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Chapter 7

Chapter 7. Product Planning and Strategies. Outline of Chapter:. The Meaning of Product Product Classification Systems Product Strategies Developing New Products New Product Adoption and Diffusion Managing Products Throughout the Product Life Cycle. The Meaning of Product.

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Chapter 7

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  1. Chapter 7 Product Planning and Strategies Ch 7: Product Planning and Strategies

  2. Outline of Chapter: • The Meaning of Product • Product Classification Systems • Product Strategies • Developing New Products • New Product Adoption and Diffusion • Managing Products Throughout the Product Life Cycle Ch 7: Product Planning and Strategies

  3. The Meaning of Product • The essence of what the company is offering the consumer. • The consumer is buying the benefit provided by the product attributes. Ch 7: Product Planning and Strategies

  4. The Meaning of Product: Product - is a set of tangible and intangible attributes, including packaging, color, price, quality, and brand, plus a seller’s services and reputation. It can be: • A product (tangible) • A service (intangible) • Place • Person • Idea Ch 7: Product Planning and Strategies

  5. Product Attributes Ch 7: Product Planning and Strategies

  6. Product Classification Systems • Whether a product is considered a consumer or business good depends on the intended target market, how it is used, and by whom. • Often one product can be both a consumer and business good. Ch 7: Product Planning and Strategies

  7. Product Classification Systems • Business Products - are intended for resale, for use in producing other products, or for providing services in an organization. • Consumer Products - are intended for use by household consumers for non-business purposes Ch 7: Product Planning and Strategies

  8. Categories of Consumer Goods: 1. Convenience goods • buy frequently,immediately, and with minimum comparison or buying effort • usually low-priced and widely available • consumer usually has complete knowledge of these products before going shopping • Ex: Mars Chocolate Ch 7: Product Planning and Strategies

  9. Categories of Consumer Goods: 2. Shopping Goods • are less frequently purchased products that consumers compare on suitability, quality, price, and style • spend much time and effort in gathering information and making comparisons • Ex: Maytag products Ch 7: Product Planning and Strategies

  10. Categories of Consumer Goods: 3. Specialty goods • products with unique characteristics or brand identification • significant group of buyers is willing to make a special purchase effort • products have a strong brand preference and are sold in very few outlets, so consumers are willing to go out of their way to get them • both the retailer’s name and the brand name are important • Ex: Rolls-Royce Luxury Cars Ch 7: Product Planning and Strategies

  11. Categories of Consumer Goods: 4. Unsought goods • products that consumers are not yet aware of or that they do not think to buy • require extensive promotion • most major innovations are unsought goods until consumers become aware of them Ch 7: Product Planning and Strategies

  12. Strategic Decisions Pertaining to the Organization’s Products • The product mix is a collection of products offered for sale, and has both breadth and depth. • Breadth  number of product lines offered. • Depth  the assortment within the line. Ch 7: Product Planning and Strategies

  13. Product Mix – Breadth and Depth Ch 7: Product Planning and Strategies

  14. Strategic Decisions Pertaining to the Organization’s Products Product Line: is a group of products intended for essentially similar uses and possessing reasonably similar characteristics; a group of related products • Breadth - of the product line is the number of individual products composing the line. • Depth - is the number of different models, styles, colors, etc. for each product. Ch 7: Product Planning and Strategies

  15. Major Product-Mix Strategies: • Product Positioning • Product Mix Expansion • Alteration of Existing Products • Trading Up and Trading Down • Product Mix Contraction Ch 7: Product Planning and Strategies

  16. Product Positioning The ability to appropriately position a product is a major determinant of company profitability. • Positioning in relation to a competitor– by drawing comparisons. • Positioning in relation to a product class or an attribute – by stressing certain attractive characteristics. • Positioning in relation to a target market. • Positioning by price and quality. Ch 7: Product Planning and Strategies

  17. Product-Mix Expansion • Increasing the depth within a particular product line and/or the number of lines. • Line extensions • Mix extensions Ch 7: Product Planning and Strategies

  18. Mix-Extension Strategies • Related-product, same brand. • Unrelated product, same brand. • Unrelated product, different brand. • Related product, different brand. Ch 7: Product Planning and Strategies

  19. The Importance of Product Innovation: New product innovation is very important to an organization’s success because it helps: 1. sustain company growth 2. provide consumer choice 3. overcome high failure rates for new products. Ch 7: Product Planning and Strategies

  20. Three categories of new products: 1.Truly innovative - new products that satisfy a real need. 2.Replacement products - new products that are significantly different from existing products in form, function or benefits provided. 3.Imitative products - products that are new to the company, but not to the market. Ch 7: Product Planning and Strategies

  21. Six steps in the New Product Development Process: Step 1: Idea generation • Companies must have a system for stimulating new ideas and for reviewing them promptly. Step 2: Screening of ideas • A new product strategy will guide the screening process. Ch 7: Product Planning and Strategies

  22. Six steps in the New Product Development Process: Step 3: Business analysis • What questions do you want answered at this stage? Step 4: Prototype development • A model of the product is manufactured and tested. Ch 7: Product Planning and Strategies

  23. Six steps in the New Product Development Process: Step 5: Test markets • Product is tested with consumers. • Product is adjusted based on the test results. • Go/no go decision is made. Step 6: Commercialization • Full scale production and marketing Ch 7: Product Planning and Strategies

  24. Organizing For Product Innovation: • Product-planning Committee • New-product Department • Venture Team • Product Manager Ch 7: Product Planning and Strategies

  25. New Product Adoption and Diffusion: Adoption process - is the decision making activity of an individual through which innovation is accepted. Diffusion process - is the process by which the innovation is spread through a market over time. Ch 7: Product Planning and Strategies

  26. Stages in the Adoption Process: 1. Awareness 2. Interest 3. Evaluation 4. Trial 5. Adoption 6. Confirmation Ch 7: Product Planning and Strategies

  27. Adopter Categories: 1. Innovators 2. Early adopters 3. Early majority 4. Late majority 5. Laggards 6. Non-adopters Ch 7: Product Planning and Strategies

  28. Innovation Characteristics Affecting the Adoption Rate: 1. Relative advantage 2. Compatibility 3. Complexity 4. Trialability 5. Observability Ch 7: Product Planning and Strategies

  29. Product Life Cycle: • The product life cycle curve represents the sales of a product category, not a particular brand. • The length of the cycle varies among products, but are generally getting shorter. • Not all products go through all stages of the cycle. • A product can be in different stages in the life cycle in different markets. • Product life cycles can be managed. Ch 7: Product Planning and Strategies

  30. Typical Life Cycle of a Product Category Ch 7: Product Planning and Strategies

  31. Life Cycle Stages Introduction • high failure rate • increasing costs, low sales, net losses • limited distribution, few competitors • stimulate primary demand • appeal to innovators • increase product awareness and trial Ch 7: Product Planning and Strategies

  32. Growth • market acceptance, early adopters start to purchase product • competitors enter market with “me-too” products • stimulate selective demand • distribution outlets increase • economies of scale in production and marketing • price may drop slightly • profit peaks and may start to decline • try to maximize market share Ch 7: Product Planning and Strategies

  33. Maturity • sales increase at a decreasing rate, level off, then decline • profits decrease • marginal producers drop out • price competition increases • promotion increases to retain dealers and shelf space • new models introduced Ch 7: Product Planning and Strategies

  34. Decline • brand loyal customers and laggards purchase product • advertising decreases; cost control important • competitors withdraw • decide to drop the product or try to revitalize the brand • try to have a profitable phase out Ch 7: Product Planning and Strategies

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