LEARNING OBJECTIVES

 Define product and describe the major

classifications of products and services.
 Describe the decisions companies make
regarding their individual products and
services, product lines, and product mixes.
 Describe the stages of the product life cycle
and how marketing strategies change during
a product’s life cycle.
 List and define the steps in the new product
development process and the major
considerations in managing this process.

2
 1. WHAT IS A PRODUCT?
 Definition
 Anything that can be offered to a market for
attention, acquisition, use, or consumption that
might satisfy a want or need.

3
LEVELS OF PRODUCT AND SERVICES
Additional consumer services and
After-sale AUGMENTED benefits (warranty, repair services,
Delivery
service PRODUCT delivery, consulting, installation,
Brand etc.)
Product name
support Features Product and service features,
ACTUAL design, quality level, brand name,
Quality
level PRODUCT packaging and other attributes
combined to deliver the core
customer value.
Credit
Packaging Design
The core, problem-solving benefits
CORE
or services that consumers seek.
CUSTOMER
Warranty (“What is the customer really
VALUE
buying?”)

4
 PRODUCT AND SERVICE CLASSIFICATIONS

 By tangibility
 Non-durable product: Tangible goods that are
immediately consumed in one use or ones that
have a lifespan of less than three years.

 Durable product: Tangible goods that can be

used for a long time (typically at least three
years) and that people do not buy very often.

 Service: An activity, benefit, or satisfaction

offered for sale that is essentially intangible and
does not result in the ownership of anything.

5
 PRODUCT AND SERVICE CLASSIFICATIONS
 Nature and Characteristics of a Service
Service • Services cannot be seen, tasted, felt,
intangibility heard, or smelled before purchase

Service • Services cannot be separated from their

inseparability providers

• Quality of services depends on who

Service
provides them and when, where, and
variability
how

Service • Services cannot be stored for later sale

perishability or use

6
PRODUCT AND SERVICE CLASSIFICATIONS

MARKET CLASSIFICATION PRODUCT CLASSIFICATION

CONSUMER
CONSUMERS
PRODUCTS

MARKET PRODUCTS

INDUSTRIAL
ORGANIZATIONS
PRODUCTS

7
 PRODUCT AND SERVICE CLASSIFICATIONS

 Consumer product  Industrial product

 A product bought by final consumers  A product bought by
for personal consumption. individuals and organizations
for further processing or for use
in conducting a business.

8
 CONSUMER PRODUCTS
CONVENIENCE SHOPPING SPECIALTY UNSOUGHT
PRODUCT PRODUCT PRODUCT PRODUCT
Customer - Frequent purchase - Less frequent purchase - Strong brand preference Little product
buying - Little planning - Much planning and and loyalty awareness or
behavior - Little comparison shopping effort - Special purchase effort knowledge (or, if
or shopping effort - Comparison of brands - Little comparison of aware, little or even
- Low customer on price, quality, and brands negative interest)
involvement style - Low price sensitivity
Examples

9
 INDUSTRIAL PRODUCTS
- Farm products (wheat, cotton, livestock, fruits,
Raw materials vegetables)
Materials - Natural products (fish, lumber, crude petroleum,
and parts iron ore)
Manufactured - Component materials (iron, yarn, cement, wires)
materials and parts - Component parts (small motors, tires, castings)

- Buildings (factories, offices)

Installations - Fixed equipment (generators, drill presses, large
INDUSTRIAL Capital computer systems, elevators)
PRODUCTS items - Portable factory equipment and tools (hand tools,
Accessory equipment lift trucks)
- Office equipment (computers, fax machines, desks)

- Operating supplies (lubricants, coal, paper, pencils)

Supplies Supplies - Repair and maintenance items (paint, nails, brooms)
and
- Maintenance and repair services (window cleaning,
services
computer repair)
Business services - Business advisory services (legal, management
consulting, advertising)
10
PRODUCT AND SERVICE CLASSIFICATIONS

E.g.: corporate image marketing, public relations, etc.

