Module 8 - Introduction to Product Strategy

horizontal conflict

channel conflict between intermediaries at the same level within a channel

vertical conflict

psychological tension or anxiety between two alternatives that are not simply different, but where one is genuinely higher than the other

The two most common classifications of product are

(I) consumer goods versus industrial goods, and (2) goods products (i.e. durables and nondurables) versus service products.

Product development

1. Idea evaluation 2. technical and market assessment 3. Product design and prototype 4. Product testing 5. Commercial start-up

Product Life Cycle and Product Strategy (video)

Product development: 1. Idea generation (what is needed in the market? how do we make this product better); 2. idea screening (do consumers want this product?what competition exists out in market?) 3. Concept development (creating a prototype so consumers can see, feel, etc.); 4. market strategy (using research to identify target market, address how you will sell to target); 5. Feasibility study (can you produce it?can you sell it?); 6. Product design (adding feature to product that consumer want); 7. Test Marketing (releasing product to small sample(test market)to gain feedback); 8. Market entry (releasing product to entire population, product begins product life cycle); After product entered to market the product life cycle starts: - describes the stages a new product goes through from beginning to end - is a tool used by marketing professionals to understand the market, and plan the marketing mix. Four stages of product life cycle: 1. introduction/birth (product lunch) - an expensive phase: high costs are associated with design, manufacturing, promotional activities and inventory to meet the anticipated demand, other costs include new packaging and labeling and market research. New product buys a early adopters. - Also marketers do a lot on introduction: push - marketers focus on product placement and obtaining preferential shelf and floor space pull - create advertisements that create a "buzz" for the product - may use samples, coupons and other promotional techniques Characteristics:high investment = less profits, minimal competition, company tries to create acceptance and gain initial distribution, company needs both push and pull promotions: targeted towards customers to increase awareness and demand for product, and confidence in the product 2. growth - once early adopters find and use a new product, other consumers are likely to follow. The product is visible, either in daily life or in the media, and consumers see neighbors and friends using it. Viral marketing is important. - important stage where the product is going catch or fail. If product is removed from market before it has recovered the costs, this is called a Bust - characteristics: product is successfully launched demand & distribution increases competition intensifies company might introduce secondary products or support services better revenue generation and ROI 3. maturity - period during which sales of a product increase more slowly, if at all. Marketers keep the name of their brand in front of consumers and reminds them of the product's features (Utility) and lasting power - by this stage, manufacturers have recouped the major costs associated with research, development and production. Costs associated with distribution is low and companies usually make very large profits during this stage - characteristics: Competition is great a product is established and promotion expenditures are less little growth potential for the product penetration pricing, and lower profit margins the major focus is toward extending the life cycle and maintaining market share converting customers product to your own is a major changing in maturity 4. retirement/decline - unable to find new customers for a given product or service, that product is in the decline stage. A temporary decline may be reversed by changing the price or a new advertising campaign - If efforts are unsuccessful: the company can look to redesign, repackage or reformulate their marketing efforts 5. Decision point stage (extension of decline stage) - maintain the product in hopes that that competitor will exit, reduce marketing support and coast along until no more profit can be made, discontinue the product when no more profit can be made or there is a successor product, modify the product and re-launch it as "New&Improved!"

The New Product Development Process

- idea generation includes , - screening. There are two common techniques for screening new product ideas: a simple checklist and the criteria are assigned importance weights and then the products are rated on a point scale measuring product compatibility concept testing, business analysis, - Technical and Marketing Development, - Manufacturing Planning, - Marketing Planning, - test-marketing - commercialization

Companies should consider several factors when a new product is developed and offered to the market. These include:

- identifying the target customers for the product or service - communicating the product or service's value in the minds of the target customers - deciding how the product fits into the current business model

The five stages of the PLC and their components can be defined as follows:

. Product development: the period during which new product ideas are generated, operationalized, and tested prior to commercialization. 2. Introduction: the period during which a new product is introduced. Initial distribution is obtained and promotion is obtained. 3. Growth: the period during which the product is accepted by consumers and the trade. Maturity: the pe~iod during which competition becomes serious. Towards the end of this period, competitors' products cut deeply into the company's market position. 5. Decline: the product becomes obsolete and its competitive disadvantage result in decline in sales and, eventually, deletion.

