Product Planning, Mix, and Development

Product Planning, Mix, and Development Chapter 30

Product Planning • A product is anything a person receives in an exchange. • Can be: • Tangible • A service • An idea • Or a combination

Continued… • Product planning – • Involves making decisions about those features that are needed to sell a business’s products, services, or ideas. • Decisions include • Product features • Packaging, labeling and branding • Services • Product warranties

Product Mix • Includes all the different products that a company makes or sells. • The type and number of products to be carried must be based on the objectives of the business, the image the business wants to project, and the market it is trying to reach.

Product Items and Lines • Product line – is a group of closely related products manufactured and/or sold by a business. • Ex.) all the car models produced by the Saturn division of General Motors • All the cereals produced by Kellogg’s • All computer by IBM • Product item – a specific model, brand, or size of a product within a product line.

Product Width and Product • The width and depth of its product offerings define a product mix. • Product width – • Refers to the number of different product lines a business manufactures and sells. • Product depth- • Refers to the number of product items offered within each product line.

Product Mix Strategies • The plan for how the business determines which product sit will make or stock. • Three product mix strategies: • Develop a completely new product to add to the product line. • Expand or modify their current product lines • Drop existing products to allow for new product offerings.

Developing New Products • New products can add a lot to a company’s overall sales and boost its market share. • Ex.) Packaged-goods giant Proctor & Gamble • Tide, Crest, and Pampers in its line-up. • Innovative ideas generated by P&G: • Febreze odor remover for fabrics, Swiffer dry-mop, Mr. Clea Antibacterial Wipes

Continued… • New product development generally involves seven key steps: • Generating ideas • Screening ideas • Developing a business proposal • Developing the product • Testing the product • Introducing the product (commercializing) • Evaluating customer acceptance

Generating Ideas • Ideas are generated by customers, competitors, channel members, and company employees. • Larger companies have a research and development department that work with marketing staff, marketing research staff, and outside research companies.

Screening Ideas • In this process ideas for products are evaluated. • Then they are matched against the company’s overall objectives to see if they fit. • Often, focus groups are used to test the product to see if it is popular or if it is a need.

Developing a Business Proposal • Once a product has passed the screening process, it then is evaluated in terms of its profit potential. • A business proposal would: • Evaluate the new product in terms of the size of the market, potential sales, cost, profit potential, technological trends, overall competitive environment, and level of risk.

Developing the Product • New product idea takes physical shape and marketers develop a marketing strategy. • Test are also done to see if the product production is possible and if not, adjustments are made. • In this stage, the following are also planned: • Production, packaging, labeling, branding, promotion and distribution.

Testing the Product • After testing in the lab, consumer acceptance of the product is the next step. • Some products are test marketed in geographical areas that were targeted by the product. • Ex.) Pepsi Max – tested in the Europe market • It was designed for non-American taste. • Focus groups are used in the development faze. • Direct-marketing test are also used.

Introducing the Product • Also called commercialization. • Product must be advertised to introduce its benefits consumers.

Evaluating Customer Acceptance • Once introduced, marketers track new product performance. • Done by evaluating customer acceptance of the product and the marketing strategies used to introduce the product. • This can be done by: • Study sales information by scanning equipment and computer systems

Continued… • The reports can help answer key questions such as: • Who are the best customers for our new product? • What new products are customers buying? • How often do customers by the new product? • When did customers last buy the new product?

Developing Existing Products • This method builds on an already established image, to appeal to new markets, and to increase sales an profits. • Sometimes new products are added to an existing product line to take advantage of the customer’s positive attitude toward the brand name.

Continued… • Two ways of developing an existing product are line extension and product modifications. • Line extensions: • Companies can expand product offerings by adding new product lines, items, or services which may not be related to the current products. • Product Modifications: • An alteration in a company’s existing product. • Modifications can be offered in a new and different varieties, formulations, colors, styles, features or sizes.

Continued… • Product modifications usually lead to the phase out of the original product. • Ex.) Coca Cola • Coke decided to introduce a sweeter cola. Many did not like the idea, Coke introduced Coke Original and Coke. In this instance a line extension was created the original was kept.

Deleting a Product or Product Line • Obsolescence – Changing interests and technology have caused products to be dropped. • Ex.) older models of desktop computers • Loss of Appeal- As customers taste change, companies drop products that no longer appeal to old taste. Ovaltine- lost a lot of appeal, but the older generation still like it. Manufacturers must decide whether to keep the product in their product mix.

Continued… • Conflict with Current Company Objectives – Sometimes a product does not match a company’s current objectives.

Replacement with New Products • Supermarkets, drugstores, department stores, and other retail outlet may change product mix frequently. • Shelf space is limited, so retailers must make shelf or display space for new products.

Lack of Profit • When sales are down, products are dropped.

Conflict with Other Products in the Line • Sometimes products take business away from the other products in the same product line.

Section 3.2

Sustaining Product Sales • Product Life Cycle • Represents the stages that a product goes through during its life. • There are four stages of the life cycle: • Introduction • Growth • Maturity • Decline

Managing During the Introduction Stage • The focus of the company’s efforts is on promotion and production • Goal: • Draw the customer’s attention to the new product. • Company works to build its sales by increasing product awareness. • Least profitable stage

Managing During the Growth Stage • In this phase, the product is enjoying success as shown by increasing sales and profit. • Advertising may now focus on consumer satisfaction, rather than on the new product benefits. • To keep its product sales growing, the company may have to introduce new models or modify the existing product to offer more than the competition.

Managing During the Maturity Stage • This stage is reached when its sales level off or slow down. • During this stage, companies soend more of its marketing dollars fighting off competition.

Managing During the Decline Stage • During this stage sales fall • Profits are smaller than cost • Companies can decide to use product mix strategies to gain more sales: • Selling or licensing the product • Recommitting the product line • Discounting the product • Regionalizing the product • Modernizing or altering the product

Sell or License the Product • Many companies sell or license their poorly performing products to risk-taking companies. • Risk-taking companies try to rejuvenate the product by changing the product’s image or introducing it to a new market.

Recommit to the Product Line • In this case, companies decide that a declining product has other uses that can help improve sales. • Ex) Knox gelatin lost sales as people spent less time cooking and stopped making fancy gelatin desserts. • Idea: • Add it to Jell-o mixes and allows people to make gelatin desserts that can be hand held.

Discount the Product • Discounting a product can save a product from deletion.

Regionalizing the Product • Sell declining the products only in the geographical areas where there is strong customer loyalty

Modernize or Alter the Product Offerings • Products can be redesigned, packaged differently, or reformulates.

Product Positioning • The focus of product positioning is the image a product projects. • The goal of product positioning is to set the product apart from the competition. • Positioning is the way you get into your customer’s mind. • Product positioning refers to the effort a business makes to identify, place, and sell its product in the marketplace.

Positioning by Price • Companies frequently position their products in a product line based upon price and quality. • Companies can offer the following: • Economy line • Mid-priced line • Luxury line

Positioning by Features and Benefits • Done by stressing their features and benefits to the buyer • Ex) Rockport shoes are positioned as comfortable shoes, whether dress or casual.

Positioning in Relation to the Competition • Position the product to compete directly with products of other companies. • Ex) Southwest Airlines

Positioning in Relation to Other Products in a Line • Individual products may be positioned in relation to other products in the same line. • Ex) Washable crayons were introduced and positioned with company’s Crayola crayon line

The End

Category Management • Is a process that involves managing product categories as individual business units. • Planogram – is a computer developed diagram that shows retailers how and where products within a category should be displayed on a shelf at individual stores.

Product Planning, Mix, and Development