PRODUCT PLANNING. OBJECTIVES Explain the role of product/service planning in marketing. List the stages of the product life cycle and describe related.

PRODUCT PLANNING

OBJECTIVES

Explain the role of product/service planning in marketing.

List the stages of the product life cycle and describe related pricing policies and marketing strategies.

PRODUCT PLANNING Product Planning includes all the

decisions a business makes in the production and sale of products, including those decisions relating to packaging, labeling, warranties, guarantees, branding, and product mix.

A well-defined product plan allows marketers to meet consumer needs and wants and reach profit goals.

COMPONENTS OF THE PRODUCT MIX

PRODUCT ITEM

PRODUCT LINE

PRODUCT ITEM

The product item is each individual good, service, or idea that a business offers for sale.

Product items are distinguished by size, style, brand, price, color, materials, or any feature that makes one item different from another.

PRODUCT LINE A product line is a group of related product

items. The products items often resemble one another in some way. Examples:

Campbell instant soupsitem: onion

Campbell Healthy Request soupsitem: chicken noodle (low

sodium)Campbell Chunky soups

item: beef stew

GROUPING PRODUCT LINES

product classification - paper, disposable similarity of function or purpose - hair,

dental hygiene, customer group – business, medical,

legal price and/or quality – budget, moderate,

luxury distribution method – retail, agents,

Internet

GILLETTE

Product Lines

Product Items

BLADES & RAZORS

TOILETRIES & COSMETICS

WRITING & OFFICE PRODUCTS

Atra PlusTrac IIDisposableS

deodorantshaving creamskin carehair care

Paper MateFlairWatermanLiquid Paper

PRODUCT MIX DIMENSIONS

Width or breadth – the number of product lines carried by a company

Depth – the number products and assortment of sizes, colors, models

Consistency – how closely the products are related in terms of end use, target market, price range, distribution

PRODUCT MIX CONSIDERATIONS

NARROW – specialization improves production efficiency, relates product to target market, easier to market

BROAD – many sales opportunities, one-stop shopping

DEEP – meets the needs of a variety of consumers at all price levels

SHALLOW – controls costs, increases exclusivity

IMPORTANCE THE PRODUCT MIX

Appeals to the company’s target market. indulgent or weight conscious?

Helps present a consist company image. exclusive or discount?

Affects the company’s profitability. the right mix generates profits needed to

run the business Helps the business to deal with

competition. companies sometimes add product lines to

meet competition

CATEGORIES OF PRODUCT FEATURES

Tangible Extended Generic

PRODUCT FEATURES Tangible Features-those that can be seen or

described. Extended Product Features-values,

emotions, image, or special services or benefits that consumers expect from products.

Generic Product Features- those based on the consumer’s basic need for the product. Examples:

Car-transportation Washer- washing clothes Phones-communications

STEPS FOR PRODUCT PLANNING

1. Select the general type of product to manufacture or sell.

2. Specify the makeup of the product mix.

3. Develop required packaging and labeling

4. Choose the extended product features to be offered.

Select the general type of product to manufacture or sell.

Product Types fall under the following categories: Consumer Goods-products used by a

consumer for personal, family, or household purposes. Types include convenience goods, shopping goods, and specialty goods.

Industrial Goods-products purchased for the production of other goods or for resale to consumers. Types include installation and accessory equipment, raw materials/components/fabricated parts, industrial supplies.

Specify the makeup of the product mix.

Product Mix – the particular assortment of products that a business offers in order to meet its market’s needs and company goals. The ingredients of the product mix are:

Product Item – each individual good, service, or idea that a business offers for sale. Example: Toyota Highlander

Product Line- A group of related product items. Example: Toyota makes the RAV4,Highlander, and4Runner as part of its SUV line.

Develop required packaging and labeling. Packaging must appeal to the

target market and labels must provide specific information and meet government requirements related to contents, directions, and safety hazards.

Choose the extended product features to be offered.

Consider the target market and related expectations for image, value, service, and warranties.

PHASES OF THE PRODUCT LIFE CYCLE

Introduction Growth Maturity Decline

PHASES OF THE PRODUCT LIFE CYCLE & PRICING POLICIES

Introduction – skimming, penetration

Growth - Maturity Decline

1. INTRODUCTION a new product is introduced. Skimming Pricing- a pricing policy that

sets a very high price for a new product to capitalize on the high demand for it during its introductory period.

The high price is geared towards trendsetters who are willing to pay the high price in order to be the first to own a new product.

Marketers understand that this stage of the product life cycle presents a unique opportunity for high profit margins.

INTRODUCTION / SKIMMING PRICING Advantage: The profit margin helps to

cover research, development, and advertisement costs for creating a prestigious image. Additionally, the initial high price allows leeway for lowering the price without insulting the target market.

Disadvantage: This policy is that it attracts competitors. Once competitors develop similar products, the price will have to be lowered to meet the competition.

INTRODUCTION / PENETRATION PRICING Penetration Pricing – The initial price for a

new product is set very low to attract consumers. This policy works best for products that have elastic demand.

Advantage: This pricing policy offsets production expenses and offers high profit margins through quick, high volume sales.

Additionally, it provides an opportunity to move into a market where other manufactures are offering high prices and lure away customers.

2. GROWTH

Growth – sales increase rapidly and production costs per unit decrease because of the high sales volume. The goal of marketers is to keep products in this stage for as long as possible.

GROWTH PHASE AND PRICING If the product was introduced with

skimming pricing, sales will have to be monitored and prices reduced in response to a leveling off in sales and the next target market.

If the product was introduced with penetration pricing, promotion will have to be used to maintain sales rather than a further reduction in price.

3. MATURITY

Maturity –sales begin to level off due to competition. Rather than implementing pricing strategies, marketers must appeal to new market segments by promoting alternative uses for the product. The marketer’s principal goal is to stretch the life of the product.

4. DECLINE

Decline-sales decrease and profit margins are reduced. To maintain profitability, marketers must decrease production costs or phase out the product.

THE PRODUCT LIFE CYCLE The movement of the product life cycle

requires marketers to continually evaluate target market, sales, pricing, and promotional strategies.

Products in the decline phase must be phased out so that production efforts can be focused towards new products that will enable the business to maintain a competitive edge in the market place.