Chapter 11 Product Concepts Products broadly defined as a good service idea or a combination of these o Difference between a good service and idea Good a tangible physical entity Example iPod Services an intangible result of application of human and mechanical efforts to people or objects hybrids Example Concert Ideas concept philosophy image or issue Example MADD Mothers Against Drunk Driving o Distinguish between 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 o Explain the product hierarchy Core products the physical or intangible service that the o Explain product management customer receives Example Car solves the core need of transportation Branded products the core products plus the characteristics that allow the consumer to differentiate it from similar products Example BMW image that is added to the car in addition to satisfying the core need Augmented products characteristics that enhance value beyond that of the core and branded product Example warranties terms of financing repair that is included in the purchase of the car Product mix all of the products a company sells Companies think about what products they are going to sell and how they are going to arrange them to understand if they have met all of the needs of the targeted segment Example Proctor and Gamble P G are known to be the quintessential marketing company and are based in Cincinnati their product mix includes Gillette Pringles Oral B Pampers and many more Product line the closely related products marketed by an organization o Example Oreos have several different varieties and are all under the Nabisco label mint lemon peanut butter etc Product line depth the number of items in a product line o Example Diet Coke would have a product depth of nine which is a pretty deep product depth meaning there are nine strictly Diet Coke products Product line breadth the number of different lines that a company or SBU markets in a particular area o Example Novartis Consumer Health who produces Excedrin markets 40 lines of consumer health products so their breadth score would be 40 o Be familiar with the product life cycle Product life cycle products are introduced they grow they mature and then they decline Introductory Stage characterized by o High failure rates little competition frequent product modification limited distribution high advertising and production costs negative profits o Very costly and risky Growth Stage characterized by o Increasing rate of sales entrance of competitors market consolidation initial healthy profits aggressive advertising of the differences between brands wider distribution prices normally fall Maturity Stage characterized by o Sales increase at a decreasing rate saturated markets annual models appear lengthened product lines service and repair assume important roles heavy promotions to dealers and consumers o Where you make most of your money cash cows Decline Stage characterized by o Long run drop in sales large inventories of unsold items elimination of all nonessential marketing expenses o Types of product life cycles High technology products spikes are a result of newly released technology or upgraded technology Fads sharp increase and then fall off Styles fashions steady increase then taper down and finally steady out as they come back in style o Explain how companies extend the product life cycle Selling to new segments Example Harley Davidson began to sell to women when they had reached their cap on their market potential at the time Stimulate more frequent use Example disposable toothbrushes you can use anywhere to encourage people to brush more than twice a day Encourage more use per occasion Example super sized fries at McDonald s Promoting more varied use Example using dryer sheets under your hat to keep o Be familiar with repositioning and improvements gnats away Repositioning re marketing and branding a product to convey a different image and for a different use than originally intended public perception Example Arm Hammer as a fridge and freezer deodorant instead of a cooking product Improvements modifications to product formulas or service processes Example toilets with built in sinks are being produced as a space saving solution for tight bathrooms o Understand the less risky alternatives to new product development 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 Example Mercedes developed a down market line extension by developing the B Class for consumers purchasing less expensive cars Product modifications changing one or more of the product s characteristics different from line extensions because the original product is removed from product line Example when a new model of a car is released the previous model is taken off the market Cost reduction quality modification taking expensive ingredients out can increase profitability Functional modifications changing the packaging in a way that is more appealing to consumers and allows you to sell more product o Difference between down market extensions and up market extensions Down market extensions expanding the line to include customers who are willing to pay less Example Mercedes B Class Up market extensions expanding the line to include more high end consumers Example cappuccino flavored Kit Kat Hershey s Cacao Reserve Sam Adams Utopia beer Acura etc o Know what brand extensions are Brand extension product developed in not closely but should still be somewhat related to one or more products in an existing product line Example Starbucks developed ice cream and liquor o Successful Chapter 12 New Product Development Percentage of new products that fail o 80 Two goals for new product development o Understanding new product development from 1 The firm s perspective 2 The customer s perspective Know the five steps of developing a new product and their order o 1 Idea Generation o 2 Idea Screening o 3 Concept Analysis Who is the target market How much will it cost to produce How much will consumers pay for it This is when focus groups occur o 4 Beta and Market Testing Test markets are used to distribute new products
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