Introduction to Marketing

Chapter 9 Objectives

1.1. Classify products by who the buyer Classify products by who the buyer is and the purpose for which the is and the purpose for which the product is being bought.product is being bought.

2.2. Understand the benefits associated Understand the benefits associated with creating a portfolio of products with creating a portfolio of products that provides appropriate product that provides appropriate product depth and width for your target depth and width for your target customers.customers.

Chapter 9 Objectives

3.3. Define new and successful products Define new and successful products and understand why products fail so and understand why products fail so that the stage for successful product that the stage for successful product development is set.development is set.

4.4. Develop successful new products Develop successful new products through uncovering unmet needs, through uncovering unmet needs, using proven development methods, using proven development methods, and managing the project through and managing the project through the organization’s infrastructure.the organization’s infrastructure.

Chapter 9 Objectives

5.5. Make decisions about brand names, Make decisions about brand names, packaging, and labeling.packaging, and labeling.

6.6. Manage products for profitability Manage products for profitability from their introduction through from their introduction through growth and into maturity.growth and into maturity.

Marketing’s Role in New Product Development and Product Decisions

• The long-term basis for the success of a firm relies on its ability not only to market one product well, but also to continue to grow and prosper by developing new products for the marketplace.

Classifying Products

• Products offer customers a bundle of benefits that address a set of needs.

• Products can be classified as either consumer or business-to-business products.

Objective 1

Classifying Products

• If a consumer purchases a product for his or her own household use, the product is called a consumer product.

• Products purchased by organizations to be used in producing other products or in operating their businesses are classified as business-to-business products.

Objective 1

Consumer Products

• Convenience Products

• Shopping products

• Specialty products

• Unsought productsObjective 1

Business-to-Business Products

• Raw materials

• Supplies

• Accessories

• Component parts and materials

• InstallationsObjective 1

Product Mix Decisions

• All of the products a company markets can be thought of as its product mix.

• A group of related items in a company’s product portfolio constitutes a product line.

Objective 2

Product Mix Decisions

• Product mix width- the number of different product lines a company offers.

• Product mix depth- the number of brands within each product line.

Objective 2

Product Mix Decisions

• Companies that offer multiple product lines enjoy numerous benefits:

– Protection against competition– Increase growth and profits– Offset sales fluctuations– Achieve greater impact– Enable economical resource usage– Avoid obsolescence

Objective 2

Setting the Stage for Successful Product Development

• Three issues must be thoroughly examined:

– Defining the type of new product to launch

– Establishing how its success will be measured

– Anticipating potential reasons for possible failure

Objective 3

Defining New Products

• Line extensions are new products that are developed as variations of existing products.

• Dimensions of newness:– How new a product is in the eyes of the

market.– How new the product is to the firm.

Objective 3

Defining New Products

• “New-to-the-World” products- products that create an entirely new market.

• These products are the riskiest of all but present enormous profit potential because they represent monopoly opportunities.

Objective 3

Defining New Products

• Core Benefit Proposition (CBP)- the primary benefit or purpose for which a customer buys a product.

Objective 3

Defining Successful Products

• Developing new products is time- and resource-consuming, as great care must be taken to ensure the best decisions are made before the product reaches channel members and final consumers.

Objective 3

Defining Successful Products

• NPD managers evaluate NPD project success using four items that span these three dimensions:

1. Financial success2. Technical performance success3. Success from the customer’s perspective

Objective 3

Defining Successful Products

• The silver bullet- the perfect product development project that achieves high levels of success on all three dimensions.

• Product mix- the full set of a firm’s products across all markets served.

Objective 3

Reasons New Products Fail

• Projects are abandoned during development for a number of reasons:

– Available technology is unable to meet desired performance specifications or a desired price point.

– A firm’s strategy changes, rendering the product no longer interesting, or a competitor beats the firm to the market.

Objective 3

Reasons New Products Fail

– A firm may uncover information that suggests the product as conceived would not solve customer problems, and thus they would not purchase it.

– The development team is unable to interest marketing or management in commercializing the product.

Objective 3

Reasons New Products Fail

• Products can fail due to either strategic or development process factors.

• Strategic reasons that products fail in the marketplace include:– Failure to provide an advantage or

performance improvement to customers over products already available in the market.

Objective 3

Reasons New Products Fail– Lack of synergy with the technologies

and manufacturing process of the firm, requiring that the firm learn about how to design and make new technologies.

– Marketing synergies lack necessary distribution channels, promotion and selling practices, or pricing policies, often because the product targets a group to whom the firm has never before marketed a product.

Objective 3

Reasons New Products Fail

• Products may not be successful in the marketplace because different aspects of the new product development process were not executed effectively.

• Failure also results when a firm fails to develop a well-thought-out project strategy at the outset of the process.

