Chapter 12: Developing and Managing Products

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Venture team (definition)

A cross-functional group that creates entirely new products that may be aimed at new markets

Regarding Product Deletion, what is beneficial for an organization to do?

A systematic review because it allows an organization to improve a products performance and ascertain when to delete products

Product design (definition)

How a product is conceived, planned, and produced; Components of design: 1. Styling - The physical appearance of a product 2. Functionality 3. Usefulness

Disruptive innovation (defintion)

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

Regarding commercialization, when are products launched?

Products are not usually launched nationwide overnight, but are introduced in stages through a process called a rollout; With a rollout, a product is introduced starting in one geographic area or set of areas and gradually expands into adjacent ones

What is a new category entry?

SLIDE 7... LOOK IN TEXTBOOK

Product features (definition)

Specific design characteristics that allow a product to perform certain tasks

How could competitors interfere in test marking?

Test marketing is expensive, and competitors may try to interfere by: 1. Increasing their own advertising or promotions 2. Lowering prices 3. Offering special incentives 4. Copying the product in the testing stage and rushing to introduce a similar product

Level of quality (definition)

The amount of quality a product processes

Consistency of quality (definition)

The degree to which a product has the same level of quality over time

What are characteristics of a product that enters the market during the commercialization phase?

When introducing a product, a firm may spend enormous sums for advertising, personal selling, and other types of promotion, as well as on manufacturing and equipment costs; Such expenditures may not be recovered for several years

What are characteristics of product differentiation?

- Consumer perception is critical in differentiating products - Three aspects of product differentiation companies must consider when creating and offering products for sale: Product quality, Product design and features, and Product support services

How can test marketing be stimulated? What are advantages of this?

- Consumers at shopping centers are asked to view an advertisement for a new product and are given a free sample to take home, then are subsequently interviewed over the phone or through online panels and asked to rate the product - Advantages: Greater speed, lower costs, and tighter security

What are characteristics of product features?

- For a brand to have a sustainable competitive advantage, marketers must determine the product designs and features that customers desire - Information from marketing research helps assess customers' product design and feature preferences

What are characteristics of the early stage of commercialization?

- Marketing management analyzes the results of test marketing to find out what changes in the marketing mix are needed before introducing the product - Marketers must make decisions about warranties, repairs, and replacement parts

Why do companies need product modifications?

- Needs and preferences change - Could make the product more durable, a higher quality, a lower price, etc.

Why is selection important in test marketing? What is the criteria used for choosing test cities?

- Selection of appropriate test areas is very important because the validity of test marketing results depends heavily on selecting test sites that provide accurate representations of the intended target market - The criteria used for choosing test cities depend upon the: 1. Product's attributes 2. Target market's characteristics 3. Firm's objectives and resources

What is the goal of test marketing?

- The aim is to determine the extent to which potential customers will buy the product - Companies use test marketing to lessen the risk of product failure

Quality (definition)

- The overall characteristics of a product that allow it to perform as expected in satisfying customer needs - Two dimensions of quality: level of quality and consistency of quality

What is repositioning?

1. A brand's market share and profitability may be strengthened by product repositioning of existing products 2. Repositioning requires changes in perception and usually changes in product features 3. Repositioning can be accomplished physically by changing the product, its price, or its distributors 4. A marketer may reposition a product by aiming it at a different target market

What are characteristics of product deletion?

1. A declining product reduces an organization's profitability and drains resources that could be used to modify other products or develop new ones 2. A marginal product may require shorter production runs, which can increase per-unit production costs 3. When a dying product loses favor with customers, the negative feelings may transfer to some of the company's other products 4. Product deletions may be met with opposition by management, salespeople, and other employees

What problems can product introduction in commercialization create?

1. A gradual introduction allows competitors to observe what the firm is doing and monitor results just as the firm's own marketers are doing; If competitors see that the newly introduced product is successful, they may quickly enter the same target market with similar products 2. As a product is introduced region by region, competitors may expand their marketing efforts to offset promotion of the new product 3. Too much delay in launching a product can cause the firm to miss out on seizing market opportunities, creating competitive offerings, and forming cooperative relationships with channel members

What are characteristics of line extensions?

