Developing and managing products

1. Developing and Managing Products

Part Three
Product
Decisions
11
Developing and
Managing Products
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PowerPoint Presentation by Charlie Cook

2. Chapter Learning Objectives

• To understand how companies manage existing products
through line extensions and product modifications
• To describe how businesses develop a product idea into
a commercial product
• To understand the importance of product differentiation
and the elements that differentiate one product from
another
• To explore how products are positioned and repositioned
in the customer’s mind
• To understand how product deletion is used to improve
product mixes
• To describe organizational structures used for
managing products
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11–2

3. Managing Existing Products

• What is a Line Extension
–Development of a product that is closely related to
existing products in the line but meets different
customer needs
• Why do a Line Extension
• Is a less expensive, low risk alternative
• May focus on the same or a new segment
• Can be used to counter
competing products
–Many “new products” are
really line extensions.
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“Cheerios”
“HoneyNut
Cheerios”
11–3

4. Managing Existing Products (cont’d)

• Product Modifications
–A change in one or more characteristics of the product
and the elimination of the original product from the
product line.
• Product must be modifiable.
• Customer must be able to perceive
modification has been made.
• Modified product more closely
satisfies customers’ needs.
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11–4

5. Product Modifications

• Quality Modifications
–Changes in material or production processes related to
a product’s dependability and durability
• Reducing quality to offer a lower price to customers
• Increasing quality to gain a competitive advantage
1st
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11–5

6. Product Modifications (cont’d)

• Functional Modifications
–Changes affecting a product’s versatility, effectiveness,
convenience, or safety; usually requiring redesign of
the product
• Aesthetic Modifications
–Changes to the sensory appeal of a product such as
altering taste, texture, sound, smell, or appearance
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11–6

7. Developing New Products

• Benefits
–Enhances product mix
–Increases depth in product line
–Attracts new customers
–Increases market and customer share
• Risks
–Expensive to develop
–Creates risk of market failure
–Loss of market share without new products
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11–7

8. Phases of New-Product Development

FIGURE 11.1
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11–8

9. Phases of New Product Development (cont’d)

• Idea Generation
–Seeking product ideas to achieve objectives
• Internal sources: marketing managers, researchers, sales
personnel, and engineers
• External sources: customers, competitors, advertising
agencies, consultants, and new-product alliances
• What about your businesses? New business and new
product? List ideas here
• Focus on unmet needs
• Group activity 4 minutes
Brainstorming session?
10 good ideas
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11–9

10. Phases of New Product Development (cont’d)

• Screening
–Choosing the most promising ideas for further review
–What criteria do you base you decision on? (Goto WP)
Concerns about cannibalization of existing products
Company capabilities to produce and market the product
Nature and wants of buyers
Concerns about whether it
fits in the mission
–In a group, screen out 5
Tell me about 1 you
screened out
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11–10

11. Phases of New Product Development (cont’d)

• Concept Testing
–Seeking potential buyers’ responses to a product idea
• Low cost determination of initial reaction to product idea
• Identification of important product
attributes and benefits
• Interview, observation or focus
group (Chap 6)
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11–11

12. Concept Test for a Tick and Flea Control Product

FIGURE 11.2
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11–12

13. Phases of New Product Development (cont’d)

• Business Analysis
–Assessing the potential of a product idea for the firm’s
sales, costs, and profits
Does product fit in with existing product mix?
Is demand strong enough to enter the market?
How will introducing the product change the market?
Is the firm capable of
developing the product?
• What are the costs for
developing and marketing?
USE EXCEL link
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11–13

14. Phases of New Product Development (cont’d)

• Product Development
–Determining if producing a product is feasible and cost
effective
Construction of a prototype, or working model
Testing of the prototype’s overall functionality
Determining the level of product quality
Branding, packaging, labeling,
pricing, and promotion decisions
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11–14

15. Phases of New Product Development (cont’d)

• Test Marketing
–Introducing a product on a limited basis to measure the
extent to which potential customers will actually buy it
• Sample launch of entire marketing mix
• Lessens risk of larger market failure
• Is expensive; simulated test marketing
is an alternative
• NO TIME FOR YOUR PRODUCTS
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11–15

16. Phases of New Product Development (cont’d)

• Commercialization
–Deciding on full-scale manufacturing and marketing
plans and preparing budgets
• Modifications indicated by test marketing are incorporated
into the production design.
• Marketing, distribution, and servicing plans are finalized.
• Product roll-out occurs in stages to lessen the risks of
introducing the new product.
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11–16