Organizations Organization marketing Aims: create, maintain, or change the attitudes and
behavior of target consumers toward an organization.

E.g.: presidents, entertainers, sports figures, doctors,

Persons Person marketing lawyers, architects, etc.
Aims: build reputations, help sell products or causes.

E.g.: cities, states, regions, nations.

Places Place marketing Aims: attract tourists, new residents, conventions,
and company offices and factories

E.g.: health care, education, and environmental

sustainability, human rights, personal safety, etc.
Ideas Social marketing Aims: encourage behaviors that will create individual
and societal well-being.

11
2. PRODUCT AND SERVICES DECISIONS
Product mix (or Product portfolio)
The set of all product lines and items that a particular PRODUCT MIX
seller offers for sale.

Product line
A group of products that are closely related because
they function in a similar manner, are sold to the
same customer groups, are marketed through the Product Product Product
same types of outlets, or fall within given price line 1 line 2 line n
ranges.

Item = Individual product Item 1

Anything that can be offered to a market for
Item 2
attention, acquisition, use, or consumption that
might satisfy a want or need. Item n

12
13
PRODUCT AND SERVICES DECISIONS

By Type
•Shampoo
FOOD & DRINK WATER PURIFIER •Conditioner
•Body Wash

By Need
HOME CARE PERSONAL CARE •Anti – itch
•Anti – grease
•Deep clean
•Nourishment

By Gender
•Women
•Men

14
PRODUCT AND SERVICES DECISIONS

 Product and services decisions include:

 Individual product and service (item) decisions
 Product line decisions
 Product mix decisions

Individual product Product line Product mix

& service decisions decisions decisions

15
2.1 PRODUCT MIX DECISIONS

 Product mix decisions include:

Product mix width

Product
mix Product mix length
decisions

Product mix depth

Product mix consistency

16
PRODUCT MIX DECISIONS
 Product mix width
 Product mix strategies
= The total number of different product
lines the company carries.
 Product mix length
= The total number of items a company
carries within its product lines.
 Product mix depth
= The total number of versions offered of
each product in the line.
 Product mix consistency
= How closely related the various product width width

lines are in end use, production

requirements, distribution channels, or
some other way.
17
2.2 PRODUCT LINE DECISIONS

 Product line decisions include:

Product line filling

Product Product line stretching

line
decisions
Product line contraction

Product line modernization

18
PRODUCT LINE DECISIONS

 Product line length  Product line length decisions

 The number of items in the product line  Including:
• Line is too short if the manager can increase • Product line expansion
profits by adding items.
• Product line filling
• Line is too long if the manager can increase
profits by dropping items. • Product line stretching
• Product line contraction
• Product line modernization
 Managers need to:
• Analyze their product lines periodically
to assess each item’s sales and profits.
• Understand how each item contributes
to the line’s overall performance.

19
PRODUCT LINE DECISIONS
 Product line filling
 Add more items within the present range of
the line
 Reasons:
• Reaching for extra profits
• Satisfying dealers
• Using excess capacity
• Becoming the leading full-line company
• Plugging holes to keep out competitors.
 Line filling may result in cannibalization and
customer confusion.
=> The company should ensure that new items
are noticeably different from existing ones.

20
PRODUCT LINE DECISIONS

Stretching Upward product line stretching

Downward product line stretching
both ways

 Companies at the upper end of the Companies  Companies at the lower end of the
market targets the product for a operating in market targets the product for a
lower level and lower-priced market the middle higher level and a higher-priced
segment. range of the market segment.
 Reasons: market.  Reasons:
- plug a market hole that otherwise - add prestige to their current
would attract a new competitor; products;
- respond to a competitor’s attack - reap higher margins or locate a
on the upper end; faster growth rate;
- locate faster growth taking place - emerge as a full-line
at the low end. manufacturer.

