Chapter 30

Product Planning Product anything a person receives during an exchange—

product, service, idea, abstract good (education), or a combination of both.

Product planning—Decisions a business makes about features to be used when marketing a product, service, or idea.

Packaging, labeling, branding, services (warranties and guarantees), and product mix.

Well-developed product plan includes:coordination of products already available to customersaddition of new productsdeletion of productsallows a business to design appropriate marketing programs.

Product Mix

Product mix—All the products a company produces or sells. Large manufacturers hundreds of productsRetailer’s product mix—All the products and

services a retailer sells. Must be planned carefully because they can’t offer every item

consumers want.

Retailer’s Product MixRetailers must choose the type and number of products.

Decisions are based on: objectives of the business image they want to create target market

However, they must choose these products while adhering to the marketing concept.

Product MixA product mix consists of all product lines and items

offered by a business. Product Category—a group of related products of varying

brands All shoes at Shoe Carnival—Nike, Adidas, Puma, K Swiss, etc.

Product line—a group of closely related products manufactured or sold by a business

All Nike shoes, all Adidas shoes Businesses usually carry more than 1 product line.

Product item—a specific model, brand, or size of a product within a product line

Nike Zoom

Category/Line/ItemProduct Category Product Line Product Item

Product Width/Product DepthProduct width—The number of different product lines a

business/manufacturer sells. Product depth—The number of items offered within each product

line. Some businesses have a large product width but small product depth Some businesses have small product width but large product depth

Decisions are based on:company objectivesprojected image target marketcompetition

Product Width/Product Depth, Cont’d.They must review their product lines to see if they need to

be expanded, decreased, or eliminated.

Category Killer: A specialty retailer that typically has a small product width but large product depth, which results in lower prices because of its segmenting capabilities, especially national chains.

Product Mix StrategiesProduct mix strategies—deciding which products a

business will produce/stockDepends on the business’s resources available and

objectivesStrategies:

Developing new productsDeveloping existing productsDeleting a product/product line

Developing New ProductsHelps companies increase sales/increase market shareNew products =35% of total salesImprove a company’s image by gaining the reputation of

being an innovator and leaderProfits are higher because they’re priced 10-15% higherhttp://www.youtube.com/watch?v=DyAPyWZU2oY

Product Development Process6 Steps:

Generating ideasScreening ideasDeveloping the productTesting the productIntroducing the productEvaluating customer acceptance

“It’s so new we don’t know what itdoes, but nobody else has it so we’re selling it.”

6 Steps1) Generating IdeasIdeas can come from

customers, competitors, employees, or channel members by having focus groups or idea sessions.

Some companies provide incentives

2) Screening IdeasIdeas are evaluated to find

which products should be further researched

Evaluation is based on:the company strategysize of the marketprofit potentialrisk levelthe effect on the company

imageproduction requirementsappeal to the customers

6 Steps Cont’d.3) Developing the ProductNew product idea takes shapePrototype—model of the

product being developed.Marketing plan is developed

plans related to production tests, packaging, labeling, branding, promotion, distribution

For some products, the government requires testing$$$$$$$$May cause long delays in the

development of the product

4) Testing the ProductSome products are test

marketed in certain geographic areas

Not every product needs to be test-marketed

Products may not be test marketed due to:costsprevious focus groupsnot wanting to give

competitors information that will lead to the competitor developing a product

6 Steps Cont’d.5) Introducing the ProductCan be very expensive due to:

costs related to advertising promoting development of a new

distribution network training for the sales force

Being first-to-market can be extremely beneficial to businesses allows them to beat competition establishes leadership in the new

product acquires new customers and builds

brand loyalty

6) Evaluating Customer AcceptanceConducting marketing research

and evaluating sales information to determine the level of customer acceptance How often do customers buy? When did customers last buy the

product? Where are the best customers for

our product? What new products are

customers buying?Also used to answer questions

concerning new product development

Developing Existing Products

Expanding the product lineBuild on the established image and brand Appeals to new marketsIncrease sales and profits

Takes advantage of customer’s positive attitudes towards the brand

Methods of Developing Product LineLine extensions—different product that appeals to the needs

of customer needs (increase depth)Product Modifications—an alteration in a company’s

existing productModified products offered in different varieties, colors, styles,

sizes, etc. Disadvantage: Costly to add a new product

More inventory, promotion, storage, distribution costs, sales rep training; takes sales away from existing products; if unsuccessful, the entire product line and business can suffer.

http://www.youtube.com/user/drpeppervideos?feature=pyv&ad=4550305122&kw=coke%20commercial#p/u/0/2tuS7Yap0KY

Deleting a Product/Product LineReasons to delete:

Obsolescence—changes in customer interests—(desktop computers)

Loss of appeal—Changes in customer’s tastes—(box TV’s)

Changes in company objectives—(Sauder)Replacement with new products—(in retail

stores/department stores)Lack of profit—(adding machines)Conflict with other products in the line—