17. Stages of Expansion into a National Market During Commercialization

Source: Adapted from Herbert G. Hicks, William M. Pride, and James D. Powell, Business: An Involvement Approach.
Copyright © 1975. Reproduced with permission of The McGraw-Hill Companies.
Copyright © Houghton Mifflin Company. All rights reserved.
FIGURE 11.3
11–17

18. Product Differentiation Through Quality, Design, and Support Services

• Product Differentiation
–Creating and designing products so that customers
perceive them as different from competing products
• Perceived differences in product quality, product design
and features, and product support services
• Branding—a crucial way to differentiate a product
Borden
Milk
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Horizon
Organic
Milk
Sunkist
11–18

19. Product Differentiation

• Product Quality?
–The overall characteristics of a product that allow it to
perform as expected in satisfying customer needs
–Level of quality is the relative amount of quality a
product possesses.
–Consistency of quality is the degree to which a product
has the same level of quality over time.
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11–19

20. Product Differentiation (cont’d)

• Product Design and Features
–Product design
• How a product is conceived, planned, and produced
• Good design provides a strong competitive advantage.
• Customers typically desire products with good designs
and that function well.
–Styling is the physical appearance
of a product
–Product features include specific design
characteristics that allow a product to
perform certain tasks
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11–20

21. Product Differentiation (cont’d)

• Product Support Services
–Customer services
• Human or mechanical efforts or activities
that add value to a product
• Delivery and installation, financing,
customer training, warranties and
guarantees, repairs, online product
information
• A competitive advantage
when all other product features
are equally matched by competitors
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11–21

22. Product Positioning and Repositioning

• Product Positioning
– Creating and maintaining a certain concept of a product
in customers’ minds
– A product’s position results from customers’ perceptions
of a product’s attributes relative to those of competing
products.
• Marketers emphasize characteristics most desired by
the target market (or segment) in advertising.
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11–22

23. Product Positioning

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11–23

24. Hypothetical Perceptual Map for Pain Relievers

Perceptual maps show
marketers how closely
products are conceptually
positioned by consumers
to “ideal points,” to their
own products, and to
competitors’ products.
FIGURE 11.4
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11–24

25. Positioning Exercise

• Italian Sub Sandwiches
• 1. List characteristics why people would buy (tangible or
perceived)
• 2. For the group of people you are targeting (consider the
competition), which are the two most important?
• Write a positioning statement
– Succinct statement of target market for which the product is
intended
– Product category in which it competes
– Unique one or two benefits (not features) the product offers
– Please spare me the vague or ambiguous platitudes about high
quality or excellent service—only mention price if you are truly the
low cost provider
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11–25

26. Product Positioning and Repositioning (cont’d)

• Repositioning a Product
–Adjusting a product’s present position can strengthen/
increase its market share and profitability.
• Repositioning is accomplished by changing the product’s
features, price, distribution, or image.
• Adding new products to the line may necessitate the
repositioning of older products.
Avon Link
Mary Kay Cosmetics adds distribution
through retail stores and online sales
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11–26

27. Product Deletion

• Product Deletion
–The process of eliminating a product from the product
mix
–Reasons to remove a product:
• Slow sales create higher unit-production costs, inventory
costs, and distribution costs.
• To prevent negative feelings from affecting the company’s
other products.
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11–27

28. Product Deletion Process

Source: Martin L. Bell, Marketing: Concepts and Strategy, 3rd ed., p. 267; copyright 1979, Houghton Mifflin Company;
used by permission of Mrs. Martin L. Bell.
Copyright © Houghton Mifflin Company. All rights reserved.
FIGURE 11.5
11–28

29. Organizing to Develop and Manage Products

• Product/Brand Manager Approach
–Product manager
• The person responsible for a product, a product line, or
several distinct products that make up a group
–Brand manager
• The person responsible for a single brand
–Market manager
• The person responsible for managing the marketing
activities that serve a particular group of customers
–Venture team
• A cross-functional group that creates entirely new
products that may be aimed at new markets
Copyright © Houghton Mifflin Company. All rights reserved.
11–29

30. After reviewing this chapter you should:

• Understand how companies manage existing products
through line extensions and product modifications
• Be able to describe how businesses develop a product idea
into a commercial product
• Understand the importance of product differentiation and the
elements that differentiate one product from another
• Know how products are positioned and repositioned in the
customer’s mind
• Understand how product deletion is used to improve product
mixes
• Be able to describe organizational structures used for
managing products
Copyright © Houghton Mifflin Company. All rights reserved.
11–30

31.

