MKTG 409 Developing Products Ch.12

Concept Testing

A small sample of potential buyers is presented with a product idea through a written or oral description to determine their attitudes and initial buying intentions regarding the product. Low-cost procedure.

Refer to Scenario 12.2. In repositioning the product, Coca-Cola changed the taste of the product. It also changed the look of the product with a larger can size and different colors. This is an example of a(n) _________________________ modification.

Aesthetic

Phase-out

Allows the product to decline without a change in the marketing strategy.

Quality Modification

Changes relating to a product's dependability and durability. Changes are executed by altering the materials or the production process.

Which is the best way to handle the deletion of a product?

Conduct a review to determine its impact on the overall product mix.

Refer to Scenario 12.3. Suppose that Victoria's firm decides to commercialize the pour-over coffeemaker. They appoint a manager to oversee the pour-over coffeemaker line and their single-serve coffeemaker line. This is an example of a market manager.

False

Commercialization

Plans for full-scale manufacturing and marketing must be refined and settled and budgets for the project prepared. Any changes to the marketing mix based on the test marketing results are made here. Decisions about warranties, repairs, and replacement parts are made.

Functional testing occurs in which part of the product development stage?

Product Development

3 aspects of Product Differentiation

Product Quality Product Design and Features Product Support Services

3 types of product modification

Quality Functional Aesthetic

During the recession, sales for many companies plummeted. The rate of unemployment grew substantially. As a result, Procter & Gamble decided to release a cheaper, more basic version of their Tide product. This lower-priced Tide Basic lacked some of the cleaning features of its more expensive counterpart, but P&G thought it would be good for cash-strapped consumers. P&G tried out Tide Basic in 100 stores in the south for about a year. The product failed to take off, and they discontinued Tide Basic. A few years later they tried again with another less expensive Tide product called Simply Tide.P&G had to modify its Tide product to appeal to this new demographic. What type of product modification did it make?

Quality Modification

Consumers consider high quality products to be:

reliable, durable, and easy to maintain.

Different way a product is considered to be new

1. A new product is one that a given firm has not marketed previously. ex: Android pay 2. A genuinely new product offers innovative benefits. ex: Apple Iphone, watch, Ipad 3. Products that are different and distinctly better are often viewed as new even though they do not represent a truly new product. ex: Colgate White Toothbrush & Pen, Amazon's Echo Speaker 4. A product can be viewed as new when it is brought to one or more markets from another market.

New-product Development Process

1. Idea generation 2. Screening 3. Concept Testing 4. Business analysis 5. Product Development 6. Test Marketing 7. Commercialization A product may be dropped at any stage of the development process.

Product Deletion Process

1. Product Line Review 2. Deletion Analysis 3.Deletion Decision a. Return to line b. Delete i. Phase Out ii. Run Out iii. Immediate Drop

Styling

A component of design. The physical appearance of the product. Most consumers seek out products that both look good and function well.

Test Marketing

A limited introduction of a product in geographic areas chosen to represent the intended market. ex: Chipotle offering Chorizo at Kansas City locations. Aim is to determine the extent to which potential customers will buy the product.

Head-to-Head Competition

A marketer's positioning objective if the product's performance characteristics are at least equal to those of competitive brands and if the product is priced lower. May be appropriate even when the price is higher if the product's performance characteristics are superior.

Assume that Coca-Cola has a manager for Powerade, a manager for Coca-Cola, a manager for Frito-Lay, and a manager for Oatmeal. What types of managers are these?

Brand Managers

Two methods used to determine when profit will be made:

Breakeven Analysis Payback Analysis

Ways a product can be repositioned

Can be accomplished by changing the product, its price, or its distribution. Changing its image through promotional efforts. Aiming it at different target markets.

Functional Modification

Changes that affect a product's versatility, effectiveness, convenience, or safety. Require the product to be redesigned. ex: Making programs available in 3D on DirectTV.

Aesthetic Modification

Changes the sensory appeal of a product by altering its taste, texture, sound, smell, or appearance. Fashion industry relies heavily on this. Helps minimize the amount of illegal counterfeiting by constantly changing the design.

