Marketing 351 Chapter 12 Developing and Managing Products

Test marketing

-a limited introduction of a product in geographic areas chosen to represent the intended market -best able to measure product failure -is a sample launching of the entire marketing mix -sales and cost analysis

Quality Modifications

-changes relating to a product's dependability and durability -inevitably tend to cause firms to reduce costs in some of the organization

Product development

-determining if producing a product is technically feasible and cost effective -Marketers begin to make decisions about labeling, packaging, branding, pricing, and promotion -test marketing -"How much quality should we build into the product?" -new-product development process when the organization determines the technological feasibility of producing the product at a cost that results in a reasonable selling price -rigorous functional testing to see if the device meets performance and safety qualifications -performance and functionality must be tested

Drawback to modifying a successful product

-is that consumer who had experience with the original version of the product may view a modified version as a riskier purchase

Commercialization

-refining and finalizing plans and budgets for full-scale manufacturing and marketing of a product -analyze the results from the recently completed test market to determine if any changes in the marketing mix are needed

Concept testing

-seeking a sample of potential buyers responses to a product idea -a small sample of potential buyers are presented with a product idea through a written or oral description in order to determine their attitudes and initial buying intentions regarding the product -Questions such as "How often would you buy this product?" and "Which features are of little or no interest to you?" -where customers are first exposed to the new product idea -Example: Management has assessed whether these ideas are consistent with Starbuck's objectives and resources. Several product ideas were dropped after this analysis -LEAST costly

Phases of New-Product Development

1. Idea Generation 2. Screening 3. Concept Testing 4. Business Analysis 5. Product Development 6. Test Marketing 7. Commercialization

Two Types of New Products

1. Innovative product that has never been sold by an organization (Generally new Product) - offers innovative benefits to customers 2. Modified Product that existed previously

Product Deletion Process

1. Product line review 2. deletion analysis 3. deletion decision 4. return to line or delete 5. phase out, run out, or immediate drop

three conditions must be met to improve a firm's product mix

1. Product must be modifiable 2. Customers must be able to perceive that a modification has been made 3. The modification should make the product more consistent with customers' desires so it provides greater satisfaction

Three major ways in which marketers engage in product differentiation:

1. Quality 2. Design and Features 3. Product support services

3 Types of modifications

1. Quality modifications 2. Functional modifications 3. Aesthetic Modifications

3 major ways to modify a product

1. quality 2. functional changes 3. Aesthetic

3 things in the commercialization phase that marketers must make decisions about:

1. warranties 2. repairs 3. replacement parts

Radically New Product

A complex product development process, including an extensive business analysis to determine the possibility of success

Product manager

ALL OF THE BRANDS IN A COMPANY the person within an organization who is responsible for a product, a product line, or several distinct products that make up a group -total marketing responsibility for all cheese products -cross functionally

Functional Modifications

Changes that affect a product's versatility, effectiveness, convenience, or safety -usually require that the product be redesigned

Aesthetic Modifications

Changes that affect the sensory appeal of a product by altering its taste, texture, sound, smell, or visual characteristics

Jamming

Competitive interference with a test-marketing program

Important characteristics of quality for consumer markets

Ease of maintenance/company reputation

T/F Firms marketing a quality product that generates strong sales can afford to keep expenses down by eliminating new-product development.

FALSE

T/F Quality modification of an existing product aims at changing the product's safety, convenience, or versatility.

FALSE- changes relating to a product's dependability and durability

T/F Concept testing gives reliable feedback, but at a relatively high cost.

FALSE- it is the least costly

T/F Quality modifications never seek to reduce product quality.

FALSE- sometimes quality modifications seek to reduce product quality

T/F Sales personnel are an external source for new product ideas

FALSE- they are an internal source for new product ideas

T/F Functional modifications make an existing product more durable

FALSE- they are changes that affect a product's versatility, effectiveness, convenience, or safety

T/F New products are classified solely as innovations that have never been sold by any organization.

FALSE- they are classified as innovative or modified

T/F Line extensions are less common than other new products because line extensions are more expensive and more risky

FALSE- they are less expensive and less risky

T/F Concept testing presents a small sample of potential buyers with a trial version of the new product to determine their initial reactions

FALSE-a small sample of potential buyers are presented with a product IDEA through a written or oral description in order to determine their attitudes and initial buying intentions regarding the product

Market manager

MARKETING ACTIVITIES FOR A SPECIFIC GROUP OF PEOPLE the person responsible for managing the marketing activities that serve a particular group of customers

Brand manager (not an organizational approach?)

