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CHAPTER 8: DEVELOPING AND MANAGING PRODUCTS AND SERVICES (New-product…
CHAPTER 8: DEVELOPING AND MANAGING PRODUCTS AND SERVICES
What is product?
Services
A form of product
Intangible activities, benefits, or satisfaction that do not result in the ownership of anything
Products
Anything offered to a market for attention, acquisition, use or consumption that may satisfy a want or need
Differentiated based on experience(s) in acquiring and using them
Levels
Actual product
Physical device with all its features, associated brand name, packaging
Core customer value
What buyers are really buying
Augmented product
Additional services & benefits that go with it
Consumer products
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table
8.2
Shopping
Specialty
Convenience
Unsought
New-Product Development Strategy
Two ways
New-product development
(development of original products,improvements, modifications, and new brand)
Acquisition
(buying a whole company, a patent, a license to produce someone else's product
Disadvantages
New product innovation is expensive and risky
Reasons to fail
Lack differentiation
Markets will be flooded with products too similar in designs, features, benefits
Similar technology within given category
Diffusion of innovation theory
Social sciences theory divides members of social group into segments according to how likely they are to adopt a new idea
Technology Adoption Life Cycle
Cross a chasm/ significant gap btw members of early adopters segments and early majority segment before a new product will be succesful
Innovators
Pursue new technology for its own sake
Early adopters
Purchase new technology soon after it is released
Only if have use or purpose for it
Early majority
Practical market segment
Wait until for real need or price more affordable
Later majority
Wait until new technology is proven or less becomes a standard
Laggards
Not comfortable with technology or have no interest
Not a valuable market to pursue
2 groups on each side
Early adopters
Seek new technology a change agent
Radially different
Give sort of advantages
Early majority
Seek productivity improvement in the new technology
Evolution not revolution
Based on the basis of benefits sought
Advantages
For company: a key source of growth
For consumer: bring new solutions & variety to their lives
New-product Development Process
Marketing strategy development
Describe the target market, planned value proposition, sales, market share, profit goals
Outline the product's planned price, distribution, marketing budget
An initial marketing strategy for new product based on the product concept
Describe the planned long-run sales & profit goals, marketing mix strategy
Business analysis
Review of the sales, costs, and profit projections
Positive review triggers product development
Estimate
Slaes history of similar products -> conduct market surveys
Minimum & maximum sales to assess risks
Expected costs and profits
Concept development and testing
Product concept
New-product idea stated in meaningful consumer terms
Concept testing
Testing new-product concepts with groups of potential consumers
Product development
Develops concept into a prototype
Undergo rigorous testing
Involve actual customers in product testing
Idea Screening
Describe products, target market, competition
Estimate market size, price, development time and cost, manufacturing costs, rate of return
Keep good ideas & drop poor ones
Evaluate new-product ideas against a set of company criteria
Test marketing
Product & marketing program introduced into a realistic market
Gain experience prior to full introduction
Idea Generation
Types
External sources
Distributors & suppliers
Distributors
Close to the market
Pass along information about consumers problems & new-product possibilities
Suppliers
Techniques
Materials
New concepts
Competitors
Buy -> see how it works -> analyze sales -> decide whether bring out a product of it own
Get clues about their new products
Customers
Analyze questions/ complaints/ comments
Others
Governments agencies/ Advertising agencies
Trade magazines, shows, seminars
Make research firms
Universities & comercial laboratories
Inventors
Crowdsourcing
Invite broad communities of people (customers, employees, independent scientists and researchers, even public at large) into new-product innovation process
Third-party crowdsourcing network
Internal sources
Company employees at all levels
The systematic search for new-product ideas
Commercialization
Full-scale introduction into the market
Invest heavily in advertising & promotions
Product Life Cycle
table 8.2 :pencil2:
Maturity stage
Last longer
Strong challenges to marketing management
Keep product consistently profitable & prevent from declining
Modify the market
Increase consumption
Find new market segments
Modify the product
Change characteristics (quality, features, styles, packaging)
Attract new users & inspire more usage
Modify the marketing mix
Change one or more marketing mix elements
Adjust prices
Improve services
Run a sale promotion
Improve sales
Decline stage
Reposition
Maintain declining products without changing its hope competitors will leave the industry
Appeal new market segments
Growth stage
Sales start climbing quickly
Sustain the growth for as long as possible
Add new features/ models
Target new market segments
Add new distribution channels
Introduction stage
Some products take off quickly, some others fail during this stage
Starts when the new product is first launched
Product and Service Decisions
Product Mix Decision
All the product lines & items that company markets
Each product line consists of several sub-lines
4 dimensions
Length
Depth
Number of versions
Consistency
How closely related the various product lines are in end use
Production requirements
Distribution channels
Width
Product Line Decision
Product line length
Increase profits by adding items -> too short
The number of items in the product line
Increase profits by dropping items -> too long
Influenced by company objectives & resources
Group of products that are closely related (function/price/customer groups/types of outlet/...)
Product line filling
Add more items within the present range of the line
Use excess capacity
Be the leading full-line company
Satisfy dealers
Reach for extra profits
Plug holes to keep out competitors
Product line stretching
Upward to add prestige to their current products
Downward
Plug a market hole to attract a new competitor
Respond to a competitor's attack
Occur when company lengths its product line beyond current range
International Product Marketing Product
Consider the example where Kraft Foods adapted the Oreo cookie for the Chinese market
Initially had the wrong flavour
Initially had the wrong segment
Package needed to be adapted
Have someone "on the ground" who understand the local culture
Much more than just translating the words in an advertisement
Individual Products & Service Decisions
Labelling
Complex graphics
Simple tags attached
Describe
Where it was made
Who made it
When it was made
Its contents
How it is to be used
How to use safely
Identify the product or brand
Packaging
Provide information
Protect the product from breakage, tampering, theft
Describe the benefits
Identify the brand
Sustainable packaging
Minimize the environmental, economic, social impacts of its products & package
Meet the requirements of the products
Optimize the use of renewable & recycled source materials
Use clean production technologies
Environmentally responsible & sustainable
Closed loop system
Circular thinking
Idea that packaging can be recycled & reused over and over again
Circular community
Review how it could optimize packaging for recycling and reuse
Retain and improve product quality
Product support services
Internet
Augment actual products
Human touch
Product attributes
Features
Competitive tool
Differentiate company's product from competitor's product
First producer of new feature -> effective way to compete
Quality
Freedom from defects
Link to customer value and satisfaction
Determine the type of marketing program that will be created to promote
Direct impact on product and service performance
Positioning tool
Style and design
Style
Describe the appearance of the product
Sensational style
Produce pleasing aesthetics
Grab attention
Not necessarily make the product perform better
Design
Heart of the product
Contribute to a product's usefulness as well as to its look
Ways to design
What features it has
Where they are located
How they are used
Good design
Observe customers
Develop deep understanding of their needs
Influence customer in choosing one's company product over another