Classification of Consumer Goods

1. A convenience good is one that requires a minimum amount of effort on the part of the consumer. Extensive distribution is the primary marketing strategy. 2. Shopping goods - consumers want to be able to compare products. Automobiles, appliances, furniture, and homes are in this group. Shoppers are willing to go to some lengths to compare values, and therefore these goods need not be distributed so widely. 3. Specialty goods represent the third product classification. From the consumer's perspective, these products are so unique that they will go to any lengths to seek out and purchase them. Almost without exception, price is not a principle factor affecting the sales of specialty goods.

Stages for New Product Development

1. Idea generation (ideas from customers and users, marketing research, competitors, other markets, company, intermediaries); 2. Screening (strengths and weaknesses, fit with objectives, market trends, rough ROI estimate); 3. Idea evaluation (concept testing, reactions from customers, rough estimates fo costs, sales, and profits); 4. Development prototype (R&D, develop model or service, test marketing mix, revise plans as needed, ROI estimate); 5. Commercialization (finalize product and marketing plan, start production and marketing, "roll out" in select markets, final ROI estimate)

Strategies for Acquiring New Products

1. Mergers and Acquisitions. Acquiring another company already successful in a field your company wishes to enter i:; an effective way of introducing products while still diversifying 2. Licenses and Patents. A patent, and the related license, arise from legal efforts to protect property rights of investors or of those who own inventions 3. Joint Ventures. When two or more companies create a third organization to conduct a new business, a joint venture exists. This organization structure emerges, primarily, when either the risk or capital requirements are too great for any single firm to bear.

There are three general approaches to market, each of which may change during the life of the product.

1. Produci differentiation is used whe~ a marketer chooses to appeal to the whole market by attempting to cater to the particular desires of all the buyers who hopefully would prefer his brand. This strategy is appro!Jriate if the brand is widely popular and can be continued in general market leaclership through strong promotion 2. Market extension is a second approach available to the product manager. Tnis entails attracting additional types of buyers into the market or discovering and promoting new uses of the product. 3. Market segmentation is the final approach. As discussed in an earlier chapter, segmentation is identifying a group of consumers that tend to respond to some aspect of the market mix in a similar way.

There are four levels of a product

1. core - which identifies what the consumers feel they are getting when they purchase the product 2. tangible - reflected primarily in its quality level, features, brand name, styling, and packaging. 3. augmented - is backed up by a host of supporting services. Often, the buyer expects these services and would reject the core tangible product if they were not available. Examples would be restrooms and escalators/elevators in the case of a department store, and warranties and return policies in the case of a lawn mower. 4. promised has an implied promise. An implied promise is a characteristic that is attached to the product over time

Strategies for Developing New Products

1.Defining the "New" in a New Product The Consumer's Viewpoint - There are a variety of ways that products can be classified as new from the perspective of the conSJmer. Degree of consumption modification and task experience se:ve as two bases for classification. New task experience can also be a criteria. An individual may live in a house for several years without ever having to repa;r a broken window Based on a schema developed by Eberhard Scheuing, new products, from the perspective of the business, can take the following forms: Changing the marketing mix: one can argue that whenever some e;ement of the marketing mix (product planning, pricing, branding, channels of dislribution, advertising, etc.) is modified, a new product emerges. 2. Modification: certain features (norn1ally product design) of an existing product are altered, and may include external changes, technological improvements, or new areas of applicability. 3. Differentiation: within one product line, variations of the existing products are added. 4. Diversification: the addition of new product lines for other applications

fad

A phenomenon that becomes popular for a very short time; the product life cycle has a steeply-sloped growth stage, a short maturity stage, and a very steep decline.

