives: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 need2-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 lineDown 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 for more growth, higher margins, or simply to position themselves as full-line manufacturers-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 namesBrand 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 butter2-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
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