Objective 3

Developing Successful New Products

• Effective product development requires that a firm successfully complete three activities:

1. Uncover unmet needs and problems2. Develop a competitively advantaged

product3. Shepherd products through the firm

Objective 4

Developing Successful New Products

• Developing a competitively advantaged product requires:

1. Input from customers on unmet needs2. Input from marketing as to what the competition is

doing to address the need3. Input from manufacturing about what the firm can

currently build4. Input from engineering as to what additional

technologies are available5. Input from R&D about new ways of potentially

addressing the need6. Input from finance about costs

Objective 4

Uncovering Unmet Needs and Problems

• Products that don’t solve customer problems or don’t solve them at a competitive cost will fail.

Objective 4

Defining Customer Needs

• Customer needs are the problems that a person or firm would like to have solved.

• Products deliver solutions to customers’ problems.

Objective 4

Methods from Understanding Customer Needs

• Realistically, customers cannot tell firms exactly what products to develop.

• They also cannot provide reliable information about anything with which they are not personally familiar or with which they have no experience.

Objective 4

Methods from Understanding Customer Needs

• Three methods are useful for gathering customer needs qualitatively:

– Becoming the people with the problems– Critically observing those with the

problems– Talking to people in depth about their

problemsObjective 4

Methods from Understanding Customer Needs

• A structured, in-depth, probing, one-on-one, situational interview technique called voice of the customer (VOC) can uncover both general and very detailed customer needs.

Objective 4

Developing a Competitively Advantaged Product

• Developing competitively advantaged products consistently over time is aided by having a strategy for what will be done and a process for how it will be accomplished.

Objective 4

Product Development Strategy

• New product strategy provides the long-term destination for where the firm is going.

• Effective strategies for product development flow from the overall business strategy of the firm.

Objective 4

Product Development Strategy

• Areas of strategic focus:

– Markets or segments– Product types or categories– Product lines– Technologies or technology platforms

Objective 4

Project Strategy

• A project strategy is the specific plan of how this project will proceed and why.

• An effective project strategy states the reasons the firm is undertaking a project and identifies specific business goals for the product.

Objective 4

Framework for Managing Product Development

• A formal product development process outlines the normal way NPD proceeds at the firm.

• The stage-gate process is a common new product development process that divides the repeatable portion of product development into a time-sequenced series of stages that are separated by a management decision gate.

Objective 4

Activities in Stage-Gate Processes

• Generate and screen ideas

• Conduct preliminary investigation

• Conduct detailed investigation

• Develop product

• Test and validate

• Commercialize and launchObjective 4

Shepherding Products through the Firm

• Shepherding products through the firm is done by putting in place appropriate organizational processes.

– Developing project leaders to lead the NPD process and navigate the politics of the organization

– Providing appropriate organization structures within which to manage projects

– Ensuring upper management support

Objective 4

Leading NPD Projects

• Project leadership can take several forms including:

– Project leaders– Champions– NPD process owners

Objective 4

Mustering Management Support for NPD

• The NPD team’s goal is to obtain and retain top management commitment to the project by keeping their attention.

Objective 4

Making Product Decisions: Branding, Packaging, and Labeling

• Branding

• Packaging

• Labeling

Objective 5

Branding Decisions• Brands serve important communication

functions and, in doing so, establish beliefs among customers about the attributes and general image of a product.

• Four important characteristics:1. Attract attention2. Be memorable3. Help communicate the positioning of the

product4. Distinguish the product from competing brands

Objective 5

Brand Equity

• The financial value of a brand can be enormous.

• In addition to the financial value, brand equity also has very important strategic value.

Objective 5

Branding Strategies

• Individual brand name strategy- each product in a company’s mix is given a specific brand name.

• Family brand name strategy- all, or a significant portion, of a company’s products are associated with a family brand name.

Objective 5

Packaging Decisions

• Packaging performs a number of essential functions:

– Protection– Identification– Information– Packaging to enhance usage– Packaging to enhance disposal– Packaging to enhance channel

acceptanceObjective 5

Labeling Decisions

• A customer-oriented label is likely to serve the following six functions:

1. Identify the manufacturer, country of origin, and ingredients or materials in the product.

2. Report the expiration date and the contents’ grading based on a prescribed government standard.

Objective 5

Labeling Decisions

3. Explain how to use the product.4. Warn about potential misuse.5. Provide easy-to-understand care

instructions.6. Serve as an important communication

link between the users, eventual buyers, and the company.

Objective 5

Managing Products through their Life Cycles

• The product life cycle- the cycle of stages that a product goes through from birth to death.– Introduction– Growth– Maturity– Decline– Individual slides to embellish on each

Objective 6

Managing the Product Portfolio

• Most companies manufacture and market a variety of products.

Objective 6