Product Strategies

1
Product Strategies

• Business 1201, Fall 2006
• Dr. Katherine Gallagher

2
Objectives

• To understand what a product is, and what is
  meant by a new product
• To know the steps in the new product development
  process, and how consumers adopt new products
• To understand the product life cycle, and its
  implications for management
• To understand the difference between product mix
  and product line
• To know the major product-mix strategies

3
Key Marketing Decisions
External Factors
Internal Factors
Target Market Position
Marketing Mix
Product
Price
Distribution
Promotion
4
Product

• Product set of tangible and intangible
  attributes, including packaging, color, price,
  quality, brand, sellers services and reputation
• Physical attributes benefits
• Goods, services, ideas

5
Classifying Consumer Products
6
Classifying Consumer Products
7
Types of New Products

• New-to-the-world (true innovations)
• New-to-the-marketer (imitative)
• Improvements (replacements)
• Line extensions
• Repositioned products

8
A Few Facts

• New product development can take a long time (22
  years for instant coffee).
• New product development is expensive (50MM in
  some consumer markets).
• Many new products are failures (33-90,
  depending on the industry).
• Almost 50 of resources spent on product
  innovation are spent on commercial failures.
• Most manufacturers cannot survive without new
  products.

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NPD Step 1Identify Strategic Role

• Goal
• Identify the purpose of the new product
• Options
• To defend market share
• To strengthen reputation as an innovator
• To increase customer satisfaction

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NPD Step 2Idea Generation

• Goals
• Recognize available ideas
• Get ideas to decision makers
• Sources of ideas
• Technology push RD
• Demand pull customers, salespeople, retailers
  and wholesalers
• Competitive products

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NPD Step 3Idea Screening

• Goals
• Eliminate unprofitable ideas
• Bad ideas
• Impractical ideas (?alliances with other firms?)
• Expand viable ideas
• Criteria
• Expected demand
• Fit with goals, resources
• Concept testing
• Reaction of potential customers to the idea

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Step 4Business Analysis

• Goal
• Evaluate whether the proposed product will
  satisfy the firms objectives
• Projections
• Sales
• Costs
• Profits
• Concern
• Cannibalization

13
Step 5Product Development

• Goal
• To develop a physical product
• Procedure
• Prototype development
• Prototype testing
• Consumer tests
• (Redesign)

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Step 6Market Testing

• Goal
• To evaluate and adjust the marketing strategy and
  marketing mix
• Common techniques
• Test markets
• Pseudo test market

15
Step 6Market Testing
16
Step 7Commercialization

• Goal
• Launch the product successfully
• Issues
• Timing
• Geographic strategy

17
Product Adoption Process

• Awareness
• Interest
• Evaluation
• Trial
• Adoption or rejection

18
New Product Diffusion

• Innovators (3)
• Early adopters (13)
• Opinion leaders
• Early majority (34)
• Late majority (34)
• Laggards (16)

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New Product Diffusion

• Influences on the rate of adoption
• Relative advantage
• Compatibility
• Complexity
• Divisibility
• Trialability
• Risk

20
Product Life Cycle

• PLC aggregate demand over an extended period of
  time for all brands making up a product category
• Applies to a product category, NOT an individual
  brand
• Four stages
• Introduction
• Growth
• Maturity
• Decline

21
Extending the PLC

• Market modification
• Looking for new users or increased use among
  present users
• Product modification
• Changing product quality, features, or style to
  attract new users or more usage from present users

22
Product Line and Product Mix

• Product line a group of closely related
  products offered by one marketer
• Product mix the collection of product lines and
  individual products offered by one marketer
• Breadth
• Depth
• Consistency

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Goal of Product Mix Strategies

• Optimize the product mix
• At any given point in time
• Over time

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Product Mix Strategies

• Expand the product mix
• Line extension
• Mix extension
• Related product, same brand
• Unrelated product, same brand
• Unrelated product, different brand
• Related product, different brand
• Contract the product mix
• Alter the composition of the product mix
• Trade up
• Trade down
• Alter existing products

25
Summary

• A product is a combination of tangible and
  intangible attributes. There are different kinds
  of new products.
• NPD is about nurturing goods ideas and rooting
  out bad ideas, at as low a cost as possible.
• Different people adopt new products/technologies
  at different rates, and need to be marketed to
  differently.
• The PLC has four stages, each with different
  implications for marketing
• The set of all a firms product lines is its
  product mix
• Product mix strategies can be expanded,
  contracted, or altered.