Product Modification

Changing one or more characteristics of a product.

Example of Line extension

Coca - Cola introducing new flavors such as black cherry vanilla, diet coke, & coca-cola zero.

The Amazon Echo is a voice-enabled wireless speaker. It has been in development since 2010. In 2014 it was released only to Amazon Prime members for purchase. In 2015 it expanded and became available in stores nationwide. What stage in the product development process was Amazon Echo in 2015?

Commercialization

Bases for Positioning

Competitors A firm can position a product to compete head-on with another brand, as PepsiCo has done against Coca-Cola or to avoid competition, as 7Up has done relative to Coca-Cola. Price, quality level, and benefits, target market

Disadvantages of Rollout

Competitors can observe what a company is doing and how successful the product is and enter the same target market. Competitors may expand their marketing efforts to offset promotion of the new product.

Victoria works in the production department for a manufacturer of coffee equipment. A new promising product idea the company is considering involves the development of simple pour-over coffee makers. These coffee makers would be made of wood with a cotton drip bag, similar to what is known in Costa Rica as Chorreadores. Victoria's firm thinks this type of product can catch on in the United States because they are exotic and highly environmentally friendly. Refer to Scenario 12.3. Victoria is working with a team to determine the feasibility of the product. Together with her team, she shows a small group of avid coffee customers a written description as well as a photo of the proposed product. She hopes to determine whether they would buy the product and what they think about it. Victoria and her team are at what stage in the product development process?

Concept Testing

Miles recently stayed at the Hyatt. He loved the experience. The staff was so nice, and the rooms were clean. The concierge was extremely helpful. He decided to stay there when he returned on his next business trip. However, the next time he stayed there, there were different staff members who were not very friendly or helpful. Also, the housekeeping staff did not change the towels in his room. The only thing he found to be the same was the concierge. This Hyatt seems to lack ____________.

Consistency of Quality

Simulated Test Marketing

Consumers at shopping centers are asked to view an ad for a new product and are given a free sample to take home.

Venture Team

Creates new products that may be aimed at new markets. Responsible for all aspects of developing a product: research and development, production and engineering, finance and accounting, and marketing.

Line extension

Development of a product that is closely related to one or more products in the existing product line but designed specifically to meet somewhat different customer needs.

Questions asked during the Business Analysis stage

Does the product fit in with the organization's existing product mix? Is demand strong enough to justify entering the market, and will this demand endure? What types of environmental and competitive changes can be expected and how will these changes affect the product's future sales, costs, and profits? Are the firm's research, development, engineering, and production capabilities adequate to develop the product? Should new facilities be constructed and how quickly can they be built?

Repositioning

Evaluating the positions of existing products and changing the perception or product features. ex: Nestle and it's Callier brand as a high-end Swiss chocolate.

Disadvantage of Test Marketing

Expensive Competitors may try to interfere Competitors may try to "jam" the test program by increasing its own advertising or promotions, lowering prices, and offering special incentives.

Run-out

Exploits any strengths left in the product. Commonly taken for technologically obsolete products such as older models of computers. Price is reduced to generate a sales spurt.

Disruptive Innovation

First described by Professor Clayton Christensen. Identifies old technologies that can be exploited in new ways or develops new business models to give customers more than they've come to expect from current products in a specific market.

Advantages of Simulated Test Marketing

Greater speed, lower costs, tighter security, reduces the flow of information to competitors and reduces jamming.

Crucial question for product development

How much quality do you build into the product?

Screening

Ideas with the greatest potential are selected for further review. Product ideas are analyzed to determine if they match the organization's missions, objectives, and resources. A firm's ability to produce and market the product are also analyzed. Most new products are rejected during this stage.

Returning to the Buckyballs example from the last chapter, the company was forced to delete its magnetic desk toy product due to safety concerns after being sued by the Consumer Product Safety Commission. What type of product deletion did the firm most likely use?

Immediate Drop

Quality may be positively related to:

Information integration within the team, customers' influence on the product development process, a quality orientation within the firm.

Benefits of Test Marketing

Lets marketers expose a product in a natural marketing environment to measure its sales performance. Company can identify weaknesses in the product or other parts of the marketing mix.