Product Line Decisions

A product line can contain one product or hundreds. The number of products in a product line refer to its depth, while the number of separate product lines owned by a company is the product line width. Assuming that we decide to fill out our product line further, there are several ways of implementing this decision. Three are most common: 1. Product proliferation' the introduction of new varieties of the initial product or products that are similar (e.g., a ketchup manufacturer introduces hickory-flavored and pizza-flavored barbecue sauces and a special hot dog sauce). 2. Brand extension: strong brand preference allows the company to introduce the related product under the brand umbrella (e.g., Jell-O introduces pie filling and diet desserts under the Jell-O brand name). 3. Private branding: producing and distributing a related product under the brand of a distributor or other producers (e.g., Firestone producing a less expensive tire for K-Mart). Line-pruning strategies involve the process of getting rid of products that no longer contribute to company profits

critical mass

A quantity or amount required to trigger a phenomenon. Critical mass is the point within the adoption curve that enough individuals have adopted an innovation such that that the continued adoption of the innovation is self-sustaining. The adoption process is an individual phenomenon the describes the series of stages an individual undergoes from first hearing about a product to finally adopting it.

Categories of Adopters

Categories of innovation adopters include innovators, early adopters, early majority, late majority, and laggards.

maturity stage, the following occurs:

Costs are lowered as a result of production volumes increasing and experience curve effects Sales volume peaks and market saturation is reached Increase in numbers of competitors entering the market Prices tend to drop due to the proliferation of competing products Brand differentiation and feature diversification is emphasized to maintain or increase market share Industrial profits go down During the maturity stage, sales will peak as the product reaches market saturation, and competition will grow increasingly fierce.

Essential Smartphone: A lesson in why a great new product is often unsuccessful (video)

Designed by Android creator Andy Rubin and introduced in summer 2017, the Essential Smartphone was recognized as being better than the latest versions of both the Apple iPhone and the Samsung Galaxy. In fact, many reviewers concluded that the Essential was the best smartphone in the world. It was (and still is) less expensive than its competition too! Even with these positive reviews and a lower price than its competition, the Essential Smartphone was not successful in the marketplace. Why would this happen? The Essential Smartphone is a current real world example of the consequences of not having strong brand name recognition and not having effective marketing strategy. Even the best new products require a well executed marketing strategy to be successful.

Decline stage

During decline, sales growth becomes negative, profits decline, competition remains high, and the product ultimately reaches its 'death'. Features of the decline stage include: - A decline in sales volume as competition becomes severe, and popularity of the product falls; - A fall in prices and profitability (the latter ultimately moving in the negative zone); - A counter-optimal cost structure; - Profit increasingly becomes a challenge of production/distribution efficiency rather than increased sales.

Factors which initiate the Need for so many new products

Financial goal Sales/Market share growth Competitive Actions Shorter Product Life Cycles technology improvements global competition material costs/availability invention demographic/lifestyle changes in consumer needs The problem is those factors needs constant investment even if the company seems doing well - Most product fail, new products drives sales and profit growth, and most product don't make it Product fail is normal: - "Over championing" means developers are so dedicated that what they are created, and they can feel that the other consumers don't feel that way - Overestimated demand means you expect to sell thousands but you sell only hundreds - Poor design - product is good but the design is not consumer wanted - Poor marketing Execution - good product, consumer wanted it but it is not explain properly - High development cost - cost more that they expected to be - Strong competitive reaction

