Developing a New productDeveloping a New product

Chapter 10Chapter 10

ProductProduct

Anything tangible offered to a market by a Anything tangible offered to a market by a business to satisfy needsbusiness to satisfy needs

– Things to consider when developing a Things to consider when developing a productproduct

Needs to meet needs and wants of Needs to meet needs and wants of target markettarget market

Need to do research: focus groups, Need to do research: focus groups, surveys, etc.surveys, etc.

DemandDemand

Direct demand – individuals or Direct demand – individuals or groups who purchase product for groups who purchase product for personal usepersonal use

Derived demand – Quantity of a Derived demand – Quantity of a product or service needed by a product or service needed by a business for its operationsbusiness for its operations

New productsNew products

A brand new product – it is A brand new product – it is considered new for up to 6 months considered new for up to 6 months after it is introducedafter it is introduced

A new improved product (has to be A new improved product (has to be significantly changed) can be significantly changed) can be considered new up to 6 months after considered new up to 6 months after it is reintroducedit is reintroduced

Where can you get product ideas?Where can you get product ideas?

Consumer panelsConsumer panels

What like about current products, What like about current products, dislike?dislike?

SalespeopleSalespeople

BrainstormingBrainstorming

Creative thinking exercisesCreative thinking exercises

Types of GoodsTypes of GoodsConvenience GoodsConvenience Goods

–Staple goods: regularly and routinely Staple goods: regularly and routinely purchased items such as milk and breadpurchased items such as milk and bread

–Impulse goods: Purchase on spur of Impulse goods: Purchase on spur of moment such as candy, magazines, etc.moment such as candy, magazines, etc.

–Emergency goods: As a result of an Emergency goods: As a result of an urgent need such as gas, towing, urgent need such as gas, towing, umbrellaumbrella

Shopping GoodsShopping Goods

Typically more expensive items such as Typically more expensive items such as clothing, cars, homes; you take more time clothing, cars, homes; you take more time looking before you buy themlooking before you buy them

1. Attribute based – variety of differences 1. Attribute based – variety of differences where you consider a number of factorswhere you consider a number of factors

2. Price based – If products have similar 2. Price based – If products have similar features, you shop for the best pricefeatures, you shop for the best price

Speciality GoodsSpeciality Goods

Products that are so satisfying, Products that are so satisfying, you won’t buy anything elseyou won’t buy anything else

–Rolls Royce, Porsche, Rolex Rolls Royce, Porsche, Rolex watch, favorite jeans, watch, favorite jeans, restaurantrestaurant

Unsought GoodsUnsought Goods

Things do not like to have to think Things do not like to have to think about buying but needabout buying but need

–Life insuranceLife insurance

–WillWill

–Legal servicesLegal services

Step 2: Idea ScreeningStep 2: Idea Screening

Identified market for product?Identified market for product?

Competition in market reasonable?Competition in market reasonable?

Have or can obtain resources to Have or can obtain resources to produce product?produce product?

Is product legal or safe?Is product legal or safe?

Can we produce quality product at a Can we produce quality product at a reasonable price?reasonable price?

Step 3: Strategy DevelopmentStep 3: Strategy Development

This is where you try to determine This is where you try to determine your:your:

1.1. ProductProduct

2.2. Price Price

3.3. PromotionPromotion

4.4. Place Place

Step 4: Financial AnalysisStep 4: Financial Analysis

Cost of producing product and Cost of producing product and marketingmarketing

Sales projection for target Sales projection for target marketmarket

Profits anticipate to makeProfits anticipate to make

Step 5: Product Development and Step 5: Product Development and TestingTesting

A.A. Designing production Designing production processprocess

B.B. Get needed equipment and Get needed equipment and personnelpersonnel

C.C. Develop a prototypeDevelop a prototype

D.D. Do a test marketDo a test market

Step 6: Product marketingStep 6: Product marketing

Need to have enough product Need to have enough product capacity to meet demand capacity to meet demand when you promotewhen you promoteNeed to coordinate marketing Need to coordinate marketing mix elements for promotion mix elements for promotion (continuously survey target (continuously survey target mkt.mkt.