Kira loves Mexican food. She saw a new Mexican restaurant that had affordable prices. She went in to eat but had a bad experience because the food was too salty. Kira thought perhaps it was just a fluke. She went back to the restaurant, but the food tasted just as bad. For Kira the restaurant has a low

Level of Quality

When Cheetos developed a new "cheesy" flavor, Cheddar Jalapeno Crunchy Cheetos, it was an example of a

Line extension

Payback Analysis

Marketers compute the time period required to recover the funds that would be invested in developing the new product.

Break-even Analysis

Marketers determine how many units they would have to sell to begin making a profit.

Avoiding Competition

May be best when the product's performance characteristics do not differ significantly from competing brands. Also appropriate when that brand has unique characteristics that are important to some buyers.

Where do new product ideas come from?

May stem from internal sources - marketing managers, researchers, sales personnel, engineers, franchisees, employees. Outside Sources - customers, competitors, advertising agencies, management consultants, and private research organizations.

8 Quality Dimensions

Performance Features Reliability (Consistency) Conformance Durability (How long will it last) Serviceability (Is it easy to maintain or repair) Aesthetics Perceived Quality

3 ways to delete a product

Phase it out Run it out Drop it immediately

CD players have been declining for years. Recognizing that CD players are a thing of the past, those who manufactured CD players have not attempted to make any changes but are letting them live out the remainder of their lives. The makers of CD players have new technology to explore and do not want to waste resources trying to prolong the life of an obsolete technology. This is an example of _____________.

Phase-Out

Systematic Review

Product is evaluated periodically to determine its impact on the overall effectiveness of the firm's product mix. Should analyze the product's contribution to the firm's sales for a given period, estimate future sales, costs. and profits associated with the product. Allows an organization to improve product performance and ascertain when to delete products.

Alternatives to functional organization

Product or Brand Manager Approach Market Manager Approach Venture Team Approach

P&G marketed Tide Basic as a detergent that could perform the basic functions of its signature Tide products at a lower price to the consumer. This was an attempt to create a concept of the product in customers' minds. This is referred to as

Product positioning

Rollout

Products are introduced in stages, starting with one geographic area or set of areas and gradually expanding to adjacent ones. Doesn't always occur state by state, can occur in groups of counties that overlap across state borders.

Advantages of Rollout

Reduces the risk of introducing a new product. If a product fails, the firm will experience smaller losses. A product can't be introduced overnight because it is hard to build wholesalers and retailer relationship to distribute the product. If the product is successful, the # of units needed to satisfy nationwide demand for it may be too large for the firm to produce in a short time. Rollout allows for fine-tuning of the marketing mix to satisfy target customers.

Product Design

Refers to how a product is conceived, planned, and produced. Involves the total sum of all the product's physical characteristics. One of the best competitive advantages any brand can possess.

Product Positioning

Refers to the decisions and activities intended to create and maintain a certain concept of the firm's product, relative to competitive brands, in customers' minds. A product's position is the result of customers' perceptions of the product's attributes relative to those of competitive brands. Can be based on specific product attributes and features.

Consistency of quality

Refers to the degree to which a product has the same level of quality over time. Also a relative concept bc it implies a quality comparison within the same brand over time.

Quality

Refers to the overall characteristics of a product that allow it to perform as expected in satisfying customer needs.

Product Manager

Responsible for a product, a product line, or several distinct products that make up an interrelated group within a multi-product organization. Used by many large, multiple-product companies.

Brand Manager

Responsible for a single brand. ex: What Kraft has for Nabisco Oreos and Oscar Mayer Lunchables. Used by many large, multiple-product companies.

Marketing Manager

Responsible for managing the marketing activities that serve a particular group of customers. ex: one for business markets and another for consumer markets

Refer to Scenario 12.3. Victoria's firm released the pour-over coffeemaker, and it became a hit among a niche group of avid coffee fans. For a few years sales were high. Eventually, however, sales peaked and started to decline. Victoria's firm realizes the coffeemaker still has a small following of dedicated customers. They plan to move on to a more advanced pour-over coffeemaker, but in the meantime they plan to emphasize the core strengths of the current coffeemaker, including the fact that it is so sustainable. This is an example of what type of product deletion?

