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PBM Notes

PBM Notes

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Published by NabinSundar Nayak
6th trimester MBA notes
6th trimester MBA notes

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Published by: NabinSundar Nayak on Jul 16, 2010
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05/19/2013

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Module: I
What Is a
Product?
 Anything received in an exchange to satisfy a need or want is a product.
o
A good, a service, or an idea received in an exchange
o
It can be tangible (a good) or intangible (a service or an idea) or acombination of both.
o
It can include functional, social, and psychological utilities or benefits.
PRODUCT CLASSIFICATIONSProducts Classes
o
Consumer:--
Products purchased to satisfy personal and family needs
o
Business:--
Products bought used in an organization’s operations, to resell,or to make other products (raw materials and components)
Types of Consumer Products
o
Convenience—inexpensive, frequently purchased items; minimalpurchasing effort
o
Shopping--buyers are willing to expend considerable effort in planning andmaking purchasesSpecialty--Items with unique characteristics that buyers are willing toexpend considerable effort to obtain
o
Unsought (impulse)--Products purchased to solve a sudden problem,products of which the customers are unaware, and products that peopledo not necessarily think about buying
Business Products
o
Installations--Facilities and non-portable major equipment
o
Accessory Equipment--used in production or office activities
o
Raw Materials--Basic natural materials Products
o
Component Parts--become part of a
o
Process Materials--not readily identifiable when used directly in theproduction of other products (e.g. screws, knobs, handles)
 
o
MRO Supplies--Maintenance, repair, and operating items that facilitateproduction and do not become part of the finished Products
o
Business Services--intangible products many organizations use inoperations (e.g. cleaning, legal, consulting, and repair services)-
Durable Goods
-
Non-Durable Goods
– consumed during use - soap, food.
Services - selling performance
Continuum between Services and Goods – McD’s-
Consumer Goods
- bought for personal use.- Convenience - Freq. purchase, min. effort, buy on price or brand.
Impulse Goods - no preplanning, not on your list, going shopping while hungry or without a list leads to more impulse buying, as do in-store displays and saleitems.-Shopping - Considerable time & effort, durable/big ticket, comparisons made.-Specialty - unique. Cust. will go out of their way to find, little or no comparisonshopping, price relatively unimportant.- Unsought - Cons. don't seek out or don't know about. Life ins., encyclopediasInbusinessandengineering,
new product development
(NPD) is the term used todescribe the complete process of bringing a newproductor service to market. Thereare two parallel paths involved in the NPD process: one involves the idea generation,product designand detail engineering; the other involves market research andmarketing analysis. Companies typically see new product development as the first stagein generating and commercializing new products within the overall strategic process of product life cycle managementused to maintain or grow their market share.
New Product Development Process
Because introducing new products on a consistent basis is important to the futuresuccess of many organizations, marketers in charge of product decisions often followset procedures for bringing products to market. In the scientific area that may mean theestablishment of ongoing laboratory research programs for discovering new products(e.g., medicines) while less scientific companies may pull together resources for productdevelopment on a less structured timetable.In this section we present a 7-step process comprising the key elements of new productdevelopment. While some companies may not follow a deliberate step-by-stepapproach, the steps are useful in showing the information input and decision making
 
that must be done in order to successfully develop new products. The process alsoshows the importance market research plays in developing products.We should note that while the 7-step process works for most industries, it is lesseffective in developing radically new products. The main reason lies in the inability of the target market to provide sufficient feedback on advanced product concepts sincethey often find it difficult to understand radically different ideas. So while many of thesesteps are used to research breakthrough ideas, the marketer should exercise cautionwhen interpreting the results.
Step 1. IDEA GENERATION
The first step of new product development requires gathering ideas to be evaluated aspotential product options. For many companies idea generation is an ongoing processwith contributions from inside and outside the organization. Many market researchtechniques are used to encourage ideas including: running focus groups withconsumers, channel members, and the company’s sales force; encouraging customer comments and suggestions via toll-free telephone numbers and website forms; andgaining insight on competitive product developments through secondary data sources.One important research technique used to generate ideas is brainstorming where open-minded, creative thinkers from inside and outside the company gather and share ideas.The dynamic nature of group members floating ideas, where one idea often sparksanother idea, can yield a wide range of possible products that can be further pursued.
Step 2. SCREENING
In Step 2 the ideas generated in Step 1 are critically evaluated by company personnel toisolate the most attractive options. Depending on the number of ideas, screening maybe done in rounds with the first round involving company executives judging thefeasibility of ideas while successive rounds may utilize more advanced researchtechniques. As the ideas are whittled down to a few attractive options, rough estimatesare made of an idea’s potential in terms of sales, production costs, profit potential, andcompetitors’ response if the product is introduced. Acceptable ideas move on to thenext step.
Step 3. CONCEPT DEVELOPMENT AND TESTING
With a few ideas in hand the marketer now attempts to obtain initial feedback fromcustomers, distributors and its own employees. Generally, focus groups are convenedwhere the ideas are presented to a group, often in the form of concept boardpresentations (i.e., storyboards) and not in actual working form. For instance, customersmay be shown a concept board displaying drawings of a product idea or even anadvertisement featuring the product. In some cases focus groups are exposed to amock-up of the ideas, which is a physical but generally non-functional version of productidea. During focus groups with customers the marketer seeks information that mayinclude: likes and dislike of the concept; level of interest in purchasing the product;

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