Role of marketing in product Role of marketing in product developmentdevelopment

The direct link to help the product The direct link to help the product development team understand what the development team understand what the customer wantscustomer wants

– SellingSelling– PromotionPromotion– DistributionDistribution– ResearchResearch

Marketing ActivitiesMarketing Activities

Gathering information – Gathering information – market researchmarket research

Study competition, customer’s Study competition, customer’s needs, review product needs, review product complaints/returnscomplaints/returns

Role of marketing continuedRole of marketing continued

Designing strategies – Deciding Designing strategies – Deciding target market mixes, companies target market mixes, companies strengths & weaknessesstrengths & weaknesses

Testing marketing mixes – Testing marketing mixes – Reduces # of product failures Reduces # of product failures (test markets, simulations(test markets, simulations

Designing a productDesigning a productBasic product – most important Basic product – most important part; need to meet the needs and part; need to meet the needs and wants of customerwants of customer–Bicycle: 2 wheels, handle bars, tire Bicycle: 2 wheels, handle bars, tire

brakesbrakes

ProductProduct

Enhanced product – offer different Enhanced product – offer different features, attachments, enhancementsfeatures, attachments, enhancements–Bicycle with different speeds, Bicycle with different speeds,

colors, types of frames, materialscolors, types of frames, materials

Extended product features – services, Extended product features – services, guarantees, credit, delivery, repair guarantees, credit, delivery, repair servicesservices

Product lineProduct line

A group of similar products with slight variations A group of similar products with slight variations –Variation in quantity: packaged in different Variation in quantity: packaged in different

quantities but same itemquantities but same item–Variation in quality: low to high quality in the same Variation in quality: low to high quality in the same

lineline–Product assortments: Complete set of all products a Product assortments: Complete set of all products a

business offers to its marketbusiness offers to its market

Product PackagingProduct PackagingTwo main goals of packaging: offers Two main goals of packaging: offers protectionprotection and and promotionpromotion

–Ease of use: consider the way the Ease of use: consider the way the customer uses the productcustomer uses the product

Style of container – Will it fit in Style of container – Will it fit in space? Convenient pour spout, space? Convenient pour spout, no metal for microwavable items, no metal for microwavable items, lunchableslunchables

Product packaging (cont.)Product packaging (cont.)

Safety – ensure product safety for Safety – ensure product safety for useruser

–Tamper resistant lids on medicines Tamper resistant lids on medicines and poisonous productsand poisonous products

–Using plastic instead of glass Using plastic instead of glass bottlesbottles

–Pudding lids from metal to plasticPudding lids from metal to plastic

Product Packaging (cont.)Product Packaging (cont.)

–Attraction: promotion shows the use Attraction: promotion shows the use of product in attractive wayof product in attractive way

Fancy perfume bottlesFancy perfume bottles

Fancy boxes/paperFancy boxes/paper–Do you tend to buy products Do you tend to buy products because of the look of the because of the look of the packaging? Is it ethical for packaging? Is it ethical for marketers to do this?marketers to do this?

Product PackagingProduct Packaging

–Handling: How package is designed Handling: How package is designed to help in displaying in store and to help in displaying in store and also for security purposesalso for security purposes

HooksHooksSmall items in larger packages Small items in larger packages (security)(security)Jewelry boxesJewelry boxesSecurity tagsSecurity tags

Product Packaging (cont.)Product Packaging (cont.)Environment – using packaging not Environment – using packaging not harmful for the environmentharmful for the environment

–Recyclable materials: aluminum, Recyclable materials: aluminum, plastic, etc.plastic, etc.

–Biodegradable materialsBiodegradable materials

–Changing aerosol cans to pump Changing aerosol cans to pump dispensersdispensers

Information on product labelInformation on product labelLabel is a information tag, wrapper, seal, or Label is a information tag, wrapper, seal, or imprinted message attached to productimprinted message attached to product

Information on label includes:Information on label includes:– Type of product (brand name, logo, etc.)Type of product (brand name, logo, etc.)– IngredientsIngredients– GuaranteeGuarantee– Date and storage informationDate and storage information– Instructions for proper use and careInstructions for proper use and care– FDA/CFSAN A Food Labeling Guide: Chapter II-FDA/CFSAN A Food Labeling Guide: Chapter II-

