MAR3023 Basic Marketing Concepts EXAM 3 Chapter 9 Product Concepts o What is a product A good service or idea or a combination of two or more of these includes supporting services installations guarantees warranties etc Good Services a tangible physical entity ex An ipod an intangible result of application of human and mechanical efforts to people or objects ex Getting your oil changed concept philosophy image or issue ex MADD Mothers Ideas Against Drunk Driving promotes safe alcohol consumption and strict enforcement of laws against drunk driving o Company to Know LEGO Privately held Danish company producing iconic toys since 1932 Name derived from 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 6 Theme Parks Denmark Germany UK Malaysia San Diego Orlando o Product Types Know the difference between Consumer Business Products Consumer Products purchases to satisfy personal and family needs and are classified according to how buyers generally behave when purchasing them Convenience Products relatively inexpensive frequently purchased items for which buyers exert minimal purchasing effort Shopping Products items for which buyers are willing to expend considerable effort in planning and making purchases Specialty Products items with unique characteristics that buyers are willing to expend considerable effort to obtain Unsought Products products purchased to solve a sudden problem products of which customers are unaware and products that people do not necessarily think of buying Business Products products bought to use in a firm s operations to resell or to make other products Installations facilities and nonportable major equipment Accessory Equipment equipment that does not become part of the final physical product but is used in production or office activities Raw Materials basic natural materials that become part of a physical product Component Parts items that become part of a physical product and are either finished items ready for assembly or items that need little processing before assembly Process Materials materials that are used directly in the production of other products but are not readily identifiable MRO Supplies maintenance repair and operating items that facilitate production and operations but do not become part of the finished product Business Services intangible products that many organizations use in their operations o Managing Existing Products Product Hierarchy Core Products the physical or intangible service that the customer receives Branded Products 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 o Strategic Product Management Product Mix all of the products a company sells Product Line a group of closely related product items viewed as a unit because of marketing technical or end use considerations Product Line Depth the number of different products offered in each product line Product Line Breadth the number of different lines that a company or SBU markets The Width of Product Mix the number of product lines a company offers Product Life Cycle the progression of a product through four stages Introduction the initial stage of a product s life cycle its first appearance in the marketplace when sales start at zero and profits are negative Growth the product life cycle stage when sales rise rapidly profits reach a peak and then they start to decline Maturity the stage of a product s life cycle when the sales curve peaks and starts to decline and profits continue to fall Decline the stage of a product s life cycle when sales fall rapidly Reposition Improvements Repositionings Improvements modifications to product formulas or service processes New Product Development is risky but there are less risky alternatives 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 Down Market Extensions Up Market Extensions Brand Extensions product developed is not closely but should still be somewhat related to one or more products in existing product line Product Modifications changes to one or more characteristics of a product different from line extensions because the original product is removed from product line Cost Reduction Quality Modification o Products at a lower price o Products at same price at lower manufacturing costs Functional Modifications o Changes affecting a product s versatility effectiveness convenience or safety Chapter 10 New Product Development o Product Development Determining if producing a product is technically feasible and cost effective o New Products 80 of new products fail Water Car and the Squba The Next Generation The Future of Glass iCycle from Apple o Two Goals for New Product Development 1 Understanding New Product Development from the firm s perspective 2 Understanding New Product Adoption from the customer s perspective o 5 Steps to Developing New Products Know in order 1 Idea Generation Seeking product ideas to achieve organizational objectives o Ex Neurofocus a Nielsen company found that Cheetos lovers actually like the orange mess on their fingers o Ex Doggie Air Conditioner 2 Idea Screening 3 Concept Analysis Selecting the ideas with the greatest potential for further review Evaluating the potential impact of a product idea on the firm s sales costs and profits o Who is the target market o How much will it cost to produce o How much will consumer pay for it 4 Beta and Market Testing 5 Product Launch Seeking a sample of potential buyers responses to a product idea o Product Innovation Ex Bird Robot TED Talk Video o Test Market A limited introduction of a product in geographic areas chosen to represent the intended market Jacksonville is 15 test market in the United States Tallahassee is a terrible test market o 143 out of 150 o Test Market Products Hardee s Carl s Junior is test marketing a foot long burger Pepsi is looking at cinnamon and mint flavored soda McDonald s is testing a new English pub burger Wendy s is test marketing hotdogs In response to second hand smoke bans tobacco companies are test marketing tobacco lozenges Have 20 of the nicotine of a cigarette o Product Adoption Process Know in order Buyer becomes aware of the
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