Developing and Managing Products Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook 11 Part Three Product.

Developing andManaging Products

Copyright © Houghton Mifflin Company. All rights reserved.Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie Cook

1111

Part ThreePart ThreeProductProduct

DecisionsDecisions

Copyright © Houghton Mifflin Company. All rights reserved. 11–2

Chapter Learning Objectives

• To understand how companies manage existing products through line extensions and product modifications

• To describe how businesses develop a product idea into a commercial product

• To understand the importance of product differentiation and the elements that differentiate one product from another

• To explore how products are positioned and repositioned in the customer’s mind

• To understand how product deletion is used to improve product mixes

• To describe organizational structures used for managing products


Managing Existing Products

• What is a Line Extension–Development of a product that is closely related to

existing products in the line but meets different customer needs

• Why do a Line Extension• Is a less expensive, low risk alternative• May focus on the same or a new segment• Can be used to counter

competing products

–Many “new products” are really line extensions.

““CheeriosCheerios””

““Honey-Honey-NutNut

Cheerios”Cheerios”


Managing Existing Products (cont’d)

• Product Modifications–A change in one or more characteristics of the product

and the elimination of the original product from the product line.

• Product must be modifiable.• Customer must be able to perceive

modification has been made.• Modified product more closely

satisfies customers’ needs.


Product Modifications

• Quality Modifications–Changes in material or production processes related to

a product’s dependability and durability• Reducing quality to offer a lower price to customers• Increasing quality to gain a competitive advantage

1st


Product Modifications (cont’d)

• Functional Modifications–Changes affecting a product’s versatility, effectiveness,

convenience, or safety; usually requiring redesign of the product

• Aesthetic Modifications–Changes to the sensory appeal of a product such as

altering taste, texture, sound, smell, or appearance


Developing New Products

• Benefits–Enhances product mix–Increases depth in product line–Attracts new customers–Increases market and customer share

• Risks–Expensive to develop–Creates risk of market failure–Loss of market share without new products


Phases of New-Product Development

FIGURE 11.1


Phases of New Product Development (cont’d)• Idea Generation

–Seeking product ideas to achieve objectives• Internal sources: marketing managers, researchers, sales

personnel, and engineers• External sources: customers, competitors, advertising

agencies, consultants, and new-product alliances• What about your businesses? New business and new

product? List ideas here• Focus on unmet needs• Group activity 4 minutes

Brainstorming session?10 good ideas


Phases of New Product Development (cont’d)

• Screening–Choosing the most promising ideas for further review–What criteria do you base you decision on? (Goto WP)

• Concerns about cannibalization of existing products• Company capabilities to produce and market the product• Nature and wants of buyers• Concerns about whether it

fits in the mission

–In a group, screen out 5Tell me about 1 youscreened out


Phases of New Product Development (cont’d)• Concept Testing

–Seeking potential buyers’ responses to a product idea• Low cost determination of initial reaction to product idea• Identification of important product

attributes and benefits• Interview, observation or focus

group (Chap 6)


Concept Test for a Tick and Flea Control

Product

FIGURE 11.2


Phases of New Product Development (cont’d)• Business Analysis

–Assessing the potential of a product idea for the firm’s sales, costs, and profits

• Does product fit in with existing product mix?• Is demand strong enough to enter the market?• How will introducing the product change the market?• Is the firm capable of

developing the product?• What are the costs for

developing and marketing?USE EXCEL link



• Product Development–Determining if producing a product is feasible and cost

effective• Construction of a prototype, or working model• Testing of the prototype’s overall functionality• Determining the level of product quality• Branding, packaging, labeling,

pricing, and promotion decisions



• Test Marketing–Introducing a product on a limited basis to measure the

extent to which potential customers will actually buy it• Sample launch of entire marketing mix• Lessens risk of larger market failure• Is expensive; simulated test marketing

is an alternative• NO TIME FOR YOUR PRODUCTS



• Commercialization–Deciding on full-scale manufacturing and marketing

plans and preparing budgets• Modifications indicated by test marketing are incorporated

into the production design.• Marketing, distribution, and servicing plans are finalized.• Product roll-out occurs in stages to lessen the risks of

introducing the new product.