-Name of Food-Name of Food

Labeling lawsLabeling lawsMust have name and address of Must have name and address of manufacturermanufacturer

Must have metric measurementsMust have metric measurements

Must have quantity of contentsMust have quantity of contents

Clearly state amount of calories, fat, Clearly state amount of calories, fat, carbohydrates, sodium, cholesterol, and carbohydrates, sodium, cholesterol, and proteinprotein

FDA (Food and Drug FDA (Food and Drug Administration) labeling Administration) labeling

requirementsrequirements

Health warnings if necessary (alcohol and Health warnings if necessary (alcohol and cigarrettes cigarrettes

Has to specify if food has been genetically Has to specify if food has been genetically modifiedmodified

Federal Trade CommissionFederal Trade Commission

Monitors deceptive advertising on labelsMonitors deceptive advertising on labels

Requires care labels on clothingRequires care labels on clothing

Monitors labels that say the package Monitors labels that say the package material has recycled contentmaterial has recycled content– Ozone safeOzone safe– BiodegradableBiodegradable– RecyclableRecyclable

Brand developmentBrand development

Brand: A name, symbol, word, Brand: A name, symbol, word, slogan, or design that slogan, or design that identifies a product, service, or identifies a product, service, or companycompany

Corporate brands: Coca-Cola, Corporate brands: Coca-Cola, McDonalds and CitibankMcDonalds and Citibank

Brand NameBrand Name

The word, group of words, letters, or The word, group of words, letters, or numbers representing a brand that numbers representing a brand that can be spokencan be spoken

Examples: PT Cruiser, Mountain Examples: PT Cruiser, Mountain Dew, SnackWellsDew, SnackWells

Brandmark/LogosBrandmark/Logos

Trade NameTrade Name

Identifies the company or Identifies the company or division of a particular division of a particular corporationcorporation

–Dell, Kellogg’s, and XeroxDell, Kellogg’s, and Xerox

Trade charactersTrade characters

Is a brand mark with human form or Is a brand mark with human form or characteristicscharacteristics

TrademarkTrademark

Trademark – a brand name, Trademark – a brand name, brand mark, trade name, or brand mark, trade name, or trade character that is given trade character that is given legal protectionlegal protection by the by the federal federal government =government = ®®

Licensed BrandLicensed Brand

Licensed Brand – Well known Licensed Brand – Well known name or symbol established by name or symbol established by one company and sold for use by one company and sold for use by another companyanother company

Example: Disney products, NFLExample: Disney products, NFL

Sesame StreetSesame Street

Licensed brandLicensed brandDisney to Limit Character Licensing to 'Healthful' FoodsDisney to Limit Character Licensing to 'Healthful' FoodsWill Also Reformulate Theme-Park MealsWill Also Reformulate Theme-Park MealsByBy Ira Ira TeinowitzTeinowitz

Published:Published: October 16, 2006 October 16, 2006 WASHINGTON (AdAge.com) -- Walt Disney Co. today said it would limit licensing WASHINGTON (AdAge.com) -- Walt Disney Co. today said it would limit licensing for most of its characters to food products low in fat and sugar -- a significant move for most of its characters to food products low in fat and sugar -- a significant move as lawmakers increasingly blame marketers for the childhood-obesity epidemic. as lawmakers increasingly blame marketers for the childhood-obesity epidemic. Among other things, Disney will ban trans fat products at McDonald's restaurants Among other things, Disney will ban trans fat products at McDonald's restaurants in its theme parks. | ALSO: Comment on this article in the 'Your Opinion' box in its theme parks. | ALSO: Comment on this article in the 'Your Opinion' box below. below.

Disney said its guidelines take effect immediately for licensing deals but will be Disney said its guidelines take effect immediately for licensing deals but will be phased in as existing contracts expire and will apply internationally. That could phased in as existing contracts expire and will apply internationally. That could take awhile: Most Disney licensing deals end by 2008, but a Kellogg Co. deal for take awhile: Most Disney licensing deals end by 2008, but a Kellogg Co. deal for cereal has another seven years to run. In addition, Disney Consumer Products has cereal has another seven years to run. In addition, Disney Consumer Products has licensing deals with Kellogg's Keebler division, Coca-Cola's Minute Maid and licensing deals with Kellogg's Keebler division, Coca-Cola's Minute Maid and McDonald's for Happy Meals. McDonald's for Happy Meals.