21
PRODUCT LINE DECISIONS
 Product line contraction
 Analyze sales, profit records, trends,
projections, and evaluate a product’s
market share;
 Use marketing research to assess
customer attitude toward the product
and closely watch for any image change.
• Identify and eliminate a product with
a consistent decline in sales and profits
• Retain strong, desirable products to
enhance profits.
 To reduce disruption to the company,
customers, and other channel members,
a company must make extensive efforts
while eliminating a product.
22
 Product line modernization
 Modernization decisions: to overhaul the
line gradually or all at once.
 Typically, changes will be made by the
marketer in the product’s quality or
through a feature or style adjustment.
 Notice: Planning for release of changes
• Too soon: causes more pressure on the
company’s cash flow.
• Too late: allows the competitors to
notice changes and initiate
redesigning their lines.
2.3 INDIVIDUAL PRODUCT DECISIONS

 Individual product decisions include:

Product attributes

Branding
Product
Packaging
decisions
Labeling and logos

Product support services

23
INDIVIDUAL PRODUCT DECISIONS

 Product and service attributes  Product and service attributes

 [1] Product quality:
• The characteristics of a product or
service that bear on its ability to
satisfy stated or implied customer
needs.
• Total quality management – TQM:
An approach in which all of the
company’s people are involved in
constantly improving the quality of
products, services, and business
processes
 [1] Product quality: 2 dimensions
• Quality level = performance quality:
the product’s ability to perform its
functions
• Quality consistency = conformance
quality: freedom from defects and
consistency in delivering a targeted
level of performance

24
INDIVIDUAL PRODUCT DECISIONS
 Product and service attributes  Product and service attributes
 [2] Product features
• Identify new features
• Decide which features to add to its
product
 Solutions:
• Periodically survey buyers who have
used the product and ask questions.
• Assess each feature’s value to
customers versus its cost to the
company.
• Features that customers value highly
in relation to costs should be added.
25
 [3] Product style and design
• Style: The appearance of a product
(eye catching or yawn producing). A
sensational style may grab attention
and produce pleasing aesthetics, but it
does not necessarily make the product
perform better.
• Design: More than skin deep—it goes
to the very heart of a product. Good
design contributes to a product’s
usefulness as well as to its looks.
• Begin with observing customers,
understanding their needs, and
shaping their product-use
experience.
INDIVIDUAL PRODUCT DECISIONS

 Branding
 Brand
• A name, term, sign, symbol, or
design, or a combination of
these, that identifies the
products or services of one
seller or group of sellers and
differentiates them from those
of competitors.

26
INDIVIDUAL PRODUCT DECISIONS

 Packaging
 Packaging
• The activities of designing and
producing the container or wrapper
for a product.
 Functions
• Hold and protect the product.
• Perform many sales tasks—from
attracting buyers to communicating
brand positioning to closing the sale.
• Become an important promotional
medium.

27
INDIVIDUAL PRODUCT DECISIONS
 Labeling & logos
 Functions
• Identify the product or brand.
• Describe several things about the
product—who made it, where it was
made, when it was made, its contents,
how it is to be used, and how to use it
safely.
• Promote the brand and engage
customers.
 Labels and brand logos can support
the brand’s positioning and add
personality to the brand.

28
INDIVIDUAL PRODUCT DECISIONS

 Product support services

 Designing support services:
• Survey customers periodically to assess
the value of current services and obtain
ideas for new ones.
• Fix problems and add new services that
will both delight customers and yield
profits to the company
 Many companies now use a
sophisticated mix of phone, email,
online, social media, mobile, and
interactive voice and data technologies
to provide support services.