Stages of Expansion into a National Market During Commercialization

FIGURE 11.3Source: Adapted from Herbert G. Hicks, William M. Pride, and James D. Powell, Business: An Involvement Approach. Copyright © 1975. Reproduced with permission of The McGraw-Hill Companies.


Product Differentiation Through Quality, Design, and Support Services

• Product Differentiation–Creating and designing products so that customers perceive

them as different from competing products• Perceived differences in product quality, product design and

features, and product support services• Branding—a crucial way to differentiate a product

HorizonOrganic

Milk

BordenMilk

Sunkist

http://sunkist.com/


Product Differentiation

• Product Quality?–The overall characteristics of a product that allow it to

perform as expected in satisfying customer needs–Level of quality is the relative amount of quality a

product possesses.–Consistency of quality is the degree to which a product

has the same level of quality over time.


Product Differentiation (cont’d)

• Product Design and Features–Product design

• How a product is conceived, planned, and produced• Good design provides a strong competitive advantage.• Customers typically desire products with good designs

and that function well.

–Styling is the physical appearance of a product

–Product features include specific design characteristics that allow a product to perform certain tasks


Product Differentiation (cont’d)

• Product Support Services–Customer services

• Human or mechanical efforts or activities that add value to a product

• Delivery and installation, financing, customer training, warranties and guarantees, repairs, online product information

• A competitive advantage when all other product features are equally matched by competitors


Product Positioning and Repositioning

• Product Positioning– Creating and maintaining a certain concept of a product

in customers’ minds– A product’s position results from customers’ perceptions

of a product’s attributes relative to those of competing products.

• Marketers emphasize characteristics most desired by the target market (or segment) in advertising.

http://www.jif.com/home.asp

http://www.chrysler.com/index.html?context=vehicles-index&type=logo


Product Positioning


Hypothetical Perceptual Map for Pain Relievers

FIGURE 11.4

Perceptual maps show marketers how closely products are conceptually positioned by consumers to “ideal points,” to their own products, and to competitors’ products.

http://tylenol.com/products/adult/detail.jhtml?id=tylenol/products/adult/regularextra.inc


Positioning Exercise

• Italian Sub Sandwiches• 1. List characteristics why people would buy (tangible or

perceived)• 2. For the group of people you are targeting (consider the

competition), which are the two most important?• Write a positioning statement

– Succinct statement of target market for which the product is intended

– Product category in which it competes– Unique one or two benefits (not features) the product offers– Please spare me the vague or ambiguous platitudes about high

quality or excellent service—only mention price if you are truly the low cost provider


Product Positioning and Repositioning (cont’d)

• Repositioning a Product –Adjusting a product’s present position can strengthen/

increase its market share and profitability.• Repositioning is accomplished by changing the product’s

features, price, distribution, or image.• Adding new products to the line may necessitate the

repositioning of older products.

Mary Kay Cosmetics adds distribution through retail stores and online sales

Mary Kay Cosmetics adds distribution through retail stores and online sales

Avon Link

http://online.wsj.com/article_print/0,,SB1034807844947610278,00.html


Product Deletion

• Product Deletion–The process of eliminating a product from the product

mix–Reasons to remove a product:

• Slow sales create higher unit-production costs, inventory costs, and distribution costs.

• To prevent negative feelings from affecting the company’s other products.


Product Deletion Process

FIGURE 11.5Source: Martin L. Bell, Marketing: Concepts and Strategy, 3rd ed., p. 267; copyright 1979, Houghton Mifflin Company; used by permission of Mrs. Martin L. Bell.


Organizing to Develop and Manage Products

• Product/Brand Manager Approach–Product manager

• The person responsible for a product, a product line, or several distinct products that make up a group

–Brand manager• The person responsible for a single brand

–Market manager• The person responsible for managing the marketing

activities that serve a particular group of customers

–Venture team• A cross-functional group that creates entirely new

products that may be aimed at new markets


After reviewing this chapter you should:• Understand how companies manage existing products

through line extensions and product modifications

• Be able to describe how businesses develop a product idea into a commercial product

• Understand the importance of product differentiation and the elements that differentiate one product from another

• Know how products are positioned and repositioned in the customer’s mind

• Understand how product deletion is used to improve product mixes

• Be able to describe organizational structures used for managing products

Chapter 11 Chapter 11 Supplemental SlidesSupplemental Slides



Key Terms and Concepts

• The following slides (a listing of terms and concepts) are intended for use at the instructor’s discretion.