Product Life CycleProduct Life Cycle

Introduction – 1Introduction – 1stst time the new time the new product is introduced. product is introduced. Promotion is focused on Promotion is focused on informing the customer about informing the customer about the productthe product

Costs are usually high during Costs are usually high during this time because of initial coststhis time because of initial costs

GrowthGrowthThis is when the product is starting to This is when the product is starting to sell well; much of the target market sell well; much of the target market knows about the product and starts knows about the product and starts buying it; competition starts enteringbuying it; competition starts entering

The promotion at this stage is to The promotion at this stage is to attract new customers and persuade attract new customers and persuade the existing customers to keep using the existing customers to keep using the productthe product

Maturity StageMaturity Stage

Sales start leveling off or slowing downSales start leveling off or slowing down

Most of target market owns the productMost of target market owns the product

Level of competition is very highLevel of competition is very high

Company spends more money trying to Company spends more money trying to fight off competitionfight off competition

Should product be changed or Should product be changed or improved to increase sales?improved to increase sales?

DeclineDecline

Sales fallSales fall

Profits may reach a point where Profits may reach a point where they are smaller than coststhey are smaller than costs

May decide to quit selling the May decide to quit selling the productproduct

May have to reduce priceMay have to reduce price

Reduce amount of promotionReduce amount of promotion

All of the products that a company All of the products that a company makes or sells is called itsmakes or sells is called its

a. product mix.a. product mix.

b. product line.b. product line.

c. product items.c. product items.

d. limited line.d. limited line.

The number of items offered within The number of items offered within each product line is the each product line is the

a. a. product line.product line.

b. product width.b. product width.

c. product depth.c. product depth.

d. product item.d. product item.

What is one place that new product What is one place that new product ideas come from?ideas come from?

A. customers.A. customers.

B. employeesB. employees

C. design engineersC. design engineers

D. all of the aboveD. all of the above

A reason why a business may A reason why a business may decide to delete a line isdecide to delete a line is

A. the product is in the maturity stage.A. the product is in the maturity stage.

B. the sales are leveling off.B. the sales are leveling off.

C. conflict with the company objectives.C. conflict with the company objectives.

D. lack of profitD. lack of profit

E. both c and dE. both c and d

One thing to consider when One thing to consider when deciding on what product mix to deciding on what product mix to

carry iscarry is

A. the image of the business.A. the image of the business.

B. the market it is trying to reach.B. the market it is trying to reach.

C. the business objectives.C. the business objectives.

D. all of these.D. all of these.

During what stage of the product During what stage of the product life cycle is the costs the highest?life cycle is the costs the highest?

A. A. introductionintroduction

B. growthB. growth

C. maturityC. maturity

D. declineD. decline

During this stage of the product life During this stage of the product life cycle product sales start leveling off cycle product sales start leveling off

and there is a lot of competition:and there is a lot of competition:

A. A. introductionintroduction

B. growthB. growth

C. maturityC. maturity

D. declineD. decline

Lexus promotes their products as Lexus promotes their products as luxurious, this is an example of luxurious, this is an example of

A. product stagingA. product staging

B. product selling.B. product selling.

C. product positioning.C. product positioning.

D. product offering.D. product offering.

The Jolly Green Giant is an The Jolly Green Giant is an example of a example of a

A. brand.A. brand.

B. trade characterB. trade character

C. trade markC. trade mark

D. licensed brandD. licensed brand

““Just do it” is an example of a Just do it” is an example of a

A. Trade characterA. Trade character

B. trade nameB. trade name

C. sloganC. slogan

D. logoD. logo

Rockport promotes its shoes as the Rockport promotes its shoes as the most comfortable shoes you can most comfortable shoes you can

wear. This is an example of wear. This is an example of positioning bypositioning by

A. price and quality.A. price and quality.

B. features and benefits.B. features and benefits.

C. in relation to the competition.C. in relation to the competition.

D. in relation to other products in its line.D. in relation to other products in its line.