ONE SPECIFIC BRAND IN A COMPANY the person responsible for a single brand -performance of a specific brant -total marketing responsibility over "diet cherry coke" -A type of product manager -cross functionally

Product Features

Specific design characteristics that allow a product to perform certain tasks

T/F An important question in the business analysis stage of new-product development is, "Will this product meet our profit goal?"

TRUE

T/F Automobile makers rely heavily on aesthetic modifications

TRUE

T/F Business analysis provides a tentative sketch of a product's profitability

TRUE

T/F Estimates of sales are an important component of business analysis

TRUE

T/F Functional modifications help an organization achieve and maintain a progressive image.

TRUE

T/F Functional modifications usually require that the product be redesigned

TRUE

T/F Many of the so-called new products that are launched each year are in fact line extensions

TRUE

T/F The business analysis stage of new-product development explores how well the new product fits in with the firm's existing product mix.

TRUE

T/F The major drawback in using aesthetic modifications is that their value is determined subjectively

TRUE

T/F The product development stage determines the technical feasibility of producing the new product

TRUE

Consistency of quality

The ability of a product to provide the same level of quality over time

Why are line extension more common than new products?

They are less expensive and lower-risk

Primary distinction between a line extension and a product modification

With product modifications, the original product is replaced in the product line while both the old and the new products remain in the case of line extension

Venture team

a cross-functional group that creates entirely new products that may be aimed at new markets -a group to determine the feasibility of a new brand -come from different functional areas of an organization

Product Support Services

a help line for questions and problems

Systematic Review

a suggested approach to deleting products, which each product is evaluated periodically to determine its impact on the overall effectiveness of the firms product mix -procedure to evaluate each product so that management will know when and how a product should be discontinued -aid in determining when product deletion is necessary.

Phase out approach

allows the product to decline without change in the marketing strategy; no attempt is made to give the product new life

Immediate drop of unprofitable product

best strategy when losses are too great to prolong to products life

Product Modifications

changes in one or more characteristics of the product

Disadvantage of test marketing a new product

competitors may copy the product.

To differentiate their products, companies sometimes emphasize the product support services that they offer. This is especially true when

consumers perceive all products in a market to have essentially the same quality, design, and features.

Product differentiation

creating and designing products so that customers perceive them as different from competing products

When determining how a product is conceived, planned, produced, and even its physical appearance and its specific characteristics, one is really talking about the product's

design, styling, and features

Line extensions

development of a product that is closely related to existing products in the line but is designed specifically to meet different customer needs -both old and new products remain

Important characteristics of quality for business markets

durability/technical suitability

Business Analysis

evaluating the potential impact of a product idea on the firms sales, cost, and profits -break even analysis -pay-back analysis- marketers compute the time period required to recover the funds that would be invested in developing the new product -"Is the demand strong enough?" -considers profitability -involve deciding whether the product should be in the product mix based on an assessment of sales, costs, and profits.

Run out approach

exploits any strengths left in the product. intensifying the marketing efforts in the core market or eliminating some marketing expenditures -price reduced to generate sales spurt -used for technologically obsolete products

Product Design

how a product is conceived, planned, and produced

Customer Services

human or mechanical efforts or activities that add value to a product -offering delivery and installation, financing arrangements, and repairs

Roll out stage

in commercialization the gradual introduction of the product -disadvantage is that it allows competitors to monitor the results

Perceived Product Image

recognizing based on brand name

Real product differentiating

recognizing quality styling and price

Idea Generation

seeking product ideas to achieve organizational objectives -examples: managers sent surveys to customers to determine which food items would appeal to them, marketers meet to identify the types of snacks that young people want

Screening

selecting the ideas with the greatest potential -Concerns about cannibalization of current product sales must be addressed -determining whether the product idea is compatible with company objectives, needs, and resources on a general level -the process of assessing each idea to determine whether it is consistent with the firm's overall objectives and resources -the largest number of new-product ideas is rejected

Product features

specific design characteristics that allow a product to perform certain task

The major drawback to using aesthetic modifications

that the value of the modification is determined subjectively

Level of Quality

the amount of quality a product possess -relative or difficult to describe without a basis of comparison

Quality

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

Styling

the physical appearance of a product

Product deletion

the process of deleting a product from the product mix when it no longer satisfies a sufficient number of customers -may be opposed by management -involve deciding whether the product should be in the product mix based on an assessment of sales, costs, and profits.