• To rearrange the slide order or alter the content of the presentation–select “Slide Sorter” under View on the main menu.–left click on an individual slide to select it; hold and drag

the slide to a new position in the slide show.–To delete an individual slide, click on the slide to select,

and press the Delete key.–Select “Normal” under View on the main menu to return

to normal view.


Important Terms

• Line Extension–Development of a product that is closely related to

existing products in the line but meets different customer needs

• Product Modifications–A change in one or more characteristics of the product

and the elimination of the original product from the product line.

• Quality Modifications–Changes in material or production processes related to

a product’s dependability and durability


Important Terms

• Functional Modifications–Changes affecting a product’s versatility, effectiveness,

convenience, or safety; usually requiring redesign of the product

• Aesthetic Modifications–Changes to the sensory appeal of a product such as

altering taste, texture, sound, smell, or appearance

• Idea Generation–Seeking product ideas to achieve objectives

• Screening–Choosing the most promising ideas for further review


Important Terms

• Concept Testing–Seeking potential buyers’ responses to a product idea

• Business Analysis–Assessing the potential of a product idea for the firm’s

sales, costs, and profits

• Product Development–Determining if producing a product is feasible and cost

effective

• Test Marketing–Introducing a product on a limited basis to measure the

extent to which potential customers will actually buy it


Important Terms

• Commercialization–Deciding on full-scale manufacturing and marketing

plans and preparing budgets

• Product Differentiation–Creating and designing products so that customers

perceive them as different from competing products

• Product Quality–The overall characteristics of a product that allow it to

perform as expected in satisfying customer needs

• Product design–How a product is conceived, planned, and produced


Important Terms

• Styling–The physical appearance of a product

• Product Positioning–Creating and maintaining a certain concept of a product

in customers’ minds

• Repositioning a Product –Adjusting a product’s present position to strengthen/

increase its market share and profitability by changing the product’s features, price, distribution, or image

• Product Deletion–The process of eliminating a product from the product

mix


Important Terms

• Product Manager–The person responsible for a product, a product line, or

several distinct products that make up a group

• Brand Manager–The person responsible for a single brand

• Market Manager–The person responsible for managing the marketing

activities that serve a particular group of customers

• Venture Team–A cross-functional group that creates entirely new

products that may be aimed at new markets


PepsiCo Product Mix- Tropicana Brands

• Tropicana Pure Premium Juices

• Tropicana 100% Pure Juice

• Tropicana Season’s Best Juices

• Copella Juices• Tropicana Pure Tropics

Juices• Hitchcock Juices

• Tropicana Twister Juice Beverages

• Kirin-Tropicana Juices• Dole Juices• Looza Juices• Fruit Smoothies and

Healthy Shakes• Looza Nectars• Juice Bowl Juices• Juice Bowl Nectars


PepsiCo Product Mix- FritoLay Brands

• Baked Lay’s Potato Chips• Baked Tostitos Brand Tortilla

Chips• Cheetos Brand Cheese

Flavored Snacks• Chester’s Brand Crackers• Doritos Brand Crackers• Doritos Brand Dips• Doritos Brand Tortilla Chips• Fritos Brand Corn Chips• Funyons Brand Onion

Flavored Rings• Grandma’s Brand Cookies

• Lay’s Brand Potato Chips

• Munchos Brand Potato Chips

• Rold Gold Brand Pretzels

• Ruffles Brand Potato Chips

• Sanitas Brand Tortilla Chips

• Smartfood Brand Popcorn

• Sunchips Brand Multigrain Snacks

• Tostitos Brand Crackers

• Tostitos Brand Dip

• Tostitos Brand Tortilla Chips

• Baken-ets Brand Fried Pork Skins

Developing and Managing Products Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook 11 Part Three Product.

Documents

product line

product ideas

original product

product mixes

commercial product

product deletion

modified product

newproduct alliances