Chapter 12-MKT 190

Product Design and Features

Second aspect of product differentiation that a company must consider

Organizing to Develop and Manage Products

need an organizational approach that accomplishes the tasks necessary to develop and manage products Alternatives to this approach is product or brand manager, market manager, or venture team approach

Run Out

exploits any strengths left in the product Commonly taken approach for technologically obsolete products such as calculators intensifying marketing can lead to a sudden jump in profits

Product Features

specific design characteristics that allow a product to perform certain tasks Add or subtracting features can allow a company to differentiate its products among the competition For a sustainable competitive advantage, marketers must determine the products designs and features that customers want Marketers must be careful not to misrepresent or over promise regarding product features or product performance

Phase Out

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

Product Support Services

A method of differentiating product offering (one of three aspects)

Consistency of Quality

A second important dimension of quality; refers to the degree to which a product has the same level of quality over time Means giving consumers the quality the expect every time they purchase the product Can be compared across companies Consistency is a critical to a company's success No company has every succeeded by creating and marketing low quality products

Level of Quality

An important dimension of quality; it is the amount of quality a product possesses It is a relative idea

Aesthetic Modifications

Change the sensory appeal of a product by altering its taste, texture, sound, smell, or appearance Buyers are swayed by looks, smells, tastes, feels, or sounds Thus, aesthetic modifications can strongly affect purchases Helps ensure a company's design reputation and minimizes the amount of illegal counterfeiting by having constant design change

Product Modifications

Changes one or more characteristics of a product Differs from a line extension in that the original product does not remain in the line ex. new car models for the same brand Like line extensions they entail less risk than making a new product

Quality Modifications

Changes relating to a product's dependability and durability Usually done by altering the materials or the production process Higher quality may require more expensive components etc. but that means the firm may be able to charge more for their products

Functional Modifications

Changes that affect a product's versatility, effectiveness, convenience, or safety Usually require redesign of the product Make a product more useful and thus enlarge the market ex: Sub Zero put dual compressors in its fridges to allow independent climate control in different compartments Can often be made in response to product shortcomings and assist in reducing possibility of liability lawsuits

Managing Existing Products

Company can benefit by capitalizing on its existing product mix Can ID weaknesses and strenghts

Styling

Component of design, it's the physical appearance of the product Is one design feature that can allow a product to sell very rapidly Means more than just appearances, also means a product's functioning and usefulness Want products that look and function well

Line Extensions

Development of a product that is closely related to one or more products in the existing product line but designed to specifically meet somewhat different customer needs Many so called new products are in fact line extensions They are more common than new products because they are less expensive, are lower risk alternative for increasing sales May focus on a market segment or be an attempt to focus on a different market segment A possible negative side effect of this is a more negative evaluation of the core product

New Product Development Process: Commercialization

During this phase, plans for full scale manufacturing and marketing must be refined and finalized and budgets for the projects prepared Analysis from the test marketing is used Results of test marketing may tell marketers to change one or more of the product's physical attributes, modify distribution plans to include more retail outlets, alter promotional efforts, or change the product's price As more changes are made from the test marketing results the projections become less valid Need to gear up for larger production but also make decisions regarding warranties, repairs, and replacement parts Type of warranty a firm provides is important especially for expensive, technically complex items An effective system for providing repair services and replacement parts is needed Normally this is done via regional service centers The product enters the market in this stage

Product Design

How a product is conceived, planned, and produced Design is a complex topic bc it involves the total sum of all the product's physical characteristics Many co's are known for the design of their products. ex. Apple Good design is one of the best competitive advantages a brand can possess

New Product Development Process: Test Marketing

Limited production of a product in geographic areas chosen to represent the intended market It is not an extension of the development stage but a sample launching of the entire marketing mix Should be conducted when the product has gone through development and initial plans have been made regarding other products in the marketing mix Provides several benefits: Lets marketers expose a product in a natural marketing environment to measure sales performance Co. can ID weaknesses in the product or in other parts of the marketing mix If initial reaction is negative then the product can be altered or the product may be unable to persuade customers to try the product again Allows experimentation with ads, pricing, packaging and measure the extent of brand awareness, brand swithcing etc. Selection of appropriate test areas is very important bc the validity of the test results depends on choosing the test sites the provide accurate representation of the intended market Choosing a test market depends on the product's attributes, target market charactersitics, firm's objectives and resources It is not without risks It is expensive and a competitor can jam the program by increasing its own promotions, lowering prices, etc This can invalidate results These are the risks Because of the risks, marketers sometimes use simulated marketing as an alternative Ads or samples are given and customers are interviewed Advantages of this are greater speed, lower cost, and tighter security, reducing competitor jamming Not all test marketed products are launched

New Product Development Process: Concept Testing

May be necessary to properly evaluate ideas Seeking a small sample of potential buyers' responses to a product idea This is presented with oral or written or picture description of the product Can have several concepts for the same product Concept is briefly described and a series of questions are presented ex. How could this product be improved? Which features are of little or no interest to you?

