Product

Product Line

a group of products offered by a firm that are closely related because they satisfy a class of needs, are used together, are sold to the same customers, are distributed through the same outlets, or fall within a given price range

Product Mix

the full set of products or lines offered for sale by an organization

Goods-Services Continuum

4 I's of Service

1.Intangibility

2.Inconsistency

3.Inseparabilty

4.Inventory

Intangibility

Services that cannot be touched, held, or seen before making a purchase decision

Inconsistency

Since services are performed by people and delivered by people, inconsistencies can arise and pose as a major challenge for businesses. Similar to quality control issues faced by manufacturers of tangible goods

Can be both good and bad

Ex. Mickey Mouse lack of employee training

Inseparability

the idea that it is hard for a customer to separate the deliverer of a service from the service itself

Ex. Hair cut from barber

Can vary with the level of customer participation

Ex. Golf Lessons

Inventory

Services are uniquely perishable – that is, the usefulness of many services is tied to a specific time and place. If a service isn’t performed today, it cannot be “inventoried” for the future

Ex. Charge a premium during peak demand, Offer discounts during off-peak times, Adjust staffing patterns / temp employees

Actual Product

the core good or service that is offered for sale to the customer.

Augmented Product

the cluster of ancillary services that accompany and support the actual product.

Ex. Salesperson’s advice, financing options, delivery

Core Benefit

the benefit the buyer expects to receive from purchase of the product.

Decision Making Classification Chart

Benefits of New Product Development

o      Additional Source of Sales and Profit

·      Ex. Growth of company

o      Re-energizes customers and employees

·      Ex. iPod

o      Opportunity to attract new customers

o      Source of competitive advantage

·      Ex. Sony with Blu-Ray

o      Keep pace with current market

o      Development of new technologies

·      Maintain current growth and has potential to spur future growth

Risk of New Product Development

o      Uses company resources today (capital, assets – cash) in order to see a return tomorrow

·      Need to make investments along the way

o      Potential to detract (cannibalization) from current products

o      May upset new customers

·      Especially those extremely loyal to brand and product

o      Customer preferences may change

o      Simply doesn’t work in the real world market

o      Employees may not buy-in

·      Ex. Sharper Image

o      Damage brand or company image

·      Possible defect

o      May lose ground on the competition

·      Ex. ConAgra’s Crock-pot classic lost to Betoni 

Options for Developing New Products

• New to the World
  • Inventions
  • Most Risky, biggest reward
• New Product Category
  • Apple to Denim Jeans (radical shift)
• Addition to existing line
  • Nano, Video, iTouch all variations from the iPod
• Product Improvement (changing a few attributes)
  • iPod Video 60GB to iPod Video 180GB
  • Less risky
• Repositioning (many attribute changes)
  • Product Reframing
  • Nano – more storage, takes pictures, lower price, many colors
  • Less risky

New Product Classification by "Newness" to consumers

Why Do New Product Introductions Fail?

·      Insignificant point of difference

·      Incomplete Market /Product Definition

·      Too little market attractiveness

·      Poor execution of marketing mix

·      Poor product quality or missed consumer needs

·      Not satisfying customer needs

·      Bad timing

Product Life Cycle

Introduction

Growth 

Maturity

Decline

Introduction

begins when the introduction of a new-to-the-world product creates a new market. Properly managed, this stage provides a firm with a foundation for future profits and market share

Growth

characterized (hopefully) by rapid growth in customers, sales, and competition.  All firms want this to continue as long as possible

Maturity

marked by slowing growth, flushing of some firms, and a fight for market share

Decline

the retirement community for older products and markets.  If a firm has not done so already, they have to think about exit strategies

Types of Products that Cause Product Life Cycles to Vary

Consumer Adoption Profiles

Strategies for Managing Existing Products

·      Product Modification involves altering a product’s characteristics, such as its quality, performance, or appearance in an effort to increase and extend the product’s sales.

o      This is a key form of differentiation as competition levels increase.

·      Market Modification refers to a company’s attempts to increase its market share through its customers.

o      Finding new users, increasing use, creating new use situations

·      Product Repositioning is an attempt to change consumer perceptions about a product relative to competitors through marketing mix actions.

o      Competitive reaction, frame for new market, trading up or down

Brand

any word, “device” (design, sound, shape, or color), or combination of these used to distinguish a seller’s products

Trademark

synonymous with the term brand, but invokes legal meaning

The use of ® is designed to indicate a firm has legally registered its trademark with the US Patent and Trademark Office (or similar governmental authority) – this offers a stronger defense of its use

Service Mark

A trademark for a particular service rather than a product

The use of ^TM or ^SM  indicates a firm is claiming rights to the use of a brand name or other mark - this may or may not be registered

Why Do Firms Develop Brand Names?

• Brands ease the identification of a seller’s offerings
• Serves as a shortcut for decision-making, perhaps providing a signal
• May “break the tie” among commodities
• Potentially adds value in the eyes of customers, warranting higher prices 

Brand Equity

the added value a given brand name contributes to a product beyond the functional benefits provided by the product

This added value results from brand name recognition, perceptions of high quality, and positive associations held by customers

Benefits of Brand Equity

Licensing

is another strategy used to benefit from brand equity

Licensing is a contractual agreement whereby a company allows another firm to use its brand name, patent, trade secret, or other property for a royalty or a fee

Line Extension

Category Extension

new products that carry a firm’s brand name in a product category that it does not currently serve

*More likely to succeed when customers see a logical fit between current and new product category

Co-Branding

or Dual Branding, is when two brands are integrated into the same product

This makes great sense if you’re the “weaker” of the two brands b/c you draw upon the strength of the other brand

Ingredient Branding

one type of co-branding in which a component or ingredient of a parent product has its own unique brand name

Multi-product Branding

is where a single name (the corporate brand) serves as the primary brand for all product categories.  This might also be called “Family” or “Umbrella” branding

 Benefit: Cheaper

Multi-branding

is where a parent brand has a different brand name to represent each product, product category, or SBU

Why might a company chose one strategy path over the other? - help customers make connection, reach new customer segment (create new identity)

Benefit: If something goes wrong, easier to isolate

Private Branding

or private labeling, is where a company manufacturers a product and sells it under either the name of the retailer, or under a brand name that it is unique to the retailer

Mixed Branding

is where a manufacturer sells products under its own brand name and that of the resellers it supplies