Run-off

Method is a nontoxic, biodegradable cleaning supplies company. Suppose one of the employees on the production team at Method got an idea for the company to expand into biodegradable plastic wrap. He has heard about new technologies that could make this possible. Method has the resources to invest in this new product, but after considering it, the production managers nixed the idea because it did not fit well with its product mix. What stage of the product development process was Method in?

Screening

Idea generation

Seeking product ideas to achieve organizational objectives.

Customer Service

Services that include any human or mechanical efforts or activities a company provides that add value to a product. ex: Delivery and installation, financing arrangements, customer training, warranties and guarantees, repairs, layaway plans, convenient hours of operation, adequate parking, and information through toll-free numbers and websites.

Product Features

Specific design characteristics that allow a product to perform certain tasks. Can be used to differentiate products from competition and products within the same company. ex: Nike shoes designed for activities from walking to running. The more features a product has, the higher its price and the higher its perceived quality.

Refer to Scenario 12.2. By using a larger can size and different colors, Coca-Cola is changing the ______________ of the product.

Styling

During the recession, sales for many companies plummeted. The rate of unemployment grew substantially. As a result, Procter & Gamble decided to release a cheaper, more basic version of their Tide product. This lower-priced Tide Basic lacked some of the cleaning features of its more expensive counterpart, but P&G thought it would be good for cash-strapped consumers. P&G tried out Tide Basic in 100 stores in the south for about a year. The product failed to take off, and they discontinued Tide Basic. A few years later they tried again with another less expensive Tide product called Simply Tide. What stage of the product development process was P&G in when it decided to discontinue Tide Basic?

Test Marketing

Level of quality

The amount of quality a product possesses. Relative term bc the quality level of one product is difficult to describe unless it is compared to that of other products.

Immediate drop

The best strategy to use when losses are too great to prolong the product's life.

Product Development

The phase in which the organization determines if it is feasible to produce the product and if it can be produced at costs low enough to make the final price reasonable. Prototype is designed and functionality is tested in a laboratory and in the field.

Product Differentiation

The process of creating and designing products so customers perceive them as different from competing products. Quality, features, styling, price, or image.

Product Deletion

The process of eliminating a product from the product mix, usually because it no longer satisfies a sufficient number of customers.

Business analysis

The product idea is evaluated to determine its potential contribution to the firm's sales, costs, and profits. Firm's seek market information (customer surveys and secondary data).

Disadvantage of Aesthetic Modification

The value of the product is determined subjectively (influenced by personal feelings, tastes, or opinions) and while a firm may strive to improve the product's sensory appeal, some customers actually may find the modified product less attractive.

How are firms using consumers for new product ideas?

Through online campaigns. Building online communities and listening to their product needs and wants. ex: Frito-Lay holding an annual contest for new flavored chips.

Prototype

Used to test acceptability. Should reveal tangible and intangible attributes associated with the product in consumers' minds.

Perceptual Mapping

Used when marketers try to analyze product positions. Created by questioning a sample of consumers about their perceptions of products, brands, and organizations with respect to two or more dimensions.

Lindsey works in R&D at a consumer products firm. She meets up with Don, who works in finance, Riley, who works in production, and David, who works in marketing. Together they are going to develop a new product that Lindsey's department had researched. They are responsible for all aspects of developing the product. This is an example of a

Venture Team

When is the marketing manager approach effective?

When a firm engages in different types of marketing activities to provide products to diverse customer groups.

Difference between product modification and Line extension

With product modification, the product is changed but the original product is no longer offered under the product line. ex: automakers creating new models of the same brand

When automakers started installing Bluetooth in cars, this was an example of ______________.

functional modification

In Australia Coca-Cola launched Mother, an energy drink. However, most people did not like the taste. Rather than introducing an entirely new product, Coca-Cola decided to reposition the product. It reformulated the Mother drink and re-released it with a new marketing campaign. Which of the following slogans should Coca-Cola use to signal to consumers that its Mother drink has been repositioned?

"New Mother—Tastes Nothing Like the Old One"