1. Are less expensive and less risky than introducing a new products 2. May focus on a different market segment or attempt to increase sales within the same market segment by more precisely satisfying the needs of people in that segment 3. The success of a line extension is enhanced if the parent brand has a high-quality brand image and if there is a good fit between the line extension and its parent 4. Line extensions, when successfully applied, can take market share from competitors Note: this develops the products depth (look at previous exam information to define depth)

What can identification of weaknesses and gaps lead to? How can a marketer identify weaknesses and gaps?

1. By assessing the composition of the current product mix, a marketer can identify weaknesses and gaps which can lead to improving the product mix 2. Line extensions and Product modifications

What are the various definitions of the term "new product"?

1. Can be an innovative product that has never been sold by any organization 2. Can be a modified product that existed previously 3. May be a product that a given firm has not marketed previously, although similar products are available from other companies 4. A product can be viewed as new when it is brought to one or more markets from another market

What are the bases marketers use for positioning?

1. Head-to-head; Is best when the product's characteristics are at least equal and if the product is priced lower 2. Avoid competition; Is critical when introducing a brand into a market in which the company already has one or more brands

What are the benefits of test marketing?

1. It lets marketers expose a product in a natural marketing environment to measure its sales performance 2. The company can strive to identify weaknesses in the product or in other parts of the marketing mix 3. Test marketing allows marketers to experiment with variations in advertising, pricing, and packaging in different test areas and to measure the extent of brand awareness, brand switching, and repeat purchases resulting from these alterations in the marketing mix

Why is gradual product introduction desirable in commercialization?

1. It reduces the risks of introducing a new product; If the product fails, the firm will experience smaller losses if it introduced the item in only a few geographic areas than if it marketed the product nationally 2. A company cannot introduce a product nationwide overnight, because a system of wholesalers and retailers to distribute the product cannot be established so quickly 3. If the product is successful from launch, the number of units needed to satisfy nationwide demand for it may be too large for the firm to produce in a short time 4. General introduction allows for fine-tuning of the marketing mix to satisfy target customers

What are characteristics of business analysis?

1. Marketers ask a series of questions and attempt to answer them through market information 2. The results of customer surveys, along with secondary data, supply the specifics needed to estimate potential sales, costs, and profits 3. To forecast sales, organizations sometimes employ break even analysis to determine how many units they would have to sell to begin making a profit or payback analysis to compute the time period required to recover the funds that would be invested in developing the new product; Because break even analysis and payback analyses are based on estimates, they are usually viewed as useful but not particularly precise tools

What are characteristics of concept testing?

1. May be necessary in order to evaluate ideas properly 2. Is a low-cost procedure that allows a company to determine customers' initial reactions to a product idea before it invests considerable resources in research and development

What are the three basic ways to delete a product?

1. Phase-out - Allows a product to decline without a change in the marketing strategy 2. Run-out - Exploits any strengths left in the product 3. Immediate drop - Used when losses are too great to prolong the product's life

What are characteristics of screening?

1. Product ideas are analyzed to determine if they match the organization's mission, objectives, and resources 2. A firm's overall abilities to produce and market the product are also analyzed 3. At times, a checklist of new-product requirements is used when making screening decisions 4. Most new product ideas are rejected during the screening phase

What are the steps of the Product Deletion Process?

1. Product line review 2. Deletion analysis 3. Deletion decision 4. Return to line OR Delete 5. Phase-out OR Run-out OR Immediate drop Diagram: available in textbook as "Figure 12.5 - Product Deletion Process" or on slide 37 of chapter 12 ppt

What conditions must exist for product modification to work?

1. The 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

What is perceptual mapping?

1. To simplify buying decisions and avoid a continuous reevaluation of numerous products, buyers tend to group, or "position," products in their minds 2. Rather than allowing customers to position products independently, marketers often try to influence and shape consumers' concepts or perceptions of products through advertising 3. Marketers sometimes analyze product positions by developing perceptual maps; Perceptual maps are created by questioning a sample of customers about their perceptions of products, brands, and organizations with respect to two or more dimensions

Why might an organization's product mix require adjustment?

