Chapter 12 Developing and Managing Products 12 1A Line Extensions Line Extension the development of a product that is closely related to one or more products in the existing product line but designed specifically to meet somewhat different needs o Line extensions are more common than new products ie new car models each year o Line extensions are cheaper lower risk and can increase sales o They can be used to take market share from competitors Ford fusion vs Prius etc 12 1B Product Modifications Product Modification changing one or more characteristics of a product It differs from line extension in that the original product does not remain in the line o Example new Ford Mustangs adopted a more modern look and the older ones have been discontinued o Product can improve a firm s product mix if The product is modifiable Customers must be able to perceive that a modification has been made The modification should make the product more consistent with customers desires to provide greater satisfaction o There are three types of product modifications 1 Quality Modifications changes relating to a product s dependability and durability ie American Airlines increasing leg room for passengers a Reducing a product s quality may allow an organization to lower its price and direct the product towards a different market 2 Functional Modifications changes that affect a product s versatility effectiveness convenience or safety ie appliances farm equipment cleaning products etc a Usually require redesign of the product b Can make a product useful to more people and thus enlarge its market 3 Aesthetic Modifications change the sensory appeal of a product by altering its taste texture sound smell or appearance a Strongly affects purchases b Fashion industry relies heavily on aesthetic modificaitons 12 2 Developing New Products Enhances product mix and adds depth to a product line o Example Microsoft developed Windows 7 in response to poor reviews of Vista A radically new product involves a complex developmental process including an extensive business analysis to determine the potential for success Before a product is introduced it goes through the seven phases of the new product developmental process 1 Idea Generation 12 2A a Seeking product ideas that will help businesses achieve their objectives b Firms may use consumer feedback to generate ideas c Can come from internal managers researchers engineers etc or external d sources Ideas may come from franchisees ie the Big Mac Filet O Fish and Egg McMuffin 2 Screening 12 2B a The ideas with the greatest potential are selected for further review b Do ideas match the organization s objectives and resources c Understanding consumer needs is important 3 Concept Testing 12 2C a A small sample of potential buyers is presented with a product idea through a written or oral description and perhaps a few drawings to determine their attitudes and initial buying intentions regarding the product b Low cost procedure that allows a company to determine customers initial reactions to a product idea before it invests considerable resources in research and development 4 Business Analysis 12 2D a The product idea is evaluated to determine its potential contribution to the firms sales costs and profits b Does the product fit in with the existing product mix Is demand strong enough What types of competition can be expected How will costs sales and profits be affected c This is the stage where businesses seek marketing information 5 Product Development 12 2E a The organization determines if it is technically feasible to produce the product and if it can be produced at costs low enough to make the final price reasonable b The idea is converted into a prototype or workable model c How much quality should be put into the product d Often lengthy and expensive Few products enter the development phase 6 Test Marketing 12 2F the intended market a A limited introduction of a product in geographic areas chosen to represent b Lessens the risk of product failure c Measures sales performance on a small scale Helps identify weaknesses that would be expensive to correct on a macro scale d Selection of appropriate test areas is very important to improve validity of results The area should represent the intended target market e Expensive and competitors may try to interfere by promoting their own products and lowering prices to draw attention away from the test product f Businesses may choose to use simulated test marketing 7 Commercialization 12 2G a Plans for full scale manufacturing and marketing must be refined and finalized and budgets for the project prepared b Plan how to set up warranties repairs and replacement parts c The product enters the market The firm spends lots on advertising and promotion d Roll Out a product is introduced in stages starting in one set of geographic areas and gradually expanding into adjacent areas i Reduces risk ii Sometimes a system of wholesalers and retailers to distribute the product cannot be established so quickly so roll out must be used iii Allows for fine tuning of the marketing mix to better satisfy customers iv Allows competitors to observe what the firm is doing and monitor results just as the firm s own marketers are doing 12 3 Product Differentiation through Quality Design and Support Services Product Differentiation the process of creating and designing products so customers perceive them as different from competing products quality features styling price or image 12 3A Product Quality customer needs quality Quality the overall characteristics of a product that allow it to perform as expected in satisfying o Durability warranty ease of use are all factors of quality o Unlike consumers organizations place far less emphasis on price than on product Level of Quality the amount of quality a product possesses It is often measured relative to other products Consistency of Quality the degree to which a product has the same level of quality over time Giving consumers the quality they expect every time they purchase the product 12 3B Product Design and Features Product Design how a product is conceived planned and produced Styling the physical appearance of the product o Good design can allow products to sell more rapidly but with good design must come functionality Product Features specific design characteristics that allow a product to perform certain tasks o Helps a business differentiate its products from competition For a brand to have a
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