Developing New Products

New Product: can have more than one meaning. A genuinely new product offers innovative benefits Can innovative product that has never been sold by any organization A radically new product involves a complex development Can also be a product that a given firm has not marketed previously although other companies have marketed similar products (ex. school glue from crayola) A product can be viewed as new when it is brought to one or more markets from another market ex. Smart Car from Europe brought to US

Market Manager

Person responsible for managing the marketing activities that serve a particular group of customers particularly effective when a firm engages in different types of marketing activities to provide products to diverse customer groups may have one market manager for business and another for consumer markets Different markets have different preferences so a market manager oversees this

New Product Development Process: Product Development

Phase in which the organization determines if it is technically feasible to product the product and if it is cost effective enough to make the price reasonable In this stage the idea or concept is converted to a prototype Prototype should reveal tangible and intangible attributes associated with the product in the consumer's minds The design, features, and intangibles must be linked with the consumers wants in the marketplace Overall functioning must be tested after the prototype is developed This is a lengthy and expensive stage of the product and few product ideas are put into development If this stage is successful then decisions regarding branding, packaging, labeling, pricing, and promotion begin to be made

Methods of Deleting a Product

Phase it out Run it out Drop it Immediately

When Can Product Modification Improve a Firm's Product Mix

Product must be modifiable Customer must be able to perceive that a modification has been made The modification should make the product more consistent with customer's desires to provide greater satisfication A drawback to modifying a successful product is that the modified version may be viewed as riskier by consumers There are three major ways to modify products; Quality Functional Aesthetic

Product Quality

Quality: refers to the overall characteristics of a product that allow it to perform as expected in satisfying customer needs As expected is important to the definition bc quality usually means different things to different customers Ex. for some it means quality Concept of quality also varies between consumer and business markets Consumer like reliable, durable, and easy to maintain Business markets consider technical suitability, ease of repair, and company reputation to be found in high quality products

Gradual Product Introduction Benefits

Reduces the risks of introducing a new product If the product fails, a smaller loss will be experienced in that area Company cannot introduce a product nationwide overnight bc a system of retailers and wholesalers cannot be established If the product is successful, the number of units needed to satisfy nationwide demand may be too large for the firm to produce in a short time Allows for fine tuning of the marketing mix to better satisfy customers Can create some problems though Allows competitors to observe what the firms is doing and monitor results( If competitors see their success, they may launch their own products

New Product Development Process: Screening

Selecting the ideas with the greatest potential for further review Product ideas are analyzed to determine whether they match the orgs objectives and resources If the idea is a product similar to the firm's existing offerings, then marketer must assess the degree to which the new product could cannibalize sales of the current products Most new product ideas are rejected during the screening phase Systematic evaluation reduces risk of overlooking pertinent facts

New Product Development Process

Seven phase process for introducing products Idea Generation Screening Concept Testing Business Analysis Product Development Test Marketing Commercialization

Product Differentiation Through Quality, Design, and Support Services

Some of the most important elements of a product are those that distinguish it from other

Roll Out

a product is introduced in stages, starting in one set of geographic areas and gradually expanding into adjacent areas It may take several years to get the product nationally available A method of commercialization

Immediate Drop

best strategy when losses are too great to prolong a product's life

Venture Team

creates entirely new products that may be aimed at new markets Unlike a product or market manager, a venture team is responsible for all aspects of developing a product; R&D, production, engineering, financing accounting and marketing Have greater flexibility to apply inventive approaches to take advantage of highly segmented markets Companies are increasingly using cross functional teams for product development to boost product quality

Brand Manager

person responsible for a single brand ex. manager of Nabisco Oreos for Kraft Co both product and brand managers must operate cross functionally to coordinate the activities, information, and strategies involved in marketing the assigned product Need to do this to meet objectives Need to consider and balance a firm's brands with the associated brands especially for luxury brands ( ex. BMW)

Product Manager

person within an organization responsible for a product, a product line, or several distinct products that make up a group ex.

Product Differentiation

process of creating and designing products so customers perceive them as different from competing products This is done by changing: Quality,Features,Styling,Price,Image A crucial element in distinguishing is brand Three aspects that involve the company's attempt to create real differences among product are product quality, product design and features, and product support services

New Product Development Process: Business Analysis

product idea is evaluated to determine its potential contribution to the firm's sales, costs, and profits Evaluators ask a variety of questions such as does this product it in the existing product mix? What type of environmental and competitive changes can be expected In this stage, firms seek market information customer surveys, secondary data etc, provide the info to make estimates with Forecasting sales are difficult in this stage (especially new and innovative products) Breakeven and payback analysis

New Product Development Process: Idea Generation

seeking product ideas to achieve organizational objectives Some ideas happen by chance but some firms try to manage their product mixes effectively usually develop systematic approaches for generating new product ideas There is relationship between the amount market information gathered and the number of ideas generated by work groups New product ideas can come from internal sources such as marketing, researchers, engineers etc. Brainstorming and incentive can help make new ideas New ideas can also come from sources outside the firm such as customers, competitors, ad agencies, or consultants ex. P&G gets 35% of its new ideas from inventors outside the firm

Customer Services

services include any human or mechanical efforts or activities a company provides that add value to a product includes installation, financing, arrangements, customer training, warranties, repairs, layaway plans Whether a large or small part of a total product offering, all marketers of goods sell customer services

Product Deletion

the process of eliminating a product from the product mix usually bc it no longer satisfies a sufficient number of customer A declining product reduces an organization's profitability and drains resources that could be used to modify or develop new products When a dying product completely loses favor with customers, the negative feelings may transfer to some of the company's other products Most co. find it hard to delete a product Products constantly undergo reformulation and redesign to fortify their fit in the product line and avoid deletion Some organizations delete products only after they have become heavy financial burdens