Diffusion Process concept

If it is a distribution over the time of adopters of a new product per service, another word if we take a distribution from those who adopt first versa another side who never adapt we come up with different categories : 1. 2.5% adapter is innovators - people with more money than average, they are willing to try new things, technology savyy, not opinion leaders for the brand. Example: if you use WhatsUp, we chat, line messaging 2. 13.5% early adopters - people who buy Tesla, virtual reality, they tend to be a social leader in their community, this group most targeting for promotion 3. 34% early majority - this group are followers of early adopters in choosing a brand, a mass of people who are looking for the price go down 4. 34% late majority - this group of people when a product gets adopted by a lot of people and then decide if they need to get it; this group is more conscious, has low income, don't like to take a risk and like to follow for the early majority Example: followers 5. 16% laggards - group of people who doesn't like changes at all, tent to be low income, not tax heavy, conscious

Classification of Industrial Goods

Industrial products can either be categorized from the perspective of the producer and how they shop for the product, or the perspective of the manufacturer and how they are produced and how much they cost. Fanns, forests, mines, and quarries provide extractive products to producers. A useful way to divide extractive products is into farm products and natural products, since they are marketed in slightly different ways. Manufactured products are those that have undergone some processing. Semi-manufactured goods are raw materials that have received some proce~ sing but require some more before they are useful to the purchaser Parts are manufactured items that are ready to be incorporated into other products. Process machinery (sometimes called "installations") refers to major piece" of equipment used in the manufacture of other goods. Equipment is made up of portable factory equipment (e.g., fork ;ift trucks, fire extinguisher) and office equipment (e.g., computers, copier machines) Supplies and service do not enter the finished product at all, bJt are nevertheiess CO~lsumed in conjunction with making the product

Stages of Adopters(five-step process)

Knowledge: In this stage the individual is first exposed to an innovation but lacks information about that innovation. During this stage of the process the individual has not been inspired to find more information about the new idea. Persuasion: In this stage, the individual is interested in the innovation and actively seeks information and details about it. Decision: In this stage, the individual takes the concepts of change (switching cost), weighs the advantages and disadvantages of using the innovation, and decides whether to adopt or reject the innovation. Due to the individualistic nature of this stage, Rogers notes that it is the most difficult stage to acquire empirical evidence. Implementation: In this stage, the individual employs the innovation to a varying degree depending on the situation. During this stage the individual determines the usefulness of the innovation and may search for further information about it. Confirmation: Although the name of this stage may be misleading, in this stage, the individual finalizes his or her decision to continue using the innovation and may end up using it to its fullest potential.

New Product Development (lecture video)

New Product Development is also a key component of Product Strategy. Using Tesla and IKEA as examples, this lecture discusses new product development New product development shares some areas with management, technology with manufacturing. New product development is an element of product strategy component of the marketing mix Product strategy - branding, brand equity (how you create it, logo design) For any new product, the consumer should involve in designing of product. Tesla brand strategy and marketing: - they place people on regular basis , the places where people shopping and look for new thing - goal of Tesla store is that people when they are living their store had smile - the price is the same - tesla business model: tesla engages the costumes which don't think to buy a car - your car your way: you can design the car through the official website and learn about a car or you can just come to store - tesla strategy to start to make an expensive car with low value, then a medium car with a medium value, third-generation car low price high value New product development doesn't make money on the first unit you make, you have to produce more Ikea is adapting its message to fit the changing needs of its target market consumers which it understands is space challenged

Product Mix Strategies

Product modification: It is normal for a product to be changed several times during its life. Product positioning is a strategic management decision that determines the place a product should occupy in a given market-its market niche.

Five Adoption Factors

Relative Advantage: How improved an innovation is over the previous generation. Compatibility: The level of compatibility that an innovation has to be assimilated into an individual's life. Complexity or Simplicity: If the innovation is perceived as complicated or difficult to use, an individual is unlikely to adopt it. Trialability: How easily an innovation may be experimented. If a user is able to test an innovation, the individual will be more likely to adopt it. Observability: The extent that an innovation is visible to others. An innovation that is more visible will drive communication among the individual's peers and personal networks, and will in turn, create more positive or negative reactions.