1. •Because customers' attitudes and product preferences change over time, their desire for certain products may wane 2. A company may need to alter its product mix for competitive reasons; A marketer may have to delete a product from the mix because a competitor dominates the market for that product; A firm may have to introduce a new product or modify an existing one to compete more efficiently 3. A marketer may expand the firm's product mix to take advantage of excess marketing and production capacity

How does a firm develop new products?

A firm develops new products as a means of enhancing its product mix and adding depth to a product line - Developing and introducing new products is fairly expensive and risky - Failing to introduce new products is also risky; Companies can lose market share with failure to innovate and keep up with competitive products

Test marketing (definition)

A limited introduction of a product in geographic areas chosen to represent the intended market; Note: not all products that are test marketed are launched

What can a products position be based on?

A product's position can be based on specific product attributes or features; Other bases for product positioning include price, quality level, benefits provided by the product, and target market

New-product development process (definition)

A seven-phase process for introducing products: 1. Idea generation 2. Screening 3. Concept testing 4. Business analysis 5. Product development 6. Test marketing 7. Commercialization Note: These are in order by lowest risk and lowest cost to greatest risk and greatest cost; Must be in this order

Functional modifications (definition)

Changes affecting a product's versatility, effectiveness, convenience, or safety

Product modification (definition)

Changes in one or more characteristics of a product; Three major types: Quality modification, functional modifications, and aesthetic modifications

Quality modifications (definition)

Changes relating to a product's dependability and durability

Aesthetic modifications (definition)

Changes relating to the sensory appeal of a product

Product differentiation (definition)

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

Product development (definition)

Determining if producing a product is technically feasible and cost-effective

Line extension (definition)

Development of a product that is closely related to existing product in the line but is designed specifically to meet different customer needs

How does product modification differ from line extensions?

Differs from a line extension in that the original product does not remain in the product line

Product deletion (definition)

Eliminating a product from the product mix when it no longer satisfies a sufficient number of customers

Business analysis (definition)

Evaluating the potential impact of a product idea on the firm's sales, costs, and profits

Customer service (definition)

Human or mechanical efforts or activities that add value to a product; Ex. include: delivery and installation, financing arrangements, customer training, warranties and guarantees, repairs, layaway plans, convenient hours of operation, adequate parking, toll-free numbers, and websites

In regards to Idea Generation, where can new product ideas come from?

New product ideas can come from several sources: 1. Internally through marketing managers, researchers, sales personnel, engineers, franchisees, or other organizational personnel 2. Externally through customers, competitors, advertising agencies, management consultants, and private research organizations; Increasingly, firms are bringing consumers into the product idea development process through online campaigns

What is a crucial question that crisis during product development? Why is it important?

Question: how much quality to build into the product - In determining the specific level of quality that is best for a product, a marketer must: 1. Ascertain approximately what price the target market views as acceptable 2. Set a quality level consistent with that of the firm's other products 3. Consider the quality of competing brands

Commercialization (definition)

Refining and finalizing plans and budgets for full-scale manufacturing and marketing of a product

Concept testing (definition)

Seeking a sample of potential buyers' responses to a product idea

Idea generation (definition)

Seeking product ideas to achieve organizational objectives

Screening (definition)

Selecting the ideas with the greatest potential for further review

Product positioning (definition)

The decisions and activities intended to create and maintain a certain concept of the firm's product, relative to competitive brands, in customers' minds; Note: *How you create a unique, desirable understanding of the product relative to the competition*

What are characteristics of the development phase?

The development phase of a new product is often a lengthy and expensive process; As a result, only a relatively small number of products of product ideas are put into development

Brand manager (definition)

The person responsible for a single brand

Market manager (definition)

The person responsible for managing the marketing activities that serve a particular group of customers

Product manager (definition)

The person within an organization who is responsible for a product, a product line, or several distinct products that make up a group

What is the goal of developing and managing products?

To provide products that satisfy target markets and achieve the firm's objectives, a marketer must develop, alter, and maintain an effective product mix

What are characteristics of product development?

To test its acceptability, the idea or concept is converted into a prototype, or working model; After a prototype is developed, its overall functioning is assessed; Its performance, safety, convenience, and other functional qualities are tested both in a laboratory and in the field


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