29
3. PRODUCT LIFE CYCLE STRATEGIES

 Product life cycle – PLC

 The course of a product’s sales and profits over its lifetime.
 The PLC has five distinct stages:
• 1. Product development
• 2. Introduction
• 3. Growth
• 4. Maturity
• 5. Decline

30
PRODUCT LIFE CYCLE STRATEGIES

 Product life cycle – PLC

SALES

PROFITS

0 Time

PRODUCT
INTRODUCTION GROWTH MATURITY DECLINE
DEVELOPMENT

31
PRODUCT LIFE CYCLE STRATEGIES
 Special PLCs
STYLE
 A basic and distinctive mode of
expression.
 Once a style is invented, it may
last for generations, passing in
and out of vogue.
 A style has a cycle showing
several periods of renewed
interest.
32
FASHION
 A currently accepted or
popular style in a given field.
 Fashions tend to grow slowly,
remain popular for a while,
and then decline slowly.
FAD
 A temporary period of
unusually high sales driven by
consumer enthusiasm and
immediate product or brand
popularity.
 May be part of a normal PLC,
or may comprise a brand’s
entire PLC.
 PRODUCT LIFE CYCLE STRATEGIES

33
4. NEW PRODUCT DEVELOPMENT STRATEGY

 Two ways to obtain new products:

 Acquisition: The buying of a whole
company, a patent, or a license to produce
someone else’s product.
 New product development: The development
of original products, product improvements,
product modifications, and new brands
through the firm’s own research and
development efforts.

34
NEW PRODUCT DEVELOPMENT STRATEGY

 Roles of new products

 To customers: Bring new solutions and variety to customers’ lives.

+  To companies: Key source of growth.

 Very expensive and very risky (60% of all new consumer packaged products
- introduced by established companies fail). Reasons:
• The company may overestimate market size.
• The actual product may be poorly designed, incorrectly positioned, launched at the
wrong time, priced too high, or poorly advertised.
• A high-level executive might push a favorite idea despite poor marketing research
findings.
• The costs of product development are higher than expected.
• Competitors fight back harder than expected.

35
NEW PRODUCT DEVELOPMENT PROCESS

36
NEW PRODUCT DEVELOPMENT PROCESS

 The systematic search for new product ideas.

 Major sources of new product ideas:
IDEA • Internal sources: employees, R&D
GENERATION • External sources: distributors, suppliers, competitors, customers, etc.
• Crowdsourcing or open-innovation: Inviting broad communities of
people—customers, employees, independent scientists and
researchers, and even the public at large—into the new product
innovation process.
 Innovative companies don’t rely only on one source or another
for new product ideas. Instead, they develop extensive
innovation networks that capture ideas and inspiration from
every possible source, from employees and customers to
outside innovators and multiple points beyond.

37
NEW PRODUCT DEVELOPMENT PROCESS

IDEA GENERATION  Screening new product ideas to spot good ones and drop
poor ones as soon as possible.
 New product idea write-up:
IDEA • A standard format that can be reviewed and evaluated by a new
product committee.
SCREENING • Describe the product or the service, the proposed customer value
proposition, the target market, and the competition, rough
estimates of market size, product price, development time and
costs, manufacturing costs, and rate of return.
 New product screening framework: R-W-W
• Is it real?
• Can we win?
• Is it worth doing?

38
NEW PRODUCT DEVELOPMENT PROCESS

IDEA GENERATION  Distinguish between:

IDEA SRCREENING
• Product idea is an idea for a possible product that the company
can see itself offering to the market.

CONCEPT
• Product concept is a detailed version of the idea stated in
DEVELOPMENT meaningful consumer terms.
& TESTING
• Product image is the way consumers perceive an actual or
potential product.

39
NEW PRODUCT DEVELOPMENT PROCESS

IDEA GENERATION  Concept development

IDEA SRCREENING • Idea  Concept 1, 2, 3, 4, …

 Concept testing: Testing new product concepts with a

CONCEPT group of target consumers to find out if the concepts have
DEVELOPMENT strong consumer appeal..
& TESTING • The concepts may be presented to consumers symbolically or
physically (a word or picture description).
• After being exposed to the concept, consumers then may be asked
to react to it by answering questions.