Goods versus Services

Service products are reflected by a wide variety of industries: utilities, barbers, travel agencies, health spas, consulting firms, medical care and banking, to name but a few, and they account for nearly 50% of tne average consumer's total expenditures, 70% of the jobs, and two-thirds of the G.N.P

The Diffusion of Innovation theory

The diffusion of innovation is a theory that seeks to explain how, why, and at what rate new ideas and technology spread through cultures. Everett Rogers said diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system. Everett Rogers (1962) espoused the theory that there are four main elements that influence the spread of a new idea: The innovation - According to Rogers, an innovation is "an idea, practice, or object that is perceived as new by an individual or other unit of adoption." Communication channels - These are "the means by which messages get from one individual to another." Time - Rogers wrote that "the innovation-decision period is the length of time required to pass through the innovation-decision process. The rate of adoption is the relative speed with which an innovation is adopted by members of a social system." Social system - According to Rogers, a social system is "a set of interrelated units that are engaged in joint problem solving to accomplish a common goal."

product life cycle

The process wherein a product is introduced to a market, grows in popularity, and is then removed as demand drops gradually to zero.

market introduction stage

This stage is characterized by a low growth rate of sales as the product is newly launched and consumers may not know much about it. Traditionally, a company usually incurs losses rather than profits during this phase. However, this stage also offers its share of opportunities. For example, there may be less competition. In some instances, a monopoly may be created if the product proves very effective and is in great demand.

Key Product Management Decisions

These decisions include 1. specifying product features 2. package design 3. branding decisions 4. establishing related services Although there are a wide range of supportive services, the following are most prevalent: - Credit and financing. With the increased acceptance of debt by the consumer, offering credit and/or financing has become an important part of the total product. - Warranty. There are several types of durable products, retail stores, and even service products where warranties are expected. - Money-back guarantees. The ultimate warranty is the money-back guarantee. To the customer, a money-back guarantee reduces risk almost totally. - Delivery, installation, training, and service. Products that tend to be physically cumbersome or located far from the customer might consider delivery (free or a small charge) to be an integral part of the new product 5. legal considerations.

The Determination of Product Objectives

a universal objective is growth in sales as a result of the introduction of a new product or the improvement of an existing product. An objective related to growth in sales is finding new uses for established products. Using excess capacity is another commonly stated product objective. This objective is prompted by the rapid turnover o~ products and the resulting changes in market share. Maintaining or improving market share may also be an objective shared by many companies. Creating product differentiation is often the primary strategy employed to reach this objective. Developing a full line of products is another typical objective. Expanding a product's appeal to new market segments is a common objective.

Characteristics of Service Products

intangibility, Simultaneous Production and Consumption, Little Standardization, High Buyer Involvement

Product Strategy

one of the four Ps of the Marketing Mix. Product Strategy involves more than just making products and providing services. It also includes elements such as branding, packaging, and after sale service. Products are like people. They are conceived, grow, mature and die. Developing new products typically have higher costs than modifying an existing one. The "new-ness" of a product will have an impact on how quickly this will be adopted by the customers. It is the marketer's responsibility to develop an effective marketing strategy throughout a product's life cycle (PLC). Strategies change over time, depending on the stage of the life cycle the product is in.

Growth stage

the second stage of the product life cycle when sales typically grow at an increasing rate, many competitors enter the market, large companies may start to acquire small pioneering firms, and profits are healthy Features of the growth stage: - Costs reduced due to economies of scale: as production and distribution are ramped up, economies of scale kick in and reduce the per unit costs. - Sales volume increases significantly: as the product increases in popularity, sales volumes increase. - Profitability begins to rise: revenues begin to exceed costs, creating profit for the company - Public awareness increases: through increased promotion, visibility and word of mouth, public awareness grows. - Competition begins to increase with a few new players in establishing market - Increased competition leads to price decreases: price wars may erupt, technology may get cheaper, or other factors can ultimately lead to falling prices.