Chapters 10-12, 14

Chapter 10

Product Concepts

• The product offering is usually the starting point in creating a marketing mix.

Product - Everything, both favorable and unfavorable, that a person receives in an exchange

• Can be a tangible good, such as a pair of shoes.

• Can be an intangible, such as a service or idea.

Types of Consumer Products

Products can be classified according to intended use

• Business product - used to manufacture other goods or services, to facilitate an organization's operations, or to resell to other customers

• Consumer product - bought to satisfy an individual's personal wants or needs.

The two types are marketed to different target markets using different distribution, promotion, and pricing strategies.

The most popular classification of consumer products are 1, convenience, 2 shopping, 3 specialty, and 4 unsought

Convivence product - a relatively inexpensive item that merits little shopping effort

• Usually bought without much planning

• Sometimes recognized by brand name

• Normally require wide distribution to sell sufficient quantities to meet profit goals.

10/11/2024

Continuation of Chapter 10

Shopping Product - a product that requires comparison shopping because it is usually more expensive than a convivence product and is found in fewer stores

• Usually purchased only after consumer compares several brands or stores on style practically, price, and lifestyle compatibility.

• 2 types of shopping products

• Homogeneous - basically similar ex washer and dryer

• Heterogeneous - essentially different ex chair

Specialty product - a particular item for which consumers search extensively and are very reluctant to accept substitutes.

• Often uses selective, statue-conscious advertising to maintain an exclusive image

• Distribution often limited to one or a very few outlets in a geographic area

• Brand names and quality of service are often very important

Unsought product - a product unknown to the potential buyer or a known product that the buyer does not actively seek

• New products fall into this category until advertising and distribution increase consumer awareness of them

• Generally sold directly through a salesperson, direct mail, or direct response advertising

10/14/2024

The rest of chapter 10

Production modification - changing one or more of a product's characteristics

• Quality modification - a change in a product's dependability or durability to lower the price or help the firm compete with rival firms.

• Functional modification - a change in a product's versatility, effectiveness, convenience, or safety.

• Style modification - a change in how the product looks

Planned obsolescence - the practice of modifying products so those that have already been sold become obsolete before they actually need replacement. Ex. Printer

Product line extension - adding additional products to an existing product line to compete more broadly in the industry

Product lines can be overextended when

• Some products in the line yield poor sales or cannibalize sales of other items in the line.

• Manufacturing or marketing resources are disproportionately allocated to slow-moving products

• Some items in the line are obsolete because of the new entries or new competitor products.

Product Items, Lines, and Mixes

Adjustments to Product Items, Lines, and Mixes

3 major benefits are likely when a firm contracts an overextended product line

• Resources become concentrated on the most important products

• Managers no longer waste resources trying to improve the sales and profits of poorly preforming products

• New -product items have a greater chance of being successful because more financial and human resources are available to manage them.

10/10/2024

Chapter 11

The Importance of New Product

New products are important to sustain growth, increase revenues and profits, and replace obsolete items.

• Some companies spend a considerable amount of money each year developing new products

• Knowing when to introduce a new product is challenging due to many unknowns.

Some companies choose to introduce a new product even when it will cannibalize sales of an existing product

Despite the amount of time and money spent on developing and testing new products, a large proportion of new product introductions fail.

The most important factor in successful new product introduction is a good match between the product and the market needs.

Many products fail to perform poorly because:

• The product was incorrectly targeted, positioned, distributed, or promoted

• They don't offer any discernible benefits as compared to existing products

• Market size was smaller than estimated

• The price was inappropriate

• The product was inferior

Categories of New Product

New Product - new to the world, the market, the producer, the seller, or some combination of these

6 categories of new products

1. New to the world product - create an entirely new market

2. New product lines - allow a firm to enter an established market

3. Additional to existing product lines - supplements to a firm's established line

New product strategy - a plan that links the new product development process with the objectives of the marketing department, business unit, and the corporation

• All 3 objectives must be consistent with one another

A new product strategy is part of an organization's overall marketing strategy.

10/23/2024

Continuation  of Chapter 11

The Rest of the 6 categories of new products

1. Improvements or revisions of existing products - significantly or slightly changed existing products.

2. Repositioned products - targeted a new markets or market segments

3. Cost reductions - provide performance similar to competing brands at a reduced price.

New - Product Development Process

Idea Generation

• New-product ideas come from many sources, such as customers, competitions, distributors, employees, brainstorming, focus groups, and etc.

Idea Screening

• Screening - the first filter in the product development process, which eliminates ideas that are inconsistent with the organization's new product strategy or are obviously inappropriate for some reason.

• Concept test - a test to evaluate a new-product idea, usually before any prototype has been created.

• Business Analysis - preliminary figures for demand, cost, sales, and profitability are calculated along with impacts on existing products and potential customers

Development

• Simultaneous product development - a team-oriented approach to new-product development

• Simulated (laboratory) market testing - The presentation of advertising and other promotional materials for several products, including a test product, to members of the product's target market.

Test Marketing

• The limited introduction of a product and a marketing program to determine the reactions of the potential customers in a market situation.

Commercialization

• The  decision to market a product involving :

− Ordering production materials and equipment

− Starting production

− Building inventories

− Shipping the product to field distribution points

− Training the sales force

− Announcing the new product to the trade

− Advertising to potential customers

The Spread of New Products

Marketers have a better chance of successfully marketing products if they understand how consumers lean about and adopt new products

Diffusion of Innovation

• Innovation - a product perceived as new by a potential adopter

• Diffusion - the process by which the adoption of an innovation spreads

11/1/2024

The Rest of Chapter 11

The Spread of New Products

Marketing Implications of the Adoption Process

2 types of communication aid diffusion process

• Word of mouth communication among consumers

• Communication from marketers to consumers

Traditional Approach - early majority - early adopter

Product Life Cycles

A concept that provides a way to trace the stages of a product's acceptance, from its introduction (birth) to its decline (death).

The time a product spends in any one stage may vary dramatically.

Look at slide - 4 stages Introduction, growth, maturity, and decline

Chapter 14 Retailing

The Importance of Retailing

• Generates 6% of GDP

• Large sum of money involved and is part of the backbone of the US economy

Ecommerce can be more expensive than physical retail it makes up about 22%

Retailer and Retail Customer Trends and Advancements

Ongoing Developments in Retail Management

• A retailing trend with great growth potential is the leveraging of technology to

increase touchpoints with customers and thereby generate greater profitability

Retail channel omnification -

the reduction of multiple retail channel systems into a single, unified system for the purpose of creating efficiencies or saving costs by unifying prices, promotions, and communication

Click-and-collect -

the practice of buying something online and then traveling to a physical store location to take delivery of the merchandise

Physical store as only showroom -

Customers visit a physical retail store to examine product features or quality, then eventually purchase online (lower inventory)