Product decisions

1.

2.

Part Five
Product Decisions
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 2

3. Chapter 11 Product Concepts

4. Objectives

• Understand the concept of a product
• Explain how to classify products
• Examine concepts of product: item, line,
and mix and how they are connected
• Understand product life cycle and impact
on marketing strategies
• Describe product adoption process
• Understand why products fail/succeed
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 4

5. What Is A Product?

• Good- Tangible physical entity
• Service- Intangible result of the application
of human and mechanical efforts to people
or objects
• Idea- Concept, philosophy, image, or issue
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 5

6. The Total Product

Copyright © Houghton Mifflin Company. All rights reserved.
11 | 6

7. Product Characteristics

• Fundamental utility
• Supplemental features
–
–
–
–
Installation
Delivery
Training
Financing
• Symbolic meaning
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 7

8. Classifying Products

• Consumer- products purchased to satisfy
personal and family needs
• Business- products brought to use in an
organization’s operations, to resell, or to
make other products
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 8

9. Convenience Products

Relatively inexpensive, frequently purchased
items for which buyers exert only minimal
purchasing effort
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 9

10. Convenience Product Strategy Implications

Retail outlets
Low per-unit gross margins
Little promotion effort
Packaging important
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 10

11. Shopping Products

Items for which buyers are willing to
expend considerable effort in planning
and making purchases
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 11

12. Shopping Product Marketing Implications

• No brand loyalty
• Fewer retail outlets than convenience
• Lower inventory turnover
• Higher gross margins
• Personal selling
• Channel member cooperation
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 12

13. Specialty Products

Items with unique characteristics that
buyers are willing to expend considerable
effort to obtain.
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 13

14. Specialty Product Marketing Implications

• Limited retail outlets
• Lower inventory turnover
• High gross margins
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 14

15. Unsought Products

Products purchased to solve a sudden
problem, products of which customers
are unaware, and products that people
do no necessarily think of buying.
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 15

16. Unsought Products Marketing Implications

Build trust with consumer by:
• Recognizable brand
• Superior performance
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 16

17. Business Products

Installations- facilities & nonportable equipment
Accessory equipment- not part of final product
Raw materials- natural materials part of product
Component parts- finished items ready for
assembly or need little processing
• Process materials-used in production but not
identifiable
• MRO supplies-maintenance, repair, and
operating items not part of final product
• Services-intangible products in operations
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 17

18. Product Line And Product Mix

• Item- specific version of product
• Line- closely related items viewed as a unit
• Mix- total group of products
• Width of mix- number to lines
• Depth of mix- number of different products
in line
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 18

19. Product Width/Depth Of Proctor & Gamble

Product Width/Depth
Of Proctor & Gamble
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 19

20. Product Life Cycle

The progression of a product through
four stages: introduction, growth,
maturity, and decline.
Windows Product Life Cycle Policy
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 20

21. Introduction Stage

The initial stage of a product’s life cycle; its
first appearance in the marketplace when
sales start at zero and profits are negative.
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 21

22. Introductory Stage

• Risk of failure high
• Buyers must be made aware of:
– Features
– Uses
– Advantages
• Sellers lack
– Resources
– Technological knowledge
– Marketing know-how
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 22

23. Growth Stage

The product life cycle stage when sales
rise rapidly and profits reach a peak, then
start to decline.
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 23

24. Growth Stage

• Sales rise rapidly
• Profits peak
• Starts to decline
• Competitors react
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 24

25. Growth Stage Marketing Strategy

• Encourage brand loyalty- stress
brand benefits
• Strengthen market share
• Emphasize product’s benefits
• Aggressive pricing
• Analyze production position
• Efficient distribution system
• Promotion costs drop as % of sales
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 25

26. Maturity Stage

The stage of a product’s life cycle when the
sales curve peaks and starts to decline, and
profits continue to fall.
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 26

27. Maturity Stage Marketing Strategy

• Intense competition
• Emphasize improvements and differences
• Advertising and dealer-oriented promotion
• Global expansion
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 27

28. Maturity Stage Objectives

1. Generate Cash Flow
2. Maintain Share of Market
3. Increase Share of Customer
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 28

29. Managing Products In The Maturity Stage

Copyright © Houghton Mifflin Company. All rights reserved.
11 | 29

30. Decline Stage

The stage of a product’s life cycle when
sales fall rapidly.
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 30

31. Decline Stage Marketing Strategy

Eliminate/reposition items
Cut promotion
Eliminate marginal distributors
Plan for phase out
Approaches
– Harvesting
– Divesting
Nike Product Life Cycle
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 31

32. Product Adoption Process

The five-stage process of buyer acceptance
of a product: awareness, interest, evaluation,
trial, and adoption.
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 32

33. Stages Of Product Adoption Process

1.
2.
3.
4.
5.
Awareness
Interest
Evaluation
Trial
Adoption
Diffusion
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 33

34. Most New Ideas Have Their Skeptics

Copyright © Houghton Mifflin Company. All rights reserved.
11 | 34

35. Adopter Categories

Innovators- first adopters
Early Adopters- careful choosers
Early Majority- deliberate and cautious
Late Majority- skeptics who only adopt
when necessary
Laggards- distrust new products
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 35

36. Product Adopter Categories

Copyright © Houghton Mifflin Company. All rights reserved.
11 | 36

37. Why Some Products Fail/Succeed

Failure to match product to needs
Failure to send right message
Technical/design problems
Poor timing
Overestimate market
Ineffective promotion
Insufficient distribution
Copyright © Houghton Mifflin Company. All rights reserved.
11 | 37

38. Product Successes And Failures

Copyright © Houghton Mifflin Company. All rights reserved.
11 | 38