40
NEW PRODUCT DEVELOPMENT PROCESS

IDEA GENERATION  Designing an initial marketing strategy for a new product

IDEA SCREENING based on the product concept.
CONCEPT DEVELOPMENT
& TESTING
 The marketing strategy statement consists of 3 parts:
• The first part describes the target market; the planned value
MARKETING proposition; and the sales, market-share, and profit goals for the
STRATEGY first few years.
DEVELOPMENT • The second part of the marketing strategy statement outlines the
product’s planned price, distribution, and marketing budget for
the first year.
• The third part of the marketing strategy statement describes the
planned long-run sales, profit goals, and marketing mix strategy.

41
NEW PRODUCT DEVELOPMENT PROCESS

IDEA GENERATION  A review of the sales, costs, and profit projections for a
IDEA SCREENING new product to find out whether these factors satisfy the
CONCEPT DEVELOPMENT company’s objectives.
& TESTING
MARKETING STRATEGY  3 steps:
DEVELOPMENT
• Estimate sales (by looking at the sales history of similar products
and conducting market surveys )  assess the range of risk.
• Estimate the expected costs (including marketing, R&D,
operations, accounting, and finance costs) and profits.
BUSINESS
• Analyze the new product’s financial attractiveness: based on sales
ANALYSIS
and cost forecasts.

42
 NEW PRODUCT DEVELOPMENT PROCESS

IDEA GENERATION  Developing the product concept into a physical product to

IDEA SCREENING ensure that the product idea can be turned into a workable
CONCEPT DEVELOPMENT market offering.
& TESTING
MARKETING STRATEGY
DEVELOPMENT

BUSINESS ANALYSIS
 Tasks:
• Develop and test one or more physical versions (prototypes) of
the product concept.
• Companies can do their own product testing or outsource testing
to other firms that specialize in testing.
PRODUCT
DEVELOPMENT

43
NEW PRODUCT DEVELOPMENT PROCESS

IDEA GENERATION  The stage of new product development in which the product
IDEA SCREENING and its proposed marketing program are tested in realistic
CONCEPT DEVELOPMENT
market settings.
& TESTING
MARKETING STRATEGY
 A company may do little or no test marketing when the costs of
DEVELOPMENT developing and introducing a new product are low or when
BUSINESS ANALYSIS management is already confident about the new product.
PRODUCT  Test markets:
DEVELOPMENT
• Standard market: extensive and costly
• Controlled test market: new products and tactics are tested among
controlled panels of shoppers and stores.
TEST
• Simulated test market: new products and marketing tactics measured
MARKETING in laboratory stores or simulated online shopping environments.

44
 NEW PRODUCT DEVELOPMENT PROCESS

IDEA GENERATION  Introducing a new product into the market.

IDEA SCREENING  Decisions:
CONCEPT DEVELOPMENT
& TESTING
• Build or rent a manufacturing facility.
MARKETING STRATEGY • Spend money for advertising, sales promotion, and other
DEVELOPMENT
marketing efforts in the first year.
BUSINESS ANALYSIS
• Decide on introduction timing.
PRODUCT
DEVELOPMENT • Decide where to launch the new product—in a single location, a
TEST MARKETING region, the national market, or the international market.

COMMERCIALIZATION

45
MANAGING NEW PRODUCT DEVELOPMENT

 Customer-Centered New Product Development

 New product development that focuses on finding new ways to solve customer problems
and create more customer-satisfying experiences.
 Begins and ends with solving customer problems
 Team-Based New Product Development
 New product development in which various company departments work closely together,
overlapping the steps in the product development process to save time and increase
effectiveness.
 Systematic New Product Development
 The new product development process should be holistic and systematic rather than
compartmentalized and haphazard => install an innovation management system to collect,
review, evaluate, and manage new product ideas.
 Outcomes:
• Create an innovation-oriented culture.
• Yield a large number of new-product ideas.

46