Chapter 7:Product Planning and Strategies

What is a Product?

It is a set of tangible and intangible attributes, including packaging, colour, price, quality, and brand, plus service and reputation, that provides a set of perceived benefits to consumers

it is more than physical products; includes services, places, persons, and ideas

it is easy to visualize the products of Esso, but more difficult to describe those of an art gallery, UNICEF, or the Salvation Army

Figure 7-1 Product Attributes

Consumer and Business Products

Whether a product is considered a consumer or business product depends on the intended target market; how it is used and by whom

Some products are sold only to consumers and households for non-business purposes; others are sold to organizations for use in the business, for resale, or to provide services

Classifying Consumer Products

convenience products: low price, low risk, consumer is not prepared to shop around, widely available in a variety of retail stores

shopping products: consumer will want to compare quality and price, risk and price are higher, available in selected retail outlets

specialty products: consumer has strong brand preferences, risk is high, prepared to seek out exclusive retail outlets

Classifying Business Products

raw materials: unprocessed, become part of other manufactured products

manufactured parts and materials: processed products that become part of other products

installations: major buildings and equipment accessory equipment: used in operations, include

computers, desks, tools operating supplies: low value, used by most

firms, convenience products for businesses

Deciding on the Product Mix

the product mix is a collection of product lines; it has both breadth and depth

the breadth is explained by the number of product lines within the mix

the depth refers to the variety of sizes, models, or items within each product line

a product line is a group of related products some companies carry a wide product mix,

while others maintain a narrow mix

Figure 7-2 Product Mix – Breadth and Depth

Product Positioning

a product’s position refers to the image that it projects in the minds of consumers

a product may be positioned in relation to a competitor by drawing comparisons

or in relation to a product class or an attribute by stressing certain attractive characteristics

or to appeal to a specific target market segment or by stressing that it offers attractive prices or

superior quality or value

Expanding the Product Mix

expansion is accomplished by increasing the depth of lines or by adding lines

increasingly, this involves line extensions may add related products under the same brand or unrelated products under the same brand or unrelated products under a different brand or related products under a different brand

Other Product-Mix Strategies

trading-up refers to the addition of a higher-priced product to reach a broader market

trading-down involves adding a lower-priced product to a line to attract people who can not afford the higher-priced original

occasionally, a product will be altered to improve it or to allow for its repositioning

companies will also eliminate products or entire product lines which are unprofitable

New Product Development

companies must be constantly modifying existing products/services and developing new ones; the marketplace demands it

how new is new? most new products are modifications of or extensions to existing ones

the introduction of a new product is a strategic decision which should be guided by the company’s goals and a new product introduction strategy

Criteria for New Products

there must be adequate market demand: necessary but not sufficient for success

must satisfy key financial criteria must be compatible with environmental standards must fit with the company’s marketing structure should also be compatible with production

capabilities, satisfy legal requirements, and fit with corporate goals and objectives

New-Product Development Process

generate ideas from a number of sources screen ideas to identify those to pursue conduct a business analysis to determine

likelihood of commercial success develop prototype for initial internal testing conduct market tests with prospective customers if business case and market tests are favourable,

proceed with commercialization

Figure 7-3 Major Stages in the New-Product Development Process

New-Product Organization

companies take a variety of approaches to organizing the new product function

product-planning committees new-product departments cross-functional new venture teams product managers many larger firms are replacing the product

manager with category managers

Adoption-Diffusion Process

different new products are adopted by consumers at different rates

the individual consumer goes through certain stages before adopting a new product

marketers must be interested in first creating awareness, then interest, then trial, before the consumer is considered an adopter

some people are genuine innovators, while others wait and try later; some never adopt

Stages in the Adoption Process

awareness: customer is exposed to the product interest: interest and information seeking evaluation: assessment of the advantages and

disadvantages of the new product trial: customer tries the product in low-risk

situation; may be a sample or test drive adoption: customer decides to buy the product confirmation: customer decides to stay with the

product; attempts dissonance reduction

Factors Affecting Adoption Rate

why are some products accepted more readily? some have obvious relative advantages over

existing alternatives some are more compatible with current values increased complexity slows the adoption rate it helps if a new product can be sampled before a

commitment is made to buy it also helps if the benefits of the new product can

be easily observed

The Product Life Cycle the concept of the product life cycle applies to

product categories, not to brands; it is related to the concept of diffusion of innovation

different products will have differently-shaped life cycle curves; will diffuse at different rates

a product is normally perceived to pass through four stages over its life cycle; introduction, growth, maturity, and decline

each stage requires different marketing strategies

Figure 7-4 Typical Life Cycle of a Product Category

Characteristics of the Stages introductory stage: developing the market,

creating awareness, reaching the innovators growth stage: competition begins, sales grow

quickly, profits peak, market penetration maturity stage: competition is intense, sales slow

down, differentiated product offerings, customers are brand loyal, few new entrants

decline stage: customers move to other options, competitors leave, profits are low, consider exit

Characteristics of Life Cycles

length of the life cycle will vary; some are quite short and may be getting shorter

some fads have very short life cycles, while other products stay at maturity for years

in high-tech markets, life cycles are very short some products do not make it through all four

stages; they may fail in introduction the life cycle must be considered in relation to a

market; stage may vary across segments

Figure 7-5 Product Life Cycle Variations

Managing the Life Cycle

successful life-cycle management requires predicting the shape of the curve and then successfully adapting strategies at each stage

when to consider entering the market how to manage to capitalize on growth it is possible to develop strategies that will extend the

maturity stage; modify the product, devise new uses, or design new appeals

greatest challenge comes at the decline stage