Chapter 11
Supplemental Slides
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11–31

32. Key Terms and Concepts

• The following slides (a listing of terms and
concepts) are intended for use at the instructor’s
discretion.
• To rearrange the slide order or alter the content
of the presentation
–select “Slide Sorter” under View on the main menu.
–left click on an individual slide to select it; hold and drag
the slide to a new position in the slide show.
–To delete an individual slide, click on the slide to select,
and press the Delete key.
–Select “Normal” under View on the main menu to return
to normal view.
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11–32

33. Important Terms

• Line Extension
–Development of a product that is closely related to
existing products in the line but meets different
customer needs
• Product Modifications
–A change in one or more characteristics of the product
and the elimination of the original product from the
product line.
• Quality Modifications
–Changes in material or production processes related to
a product’s dependability and durability
Copyright © Houghton Mifflin Company. All rights reserved.
11–33

34. Important Terms

• Functional Modifications
–Changes affecting a product’s versatility, effectiveness,
convenience, or safety; usually requiring redesign of
the product
• Aesthetic Modifications
–Changes to the sensory appeal of a product such as
altering taste, texture, sound, smell, or appearance
• Idea Generation
–Seeking product ideas to achieve objectives
• Screening
–Choosing the most promising ideas for further review
Copyright © Houghton Mifflin Company. All rights reserved.
11–34

35. Important Terms

• Concept Testing
–Seeking potential buyers’ responses to a product idea
• Business Analysis
–Assessing the potential of a product idea for the firm’s
sales, costs, and profits
• Product Development
–Determining if producing a product is feasible and cost
effective
• Test Marketing
–Introducing a product on a limited basis to measure the
extent to which potential customers will actually buy it
Copyright © Houghton Mifflin Company. All rights reserved.
11–35

36. Important Terms

• Commercialization
–Deciding on full-scale manufacturing and marketing
plans and preparing budgets
• Product Differentiation
–Creating and designing products so that customers
perceive them as different from competing products
• Product Quality
–The overall characteristics of a product that allow it to
perform as expected in satisfying customer needs
• Product design
–How a product is conceived, planned, and produced
Copyright © Houghton Mifflin Company. All rights reserved.
11–36

37. Important Terms

• Styling
–The physical appearance of a product
• Product Positioning
–Creating and maintaining a certain concept of a product
in customers’ minds
• Repositioning a Product
–Adjusting a product’s present position to strengthen/
increase its market share and profitability by changing
the product’s features, price, distribution, or image
• Product Deletion
–The process of eliminating a product from the product
mix
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11–37

38. Important Terms

• Product Manager
–The person responsible for a product, a product line, or
several distinct products that make up a group
• Brand Manager
–The person responsible for a single brand
• Market Manager
–The person responsible for managing the marketing
activities that serve a particular group of customers
• Venture Team
–A cross-functional group that creates entirely new
products that may be aimed at new markets
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11–38

39. PepsiCo Product Mix- Tropicana Brands

• Tropicana Pure Premium
Juices
• Tropicana 100% Pure
Juice
• Tropicana Season’s Best
Juices
• Copella Juices
• Tropicana Pure Tropics
Juices
• Hitchcock Juices
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• Tropicana Twister Juice
Beverages
• Kirin-Tropicana Juices
• Dole Juices
• Looza Juices
• Fruit Smoothies and
Healthy Shakes
• Looza Nectars
• Juice Bowl Juices
• Juice Bowl Nectars
11–39

40.

PepsiCo Product Mix- FritoLay Brands
• Baked Lay’s Potato Chips
• Baked Tostitos Brand Tortilla
Chips
• Cheetos Brand Cheese
Flavored Snacks
• Chester’s Brand Crackers
• Doritos Brand Crackers
• Doritos Brand Dips
• Doritos Brand Tortilla Chips
• Fritos Brand Corn Chips
• Funyons Brand Onion
Flavored Rings
• Grandma’s Brand Cookies
Copyright © Houghton Mifflin Company. All rights reserved.
Lay’s Brand Potato Chips
Munchos Brand Potato Chips
Rold Gold Brand Pretzels
Ruffles Brand Potato Chips
Sanitas Brand Tortilla Chips
Smartfood Brand Popcorn
Sunchips Brand Multigrain
Snacks
Tostitos Brand Crackers
Tostitos Brand Dip
Tostitos Brand Tortilla Chips
Baken-ets Brand Fried Pork
Skins
11–40